Franchise Q&A
[Q] What should a franchisee look for in a franchisor?
[BIO] JOHN
PRATT is a partner at Hamilton Pratt Business and Franchise Solicitors.
for the franchisor and the continuing fees are clear and transparent and are set at an appropriate level – usually less than 10 per cent of your turnover. Lastly, has the franchisor obtained
a registered trademark? Too many franchisors are starting to trade without a registered trademark or indeed without even an application for one. Brands are usually extremely important for franchising and you need to benefi t from a recognised brand.
[A] The fi rst thing is do not get over- excited and carried away when choosing
a franchise. You need to take a long, hard and objective view of the franchisor and the franchise it offers. Secondly, it is important that you feel you can trust your franchisor before proceeding. If the franchisor is a member of the British Franchise Assoication, then this can offer some reassurance. Also make sure the franchisor is prepared to provide you with a full list of its franchisees (and not simply those that he or she wants you to talk to). Additionally, seek evidence that this is a franchise brand that the banks are prepared to fund. In an ideal world your franchisor will have been established for some considerable period of time and has a large number of franchisees all of whom (and certainly not less than 90 per cent) are trading profi tably. The franchisor needs to provide great initial and ongoing training and the operations manual has to be detailed, up-to-date and constantly improved by the franchisor. You should also satisfy yourself that the initial fee that you are being asked to pay does not contain a profi t element
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Businessfranchise.com | March 2012
[Q] I have found there is much inconsistency between franchisors with regard to the initial franchise fees they charge. Why is this?
[BIO] PETER
WILLIAMS is a well-established franchise consultant.
be worth more than a franchise still at an early stage of development. The most important issue, however, concerns what the initial fee actually provides for. It might simply relate to the franchise licence itself (hence the term Franchise Licence Fee) in which case the cost of the training programme, equipment, stock, marketing material, offi ce requirements and so on will be itemised separately, or it may embrace a package that includes all or some of these items. In assessing the overall fi nancial implications, you should not dwell solely on the initial fee. Best practice is to prepare a full checklist detailing everything that you will require to become established as a franchisee, to which you will need to add an appropriate amount of working capital. By adopting this approach you will be in a better position to make meaningful comparisons between franchises, assisting you in the decision- making process.
[Q] What type of business makes a good franchise?
[BIO] ALAN
WILKINSON Alan is a franchise development consultant
for The Franchise Development Centre.
[A] There are a number of valid reasons. Firstly each franchisor will take a view as to the
value of their respective offerings, so there will never be uniformity. But there is much more to it. For example, size of territory and whether or not exclusivity is granted could be factors and a mature franchise with a large network of successful franchisees is often considered to
[A] It is vital that prospective franchisees investigate fully any franchise they are
considering joining. A good franchisor should have in place a robust due diligence process, which will take the prospective franchisee
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