How to separate fact from fiction when choosing a franchise

Top tips to ensure you don’t get lost in the sales patter

Franchising is a word that’s often bandied about and can come in many different forms: film franchises, rail franchises and even license opportunities that disguise themselves as franchises. So what are we talking about and why do we bother educating on the technicalities of business format franchising?

Firstly, it’s important to note that business format franchising has grown year on year for the past 20 years and even through periods of economic challenge has continued to thrive. Unfortunately, some businesses disguise themselves as such to encourage investment. Below are some top tips to ensure you don’t get lost in the sales patter:

What’s a business format franchise?

It’s the opportunity to build and operate a business that’s represented by a larger brand.

You will be asked to sign a franchise agreement, which will dictate a length of contract and detail obligations of both you and the franchisor. You’ll be asked to pay a license fee on entry and be required to contribute an ongoing management service fee.

Importantly, you will be provided with the tools and know-how to effectively operate that business in your territory with the ongoing support of your franchisor.

How to spot a business format franchise

The proposition will be clearly detailed and the recruitment process should provide reasonable time for both the franchisor and you, as the investor, to consider the opportunity. At no point should you feel under pressure to sign an agreement or ‘secure’ a territory due to fear of missing out.

Any projections should be based on trading evidence and the franchisor should be able to explain clearly what they’re based on, along with any associated working conditions to achieve them. There will be a substantial training plan and ongoing support, should you need it. The length of the agreement you will be required to sign should allow you to see a good return on your investment and usually there will be an automatic right to renew, should you be operating to standard.

Important due diligence questions include:

• Can I speak to a variety of existing franchisees in the network?
• What support and equipment are included in my initial franchise fee?
• How much working capital will I need?
• What marketing support do you provide?
• What does the support team comprise of and who will be my point of contact?

Before making any decisions, ask everything you need that will provide you with the comfort that if you follow the model and work hard your investment will be supported.

Additionally, any business can undergo difficult times and business format franchising is no different. When embarking on your franchise journey, ensure the people you are partnering with are people you are comfortable with.

How can the bfa help you? Visit our website - thebfa. org - which houses a wealth of information about franchising. We can also be contacted directly.

You will find accredited franchises featured in our online directory, along with a free online franchisee certificate and seminar dates to help you determine if franchising is for you.

If you become a franchisee, you can also become a member of the bfa in your own right. This means we can connect you with franchisee peers and engage with you on your ongoing business development journey.

The author

Emily Price is chief operating officer at the British Franchise Association