Though some details may differ from one industry to another, the process of buying a franchise can still be broken down into a series of eight key phases. You should aim to complete each step carefully and in your own time, and be ready to get professional advice before making any binding commitments.
Beyond ‘being your own boss’, why do you want to buy a franchise business? Have you talked the idea through with your partner/family?
Will you be comfortable following a franchisor’s detailed business plans (unlike with an independent business, you are obliged to follow a proven, albeit limiting formula)? How do you feel about sharing a percentage of the profits you earn?
And are you willing and able to invest your own cash and take on debt in the form of a business loan?
2. Appoint a franchise consultant
You can (and should) access for yourself lots of information about buying a franchise. However, an experienced franchise consultant will answer your questions, take you through the ‘small print’, give you practical support and valuable ‘insider’ advice, and guide you smoothly through what can feel like a complex process.
3. Investigate potential options
Ideally, you should narrow down your field of interest to certain sectors – whether it’s in retail, fast food, cleaning or something else – or filter your options by other means. Perhaps you want to work from home? Or you will only consider low-cost franchises?
And be sure that you have at least most of the skills you will need to operate your chosen type of business.
Successful franchisors will have lots of useful information and most hold ‘discovery days’ for prospective franchisees to attend and learn about their franchise schemes.
4. Visit existing franchisees
If your preliminary discussion with a potential franchisor reveals the company would welcome you into their ranks as a franchisee, you should then receive their formal ‘franchise disclosure document’ (FDD).
Among many other things, this will list their existing franchise outlets. Your next task should be a fact-finding visit to some of these businesses to speak to their owners about their experience of the system.
Do they get good support from the franchisor? Are they getting everything they were promised (training, finance, marketing etc)?
5. Decide on your location
Your franchisor will help you choose your location – indeed, they may bar you from setting up in certain places, which at least could protect you from making a bad decision.
As with an independent business, however, you should carefully research your location yourself. Consider things like accessibility for customers (car parking space and proximity to transport links being helpful), visibility and footfall (high streets obviously being ideal, if you’re seeking high numbers of customers walking past the store), whether local demographics favour your business (e.g., budget retail works well in a low-income area) and local competition (how many similar businesses are nearby).
6. Select your franchise (and funding arrangements)
Keep repeating steps three, four and five until you’re happy with your choice – however long it takes. Once satisfied, you need to draw up a formal business plan to present to a bank or specialist small-business lender.
Calculate carefully the size of the loan you need – the franchisor should help – accounting not just for the initial franchise fee, but also ongoing working capital and a safety margin to cover unforeseen difficulties.
7. Sign your franchise agreement
Once the bank signs off on the loan it’s time to engage an experienced franchise lawyer to vet the franchise documents and complete negotiations with the franchisor on your behalf.
Though profitable schemes involving national brands will have ‘standard’ franchise agreements, this is no time to act on impulse or leave important questions unanswered. Don’t sign the document until you are completely satisfied.
8. Prepare to launch
Any business will need various permits and insurances to comply with regulations, and your franchisor will probably be your main source of support here. You will also need to hire employees and organise training – once again with the assistance of your franchisor.
Once your doors are open to customers, you can then start to reap the benefits of your careful planning and preparation. Good luck!