New steps to buying a franchise

1.    Decide whether you want to be involved in a service or retail business. There are pros and cons. If you are the sort of person who does not want to work anti-social hours, a retail operation or a business which operates during office hours would suit you better. However, a retail operation from a fixed location does have disadvantages, such as taking on lease obligations, employing staff and carrying stock. On the other hand, if you are in the service business, it is quite likely that working office hours alone will not "cut the mustard". Much depends on the type of service business; if you take a carpet cleaning business, for example, this will mean working anti-social hours; on the other hand, you are likely to be working from home with little or no need to pay rent or carry a large stock of products.

2.    Decide how much you can afford. There is usually a choice of franchises in the same line of business and they don't all cost the same. For example, there is more than one carpet cleaning franchise available. Moreover, there are many other service franchises available, so the logical thing to do is to look and see what is available for sale in your price range. 

3.    Obtain as much detail from the franchisor as possible. Where the franchisor provides financial illustrations, study these carefully to satisfy yourself that the income shown in those illustrations satisfies your needs and requirements. But bear in mind that these are only illustrations and may be optimistic.

4.    While reviewing the information supplied by the franchisor, contact your bank manager (for a possible loan) and discuss with him/her whether, in principle, the bank will lend you the money you require for the type of franchise you are contemplating buying. Most banks now operate sophisticated information systems whereby bank managers have access to a central office from which they can obtain detailed information about many franchises, which will enable them to make a decision.

5.    Arrange for a solicitor, who is experienced in franchising, to review the franchise agreement and advise you on it.

6.    If you and your solicitor are satisfied with the agreement, see your accountant for advice as to the detailed aspects of the franchise. By now, you should have some idea of the sort of premises you will be occupying or your "territory". The franchisor may have produced some financial projections for your particular business; if not, your accountant will help you to put together profit projections etc. and, if necessary, a business plan in support of your loan application with your bank.

7.    At this stage you will probably be asked to sign the franchise agreement.  You should be guided by your solicitor as to the timing of signing the franchise agreement, which should be conditional on your securing satisfactory premises and a bank loan.

8.    Where retail premises are involved, at this stage serious effort should be made to secure satisfactory premises. You should start talking to your franchisor about the details of converting the premises into a franchised outlet.

9.    By this time, your bank should have responded to your application for a loan and if the answer is 'yes' you will be in a position to push those involved into finalising the lease for the premises. It is important that you do not enter into a binding commitment to take on premises unless and until you have your bank's agreement to the loan and you have signed the franchise agreement.

10.    Once you have completed the acquisition of the premises, you can go about converting the premises into a franchised outlet and going on the franchisor's training course.

From stage five, the sequence of events up to when you are ready to open for business will vary depending upon the nature of the franchise.

The important thing to remember is that there will come a time when you have to make three significant commitments to three different parties:

(1) To the franchisor, by signing a franchise agreement or an agreement to purchase a franchise;

(2) To your landlord, by signing a lease or an agreement to take a lease of the premises;

(3) To the bank, to take up the loan.

Having selected a franchise you wish to buy, there are a number of matters to which you have to attend before you can open for business. What you need to do will depend on the nature of the business you are contemplating. For example, the requirements of a franchise which involves a process to be applied to products before they are sold will be different from where the products can be sold off the shelf. Nevertheless, the above general guide of the steps, and the order in which they might be taken, should help you to complete the transaction more efficiently, both in terms of costs and also in terms of your time and effort.