Raising the question

Buying a franchise is likely to be one of the most important decisions of your life. Look at your own skills, your background, training and qualifications and build these factors into your choice of franchise.

When you purchase a franchise, you are entering into a long-term business relationship with the franchisor – so it’s extremely important that you research their history and business performance. However enthusiastic you are, don’t rush, and be wary of franchisor pressure to sign up – an ethical franchisor should not subject you to any kind of tactics, such as a “if you don’t sign now you won’t get another opportunity” approach.

Work through your personal checklist to ensure you are satisfied that you haveresearched your franchise opportunity in full. Whether you are meeting face-to-face at a Discovery Day, visiting a stand at a National Franchise Exhibition, conducting a correspondence over email or discussing the opportunity over a telephone call, there are key issues on which you should seek further information and that the franchisor should be clear about.

At the very least, the top 20 questions you should be asking are:

1. How long has the franchisor been in franchising?

2. What is the background of the directors?

3. How much expertise/experience do the directors have in the business
they are franchising?

4. Is this business financially sound? Ask for three years’ audited accounts and current management accounts if possible. Ask your accountant to look at them.

5. Is the franchisor a member of the British Franchise Association? If not, why not?

6. Have any franchisees failed?

7. If the franchise is new to the market, what pilot scheme did the franchisor operate? Remember that when buying a new franchise you should get a proven business format and as much information as possible on the pilot operations.

8. What initial and ongoing training and support is offered?

9. How much support is given in choosing and fitting out premises (if the franchise requires them)?

10. Is there a market for the franchise’s goods or services? Has there been any market research?

11. How much does the franchise cost and what does the price include? How does this compare with other franchises?

12. How much will you have to pay on an ongoing basis? (This is normally a percentage of turnover, or a mark-up on goods supplied).

13. Have you been given any financial projections for your business? Have you seen any actual trading figures from existing franchise owners that show whether these projections are realistic?

14. Who are the main competitors and how do they compare in terms of price, quality, delivery and service?

15. Is there a long-term market for your goods or services, or is the franchise operating in a market subject to changes in fashion? Is the business seasonal?

16. What sales area is being offered? Is it postcode based or geographically based? Is there a set territory?

17. How long is the term of the legal contract – can you renew it?

18. Do you have to achieve minimum levels of turnover, or buy minimum   amounts of stock?

19. What happens if you don’t achieve this?

20. Can you sell the business in due course? What restrictions are there on sale?

The responses you receive to the questions above could prove to be
invaluable. Combine this with what you know of yourself, your capabilities, working style and even any gut feelings you may have as to how you feel about their company/brand culture and it could help you to make a well-balanced decision.

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