Should you worry about being cheated by a franchisor?


theif

Last year we asked a number of UK franchisors and franchisees what they thought were the biggest misconceptions about franchising. In this series, we look at these misconceptions and attempt to discover the truth (or untruths!) behind them.

This week: Inadequate regulation allows a minority of unscrupulous or incompetent franchisors to tarnish the entire industry

It’s a legitimate concern – that a company posing as a reputable franchise will take your initial fee and head for the hills.

The reality is that this rarely happens in the UK’S franchising community, and there are many ways to protect yourself.

Although there is no centralised regulation for franchises in this country (agreements are created under standard contract law and are subject to no sector specific guidelines), the British Franchise Association (BFA) and the Approved Franchise Association (AFA) are well respected advocates of self-regulation, and have helped create a strong and reputable franchise industry.

If a franchise becomes a member they are expected to follow a code of practice that will protect their reputation and reassure potential franchisees that they are investing in a bona fide business opportunity.

‘I recommend buyers do as much research as possible. The BFA is always a great place to start. You can be reassured that full members of the BFA are established franchised businesses with a proven track record.  They have to be tested against strict criteria in order to qualify.’

- Michelle Willams, Franchise Director at AutoSmart (the BFA’s Franchisor of the Year in 2012)

The truth is that he vast majority of franchises in the UK offer attractive packages which include training, ongoing advice and support, marketing strategies and exclusive territories, enabling a new franchisee to expand their business, and earning potential, quickly and easily.

Occasionally, a ‘cowboy’ franchise may come along and take advantage of unwitting investors, but if potential franchisees check that their franchisor has registered with a governing body, and that their contract adheres to advised terms, there should be little room for foul play.

It’s also worth looking at existing franchisees loyalty to the business you want to invest in

‘Note how long franchisees stay in the network. The average length of time an Autosmart franchisee chooses to stay with us is 12 years. This is a great indicator to buyers, and us, that we are doing something right. A high turnaround should definitely be questioned.’ 

- Michelle Willams, Franchise Director at AutoSmart (the BFA’s Franchisor of the Year in 2012)

The bottom line is that a franchisor’s ability to attract investment depends largely on achieving a respectable image and their prospects are also reliant on the reputation of franchising as a whole.

The industry is dedicated to maintaining this symbiotic relationship between investor confidence and market strength, so the odd opportunist can be easily spotted and avoided.

More common misconceptions about franchising:

Franchisors take a slice of the franchisee's profits with franchisees receiving little in return

The vast majority of franchises are in the fast food sector

A franchise is no more likely to succeed than a start up

 

About The Author

Nicky Tatley Writer
Nicky contributes articles to all titles in the Dynamis stable, primarily BusinessesForSale.com, FranchiseSales.com and PropertySales.com and is a regular contributor to other business publications including Talk Business, Bdaily.co.uk and NuWire Investor.