Choosing the correct franchise can be an extremely complex & confusing task.
Follow this handy guide to know how you can make it easier.
Choosing Your Franchise – It’s Tougher Than You Imagine!
Franchising is one of the most attractive and accessible ways for people to fulfil their dreams of running a business. It is particularly useful for those who – for the want of capital and/or ideas – always find business opportunities just beyond their reach.
As we have discussed on our What is Franchising page, franchising has flourished at an unprecedented rate in the last few years. In 2017 alone, franchise businesses contributed close to £15 billion to the UK economy, while also generating hundreds of thousands of jobs. It is also imperative to note here that franchise businesses have enjoyed a far better track record of success than new businesses and start-ups. Therefore, if you have made up your mind about running your own franchise business, the time, you will be glad to know, couldn’t be better. If you are still on the fence about the whole franchising idea, perhaps our Should You Run a Franchise Business guide can help you decide.
With over 900 brands (and counting) offering franchise opportunities in the UK, finding ‘the one’ that will work for you is easier said than done. The confusion, however, shouldn’t detract you. In this short, handy guide to choosing the correct franchise, we will discuss how you can systematically narrow your options down and maximise your chances of running a successful franchise.
Statistics Source – Proactive Marketing
Make It All About You!
This seemingly insular piece of advice can go a long way in helping you succeed in the world of business. The very first thing you will need to do here is to think like a business, and not as an individual. You will want to secure your own interests first and the foremost – just how you are advised to look after yourself in a safety drill.
Whichever franchise you choose, you will be paying money to acquire and run it. So, it’s only reasonable for you to expect a decent return on that investment, along with other resources you will put on the line over the next few years. Once you have this figured out, you can ask yourself some very important questions.
1. Why Do You Want to Run a Franchise?
What’s the main reason for you to be interested in running a franchise business? Some of the most common reasons for people to want to run a franchise are:
a. I want to work for myself, be my own boss.
b. I think I can secure my financial future by running a franchise.
c. I have always wanted to be in a business, and this is the best way for me.
d. I enjoy the responsibility that comes with running my own business.
e. I want to do something that I really enjoy.
f. I just want a break. I would love to work from home if I could.
Your answer can be one, many or none of the above. Regardless of the number, it can tell you a lot about your motives. If your decision is primarily money-motivated, you will have to look past the marginally profitable franchise opportunities and go after the ones that are financially more promising. If you want to get a taste of entrepreneurship through a franchise while continuing with your job, you may want to look at only the franchises that don’t consume a lot of your time.
2. How Much Money Can You Afford to Invest?
The next question, quite predictably, has to do with money. Every franchise opportunity comes with a price tag. But that, unfortunately, isn’t the only cost involved. Even before your franchise is open for business, you will be required to pay for the inventory, personnel and a number of other costs. A more in-depth analysis of these costs is available on our Economics of Franchising page. Therefore, shortlisting the franchise opportunities that fit your budget can save you a lot of hassle and time.
Most franchisors expect you to raise at least 40% of the initial working capital required all by yourself. The remainder is usually raised via external financing. For example, if you have available a sum of £10,000 to invest upfront, you can potentially secure franchise opportunities that cost up to £25,000. As a rule of thumb, you should look to invest 50 to 60% of the initial capital. This creates a leeway for you to manage unexpected expenses without stretching your credit limit thin. You can also refer to our Franchisee Finance page to know more about how you can fund your venture with a loan from specialist lenders.
3. Are You Willing to Take Risks?
Franchising, even though a business model, is best treated as an active investment. Therefore, before you put your hard-earned money and countless working hours at stake, it’s important for you to know how much risk exposure you are willing to assume.
If your risk appetite is significant – in other words, you are not wholly dependent on the money you are investing – you can afford to entertain not-yet-proven but potentially very profitable franchise opportunities. A safer bet, in other cases, would be to go with established franchisors that have longstanding industry reputation.
4. What Is Your Expertise and Experience?
This is an important yet, unfortunately, often neglected aspect. While enjoying your work is important, it cannot and should not take precedence over your skill sets. For example, if you are really good at managing your business clientele and have a sizeable network of business contacts, it is often a good idea to choose a B2B franchise – even though that may not be the most appealing idea.
Some examples of such skill sets are:
- Personnel management
- Space management
- Working with the elderly
- Working with children
- Automobiles and driving
- Retail products and services
- Customer relations
- Accounting, finances and statistics
- Shipping, storage and delivery
- Administrative work
- Marketing, B2C selling
- Creative arts
The list is virtually endless. A good practice here would be to list all of your skill sets and find a common denominator between most of them. It’s quite likely that this will help you further shortlist the franchise opportunities.
It’s often claimed that franchising can help you ‘reinvent’ yourself by working in a completely alien industry. While true to some extent, this notion should never dictate your business decisions. It’s always safer, and usually more profitable, to build onto the skills and experiences you may already possess.
5. Will You Be Working Full-Time?
Another important question you must answer before you choose a franchise!
Running a franchise is, at the end of the day, a business venture. If you cannot dedicate enough time, energy and thought towards making it work, you will always be likely to fall short of your goals. Many franchisees treat their franchises as ‘jobs’ – a definite way to find yourself gradually drifting away from the whole idea of franchising.
To not have to confront that scenario, it’s advisable to take on a franchise opportunity that you can comfortably manage. If you are going to work full-time, you have to take into consideration factors such as your health, commitments to the family, the daily commute and other similar factors. If you are going to work part-time, you need to be certain about the number of hours you can spare and the number of hours your franchise business will demand of you every week.
A Ready-to-Go Checklist to Help You Choose the Correct Franchise
The first step is usually the hardest, and we, at franchise4u, are fully aware of it. So, to help you select a franchise that is most likely to suit your interests, we have created a handy checklist. This checklist sums up the points we have discussed above. You can print this checklist out, sit down all by yourself or with your partner in a quiet room and make notes of your responses. If once isn’t enough, you can repeat the process until you are satisfied. You can then self-assess your answers and try to draw logical conclusions from them. It’s important to be as objective as you can while answering these questions.
We are confident that, at the end of this old-school exercise, you will be left with fewer and better options to choose from.
|Why do you want to run a franchise?|
|Have you been thinking about this for a long time? If yes, why act now? If no, is your decision impulsive?|
|What franchises have you seen, visited or heard of in real life?|
|Which brands come to your mind when you think of franchising?|
|Do you have any prior experience in running a business?|
|What are you more interested in – working from home or working at a business location? If it’s the latter, how far are you willing to travel?|
|How many hours per week can you dedicate to a franchise, should you choose to run one?|
|What are your interests?|
|What are your most valuable skill sets? Do they match with your interests?|
|Name a few industries that you already have at the top of your preferences.|
|How much money can you invest? How much money are you willing to invest?|
|What are the returns you expect on your investments in a franchise business?|
|How aware are you of how franchising works?|
|Have you explored other business opportunities than franchising? If yes, what are those?|
|How confident are you of being able to manage, lead and keep motivated a group of employees?|
While self-assessing your responses, you may want to make sure that the following aspects are balanced in measures that work for you.
- Available capital
- Your interests
- Your goals
- Your expertise and experience
- Your schedule, health and personal commitments
- Your understanding of the business
Once you have a handful of potential industries as your franchise candidates, you can be more thorough and diligent with your search. It will, then, be a good time to read about things you need to know before buying a franchise .