Reduce the risk of buyer’s regret by learning from these common mistakes

Every prospective franchisee has thought about the possibility of franchise regret, so if it’s currently keeping you awake at night, you’re not alone. But there are ways to reduce the risk

First, accept that no one can predict the future, so there will always be some things that you wish you’d known or done before investing in your franchise. However, the good news is that all franchisees and franchisors will be able to talk about this, so the best way to tackle your fears is to converse with people already in the franchise sector.

Here’s some common regrets and how to avoid them.

1. I wish I’d done more research

This is probably the number one cause of franchise regret. Len Rainford, franchise consultant and founder of The Franchise Specialist, says: “I’d estimate that 50 per cent of franchise buyers don’t research the franchise very much - and some buy a franchise after asking only a few questions or even none at all. They go into franchising with rose-tinted spectacles. It’s remarkable when you think that they may be investing huge sums of money.”

2. I wish I’d understood what franchising is

“The mainstream business media does not cover franchising much, or explain what it is, so I’ve heard of prospective franchisees who don’t understand the concept and think a franchise means they are in business on their own,” says Doug Walker, marketing manager at the it’seeze franchise, whose franchisees promote, consult on, and sell it’seeze website packages to local businesses.

Some prospective franchisees may not realise the collaborative nature of franchising, and that it involves responsibilities from both the franchisee and the franchisor.

Research what business franchising really is about before you start looking at individual franchises.

3. I wish I’d understood what this franchise is about

Research franchises that suit you, but ensure you understand what’s involved.

Chris Wootton, managing director of the Poppies Cleaning franchise, says: “We make it clear that a Poppies franchise is about managing a team of cleaners rather than being one. If there’s a shortage of staff we expect you to manage your way out of it rather than go out and do the cleaning yourself.”

As a Poppies franchisee for eight years before he became the franchisor, Chris says: “I wish I’d understood that part of the franchisee’s role is smoothing the relationships between clients and staff. I would still have invested in a Poppies franchise, but I was more surprised than I should have been by this.

“As a result I’d advise prospective franchisees to spend some time shadowing an existing franchisee, to see what the life is actually like before they invest.”

Cathryn Hayes, franchise director at mobile SMART auto repair franchise Revive! says: “Some prospective franchisees initially think that Revive! franchisees do the repairs themselves, but in fact, it’s a management franchise. We use fewer pictures of franchisees with vans to help counter this belief.”

She adds: “As part of the recruitment process we provide prospective franchisees with notes about the kind of research they should do, including looking at potential competitors in their chosen territory and asking for quotes for work on their own cars. It’s important to discover what they are getting into before they invest rather than finding out later.”

4. I wish I’d asked more questions

The most common regret I have heard from franchisees is that they wished they had asked more questions before they invested,” says Doug. “Because they have not really asked enough questions sometimes they are surprised to find there are elements of our support that they don’t know about.”

Cathryn says: “Most of our questions from new franchisees are about support, both from the franchisor and the franchise network. We have regular roadshows where franchisees get together so it’s clear to them all that they are part of something bigger than themselves and they can learn from each other’s expertise.”

5. Don’t be afraid to ask even the most basic questions

Chris says: “There’s no such thing as a stupid question. Your franchisor will have heard all sorts of questions before. Don’t be afraid or embarrassed to give honest feedback on the business either. Your fresh eyes will be able to see things that are invisible to those already in the business. New people see things the way customers do and can give valuable insights.”

6. I wish I’d realised the financial impact on my life

Cathryn says: “We offer template profit and loss and cashflow forecasts and encourage prospective franchisees to play around with the figures so they can see what impact business ebbs and flows could have on their own financial lives.

“It also shows them that they need to have a buffer of money available. Sometimes this exercise makes them realise that they should wait until they are in a stronger financial position before investing.

“Knowing what to expect can help stave off financial crises later.”

7. I wish I had got family support

Setting up and running a business, franchise or not, puts a strain on personal relationships and it has been known to lead to family break-ups. Take your family to franchise discovery days or to initial recruitment meetings to ensure that everyone knows what’s involved and is on board with the venture.

8. I wish I planned for the end of the franchise term

Franchise agreement terms vary but many are only for five years. Doug says: “Many franchisees don’t think at the start what they want to do at the end of the term. We encourage franchisees to think about this even before they invest. Are they going to renew, sell the business on, or pass it on to other family members, for instance?”

Len says: “Check the franchise agreement about this before you sign it. There may not even be a clause about renewal - I know of one big franchise that hasn’t got one. There usually is one but franchisors commonly have the right to change contract details when the term expires, and franchisees may not like the changes.”

9. I wish I’d taken more time to decide

Rushing into a major life decision like starting a business increases the risk of regret later. Responsible franchisors will not rush you, so don’t rush yourself.

7 Questions to ask to cut the risk of franchise regret

Len Rainford, founder of The Franchise Specialist consultancy, says: “There are many more questions to ask, but these are for starters.”

1. Are you suited to self-employment, hard work and long hours?

2. Are you good at building rapport? It’s essential for gaining customers.

3. Are you prepared to follow a franchise system or prefer doing your own thing?

4. What sector would you enjoy and know something about?

5. What does the relevant market look like? Research the market and the different types of franchises that serve it.

6. What can you realistically afford? Don’t overestimate your finances.

7. Is the franchisor credible, stable and financially sound?

“When you are researching a franchise, it’s always impossible to know everything before you get started,” says John Wright

John has been the it’seeze Web Design Horsham franchisee for six years, providing website consultancy and design services to small businesses.

John explains: “I did a lot of research about franchising and the it’seeze franchise, including speaking to some other franchisees, before I signed up. Nevertheless, there were still some things that were unexpected after I got started, but with support from the franchisor, I was able to deal with them. If I had known about them it would not have made any difference to my decision to go ahead, though.”

John advises other prospective franchisees: “The thing is, you don’t know what you don’t know, so I now recommend that among the questions you should ask existing franchisees, you should always include: ‘What questions would you suggest I asked you?’

“If you asked this of, say, five franchisees, you might well get five different answers. That way you’ll get a broader picture of life as a franchisee that might include some things you may never have thought of.”

It helps to have a checklist of questions

Jinesh (Jai) and Reena Patel launched their Revive! Mobile Bodywork Repairs Franchise in Gloucester a year ago. Jai’s background in the automotive trade and Reena’s in financial services, give them combined experience in management, HR, finance and marketing, and this is their first business venture.

“Revive! tells you everything you need to know before you sign up and provides you with a great deal of information before launch – once you’re up and running there’s so much to do and it can be hard to take everything in. It’s worth doing your own research, asking questions, keeping a checklist, and being organised,” says Jai.

Revive! franchisees manage teams of mobile technicians. “Revive! provides support in areas including marketing, recruitment, accounts and systems, but we felt we needed guidance on HR and health and safety to ensure we supported our staff so we decided to use an outsourced consultancy. It’s the same one Revive! uses so we get a discount,” says Reena.

“Part of our training included information about various kinds of repairs and how to deal with them. If I could go back, I would have taken the same training as our technicians to understand the techniques and issues they face and learn more about the art of this trade,” says Jai.

“Overall, the advice and support from the franchisor and franchisee network have been invaluable,” says Jai and Reena second this point.

Anonymous stories of franchise regrets

“One woman had her chequebook out ready to pay the fee immediately, even in the initial meeting with me. She and her husband were just not suitable, though.”

“The franchise demanded that franchisees should respond to clients 24/7. One prospective franchisee said he had been in sales for years, so that was no problem. However, once he got started, he would turn down any jobs that came in during evenings or weekends.”

Understand your franchise contract

At its most extreme, franchise regret can result in litigation between the franchisee and franchisor. John Pratt, partner at franchising and business solicitors Hamilton Pratt says: “Unfortunately franchisee-franchisor disputes are very common – not surprising because franchise agreements are complex commercial agreements. They last a long time and franchisees receive most of the ‘benefits’ in the early part of the term, so unless the franchisor is very good (most are), later in the relationship franchisees may resent the restrictions on them and the payments which they have to make to the franchisor.”

He stresses: “Before you sign a franchise contract get it assessed by a franchise specialist solicitor. They will check and explain what it means for you.”

The most common causes of franchise regret, he says, are franchisees not fully investigating a franchise before committing; the franchisor not providing the assistance promised; and franchisees not appreciating the commitment required.

He advises fully investigating a franchise, speaking to all existing franchisees (not simply those that the franchisor wants you to talk to), and not accepting at face value that everything you’re told is true or will necessarily apply to you. He adds: “Ask, in writing, that the franchisor confirms any financial information provided is based on average franchisee performance and ask for the answer to be in writing.”

Finally, he cautions: “Don’t get overexcited and rush in, or be pressurised into entering into the agreement.”

The author

Linda Whitney writes about franchising for the Daily Mail, What Franchise and many other publications.