Starting a business is a big decision so it’s important to take everything in to account when considering a franchise and deciding weather its right for you.
What size territory should you look for when considering a franchise?
In some ways, the larger the territory the better. The more people in your territory , the more potential customers you have. However if you only want to work a set number of hours so will only run in one part of the territory then you may end up paying for areas that you won’t operate in. For example, if your territory has two major towns and you only plan to operate in one. If your business is something people will only travel a short distance for, like baby classes, then a small territory could be better. If you’re offering something that people will travel for then a big territory can help make sure you aren’t competing with other franchisees.
How much are the on going fees and what do you get for them?
Most franchisors ask you to pay a fee, usually monthly, quarterly or annually. This is to cover the cost of things like national marketing, maintenance of resources like websites and support. Sometimes the fee is a percentage of sales or it can be a fixed amount. If it’s fixed, bear in mind you’ll have to pay it, weather you’re making money or not and if you plan to keep your business quite small, it can be a big chunk of your profits.
To decide if the fee is reasonable, find out exactly what you get for it. How much national marketing do they undertake, how quickly is the website updated and how much Support do they offer you? Find out what their service standards are in terms of how long they expect it to take for them to reply to emails, make changes to the website etc.
What will your relationship be like with other franchisees?
One of the main benefits of running a franchise as opposed to going it alone is the support and much of this comes from more experienced franchisees. Is there a way for all franchisees to keep in touch, for example a forum or a Facebook group? Are there any training events or get together where you’ll meet in person? Do the local franchisees work together to benefit from local events, for example splitting the cost of regional advertising or trade show attendance?
How is Social Media dealt with?
Social media is a massive part of how people find out about goods and services these days. This means it’s important to understand how it will be used when considering a franchise. Are social media accounts set up for each individual franchise? Or are they regional with a number of people sharing a page? Are there guideline for how to manage it? Both in practical terms and the protection of the businesses reputation.
Also on the subject of social media, it’s also worth having a look at posts and reviews about the business. This will give you an idea of the sort of reputation they have.
What happens if it doesn’t work out? Or if it does?
While it’s important to be positive we also need to protect ourselves if the worst should happen. Find out if you are able to sell the franchise if you no longer want to run it. If you are, do you need approval of the franchisors? Do they take a percentage of the sale price? If you just want to stop running the franchise, will you owe them anything? Some franchise contracts include an agreement that you will continue to pay the management fee. This can be until another franchisee is found or your contract expires.
On the other hand, if you still want to carry on when the contract expires, what are the renewal terms? Is renewal automatic. Is there a charge? Can they increase the management fee when you renew?