choose franchise tips

How to choose the right franchise: top tips

Sarah Stowe

Choice is a wonderful thing but it can be overwhelming when you are looking for a business.

It’s crucial you make the right choice when selecting a franchise, and you will probably have multiple options to consider.

So how do you start?

Select a franchise you’ll love

It is paramount that you enjoy the business you buy. Businesses thrive when their owners are passionate about the products or services they offer. If you are genuinely interested in what the franchise provides, you will more easily acquire the necessary information and skills. Enjoyment fosters expertise, which is vital for success. 

When you love your work, it becomes a joy rather than a chore, and this enthusiasm will resonate with your customers and your staff. Passionate business owners tend to work harder, put in more hours, and integrate their work into their lives seamlessly, leading to greater success.

Pick a market that’s got potential

Do your homework on an industry that interests you and consider if the growth potential matches your goals. Many new franchisees move beyond their chosen career path when investing in a new business; with the backing of the franchisor’s expertise it’s a great way to step into a whole new field of business.

Consider whether an exceptional growth trajectory can continue – perhaps the concept is a novelty and growth will plateau or decline. An industry might be just gaining momentum and you’ll be able to take advantage of the boom. Perhaps the sector is a solid, slow-growth industry that will provide a steady revenue stream in all economic conditions.

It’s important to understand the market, and whether it fits your business aims.

Trust your instincts

When you enter into a franchise agreement you are forming a business partnership and the relationship with your franchisor and their team is crucial to your success. You must trust and be able to work harmoniously with them. If you have any doubts about their integrity or the compatibility of your values, think carefully before proceeding. 

Always trust your instincts; if something jars during the selection and recruitment process, it may indicate a poor fit. A good emotional and philosophical match with the franchisor is almost as important as the business itself.

Look for integrity

Integrity is vital for two main reasons:

  1. It ensures peace of mind and ethical business practices, which contribute to long-term success and personal satisfaction. Avoid the lure of unethical practices that may lead to wealth but compromise your values.
  2. High integrity builds a strong reputation, crucial for local service businesses like franchises. A solid reputation can eliminate the need for extensive advertising as satisfied customers will naturally promote your business.

Understand the financials

It is critical to understand the financial aspects of a franchise; don’t leave the number-crunching to an accountant, or the franchisor.

  • Investment level: Assess what you are getting for your investment and whether it offers good value.
  • Return on investment (ROI): Determine how long it will take to recover your investment and achieve profitability. Ensure these projections are realistic and attainable.
  • Running costs: Identify both fixed and variable costs, including overheads like leases, wages, and premises, as well as costs dependent on sales levels.
  • Working capital: Calculate the funds needed to cover running costs and salaries before the business starts generating sufficient profit.
  • Borrowing Arrangements: Evaluate loan options and their affordability. Compare different lenders to secure the best rates and terms.

Familiarise yourself with these financial metrics to strengthen your negotiation position and make informed decisions.

Once you buy a franchise, reversing your decision can be challenging and costly. Do the hard work before you invest in a franchise and seek a wide range of perspectives. Start by finding out what current and former franchisees, customers and competitors think of the business, and research the market and its potential for growth.

Turn to the experts

Finally, but vitally, seek expert advice. Yes, you want the opinions of your friends and family but turn to experts in the franchising field to get a professional review.

Many prospective franchisees fail to consult specialists before investing their savings – and that can backfire. If you lack prior business experience, getting relevant expertise is invaluable. Lawyers with franchising experience are well-versed in the nuances of franchise agreements and accountants can provide an objective perspective on the potential of the business.