Research is key

What is the key to unlocking the right franchise investment for you? Research and plenty of it, says Lloyds TSB’s Richard Holden

Don't leave any stone unturned in your search for the perfect franchise. In this technological age there is a wealth of information available online as well as in trade publications such as this one. When you start exploring franchise options it can be bewildering, so how can you whittle down your choice from the 850-odd UK-based franchise opportunities to find the right one for you?

Finance
The logical first step is to eliminate all opportunities that are either out of your price range or that will not generate you sufficient income to meet your own personal requirements. Everyone should work to a budget, so establish how much you can invest from your own savings.

Franchise specialist banks will typically consider finance up to 70 per cent of the total investment cost including working capital if you are looking to invest in a well established, proven franchise brand. For instance if you have £12,000 savings, the bank may look at providing finance up to £28,000 to support your plans, which means your total investment fund will be a maximum of £40,000. Now you've established the investment level don't investigate opportunities that will stretch your budget.

Bank finance is subject to status and a review of your business plan. Expect your plan to be challenged by the bank manager and be prepared to answer their questions confidently. The lender may require security to cover the finance, which is usually a legal charge over a residential property. The government-backed Enterprise Finance Guarantee scheme may be available if you do not have adequate security to offer the lender, so it would be worthwhile speaking to the bank's franchise department in the first instance to get their view on the financial support that may be made available to you.

Match make
The next step is to eliminate unsuitable opportunities. You should have a clear idea whether you want to run a business from home, a vehicle or from an office. You will also have views on whether you wish to work for yourself as an owner operator or to employ staff and to manage a team. Whatever your requirements, there will be plenty of franchises available to choose from. You should look at your lifestyle and how it may change if you are operating your own business.

Seek advice
It's a good idea to contact franchise professionals such as the British Franchise Association (bfa), franchise specialist banks, solicitors and accountants for expert advice. It is advisable to concentrate your research initially on the franchise brands that are members of the British Franchise Association because they will have undergone an assessment to gain membership. You can widen your search later if necessary. Ethical franchise brands will stand up to scrutiny and are likely to be a natural choice for the shrewd investor.

Consider the market
Look at the industry sector and find out what is happening in the market. Are their any statutory changes pending? How has the economic climate affected the industry? Your research may include contacting industry bodies or reading industry-related publications to learn more. Look at the competitors and make comparisons. Avoid industries that are prone to boom and bust cycles or indeed ‘fad' businesses that may not be popular in a few years time.

Quiz time
Ask questions of the franchisor and speak to as many franchisees as you can. There is an old Chinese proverb that says: ‘He who asks is a fool for five minutes, but he who does not ask remains a fool forever'.
By following these steps you should have narrowed down the options and now it is time to decide. Don't make a commitment to invest unless you are 100 per cent satisfied. If you are still uncertain, go back to the beginning and start over again. If by doing so you reach the same conclusion then that franchise brand is probably the one for you.

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