| When you buy a franchise opportunity, you are buying | | | | franchise. Trade reports are very helpful in this |
| much more than a just a business. A business which | | | | capacity and can be found very easily by a qualified |
| stands a higher chance of success compared to | | | | accountant. |
| people who choose to start a business on their own. | | | | A decent franchise agreement is also essential. This |
| You are also buying into a business which has strict | | | | should protect the franchisee as well as the franchisor. |
| control and regulations as to what you can and can | | | | Too many agreements are biased towards the |
| not do. | | | | franchisor and these should be avoided at all costs. If |
| The franchisor will insist on certain quality standards | | | | you are not legal speak savvy then it is very important |
| being maintained. This is so that the end consumers | | | | to get advice from a franchise lawyer. |
| receive a high standard product delivered in a way | | | | Some franchise businesses which were very |
| that they are accustomed to at other outlets. | | | | successful in the past are now struggling and a few |
| You will be allowed to make small changes in the way | | | | will fold. Make sure that your accountant has a look at |
| you run your business compared to other franchisees, | | | | the financial reports of the franchise business that you |
| but the business will have to operate to a high | | | | are thinking of buying into. You need a strong |
| standard and all the major decisions on the | | | | franchisor on your side for many years to come. |
| management of the business have already been | | | | There are even restrictions in the franchise agreement |
| taken. | | | | which cover in detail the processes involved in selling |
| Why is it like this? The franchisor has probably spent | | | | your business. The franchisor has to be satisfied that |
| many years if not decades creating a business that | | | | the buyer will make a suitable candidate for the |
| works and can be sold successfully as a franchise. | | | | business. They will charge the franchisee a fixed figure |
| They have usually invested heavily in marketing | | | | or a percentage of the final price achieved to cover |
| materials, advertising campaigns, shop floor layouts | | | | their costs associated with creating new legal |
| logos and branding. | | | | agreements, helping with the smooth transfer, doing |
| A poor franchisee can have a very detrimental affect | | | | credit checks on the potential buyer and providing long |
| on the group as a whole. The press loves it when | | | | term support to someone who might not have any |
| something goes wrong in business and is quick to | | | | experience in managing a business. |
| spread the news. It is essential for the franchisor to | | | | What happens when a franchisor rolls out a new |
| spend some quality time on the poor performing | | | | product that fails spectacularly? Usually the greatest |
| franchisees as the franchise network is as strong as | | | | loss is incurred by the franchise network. It is essential |
| the weakest link. | | | | that these products are trialed in certain locations |
| In return for all this support and ongoing training | | | | before a nation roll out. |
| programmes the franchisee will have to pay a | | | | Often the need for profit and the desire for turnover |
| franchise fee at the outset and ongoing license | | | | can lead to conflicts between the franchisee and the |
| (royalty) fees. These payments can make a huge | | | | franchisor. This is usually due to the way royalty |
| dent in the profitability of the business so it is essential | | | | payments are calculated in the franchise agreement. In |
| that you choose a franchise opportunity that not only | | | | some case the franchisee could be forced into |
| has high margins but also decent turnover. | | | | increasing their business even though they are happy |
| In the franchise business a prospective buyer has to | | | | with the current turnover and profitability of the |
| tread extremely carefully. Not all franchises are the | | | | business. |
| same. The market place is also evolving very rapidly. | | | | There are many other disadvantages to buying a |
| What may have worked as a business only a few | | | | franchise opportunity which I will cover in later articles. |
| years ago might not be a viable business opportunity | | | | In all fairness though, if you can find a decent |
| now. | | | | opportunity and take heed of all the advice in this |
| It is imperative that the franchisee takes advice about | | | | article you should be on the way to a successful |
| the current market place before buying into any new | | | | business life. |