We answer your common FAQs when buying a franchise
Lots of people invest in a franchise every year. There are some 40,000 franchisees trading in the UK today. That’s 40,000 people who’ve chosen business ownership over PAYE. These people have left behind the security of a salaried career. They’ve invested money and effort into a franchised business of their own. They’ve made that leap of faith.
But what about you? Are you ready to do the same? Because, while you’ll consider hundreds of FAQs when buying a franchise, those at the top of the list are ones you need to ask yourself. And the biggest one is just that.
Are you ready?
There’s only one person who knows that answer to that. And that’s you. Of course, talk to the people closest to you. Bounce ideas off your friends. Find out whether your family is prepared to support you through the highs and lows. But you’re the only person who really knows whether you’re ready. So ask difficult questions of yourself. And, of course, try to be honest with yourself too!
The most important FAQs when buying a franchise
The franchise industry is a big one. It generates more than £13billion for the UK’s economy. But those 40,000 franchisees trading today make up just a small proportion of the country’s 30million-strong workforce. So, while franchising is a safer way of getting into business for yourself – statistically five times safer than starting up on your own – there aren’t that many people brave enough to do it.
It’s because the really safe option is to stick with PAYE. To accept corporate games, lengthy commutes or a boring nine-to-five in return for a regular salary and certainty. In the end, it all comes down to risk. And nerve. And belief …in yourself.
Choosing a franchise over starting alone might improve your chances of success. But it’s still a risk. And one that very few people are prepared to take.
Those that do are confident in their own abilities. They are self-motivated and resilient. They can follow a model and think for themselves.
And those are just a few of the character traits that good franchisees possess. You’ll also need to be decisive and determined; hard working and thick skinned.
Franchising isn’t for those who just want to turn up, get through the day, get paid and get home. Franchising will take over your life (in a good way if you’re ambitious). But you need to be 100% sure that it’s the right option for you. All of this has been covered before in a previous article. But it’s worth stating once more. The most important FAQs when buying a franchise are those that you ask yourself.
It’s your life – the personal FAQs when buying a franchise
It can be quite bewildering for people looking at the franchise industry for the first time. How do you know which are the best franchises? And, more importantly, how do you know which are the best franchises for you and your circumstances?
With more than 900 franchises operations in the UK, there’s something for everyone. There are franchises that suit first-time investors and others that attract seasoned entrepreneurs. Some work for busy parents, others require a full-time commitment.
So you’ll need to compile your own FAQs when buying a franchise, and these will reflect those individual requirements you might have.
For example, if you have a young family and want to spend more time with them, you’ll need to ask about the operating hours of that particular franchise. Or, if you’re fed up of spending half your working week stuck in traffic, you should know how much travelling a franchisee has to do each week. What type of franchise appeals to you? And can you really see yourself doing it? These are important personal FAQs when buying a franchise.
Even the most ethical franchisor is selling their franchise. They’ll ask you lots of questions and assess whether you are right for their business. But their motivation is to recruit franchisees. They’ll trust that you have the right motivation, and expect you to undertake some level of self-assessment.
And that’s where you must be honest.
If you struggle assembling a basic bookshelf from Ikea, then don’t look at any hands-on franchises, no matter how low the investment. And if you hate driving and get road rage at the slightest provocation, then don’t invest in a man-in-a-van franchise.
Investment and Returns – the financial FAQs when buying a franchise
One of the key questions most budding franchisees ask: is how much money will I make?
The answer from the franchisor is likely to be: it depends how hard you’re prepared to work. Which is fair enough. And largely accurate.
But dig deeper than that. Because a good franchisor has access to their franchisees’ accounts and will know the potential earnings range. So some of the FAQs when buying a franchise are linked to the investment and returns.
- What is the total investment?
- When will I see a return on my investment?
- How soon will I be able to pay myself a wage?
- What do the top franchisees net each year?
- What do the lower performers earn?
- What is the average earnings of your franchisees?
- Can I see some of franchisees’ annual accounts?
- Have franchisees got into financial difficulty, and why?
- You should also ask a franchisor about failure. Because it happens. Even to the best brands around.
Franchises close down. It’s nothing to be worried about if there is a legitimate reason for that failure. But before you buy a franchise, you need to know any pitfalls you should avoid to make sure you’re not the next statistic.
Help when you need it – support-related FAQs when buying a franchise
You invest in a franchise because you don’t want to be another statistic. You don’t want to be one of the 90% of business start-ups that fail after two years. You invest in a franchise because the model is proven and you aren’t on your own.
So some of the FAQs when buying a franchise will be centred around what level of support is provided. And it won’t be the same for all the franchises you look at.
If you invest in a home-based or internet franchise, you might find the only support you need is on the telephone or through email. Whereas, if you’re investing in a retail business, the support will be more hands-on.
When conducting your due diligence, ask franchisees about the support they received. Was it what they were promised? A franchise is your own business, and you can’t expect to have your hand held 24 hours a day. But, and especially in the early days, you should expect guidance, support and mentoring to help you kick-start your business.
Linked to the support-related FAQs when buying a franchise, is how much will that support cost you? And how is it paid.
Some franchises have a fixed monthly fee, which at least means you know what you’re paying each month. On the other hand, you could argue that there is less of an incentive for a franchisor to help you grow your business if they know they’re getting the same amount from you each month. It’s great for successful franchisees, of course, as the more they earn, the more goes in their pockets. But for poorer performers, it can be a blow to have to pay out a fixed fee when they’re not bringing in much income.
Many franchisors charge their Management Services Fees (MSF) as a percentage of your turnover. Obviously this means the more sales or turnover you achieve, the more you pay out – but at least it’s relative. And the big plus is the franchisor has a clear incentive to make you and your business successful. After all, if you don’t sell anything, they won’t make any money.
The British Franchise Association (bfa) is the regulatory body for the UK’s franchise industry, and works to ensure its members operate ethically. It can help you put together your FAQs when buying a franchise. It is also a measure of the most successful and ethical franchises in the UK.
And DaltonsBusiness.com featured many of the most successful franchised brands in the country. Click here to find out more.