Start Your Own Business Through Buying a Franchise
David Killeen, Managing Partner of Kileen and Associates, offers his 'Top Tips' to those thinking of buying a franchise.
What Is Franchising?
Franchising is a formal business relationship where the owner of a product, service or a recognised and registered trademark / trade name agrees for a fee or combination of fees, to allow an independent third party or company to trade under its trademark / trade name and sell the same products and or services independently.
The franchisor is the original developer of the business concept and the franchisee is the investor who purchases the rights to trade using the franchisors proven business systems. The franchisee pays a fee or combination of fees over the term of the agreement for that privilege. The franchisor passes the benefit of it’s “know how and expertise” to the franchisee.
The franchisee is given the legal right to replicate the franchisors business model in strict adherence to the business systems outlined in the operations manual and the terms contained in the legal agreements, which frame the contractual relationship between the parties.
Top Tips: Evaluating What Is a Good Franchise to Buy
1. Does the franchisor have a successful, financially viable business proposition in its own right?
2. Do they own the rights to trade under the trademark or trade name?
3. Has the franchisor tested the franchisability of the business concept through running a minimum of one independent, arms length pilot franchise to prove the concept can be franchised successfully?
4. How keen is the franchisor to sign you up? If the franchisor comes across as too eager they are not being as selective in their recruitment processes as they should be. Beware!
5. If the franchisor is making representations on how successful you will be financially, be very wary. Remember “Good franchises are bought not sold”
6. How strong is the franchisor financially? Seek out the company’s accounts through the companies’ office to make sure they are financially secure if they operate as a limited liability company.
7. What organisational structure has the franchisor in place to properly support the franchise programme rollout?
8. Make your own assessment on the experience and the credibility of the franchisors management team. Have confidence in your “gut”.
9. Before buying a franchise given you have been some way through the recruitment process ask for a supervised viewing of the operations manual and the training programme. The franchisor is unlikely to give you free access to the documentation so expect only a supervised viewing.
10. Request a list of all the other franchisees that the franchisor has in place with contact details. Go and visit them. Ask them the important questions about their own experience with the franchisor. Ask have their expectations been met in relation to the comprehensive training and support being promoted by the franchisor.
11. Visit the business unit(s) run by the franchisor and assess their standards of operation.
12. Finally assess the honesty and transparency of the franchisor through the recruitment process.
If there is any uncertainty about terms or fees or the terms appear to be negotiable then seriously question the uniformity of terms being offered by the franchisors to other franchisees and question the integrity of the franchise offer overall.
Remember when assessing the suitability of a franchise to purchase the underlying principle of “Caveat emptor” applies. So do your due diligence and “let the buyer beware”.
For more information on franchising, please email killeenassociates@yahoo.com or dkilleen@oceanfree.net.