What should you consider?
Ian Bradley, Franchise Director, My Window Cleaner
I was recently asked to write an article for Elite Franchise magazine, which you can read here: http://elitefranchisemagazine.co.uk/people/item/buying-a-franchise-then-tick-these-five-things-off-your-list-first
My original, unedited version is below. I hope you enjoy the read….
What should people consider before buying a franchise?
This is a huge question and I could write a book on this subject alone. We need to break this down into five different areas:
Personal attributes & family
You need to look into a mirror and ask yourself if you have the skills, motivation, desire and passion to operate your own business. Owning a business is difficult and has downsides as well as upsides. You need to be a Jack-of-all-trades and ensure that you understand how much hard work and effort that you will need to put in to ensure success. Think of it as a 24/7 commitment that you will need to work around family life and other previous lifestyle commitments that you once enjoyed! Being a franchisee is just as hard work as going it alone, but with less risk. Just be aware of the effort required.
This falls into two categories; personal and business. When completing your pre-start business models, ensure that you work on three variants – Target, Optimistic and Pessimistic. This way, you will be aware of the financial implications on both your new business and you personally. Ensure that you have enough working capital at the start and that you also complete a Personal Finance Plan that fits in with any drawings that you may be able to take. Remember, the first year is about building the foundations – profit may come later.
Is this a reputable company that you can have a working relationship with? Are they bfa members, how long have they been trading, what are their medium- and long-terms plans? At the outset, clarify the training and support that you will receive, along with what their expectations of you are. Ensure that you get to speak with other franchisees and that you understand completely how the working relationship manifests itself. A franchisor will set up a franchisee in business to succeed, not fail. You will need faith in the franchisor, to be open to their ideas, and implement the model at a local level.
Ensure you do your homework on the marketplace you are considering entering. Do you understand the market, who are your competitors and what differentiates your new business? Is the market growing? And consider what the market will look like in five or 10 years’ time. Will technology replace the existing requirement and how would you and the franchisor counter this? You need to reassure yourself that the business you are entering will drive your passion and that it has a future.
The end goal
I always ask a potential franchisee when they would like to sell their business. A strange question, you may ask? However, remember that you are building an asset to sell at some point in the future. So what is your exit strategy and how will the franchisor help you in achieving that? You really need to consider this at the very beginning and then work towards achieving that goal.
What are the three most common mistakes new franchisees make and why are they bad for business?
The three most common mistakes are:
Lack of working capital and cash flow implications
Not understanding what is required of you as a business owner
Not implementing the model successfully at a local level
A good franchisor will mentor you, to ensure that these common errors are not made. However, you still need to action what’s discussed and ensure that you work hard to implement any change of direction required.
These three oversights will put additional pressures on you, both personally and for your business. A lack of working capital will mean that you do not have the cash available to implement the model and may lead onto cash flow constraints. If you do not have a plan at the outset, it means that you may not understand what is expected of you as a business owner and therefore you are rudderless. You must control the business (not let it control you) and plan each and every working day. Lastly, the model should be already be proven. You need to follow the Operations Manual and implement the marketing plan, set out by the franchisor, within your territory.
Just remember, that these are common mistakes, mainly made when you try and go it alone. With a good franchisor guiding you, you are less likely to experience these, but you need to be aware of them.
Lastly, a franchisor will set you up in business to succeed, not to fail.