102
HOTtopic
Andrew cutler
Andrew Cutler is franchise and
sales director of Card Connection,
a market-leading greeting cards
franchised company. .
Pick a winner!
FRANCHISE ADVICE
Find a franchise in a recession with this fi ve point plan from franchisor,
Andrew Cutler
R
EDUCING THE risk when buying "Be sure to have an up-front 4) Check the accounts
a franchise in a recession is critical.
and open discussion about the
If you are buying a resale, evaluate the profi t and
There are a number of factors to loss accounts of the franchisee you are buying
check to ensure your potential investment
fi nancial climate with your
the business from for at least the past three years.
will be profitable in difficult financial times. chosen franchisor." This will provide key information about how
Here are five top tips on how to select a much the franchisee has earned in the past – in
successful business: the good times – and how the business has faired in the recession so far. If
you are buying a virgin territory, ask for copies of the accounts of established
1) Do your homework similar sized franchises and use an independent accountant to verify that
Thorough research into industry sectors, the franchisor's background, there are no hidden problems.
product popularity and existing franchisees is the only way to ensure
you invest in a winning franchise. Through the internet, rich sources of However much you love the idea of buying a particular franchise, at the end
information are readily available so fi nd out all there is to know about of the day this will be your income so be sure that the sums add up. Spend
various franchise options. Look at which sectors are proving more some time with your accountant to evaluate honestly if the business is likely
profi table and what products are remaining popular to ensure you are well to bring in enough money to support you and your family in the current
prepared before purchasing any business. market conditions. Keep in mind that as well as the challenging fi nancial
situation, you will have a steep learning curve, possible borrowing costs and
2) Look for accreditations initial investment in equipment or stock to contend with.
Ask the franchisor what accreditations the franchise has. For example,
British Franchise Association (bfa) members are required to adhere to a 5) Talk openly
code of ethics. Be sure to have an up-front and open discussion about the fi nancial climate
with your chosen franchisor. If it’s a resale, fi nd out why the franchise is
3) Select an established franchise for sale. Enquire about plans to mitigate the effects of the global fi nancial
Franchisors that have been around for a while will be experienced in slow down within the business. Ask for their advice on how you will need
helping franchisees manage their businesses in more challenging economic to tackle the challenges that the current market situation presents and
times. You may even be able to fi nd out how the franchise did in previous particularly what support you should be expecting. Find out how other
downturns. Those that survived are most likely to be in a good position existing franchisees are faring and what strategies they are implementing to
to work through diffi cult times – they will have the advantage of hindsight keep their businesses fi nancially healthy. If they are burying their heads in the
and lessons learned. sand and don’t have any plans, beware!
Even in a recession there are still plenty of thriving businesses out there
and many good opportunities available. However, only careful research
will allow you to select a suitable franchise that will survive
and even thrive in the most challenging
economic times. ■
November 2009
www.businessfranchise.com
BF102_HotTopic-Cutler-Nov09.indd 1 15/10/2009 09:40
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