Simple Guide to Buying a Franchise

James London

Description

A simple guide to the questions you need to ask before buying a franchise

Sujets

• Gestion et management

Informations

• Publié par: Andrews UK
• Date de parution: 19 juin 2014
• Nombre de lectures: 0
• EAN13: 9781781662342
• Langue: English

Extrait

Title Page
A SIMPLE GUIDE TO BUYING A FRANCHISE
The Questions You Should Ask, But Franchisors Would Rather You Did Not.


By
James London



Publisher Information
A Simple Guide to Buying a Franchise.
Published in 2011 by Andrews UK Limited
www.andrewsuk.com
This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out or otherwise circulated without the publisher’s prior written consent in any form of binding or cover other than that in which it is published, and without a similar condition being imposed on the subsequent purchaser.
The characters and situations in this book are entirely imaginary and bear no relation to any real person or actual happening.
Copyright © James London
The right of James London to be identified as author of this book has been asserted in accordance with section 77 and 78 of the Copyrights Designs and Patents Act 1988.



Disclaimer
The contents of this document are merely meant to highlight areas that any prospective franchisee should look to explore, it is in no way exhaustive and the author takes no responsibility as to the validity of the statements made as all franchise opportunities will differ. The content is made up from experiences within the franchise and general business arena.
The author advises all readers to seek independent professional advice prior to entering any business arrangement, including but not limited to, Financial, Tax, Legal and Investment.
All of the text contained herein are the copyright of the author and cannot be duplicated in whole or in part, in any form including but not limited to print, internet, internet forums and other mediums.
No part of this text may be used without the express permission of the author or their publisher.



Introduction
The motivations for putting these issues down on paper are varied and have come as a result of my experience of dealing with both franchisees and franchisors over a period of time.
A lot of what you will read in this book is aimed more at the entry level franchise arena not at the more established entrepreneurs who may buy into one of the global food or hotel franchises that exist. This is more aimed at the franchisees where the entry cost may be as low as $/£10k.
I am not an MBA or academically qualified expert, but I have been in your shoes and those of the franchisor, having worked my way up the hard way. A lot of the following is basic common sense, but when getting swept along with the idea of being your own boss, often common sense gets left behind and you only see and hear what you want to see and hear, or more importantly what a sales person wants you to see and hear.
The basic premise of franchising is a sound one, person/or company A has a business idea, they establish a pilot for the concept and prove that a market exists. Then rather than commit their own capital to the expansion of the business they allow others to buy an allocated territory or market sector for a pre-determined amount of time. In return for this the individual buying a defined area now becomes a franchisee and the original company becomes the franchisor.
However in a number of cases the franchisor becomes torn between doing what is right for the franchisee and what is right for the franchisor, which at times can have a negative effect on the franchisees.
One clear example of this is to sell a territory that they know will not return the projected revenues and may have possibly had more than one previous franchisee who has failed despite working very hard in that territory. The franchisor will inevitably come back with “everyone has the right to try” or the “previous franchisee was lazy”, “under re sourced” etc”.
In some countries it is law to disclose if franchisees have failed and why, this I believe would be a good step to take in a more developed market place such as ours.
By becoming the franchisee you will usually sign up to an agreement that will cover many aspects including but not limited to;
Paying an on-going management fee/royalty for the term of the contract.
Only purchase a specified range of products from the franchisor (at prices they dictate).
Committing to training and re-training as required (often at a cost to the franchisee).
The key thing to remember is that the franchisor, despite what they will often say, is there with one primary aim and that is to SELL you a franchise, then to SELL you products along with the monthly royalties or management and other fees.
Whilst I talk about some specific types of franchises in this guide, the basic premise will still apply in most types of franchises on offer in the global marketplace today.



Buying A Franchise
Some Key Areas You Need To Explore And Understand.
The franchisor exists to make money out of you and any additional revenue streams that they can put themselves in the middle of. This can include but not be limited to putting themselves between you and prospective customers of which, more, later in this guide.
The following is not meant to answer the hundreds of questions that you should be asking prior to entering any business venture, but is aimed at helping you to be better prepared when undertaking due diligence or meeting with prospective franchisors for the first time.
I am not against the principal of franchising; however, I do believe that when the franchisor is dealing with individuals who are looking at possibly going into business for the first time they owe a duty of care to enable them to make a decision based on fact.
It should not be a game of who can hide the most information until there is a signed franchise agreement at which point most prospective franchisees have been swept along on the wave of being their own boss, that they accept that, “Things can be discussed once you are on board”, “I’ll get back to you on that one” or “All of that will be covered off during your training course”.
Remember, if you ask a question you need to get an answer to that question before you sign any agreement. More importantly when you get an answer, get it in writing, too often when a dispute arises without the original written answer it comes down to “our understanding was” or “we believe that the original intention was to” in other words it’s their word against yours.
Having read one of the numerous small business or franchise based magazines or perhaps having attended one of the many franchise exhibitions that are staged, you will now have you mind working overtime putting yourself in the position of being “your own boss”. At this point you may well be on the verge of making that initial contact with one or perhaps more franchise operators that appeal to you.
The key thing now is that whatever happens next ALWAYS remember that the franchise opportunity will be presented to you in a number of ways, these will include; Open days Workshops Seminars Discovery days Meet the franchisees day One to one’s
Whichever way the business opportunity that you are exploring is presented to you, you must always remember one thing. They are SELLING to YOU. And remember that by you having made the first approach it says that you are going to be very receptive to a sales pitch.
So what are the basic levels of information that any prospective franchisee should be seeking the answers to? The following pages will give you an insight into some of these topics.
A basic question that most people want to know, but are afraid to ask is not, “How many franchisees failed? ” as this can be manipulated to exclude those “currently for sale”, “ill health”, “retirement” etc.
Two things you should be looking to ask are:
“How many franchisees have ceased to be part of the network during the past twelve months for whatever reason? “How many franchisees are currently in the network and of those, what percentage have completed the minimum contract term”
Let’s be realistic, health reasons can be brought on by the financial problems of a poorly performing business model and a host of other reasons.
Some other ways of exploring the performance of the franchise opportunity that you are investigating could be to ask: “How many franchises have been for sale and have been re-sold in the past twelve months? ”