So, you’re thinking about taking on a franchise business? It’s a great idea and can be very successful and rewarding, but before you do anything take a look at these top tips:
Pay Careful Attention To The Contract
Your contract should contain all the critical details about your franchise, from the simple facts such as the name to the critical points like your territory and fees. If something isn’t covered, it can be quite challenging to make a franchisor honor promises made but not recorded in the contract.
Know What You’re Signing Up To
Your contract will likely be a lengthy document, so it is critical that you understand what you are signing up for. Franchises are often granted for a minimum of five years, and often you won’t be able to get out of it early even if you don’t like it/you can’t make it pay unless you sell the business. Make sure you get a fixed fee review and report from a good lawyer who won’t waste your time and money negotiating points that are standard in the industry.
Know What You Own
Be aware that if you engage a contractor in designing your websites, while legally you will be paying for the work, the designer will own the content that it creates. This can cause all sorts of problems particularly when you want to sell your business. To stop this happening, make sure you have a simple contract with the designer that makes you the owner of the rights in your website.
Know What You’re Responsible For
As a franchisee, you are responsible for any staff you have, and you are accountable for their actions, for example, if staff use customer data improperly or abuse social networking sites to damage your brand not only can the franchisor terminate your contract but, you are often financially responsible for any damage caused. Make sure that you have appropriate policies in place with staff and that your employment contracts protect you if this happens.
Remember, You Don’t Own Your Customers
If you do well with your franchise and make a real success of it, you may be tempted to let your contract expire and then go it alone by setting up your own similar business, with a different name obviously and then diverting your custom to it. This would not be good practice, and as most franchise contracts contain enforceable provisions that prevent you from doing this for a limited time, then it would most likely be illegal. If you are tempted to do this get advice first as it could cost you a lot of money and a lot of heartache.
Do Your Homework
Speak to other franchisees in the same business, ask them about the financials and the funding that you will need. Also, make sure that you have taken the time to look to see who are the competitors already in your area. If you are worried about it not working out, consider asking for an option to terminate after say 18 months.
Have A Business Plan
Banks will expect a decent business plan and to interview you to be sure that you know what you are doing if you are looking for help financially from them. While your franchisor may be able to prepare you for this, if not then look for some consultancy advice. Think about what business structure to use and check out which banks support franchising and ask for their specialist franchise team.
Get Advice
Some franchises operate in heavily regulated sectors, for example, the Care Sector. If you’re going for one of these, you will need to make sure your franchise complies with applicable legislation, or you risk losing your franchise and paying hefty fines. It might be that there are mosquito businesses for sale that you have your eye on, so get to know the industry and speak to people who’ve done it before.
Take Your Time
Successful franchisees often operate many different franchises, and while this is a lucrative revenue option, it is essential to iron out any problems with your current franchise before taking on more. Make sure you can get one right first and then think about expansion.
Plan For Your Exit
Setting up your franchise correctly from the outset will save you problems when you want to sell. Having the right systems, policies and structure in place help to ease what can be a tricky process, don’t cut corners in the beginning; it will not save you money in the long run.
