Buying a Franchise

Mudd14

I have seena franchise for sale that my partner is interested in finding our more info on. Can any one give any advise on buying an already established franchise?

borders_dude

I would suggest consulting proffesisonals (or however you spell it), as well as this forum.

angel2010_2

You must do research, buying a franchise was one of the worst things I ever did and it cost me money to get out of it!

Mudd14

Did you buy a new franchise? What was it doing?

I know of the franchise and it is already well established which takes away the risk somewhat.

pitkin2020

Like others have said you really need to look deeper into the franchise. Whats the financials like, why are they selling etc etc. Could you start your own setup at far less cost.

Franchises aren't all they are cracked up to be, they are great if you own the rights but as a francisher your paying a lot for the privelage of using someones brand, nothing more.

lincroft1710

If you work on the basis of halving the profits and doubling the start up costs claimed by the franchiser, you may have a more accurate idea of the viability of a franchise. As other posters have said, do plenty of research and seek competent professional advice.

pitkin2020

Mudd14 wrote: »

Did you buy a new franchise? What was it doing?

I know of the franchise and it is already well established which takes away the risk somewhat.

It maybe well established but there is still a massive risk, not knowing what the franchise actually is its hard to point out the obvious risks. Buying any business is always a risk, even more so with a franchise as you may not retain the same customers the previous owners had yet you still have all the financial obligations under the franchise.

If its well established why is it up for sale??

lincroft1710

If its well established why is it up for sale??

Ten very wise words of advice!

paulwf

As a very general introduction on FranchiseSuccess.tv there is a video called "Become a successful franchisee". You need to register for free to watch all of it, it is a bit cheesy and overly long but has some good points.

http://www.ukbusinessforums.co.uk/forums/ has a good franchising forum, though please remember forums tend to be full of bitter ex-franchisees, people that are making money from their business tend to keep a low profile

After an initial meeting with the franchisor you may need to hand over a sum of money (perhaps £1,000) to show them you are serious before you get to see the contract. You will also have to sign a non disclosure agreement. Check if this amount is refundable. Once you have a contract appoint a commercial solicitor familiar with franchising (a family law solicitor will not do) and get the contract vetted. This will cost several hundred pounds so make sure you are serious about the franchise first.

Do as much research as you can online and on Companies House website. Visit franchisees (get permission from the franchisor first) and find out if any franchisees have closed and if so why. Your accountant may also be able to do a very basic credit check on the parent company for free.

Three general points to look for in a good franchisor:

- The up front fee covers their costs and doesn't make them a profit. This shows they want to develop your business and not just grab your money and run.

- For the ongoing fee a percentage is preferable to a fixed cost. Again, this shows the franchisor is trying to grow your business and not just grab your money. You will also be protected if you stop trading...with a fixed weekly fee you may be tied to paying it for 5 years! NB - sometimes a fixed fee is used because the franchisor can't reliably monitor your sales, so it isn't always a negative but I would much prefer a percentage.

- Check if you have to use certain suppliers, and if so whether you are getting goods at cost or if the franchisor is taking a cut.

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