Do your research

Franchise expert Nigel Toplis on how to assess a franchisor

In order to decide on the right franchise for you there are six steps to consider: suitability, investment level, the industry, the franchisor, professional advice – both legal and financial – and finally, making the decision.

All six are important but in this article we are looking specifically at assessing the franchisor.

A proven business history – ensure the franchisor has been successfully trading for at least two years. Ask to see evidence of their trading history and their annual accounts. Meet with other franchisees and gauge their opinions.

Well-documented systems – the 
franchisor should have their business system documented by way of a manual 
or manuals.Effective training – the franchisor should
 provide you with training in all aspects 
of the business system, including 
(but not limited to) sales, marketing, operations and finance. Ask to see a 
copy of the training programme for 
new franchisees.

Security of tenure – make sure that 
the franchisor does actually own the franchise or at least has the rights to operate the franchise. It is not unusual 
for a franchisor to run the business 
under a master licence agreement from another country.

Ongoing support structure – this is 
critical. Not only are you buying into a brand and a business system, but also 
into the franchisor’s intellect, know-how and continued support.

Bfa membership – the British Franchise Association carries out vigorous checks on its members and bfa accreditation gives added peace of mind.

Once you’ve looked into the attributes of a franchise, carry out background research with the bfa, Companies House and franchise advisory services and consider the following:

• Are there other franchisors in the industry?
• If not, why not?
• Is your preferred franchisor the largest operator or a key player?
• Are they a relative newcomer but with a brilliant new slant?
• Does it offer the best package to you as a customer?
• How often does a consumer buy the product or service and do the products or services enjoy repeat business?
• What is the typical value of a sale and the typical profit?
• How many customers would you need to meet your minimum business projections?
• Does this franchisor seem profitable?
• Does this franchisor offer the best potential for growth?

There is nothing better, however, than meeting the franchisor face-to-face and asking about things such as profitability, their vision and the support they can offer you, as well as their knowledge on the sector and market trends.

In addition to this, get a copy of the franchise agreement. They won’t changethe document to suit you, but you need to be aware of its contents. Once you have met with the franchisor and you are happy to proceed, do ask to visit or speak with some existing franchisees.

So, in summary, look for a franchisee where the franchisor has a proven history, good systems, effective training and bfa membership. Ideally they will be a business in which you have an interest and some or most of the requisite skills, you are able to meet the required investment level and the sector is one that is large, growing and sustainable.

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