How to buy a business franchise
Buying a franchise is not like buying other types of business. You need to go through an interview process so the franchisor can make sure you're right for the network and the brand. But it does offer some big advantages over the normal purchasing process. Use this guide to find out how to do it or download our free e-book for further business advice.
How can I find a franchise?
- The British Franchise Association (BFA) lists all its franchise members.
- Franchise directories (which will include non-BFA members).
- Websites such as www.the-franchise-shop.com.
- Various franchise exhibitions take place around the country, such as the The National Franchise Exhibition.
- Franchise magazines, such as The Franchise Magazine.
What kind of franchise will suit me?
Consider all the following:
Personal interests & Employment experience.
You don't have to have worked in the same sector as the franchise is in, but you need to make sure you managerial, accountancy marketing and other required skills are going to be good enough. Some franchise operations are easier to run than others, so pick carefully and speak to the seller for more guidance.
What you can afford.
Look closely at what the price entails, as you may be loaded with premises, equipment or stock costs on top of the initial fee. Talk to the seller to find out more. Figure out how much you're prepared to borrow from a bank and whether the profits the franchise is predicted to make meet repayments with enough leftover to support you and anyone dependent on you.
- How much time you have to put into the business. Talk to the seller about whether you'll be working weekends and late nights.
- How much support is on offer from the franchisor, compared with how much you think you'll need.
- How much freedom you get with the franchise, compared with how much you want in how you run the business.
How do I buy a franchise?
Start with a shortlist of several franchises you like the sound of and can afford to research further. Research the franchisors. What's their background? What's the success rate of other franchisees? Have other franchisees stayed in the operation or left quickly? What are their profits like? Is that enough to support you?
You don't just buy a franchise outright - you have to go through a selection process, akin to a job interview. (No surprise really, as you'll be representing the franchisor's brand.) Be prepared for this when you've made a choice about what franchise operation you want to join - and remember you have the rest of your shortlist if you're unsuccessful. The intensity of the selection process should give you an ide aof the success rate expected from you and the credibility of the franchisor. Be suspicious of anyone willing to hand over their brand to you without properly assessing your capabilities first.
If you're successful you need to carry out due diligence and get professional advice from solicitors, surveyors and accountants before making any payments to make sure the business is sound. When you pay, there is usually an initial 'finance fee' that pays for the licensing agreement and the costs of training. There are the on-going management service fees, often dependent on annual turnover. Make sure you know all the costs involved before committing.
- Make a shortlist of franchises you're interested in
- Research the franchisors and market
- Pick the one that suits you best
- Research other franchisees in the network to make sure it earnsenough and is reputable
- Confirm it's reputable with the BFA
- Get the full run-down of costs from the seller
- Make sure you have the finances needed to buy and run it
- Talk to your bank if necessary, before applying
- Approach the company and start the selection process
- Agree costs, ongoing payments and type of franchise set upincluding what the franchisee has authority over
- Carry out due diligence and advise solicitor, surveyor andaccountant before making any payment
What is the average price for buying a franchise?
Purchase costs alone are on average £15,000. But new franchiseesneed an average of £50,400 for everything needed to open (including premises, equipment, stock, and so on).