If you’re reading this then you probably like the idea of buying a franchise for sale.
But have you really thought honestly about what it involves and whether it will suit you? There are two overarching considerations: are you suited to being your own boss generally, and are you suited to running a franchise?
You can roughly divide entrepreneurs into two camps. At one end of the spectrum, you have the born entrepreneur. This is someone who has always harboured entrepreneurial aspirations, perhaps even from childhood.
They might have been the most prominent kid at school when it came to trading football stickers or volunteering to help run the tuck shop. It’s in his or her blood as the cliché goes. One in five schoolchildren already harbours a dream of running their own business.
For whatever reason, this person might have reached their 30s or even later without ever running a business. Perhaps they just wanted to party and be free of too much responsibility in their 20s.
At the other extreme, maybe they had children young and needed a secure income, and now the offspring have flown the nest and they now feel ready to take that entrepreneurial gamble.
Whatever their personal circumstances, the born entrepreneur knew deep down the day would come when they simply had to be their own boss
Alternatively, maybe they just wanted to build up some savings before starting a business or amass relevant experience in their chosen industry, or simply in life, first. Whatever their personal circumstances, these people knew deep down the day would come when they simply had to be their own boss. Always chafing under someone else’s jurisdiction, their frustrations ultimately, inevitably, become too much to bear.
Such a person is certainly suited to being their own boss. However, that doesn’t necessarily mean they’re suited to franchising.
In fact, some of the very reasons why a born entrepreneur is keen on entrepreneurship – most notably the freedom to make executive decisions – do not apply to franchising.
At the other end of the spectrum, you have the accidental entrepreneur. This is someone whose personal circumstances have changed and running a business has now occurred to them as an option for the first time.
Perhaps they’ve lost their job and are considering starting or buying a business or franchise as part of a range of options. They’re ruling nothing in or out, and they’re open-minded.
Armed hopefully with a hefty redundancy payment, this gives them the luxury of taking their time to make the right choice, and having money to invest in a business if they decide business ownership is their next step.
It could otherwise be a new mother who wants a more flexible way of earning money. Hitherto an unimaginable commitment, running a business is now feasible for parents thanks to the advent of the internet, as it enables them to work from home part-time.
Running a web business within the framework of a franchise network, with the all the support and greater chance of success that entails, makes it even more viable.
Of course, many people fall somewhere between the two poles of born and accidental entrepreneurs.
They might have always had entrepreneurial leanings but were enjoying their job and the financial security it promised anyway. Franchising may well suit such people as many franchises offer an income very early on and their proven formula means it’s still a relatively secure income.
Having considered your personality, ambitions, skills, experience and financial capability, you may or may not decide that franchising is right for you. There’s no great shame in admitting your destiny lies elsewhere. As long as you’re honest about your capabilities and limitations, this is an invaluable exercise.
Of course, not all franchises are the same. Certain qualities demanded from franchisees apply across the board, but some apply to particular industries.
So a born entrepreneur with children to support might find a franchise which gives him or her more freedom than most others, but also gives a greater guarantee of success than if they started their own business.
Or someone with self-motivation who is happy to shoulder the burden of being ultimately responsible for a venture’s success, and yet has no interest or talent for strategic thinking or being creative, would be able to find franchises with extensive marketing and strategic support, and a rigid, proven formula.
Hopefully this article will help the born entrepreneur decide if franchising will suit them rather than starting up their own business or buying one. Those at the ‘accidental’ end of the spectrum will ask themselves the same question, but also whether business ownership suits them at all.
Franchisors can effectively screen you when you apply to buy a franchise, but you can save yourself a lot of time and effort by doing a preliminary examination of your abilities first.
Stress and sacrifice
- Are you persistent and determined? Can you set your objectives and follow your chosen business plan until they are achieved, no matter what?
- Can you remain positive in periods of adversity? Can you remain amiable and business-like with clients and suppliers when the business is not going as well as it should?
- Can you cope with the hours required? On average, new business owners work 60 hours a week, although usually the hours will fall as the business becomes established and you hire extra staff. Some franchises are less demanding on your time, such as many internet franchises, because a website can run itself for long periods and there are no premises to maintain.
- Are you willing to sacrifice your social life in the early stages? And deal with the priorities of the business at any time, however inconvenient it might be?
- Can you work on your own for long periods, away from the sociable atmosphere of an office or other workplace? If you run a people-orientated franchise, perhaps one in retail, then this won’t be much of a problem, but if, say, you’ll be working from home then this becomes a vital consideration.
- Away from hierarchy and rigid work arrangements, can you be self-disciplined? Are you self-reliant, and can you inspire and enthuse yourself?
- You may have advanced quite far in your previous career and reached a certain status. Can you go back, mentally, to square one and be prepared to learn a new role all over again?
- Can you cope with the stress of repaying a bank loan? Some franchises are cheaper than others, so you might opt for a budget choice.
- You’re probably used to receiving a regular pay cheque of a fixed or minimum value. Are you anxious at the prospect of fluctuating financial fortunes and possibly barely breaking even in the initial stages?
You’re lying, or remarkably fearless, if you had no misgivings about any of the above. After all, the unifying theme is stress – about the prospect of failure, of not making enough money, of not being able to repay creditors, the pressure on family life, and so on.
The pressures will ease and ultimately you can reap rewards greatly superior to any you enjoy in employment. You’ll get to keep most of your profits, but ultimately pay the price if the business goes under. So as the saying goes, if you like to switch off completely after a day of work, then a business – of any kind – isn’t for you.
We all have different thresholds, and some franchises are more stressful than others. A franchise which dominates a recession-proof sector, for example, or one which enables you to have weekends off, will obviously be less stressful than a relatively untested franchise in an ultra-competitive market.
Do you thrive or flounder under pressure? If you feel that yes, you can handle the potential stresses and strains, then there’s no reason why you can’t buy a franchise and succeed, because often franchisors are more than happy to teach any skills you may need.
Financial and personal circumstances
Credit crunch or no credit crunch, financial obstacles should be more surmountable than any susceptibility to stress or lack of motivation. If you’re mentally strong enough then you’ll likely be willing to take these financial risks – unless, of course, you have a family.
However, it's worth bearing in mind that no career or business choice offers 100% guaranteed income security, and as long as you're careful in choosing your franchise, there's no reason to fear failure.
- How much are you willing or able to contribute yourself to the venture?
- Are you willing to make up any shortfall with a bank loan, and commit to being a debtor for a given period?
- Do you have a family, mortgage or other commitment that affects how much of a financial risk you’re willing to take?
- Will your loved ones understand that your business, at least sometimes, has to come first? Will your relationship or marriage survive?
- Do your loved ones understand that money might be tight in the early days, that you might have to live frugally?
Because skills are learnt rather than innate, and franchisors invariably provide comprehensive training in all areas of running a business, saying no to many of the following points does not preclude you from buying a franchise. It all depends on the industry; different franchises will demand different levels and kinds of expertise, depending on the demands of the role.
- How much do you know about business? No franchisor expects you to have an MA in business theory but you ideally need a rudimentary grasp of basic business principles. If you have a rough idea of how to read a balance sheet, understand concepts such as depreciation and interest, the difference between fixed and current assets and what separates capital expenditure from operational expenditure, then you’ll reassure the franchisor that you’ll be able to do your accounts and other paperwork. You could be the best hairdresser in the world but if you demonstrate a complete lack of business acumen then that will likely count against you.
- Do you have basic IT skills, in Microsoft Word, Microsoft Excel, any accountancy packages, or other software?
- What specialist skills do you have and which franchise sectors can you apply them to? As you can imagine, a retail franchise needs people skills and money-handling skills, while an IT or internet franchise requires a significant degree of online prowess. However, sometimes a franchise will be more managerial in nature, in which case you’ll be orchestrating staff who deliver the product/service themselves, so managerial/executive skills are more relevant than sector-specific knowhow – although at least an interest in the industry is important.
- 4. Are you able to manage other people effectively? Do you have some appreciation of employment law? (But having said this, 66% of new start-ups only employ one person – the owner. You may well be on your own in the business, at least in the early days.)
- Can you communicate and socialise with clients and suppliers in a professional manner? Have you ever had to chase creditors?
Very few franchises expect you to have previous experience of running businesses (although managerial experience is often valued, especially if running the franchise involved managing a number of people). In fact – and this is remarkable until you consider the reasons why – many actually prefer people without entrepreneurial experience. Why?
If you’re used to doing things your own way and being answerable only to yourself then you might resent having to adhere to a rigid formula and system. The concern would be that you’d disregard the tried and tested procedures that have helped the business to prosper, whereas if you’re used to being told what to do, a franchise will still seem like relative freedom.
The same applies to industry-specific experience. If you’re an experienced chef and you join a pizza franchise, then you might, with good intentions, be compelled to tinker with the recipes, which breaches your obligations, because the menu must be identical around the entire network. Even if you suppress your creative instincts, this could leave you demoralised.
And this segues neatly into the final section. You have the necessary personal qualities, financial means, skills and experience necessary to buy a franchise, or rather a particular kind of franchise.
But do you really want to buy a franchise? You’ve got this far into the article, so chances are you’re well aware of the merits of running a franchise – a tried and trusted formula, recognised brand, strategic, marketing, administrative and technical support, and so on.
But have you really considered the potential downsides? If you’ve a need for full control and keen creative instincts, but you’ve a family to support and don’t want the all-consuming stress of the start-up phase, perhaps you could buy a business from BusinessesForSale.com instead?
However, if you’re willing to accept less control, then a franchise is a business with a very high success rate.
Are you suited to franchising?
Yes, if you...
- ...wish to minimise risk – this might be because you are conscious of supporting your family, for instance
- ...have a desire to make a profit that outstrips your need for entrepreneurial freedom
- ...are limited in the capital you can raise yourself or from banks for a start-up;
- ...wish to avoid two years of struggle keeping a start-up afloat, and establishing the brand image as well as the right products and services;
- ...do not wish to do your own marketing;
- ...want to avoid the hassle of finding a profitable location for your business; and
- ...want to expand your business rapidly.
- ...respond well to training and being told what to do
And do not mind…
- …missing out on the challenge of finding the right product or service mix
- ...sacrificing creative freedom in forging your own brand
- …missing out the challenge of identifying and targeting markets – and adapting your brand, product range/services and marketing strategies to suit the market
- …being powerless, to a degree, to influence your own fortunes, depending instead on the performance of the franchisor and other franchisees
- …losing a percentage of your revenues to the franchisor
- …being prevented from working in the same industry for competitors after the expiry or sale of your franchise
- …and generally missing out on the joy of seeing your own business grow from a vulnerable sapling to a strong oak with an extensive network of roots.
It’s possible that you’ll decide to buy a franchise but be declined by your targeted franchise. You shouldn’t necessarily be too disheartened, and consider other franchises instead.
However, the franchisor’s feedback could be invaluable in convincing you otherwise, perhaps indicating that you’re too much of a maverick, too attached to a rigid routine, office banter and regular pay cheque. There is no great shame in being declined, but it will save you a lot of money, time, stress and misery. Franchising isn’t for everyone.
If you are accepted as a franchisee for a major brand with a record of constant expansion, then you can be assured that your chances of success are extremely high. As you can imagine, few franchises of the calibre of, say, Subway or Kall Kwik, have failed.
The most important thing to note about the ideal franchisee is that his or her attributes are innate. Franchisors are happy to teach people various skills – in fact, in a way they’d prefer to, as they can teach them to operate in accordance with the company’s brand standards – such as how to operate a computer system, conduct sales calls and or complete a profit and loss statement.
What is harder to teach are traits like enthusiasm, positivity, hunger for success, the ability to handle pressure, trustworthiness and people skills – so if you have these sorts of qualities, you have every chance of making it as a franchisee.
Impressing the franchisor
- Research the franchising industry: competition in the sector, the business itself – its product, values, ethos. Arrive to interviews armed with figures
- Ask for profit and loss accounts for the outgoing franchisee or of a similar sized territory
- Ask about the cost of stock, training, equipment and ongoing costs, so you show you’re thinking about whether you can make an adequate personal income – demonstrates a good business head
- Assess how to finance it before any meeting, whether from savings or bank finance, accounting for working capital, which can account for up to 20% of the investment
- Prepare examples of your achievements, of how you’ve overcome problems innovatively, how you’ve won sales or praise from customers in previous jobs (just like you might in a regular job interview).