Considering buying a franchise? If you’ve already decided which sector you want to get into, then great! But before you jump in, make sure you take days – even weeks – to ensure you get the right franchise opportunity for you. And that means reading the small print, as well as paying close attention to the following points:
1. What sector should you go in to? Where does your passion lie? What hours can you see yourself working? Eight, maybe twelve hours a day? Your business has to be something you’re interested in. Your next step is to choose the right franchise…
2. What is the team like? Are they the type of people you could work with? Or did you feel your teeth grating and a little on edge after 15 minutes of meeting them? If it’s the latter, then run.
3. What’s their experience in the industry? If the team pass stage one as far as you’re concerned, then it’s time to delve a little deeper. It’s easy to research individuals on the internet these days, but ask too. How long have they been in franchising, and the property/retail/cleaning etc. industry itself?
4. Is franchising right for you? Another big consideration before you sign on the dotted line is, are you the type of person who can conform to guidelines or are you the type of entrepreneur who likes to go out on their own? If it’s the latter, perhaps a franchise opportunity isn’t the way to go.
5. How much time will you put in? If you see your franchising opportunity as a part-time job, then just make sure the company you choose is a good fit. Some franchises e.g. restaurants are a big time commitment.
6. How much is it going to cost? Your total bill will have to factor in the initial franchise licence fee, then there is the monthly – or annual – royalty fees. Check if there are any other fees attributable to the franchiser too. Meanwhile, there’s your own costs i.e. rent, heating & lighting of the premises (office, shop etc), staff and your own salary.
7. How are you going to fund it? You may hate the idea of taking out a loan, but for many franchisees they have no option. Even if you do have savings, a loan isn’t always a bad idea. It can give you additional funding (a good thing at the start) and means you can still go on a much-needed holiday with your own savings. Just choose carefully; whether it’s via family, the bank, private funding or a special franchisee loan.
8. What do you hope to get from it? Yes, you want to make a good profit. But, after that? Are you hoping to start up your own business and using the franchise as a means of learning how to do that? Perhaps you plan on selling up and buying into another franchise opportunity a decade down the line? It’s a good idea to have something to aim towards (an exit strategy, in other words).
Once you’ve decided you’re going to go ahead, there’s a number of things to get in place first, including:
9. Opening a business bank account. It’s crucial – for your peace of mind and easy accounting practice – that you keep your business and personal finances separate. But wait until you decide on your business structure first. Which brings us on nicely to our next point…
10. Should you become a limited company? For many franchisees it makes complete sense to register as a company (rather than a sole trader). You’ll not only pay less tax (Corporate Tax is lower than Income Tax and is due to become lower still), but it means that if the worst comes to the worst and you get sued or your business goes bust, it means you won’t lose your home or personal savings (since personal and business money is separate).