When buying a franchise it pays to check all the details. Here are some things to thing about:
Support and control
If you are paying for support on a monthly or annual basis, find out exactly what you are getting. What sort of training is offered? Again, talk to other franchisees about their experiences. It is good to find out what a few different companies offer so that you can make comparisons. Find out how the franchisor controls the franchisees. What sort of financial reports will they want from you? Will they inspect the quality of what you are doing? Although this may seem onerous, it can also ensure the good reputation of the company you are buying into. Ultimately, you are putting effort into building up your business so you have a valuable capital asset.
When you sign up for a franchise, you need to plan what will happen in the future. Are you tied in for a certain period? Many franchises are for five years. The length of the contract can reflect how long it will take you to recoup your investment and start running a profitable business, so some franchise agreements are for longer or shorter periods. What will happen at the end of the period you have signed up for? You may have the right to renew for another five years.
Realistically, how many long do you see yourself running the business? Would you want to sell it to retire, or pass it on to a family member? Find out what happens if you want to sell the business. Does the franchisor help you find a buyer if you want to sell the business, and what requirements will a new buyer have to meet?
Check out the finances and read any contract carefully. It is essential to get legal advice from a solicitor with specialist knowledge of franchising. Contracts tend to be non negotiable, but your adviser will help you understand what you are agreeing to. Ask your advisor to spell out hidden penalties. What happens if you fail to meet targets? How long are you committed for, and what happens at the end of that period?
Codes of ethics
Ask if the franchisor is a member of the British Franchise Association. This means the franchisor has been independently assessed against a code of ethical franchising.