Franchise Advice
options and forward planning on how to get the most out of their day. Exhibitions are a great way to research the market and speak to franchisors face to face, giving you a deeper insight – especially on the trickier questions. There shouldn’t be any enquiry that a franchisor is not prepared to give a satisfactory answer to, or at least get back to you. You should have a plan for your visit from the outset by deciding which seminars to attend and which franchisors you want to speak to. It’s also a good idea to have a standard set of questions to ask each of them so you can compare their responses.
W
Of course, one of the most vital elements of getting your business started is fi nancing and understanding what level of investment you can afford to make in a franchise opportunity, including any loans. As a guide, banks – including NatWest – lend up to 70 per cent for a proven franchise and nearer to 50 per cent for a new concept. So if you have £20,000, you could borrow around £40,000 for an established franchise. You should, however, always retain some funds for emergencies; even if you have the full amount to buy the business you may want to borrow to retain a surplus – the amount being relative to your total investment but 10 per cent is a useful guide. This is so that if an issue arises that affects the business, such as poor sales, power failure or fl ood, you have the funds to manage the situation.
ith The National Franchise
Exhibition coming up, prospective franchisees will be evaluating all their
Just as important, though, will be the ability to service the fi nance you obtain. A bank will carefully assess what funds you need to live off personally in addition to making payments on any fi nance you take out. So ask yourself: does the business generate suffi cient profi t to repay the fi nance, cover your personal costs and provide a surplus? If the answer is positive that’s a good start.
“Running any business – even a franchise – will be hard work, so getting the fi nances right is very important”
In terms of the type of fi nance available for the known capital expenses such as franchise fee, shop fi tting, equipment and similar costs, a loan is probably the vehicle to use, as the fi nance is not likely to be repaid in the fi rst few months but over a few years. If you require capital for a van or car it may be you look to asset fi nance to fund the cost. The asset is then the security for the lender. For working capital – where it is a relatively short-term requirement – an overdraft may be suitable. Overdrafts are usually reviewed every 12 months and the amount will be determined by the cashfl ow forecast you provide. So how do you know what fi nance levels
you require? The starting point is clearly the franchisor, as they will have the experience of other established franchisees. They will normally provide a template business
plan and set-up costs, though of course each franchisee’s requirement can differ. Some franchisors use a third party to assist franchisees with completing their plan such as Franchise Finance, a bfa-affi liated member. These organisations will have a good understanding of the franchise from previous plans they have helped with and complement that by providing an independent view of your proposal. As the business develops in the fi rst months and year, make sure you monitor progress, which could be daily, weekly or monthly, though this can never be too frequent. If things are not going as planned do not bury your head in the sand; speak to the franchisor, other franchisees, the bank and other professional advisors to see how you can collectively get things back on track – that’s what they are there for. If you are thinking about taking on a franchise, don’t just walk into a branch of your local bank but contact a dedicated franchise team who can deliver industry- specifi c support and put you in touch with a local specialist. You can fi nd out more about fi nancing your franchise in one of the bfa seminars at The National Franchise Exhibition at NEC, Birmingham, in March (see
franchiseinfo.com for tickets). Running any business – even a franchise – will be hard work, so getting the fi nances right is very important. n
MARK SCOTT
Mark Scott is director of franchise development at NatWest. Email
franchise@natwest.com for more advice.
March 2015 |
Businessfranchise.com | 53
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112