Franchise advice: Which franchise for you?

What are the different types of franchises?

Investment Franchise
You invest a substantial amount of capital and in return retain overall control, employing a management team and staff to run on a day to day basis.


Retail Franchise
You buy the right to run one or more retail outlets, employing their own staff and displaying and selling only those products or services that the franchisor approves.


Distribution Franchise
Working from a depot owned company owned by the franchisor, operating their own rounds and delivering products approved by the franchisor within a defined area.

 

Job Franchise
Usually a one person business which offers the opportunity to work from home.

 

Executive Franchise
This is based on providing the type of services usually described as “white collar” or professional.

 

Depot Franchise
In this instance you run you own depot, servicing a mixture of trade and retail customers.

 
You will find that an entire range of different types of business
fit within the various franchise types described above.

 

Key advantages to choosing franchises

1)   Close interdependence and support nework

If you buy a franchise, your success and that of the franchisor are very closely linked. Choosing a reputable well established franchise can provide a great security blanket when starting a business. You have access to a management team who have set up a business and done it very well.

 

2)   Low financial risk

If you are investing, in a proven successful business formula you’re financial risk should be reduced.

 

3)   The use of an established brand name

In an increasing competitive market customers are loyal to those brands they know and are familiar with. Marketing and investment in a brand can be costly and takes years to establish.  You “side step” these business stages.

 

Are you personally suited to franchising?

Before you decide upon franchising you must be sure that franchising is right for you!


There are restrictions that the franchisor will place upon you and disciplines that need to be adhered to.  Compliance of guidelines is essential to the success of the business. It’s important that there’s a good working relationship between both parties in order to maximise capital gain.

 

You will sign a franchise agreement, under which it’s probable that you will either have to make regular payments to your franchisor or buy products from them. This obligation will continue throughout the life of the agreement and you cannot arbitrarily decide to pay or buy products.

 

You need to be aware of any restrictions that might apply to you if you decide to leave the franchise. You are unlikely, for example, to be allowed to pull down the franchise sign and continue trading under your own name in the same type of business from the same premises. This checklist may help you decide if franchising is for you.

  • Are you sufficiently keen to have your own business that you are prepared to risk your life savings and borrow against the security of your home to raise the capital to start the business?  
  • Are you prepared to accept the long-term obligations of the franchise agreement and conduct your business according to the system laid down by the franchisor?
  • Are you prepared to make all the sacrifices associated with running your own business and being your own boss? 
  • Are you able to deal with the stresses of running your own business and the knowledge that it is your sole source of income?
  • Are you a self-starter with ambition and a high energy level?
  • Are you physically fit and do you enjoy good health?
  • Do you have the backing of your family and do they understand the implications of you having your own business. Are they in full support of your plans?
 

Choosing the right type of franchise business for you...

Again some personal questions must be answered, for example what type of franchise can you afford?  As you will appreciate, the start-up costs of a franchise that you run from home will be very different from a franchise that requires retail premises and extensive stock.


To assess your price range, a very rough rule of thumb, if you have some security, is to add up your savings and multiply by three (e.g. if you have savings of €20,000, you could expect to be able to finance a franchise with start-up costs of around €60,000). A point to remember is that you must not be tempted to over-borrow. This could cause difficulties, particularly in periods of depressed sales or high interest rates.


Given you now know your price range, the second personal question to consider, is the type of business that would best suit you. You will need to choose a business in which you will be happy to work day-after-day, and preferably one in which you have some aptitude or affinity and perhaps some experience. There are plenty of franchises to choose from so you will find a business that appeals to you.

 

Finally, you should consider some marketing questions. Is the franchise serving an established market, or has that market yet to be developed? Is the market expanding or declining? Is it seasonal? Does it depend on trading from highly-specialised sites? How strong is the competition? Is the franchise competitive in its market? What share of the market does it hold?