Choosing a Franchise
The first step in considering whether or not to buy a franchise is to decide whether franchising itself is right for you. But even once you have made that decision, there is still much to consider.
The next step is to choose a franchise, and make sure that it is the right opportunity for you.
Our page What is Franchising? explains the concept of franchising and sets out its advantages and disadvantages. This page discusses what you should consider when selecting a franchise, and how to identify an opportunity that will work for you. Many of the considerations about a franchise are similar to setting up in business generally—for example, whether you are prepared to work relatively long hours to make it work—but this page focuses on those issues specific to franchising.
There is no such thing as ‘the best’ franchise.
There is only ‘the right franchise for you’, or ‘the franchise that you want to operate’.
Assessing Your Skills and Interests
The first step in deciding on a franchise is to assess your own skills and interests. You need to want to operate this franchise in that particular sector or industry, so it needs to interest you, and also play to your skills and experience in some way.
For example, it is likely to be both very challenging and quite boring to run a franchise offering music classes for babies and toddlers if you a) do not have any children, and b) have no interest in music. You will be unable to relate to your customers in any way, and may find that what you are trying to provide does not work for them.
On the other hand, if you are a music teacher, or even a casual musician who is looking for a way to combine work with having young children, this may be the perfect opportunity for you.
This is not to say that you absolutely should not consider a franchise in an area that is new to you, but you should consider whether your existing skills, interests, and experience will help.
You may find it helpful to carry out a personal SWOT analysis to identify areas of strengths and weaknesses, and also things that might help or hinder you in your franchising career.
At this stage, it is worth considering both the industry or sector, and also the types of work that you have previously done, and/or would be prepared to do. It is also helpful to identify anything that you absolutely do not wish to do.
How Do You Want to Work?
Having assessed your skills and experience, the next step is to consider how you would like to work.
- Do you want fairly standard working hours (broadly 9 to 5), or would weekend working be better for you?
- What environment do you want to work in? You might decide that you would like to work from home, out of an office, or in a shop, perhaps.
- Do you want to work with other people or alone? In particular, do you want to be managing a big team of people?
- How much travelling are you prepared to do, both as part of your work, and as a commute?
Finding and Assessing Franchise Opportunities
Having considered both these areas—your skills and experience, and how you want to work—you are now in a position to measure any potential franchise opportunities against your requirements.
You therefore need to start looking for franchise opportunities. It is advisable to look for franchises that have been approved by some kind of industry body, as these will have been independently assessed as good quality, offering reasonable opportunities.
Franchising industry bodies
In the UK, the British Franchise Association is the voluntary self-regulatory body for the franchising sector, and validates franchise opportunities.
In the US, the Federal Trade Commission regulates franchising at the federal level.
You can also search websites like Franchise Direct (www.franchisedirect.com), which maintains a list of the top 100 global franchises, or Which Franchise? (www.whichfranchise.com), which has advice on choosing franchises.
Make sure that you do a thorough search for options, and do not just go for the first franchise that you find.
Once you have found some possible franchise opportunities, you first need to assess them against your list of requirements.
For any that fit, you also need to carry out what is basically your own personal due diligence checks. It is advisable to:
Do a thorough web search for each possible franchise and its franchisor. In particular, you need to look for any previous businesses and franchise opportunities run by the same person, and see what people have said about them.
Visit all your shortlisted candidate franchises in person. Having a website and a phone number does not guarantee an ethical, thriving business. It is advisable not to go any further with any franchisor until you have met them in person, and feel confident that you could work with them on an ongoing basis. If you have any doubt, don’t do it.
Check that the territory offered will work for you—but don’t select solely on that basis. You need to be confident that the territory will work for you: that it will fit with your travel requirements, and also provide a reasonable income. Ask for evidence of the franchisor’s assessment of the territory, and also do your own market research before committing. If it doesn’t look right, see if you can negotiate an alternative that fits better.
Talk to existing franchisees. It is worth discussing how they work, as well as their views on the franchisor, as you want to know whether you could work that way. If you find that you get on well with the existing franchisees, and they seem happy with the work, then it might be reasonable to say that you would be a good fit with the franchise.
Check out the finances. You should be prepared to challenge the franchisor’s assessment of your likely sales and/or activity, and ask for evidence. You should also challenge growth assumptions, and make sure that you are confident that you can deliver what they suggest. You should also consider how much you want to invest in the business, and whether this fits with the franchise fee and ongoing service costs.
Find out what support will be available. You should be expecting to learn from both the franchisor, and the experience of other franchisees, so you want to know about both formal support and networking opportunities and expectations. Do these fit with what you want from a business? Finally, will the level of support be enough to enable you to get started and keep going in that business?
Finding the Right Relationship
The final step is to consider the franchisor.
This could well be the most important business relationship in your life for the next five to ten years, so it needs to be right. You need to be confident that you can work with this person, and that you share similar values and aspirations for the business. You also need to be confident that you have similar expectations of what you will each put in, and how you will operate.
There is no room for doubt here.
One last thought
Taking on a franchise is a big decision. You need to be sure that the decision is right, and you also need to make sure that it is fully informed. Never be afraid to take time to think about it, and also seek good legal advice about contracts.
A franchisor who tries to rush you is probably not going to be a good and ethical business partner anyway.