Steps to franchising

Cathryn Hayes on how to get the most of your time at the National Franchise Exhibition

Running your own business may be your long-term goal, but it can be a frightening step to take. Franchising gives you the chance to own and run a business under an established brand, with a proven format, market and business systems.

The ideal way to find out more about franchising is to visit the National Franchise Exhibition at the NEC in Birmingham on 5 & 6 October. Visitors to the show can take advantage of the many talks and presentations given by experienced franchisees to gain valuable advice on running a franchised business. (For more information, see the Show Guide on pages 35-58)

Whilst at the exhibition take the opportunity to speak to the many franchisors and professionals who are on hand to give advice and answer your questions. The bfa also run regular seminars during the course of an exhibition. Of course, there is a lot of work to do before you will be ready to part with any money – you will need to research your chosen franchise, making sure that it is the right one for you and that you are fully aware of what is involved. So how do you research a franchise? Below are some top tips:

• Find out what franchises are available – as well as franchise exhibitions, there are publications such as this one and websites like franchiseinfo.co.uk that are devoted to franchising and starting a business – or visit the British Franchise Association (bfa) stand at the event for further information or go to their website: www.thebfa.org.

• Take as much advice as possible – advice on choosing a franchise is available from the bfa, banks, lawyers and accountants. Examine your strengths and weaknesses – what skills do you have? Does the franchisor provide training and back-up to help you overcome any weaknesses? Check the franchise is right for you – is the business one you can see yourself running? Talk to existing franchisees – what problems did they have, how successful are they?

• Investigate the franchisor – ask for a copy of the annual accounts. It is important that the franchisor has the financial resources to support a franchise network.

• Examine the marketplace – is there a market for your chosen franchise’s goods/services? Is the franchise operating in a market subject to fashion? Take care with new franchises – has the franchise been piloted, how long has the franchisor been in business?

• Check the legal agreement – has the franchise agreement been vetted by a franchise specialist solicitor? Take your time – however enthusiastic you are, don’t be rushed, and do your homework.

Remember all business involves some form of risk, including franchising. However, there is no doubt that going into business as a franchisee of a well-established, proven business format franchise will give you the best possible start. You will need to ensure that you have the funds to purchase the franchise you are interested in to set up your new business.

For an established franchise, most of the major banks will lend up to 70 per cent of the start-up costs, for newer franchises the figure will be 50 per cent. With this in mind: How much will you be able to borrow? Prepare a full list of your personal expenditure: mortgage, hire purchase, household bills, and so on. This will show how much money you will need to take out of the business in order to live. What security can you give to back up your loan? You might have a life policy with some value, or have equity in your home. Start preparing your business plan – this is a vital document to obtain finance ` from the bank.

As part of your business plan, you will need to prepare cashflow forecasts for the first two years of the business. Your franchisor will help, but you need to be sure that you understand the figures. For example, what are they based on, how much do you need to turnover in order to break even?

Starting your own franchise will involve a great deal of planning and research. For practical information visit the National Franchise Exhibition, NEC Birmingham on 5 & 6 October and talk to a representative from HSBC on stand J60. 

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