FRANCHISE ADVICE


Once you are determined that the


franchise route is for you then here are some top tips: What to find out from the franchisor: l Financial health and track record of the company


l The company’s franchising history l Membership of the British Franchise Association


l Results of the pilot operation (if applicable)


l Current number of franchisees, starters and leavers over the last five years


l Permission to talk to existing franchisees, and not just the ones nominated by the franchisor


l Company’s main source of earnings l Value, appeal and long-term viability of product/service


l Head office commitment to support l Full details of the initial training programme


l Additional training costs to the franchisees


l Total size of the franchise investment requirement


l Ongoing fees or charges l Realistic estimate of working capital needed


l Bank and other references l Territorial practices and exclusivity terms


l National and regional advertising practices


l The exclusivity and sustainability of product supply contracts


l Franchisor’s margins on product supply l Target obligations l ealistic franchisee profit and loss figures


l Ongoing support and the Management Service Fees


l Restrictions on franchisee’s operations l Franchisor’s launch assistance programme


l A sample of the franchise agreement


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Warning signs in reviewing a franchise - be wary if the franchisor: l Tries to get you to sign a Deposit Agreement to reserve a territory before you have had a chance to do thorough due diligence and taken professional advice


l Does not offer an automatic right to renew your agreement


l Has a very short-term contract l ressures you to act now’ before the cost goes up


l Tries to trade you up to a higher fee l Demands large front-end licence fee l romises huge profits with thin investments


l romises easy sales’ l Promises large income working from home


l Fails to give statistics on sales and profits


l Evades identifying directors or principals


l Has no data on financial track record l Cannot give plans for future development


l Has incomprehensible contract or vague territories


l Is vague about support and training


l Has a name similar to a well-known business


l Is ignorant of competition l Has weak advertising l Avoids detailing your financial obligations


l Tries to meet only in a hotel or has poor head office premises


l Is evasive about access to existing franchisees


There is much information to consider


here but it is so important that you do, so that you enjoy a long and fruitful relationship with franchising and you won’t find yourself asking What do franchisors ever do for us? l


NICK WILLIAMS is franchise consultant at Ashtons Franchise Consulting. Visit them on stand E120 at The British & International Franchise Exhibition, 17-18 June, Olympia London.


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