Ten steps to franchising

Once you have made one of the most important decisions in your life: whether to start a business of your own, the next decision is almost equally important, which is what sort of business should you go into.

1. Decide whether you want to be involved in a service or retail business. If you do not want to work anti-social hours, then a retail operation or a business that operates during office hours would suit you more. Operation from a fixed location means you would be responsible for 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, of course, depends on the type of service business; if you take a carpet cleaning business as an example, this will invariably mean working anti-social hours; on the other hand you are quite 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 now usually a choice of franchises in the same line of business and they don't all cost the same. Ensure you 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 meets your needs and requirements.

4. Contact your bank manager (if you think you will need a loan) and discuss with them whether, in principle, the bank will lend you the money you require.

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. The franchisor may have produced some financial projections for your particular business, if not, your accountant will help you 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 and you should start talking to your franchisor about the details of converting the premises into a franchised outlet.

9. If the answer to a loan 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.

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. 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.

You may also be interested in...