Franchise Advice
How to research the market
If your New Year’s resolution is to buy a franchise, make sure you do your research, says Lloyd’s TSB’s Richard Holden
T
he New Year is normally a busy time in franchising as many people make resolutions to start their own business. Investing in a well established and proven
franchise brand can offer you a better chance of building a successful business than setting up a new business start-up alone. For investors there is a diverse range of business opportunities to choose from that will provide you with a model and system to build a successful business and achieve a return on your investment. So what can prospective business owners do to make sure they invest in an ethical company? Firstly, do your research, including getting information up front and in writing. Most business opportunities don’t hesitate to give this information. Secondly, speak to as many people who
have previously bought into the business as you can. Do not let the owner ‘cherry pick’ who you speak to by insisting on an entire list of the network. By asking a few carefully chosen questions you can quickly build a picture about the potential of the business opportunity you are considering. For impartial advice about the franchise opportunity you are looking at speak to the bank’s team of franchise experts. It is important to analyse the marketing messages of a business too. You may come across a handful of ventures offering high earnings in a short period for relatively little effort, which might sound a bit too good to be true. Ask the franchisor lots of questions and ascertain how much support you will receive. There are of course some franchise
opportunities that offer better opportunities than others to build a successful business.
Get online The Internet can be a good source of information about a business opportunity and its owners. A simple Google search can reveal consumer complaints, outstanding legal action, previous business failures and disharmony amongst investors.
“Trading performance of any business is directly linked to the drive and commitment of the franchisees”
Research all you can about the business. Have the people been involved with other businesses and if so is there a track record of success? Is the person running the business actually a director of the company, if not are they disqualified from being so? Sometimes a family member will be listed as a director at Companies House but the person disqualified will be running the operation.
The figures If there are any potential earnings claims ensure that they can be substantiated by most of the network already operating under the model. Of course, trading performance of any business is directly linked to the drive and commitment of the franchisees. Ensure you understand what the figures are based upon. Get earnings
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claims in writing and ask for supporting evidence.
Check out what companies are members of the British Franchise Association (bfa) – the voluntary self- regulatory body for the UK franchise sector. Its main job is to help potential franchisees recognise ethical businesses. Another check you may wish to consider is contacting the Trading Standards office both in the hometown of the business and where you live to find out whether there is any record of complaints that may indicate questionable practices. Unscrupulous dealers can change names and locations to hide a history of complaints. Ask questions and ensure that you are satisfied with the responses you get. Take your time before you commit. Promoters of unethical business opportunities are likely to use high-pressure sales tactics to get you to buy-in. If the business opportunity is legitimate, the owner will give you time to decide.
The New Year can be an ideal time
to realise your dream of running your own business so ensure that you do your homework and invest in the perfect franchise for you. n
Richard Holden
Richard Holden is head of franchising for Lloyds TSB Commercial. For more information email richard.j.holden@
lloydstsb.co.uk
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