franchise's - Good or Bad idea?

magpiesnest

hi, not sure if this is the right place for this but will ask anyway. has anyone taken on a franchise and had the promised benefits all work out or are the proposed numbers on the website deliberatly high to lure people in?
i am thinking of buying a franchise but how do you get to know all of the risks / pitfalls about it until it's too late.

Rainmaker_uk

I would check out The British Franchise Association http://www.thebfa.org/

Give them a call and nake sure you do thorough due dilligence before you buy. Some fenachises are very good (MacDonalds for one) but some are not so good.

I would not take too seriously the info you get on MSE re franchises as most people on here are not investors and are looking for money savings only...

magpiesnest

hi rainmaker, thanks for that. i have taken a look at the website and the franchise i was looking at does not seen to be listed as affiliated to them. should i be worried about that?

Rainmaker_uk

magpiesnest wrote: »

hi rainmaker, thanks for that. i have taken a look at the website and the franchise i was looking at does not seen to be listed as affiliated to them. should i be worried about that?

Not necessarily but it is a red flag that requires a deeper look.

A reputable company that has franchising as a major part of their business plan would often be affiliated to some or other body as this would suggest that they have done things in the right way. Maybe they are affiliated to another repuatble body?

When it comes to franchises you really do need to do a lot of research.

Look very carefully at the territory on offer - how does it compare to other territories with regards to opportunity (size, population, density and demographics for your service? Is there room for expansion?

Consider whether the franchise is proven - how long trading, how many other franchisees? How much do they earn? Will they let you speak to them (all of them not the ones they suggest!)

What support and training do they offer?

What marketing service/leads to they guarnetee and for what costs?

Are there any restrictions in place to stop or hinder selling your franchise in the future?



Hope this helps.

magpiesnest

thanks again Rainmaker, it seems the franchise i'm looking at is fairly new, i am going to give them a ring and see what they have to say before i apply, even then i have committed nothing but a little time. it's a minefield out there isn't it.

Rainmaker_uk

Everyone wants your money

inmypocketnottheirs

Rainmaker_uk wrote: »

Everyone wants your money

Ain't that the truth! :eek:

A large part of what you pay a franchisor for is their experience and expertise. If it is a new set up, what experience and expertise is there? Be careful you don't lose your shirt!

wuckfit

As a general rule of thumb, the people that make the most money from franchises are the franchisors, not the franchisees.

If a franchise is for sale, then the liklihood is that the franchisee has realised this and is trying to recoup the startup and equipment costs incurred when they took the franchise on.

Franchises operate by taking a percentage of the gross profit on every sale, known as royalties. some do brand royalties plus a separate advertising royalty. that's a cut that you lose before all staff and other premises costs. Some allow you to purchase stock as part of a collective, others stipulate that they must supply you. One of the pitfalls to avoid is to realise that the figures quoted are for exceptional franchises in very busy areas and not a guaranteed return. And be very careful to ensure how big your 'patch' is - the last thing you want is another franchisee to open up round the corner, and be powerless to prevent it from happening.

The only way to make a decent living as a franchisee is to be able to run several franchises at once. But in the main, as a franchisee, you could be putting in 80+ hour weeks, and working out at well below minimum wage. Yes it can reward those who are prepared to work hard. However I can't see the point of sinking up to £350k into a fast food franchise to work 80-100 hrs a week.

It's worth looking at some of the burger and other fast food websites and researching the franchise costs. It's a major eye-opener. It gave me a whole lot of respect for the franchisees who are prepared to take on a number of outlets and make a success of them. Though personally, I'd take more pride from owning the name above the door, rather than being a franchise of a big chain.

inmypocketnottheirs

Further to wuckfit (had to watch myself there!) another way of looking at a franchise is that you are buying yourself a job.

Padstow

It's not true that franchises only get resold to recoup losses. People move abroad, retire, sell to go into something else.

Do you want hands on? eg subway, where the franchisee works in the business all day. Or more management style such as Green Thumb, where the franchisee directs the operators.

If the latter, you will need good selling and marketing skills.

There is a good uk business forum, but the franchise section is about £40pa. the rest is free.

If you want an income from day one, then purchasing a secondhand franchise is a good idea. Franchisees have accounts too, for the cynics here!

Please don't think all franchises cost hundreds of thousands to purchase, some may be below £20,000, a lot below. Franchise suits those who don't wish to be entirely alone, because you always have support there.

joeypesci

magpiesnest wrote: »

hi, not sure if this is the right place for this but will ask anyway. has anyone taken on a franchise and had the promised benefits all work out or are the proposed numbers on the website deliberatly high to lure people in?
i am thinking of buying a franchise but how do you get to know all of the risks / pitfalls about it until it's too late.

I have no direct experience but to say a mate of mines mate, brought a MC D's franchise and had to work really hard for a few years before he could start relaxing on the money.

Also, where I now live there is the local small subway shop that appears to be franchised (was a piece about the guy recently I think in local paper). From that small Subway store he now owns another bigger store close by and another big store out side of the massive Tesco. So another one where it seems to have paid off. But I'm pretty sure it's a lot of hard work for the first few years.