What’s the best way to select a franchise? We’ve got 3 ways to go about it.
So you’re in the market for a franchise. Here are 3 ways to get the right one:
1. Do your homework
A study by Griffith University earlier this year found that prospective franchisees skimp on research, and only 20 percent of franchisees and small business owners knew what the term ‘due diligence’ is.
But this is not the way to go about buying a franchise.
Chatime group GM Carlos Antonius agrees.
“Understand as much as you can about the franchise system, speak to as many franchisees and customers as possible,” he says.
Jonathan Payne, managing director at Xpresso Mobile Cafe, says potential franchisees should also check out the competitors and the proposed territory selected for the franchisee.
2. Make sure your finances are ready
Most franchises come with an initial investment cost and ongoing costs, as well as important legal documents like a franchise agreement and disclosure document.
“Ensure you have already started discussions with your financial advisers such as your accountant about financing a business purchase and ensure you know what you can afford,” says Peter Fiasco, franchise development manager at Hairhouse Warehouse.
“It is no use for a franchisor to discuss an opportunity if in the end you do not have the available funds or equity position to purchase the business.
“If you do this at the start and upfront, it streamlines the process and increases your chances of approval.”
Antonius also suggests that potential buyers consult franchise accountants to “ interrogate financial model assumptions.”
“Too many times franchise buyers forecast aggressive sales assumptions without consideration of how a business may look if sales don’t meet forecast,” he explains.
“Sensitivity analysis is integral part of understanding what strategies a franchisee will need to adopt if sales are softer.”
He also recommends speaking to a legal professional to review franchise agreements and disclosure documents.
3. Get the mindset right
Operating a business is a journey at the end of the day, so it’s important that your attitude to the process is switched on and your support system at home is intact.
“Be positive. We simply don’t work with ‘glass half empty’ type folks,” says Payne.
Sal El Houli, general manager at Famous Fish highlights the need for passion.
“Coming in with the right attitude/reason why is the most important thing,” he says.
“If you’re not passionate about the product/service you are working with and don’t have a strong level of commitment and resilience to dealing with adversity, then it can be a tough journey.”