Four things you need to know before you buy a franchise
You are ready to buy a business and to embrace the excitement and challenge of being your own boss. Here are four things you need to know about buying a franchise:
1. Investing in the brand
The brand is the very core of the franchise system and is the company's window to the world, showcasing how an outlet looks and feels. The franchise brand represents the consistent, standardised, familiar experience which consumers relate to and value.
As a franchisee, you need to be confident that the brand is both compelling and distinctive.
2. The franchise system
The franchise system or the network is generally used to describe the franchised business itself, the branding and front of house dimension, the brand specific offering of goods and services as well as the individual units which are part of the system.
It refers to the investment; the business, management and operational systems which ensure consistency of performance and experience across the network but should also provide for efficient and profitable operations.
As a franchisee, you need to be satisfied that the system is proven. It's important to speak with existing franchisees to identify a proven franchise system that will suit you.
3. The franchise relationship
A franchisee’s relationship with the franchisor is one of the esential factors that makes for a successful franchise system. The franchisor/franchisee relationship is a legal and commercial one as indicated by the franchise agreement, but there is much more to it.
The franchising relationship is largely interdependent, relies on good faith, and lasts for an extended period of time - agreements are commonly three or five year terms. Like personal relationships, the franchising relationship comes with challenges beyond the commercial.
As a potential franchisee, you need to be confident with from discussions with the existing franchisees that the relationship is respectful and healthy.
Effective communication is the key to getting it right.
Making a profit
Franchisors with a successful business model franchise the brand to improve their bottom line. And potential franchisees also buy franchises to get the most from their investment of time and money.
It is the combination of the franchisee's proprietorship and the franchisor's system that makes a proven formula to attain financial benefit for both parties.
But buying a franchise is not dependent on a sprinkling of fairy dust – there is no magic moneymaking formula for either party. Franchisors will rarely provide definitive financial promises and the prospective franchisee must do thorough research to be satisfied that the numbers add up.