Franchise Focus Business News…

1. Ask your franchisor is it possible to pay in installments, instead of a lump sum investment. For many businesses this just won’t work, but if your preferred franchise doesn’t involve buying and selling large amounts of stock it may be an option.
2. Consider less expensive franchise opportunities. If you want to start a web design business, but are prepared to go without some of the supports and packages of some more expensive businesses, a cheaper option might work for you.
3. Shelve the idea of buying a franchise for a few months,and save up to invest without having a loan hanging over your head. A little bit of extra time will give you the time to make sure this really is the path you want to take.

Consider borrowing money from friends or family.

This is happening more and more, as the “Access to Finance 2007 and 2010″ report revealed. If you decide to go down this path, there are a few crucial things to keep in mind:

• Research current interest rates and the tax implications of borrowing from a family member. Even if you agree not to pay interest, the taxman might still expect a payment from income earned through interest from your lender.
• Be realistic. Discuss a feasible payment schedule. Every penny counts in the early days of a new business, so high loan repayments might be a cross your business won’t be able to carry. Will you be paying interest on the loan? Over what period will you pack back the loan?
• Contract. Whilst an IOU on the back of a napkin is not a suitable place to put your loan agreement in writing, writing a promissory note (informal contract) is not a very complicated process. The document should outline the amount of the loan, the interest rate(s), the term of the loan, what will happen should the loan not be paid back and collateral (if any). Make sure the document is structured, signed by both parties and a witness and that you keep a copy. You can download a sample contract online. However for loans involving large sums of money it is advisable to seek legal advice.
• Taxes. File all the relevant documents  that apply to your loan for tax purposes, you may also have to make these available to your lender.
• Relationship. When it comes to discussing matters related to the loan, it is absolutely vital that you try to maintain as professional a relationship as possible. Keep your payments on time up-to-date with the contract requirements. Your relationship will suffer otherwise.
• Communications. Equally, if you run into difficulties with the loan, discuss repayment options with your family member. Banks often restructure loans for customers struggling to repay. This should be a last resort.
• Your business. Make it clear from the onset that this is your business, and a loan is not a free reign for your family to criticise and give unwanted advice, unless you want their opinion. Blowing your loan on fast cars, loose women and scratch cards could give them cause for concern, so avoid squandering the money.

The report entitled “Access to Finance 2007 and 2010″ was released earlier this week and surveys small businesses across more than 20 EU countries.

Covering the period between the start of the recession and last year, the main findings of the report included:

• 35 per cent of small and medium-sized businesses sought finance in 2007. This rose to 42 per cent in 2010.
• For those seeking loan finance, around three-quarters of businesses approached banks.
• In 2007, successful loan finance approaches to banks were around 90 per cent. This fell to 65 per cent in 2010.
• Five out of every six businesses that expect to need future finance anticipate seeking it from banks.

Businesses who attempted to source finance from owners and banks are experiencing lower success rates. On the flip side, businesses are becoming more creative and sourcing finance from local sources.

The number of businesses who succeeded in raising finance from employees of the business, family or friends and other businesses all rose, highlighting the growth of community-based funding.

The reasons businesses failed to secure finance from banks all diverged from the standard excuses which included poor loan history; risky business proposal; insufficient collateral; poor credit rating or lack of own capital. This indicates the downturn in the economy is responsible for finance applications failing.

Ever wondered what happens when you discover a franchise opportunity on our site, get all tingely with excitement and submit an enquiry form?

You have already taken the first step on the path to being your own boss so congratulations!

Your Lead

We let the franchisor know you’re interested straight away, so they can take a look at your details, and see if you’re a suitable candidate. At this early stage, the information you provide about the amount you have to invest and the areas you are interested are important to let the franchisor know a little bit about you.

Contact You

When the franchisor gets your details, their next step will be to contact you, by the channels which you indicated. This could be a quick phone call or an email and will usually provide you with extra information about the opportunity. This initial contact is vital to ensure the franchisee, franchisor and the business itself suits all involved.

Face to Face

If both parties are still interested, the next step will usually be to meet in flesh and blood. A meeting may be arranged for a public location; you might be invited along to a discovery day or you may be invited to take a peek around head offices or another franchisees premises. Any additional information you receive about the company at this stages may be subject to a confidentiality agreement.

Evaluation and Research

At this stage, it’s import that you research the business model, the market and previous franchisees. The franchisor will assess you to make sure you’re the right person to take on as a franchisee, and offer you the opportunity to meet some franchisees.

The Agreeement

When both parties are confident about going ahead with the franchise, you will be provided with the franchise agreement. This is the contract which will set out the terms and conditions of your new business, and it will outline the rights and responsibilities of both parties. This can often be a very long document, and you will be given time to seek legal advice. You may have to pay a deposit to the franchisor at this stage, which may be non-refundable.

Financing

If you require lending assistance, either through the franchisor or a high street bank, you will have to arrange this finance, usually before the franchise agreement is signed. This may involve creating a business plan, and one or more meetings with a bank manager. Franchisors can usually provide support and documentation, or will attend any bank meetings with you. If you are using your savings, you may need to give your bank or building society notice that you intend to withdraw the funds.

Payment and Signature

Both you and the franchisor will sign the franchise agreement, and at this stage you will usually be expected to pay the the full licence fee (or a portion of it).

Congratulations, you are now officially a franchise business owner!

Training

The training provided can vary from franchise to franchise. It can last anywhere between a few days and a few months.

• Hands-on training where you are invited to an existing franchise location to learn the ropes.
• Residential training, where you will receive focused and concentrated training.
• Head office training, where you will attend head office to take part in a training programme.
• Trainer comes to you, where the franchisor will send a trainer to you for one-on-one training.
• A combination of the above, which may include classroom or hands-on learning.

The Launch

The franchisor will usually provide significant support to help you launch your business and get trading. This help may include advice on marketing and event-planning. Members from head office will usually attend, as well as local people, small business owners and even the media.

Your Own Boss

Once you’ve launched, you are officially your own boss, you’ve finally made it! As you are still learning at this early stage, the franchise team will be on hand to provide advice when needed, whilst giving you the space and freedom to get to work. You will usually be provided with guidelines and operations manuals, and you may be contractually obliged to use these.

Year One

After twelve months, the hardest graft has been done, but you’re not finished yet. You will be operating without the need for constant support from your franchisor, but they will be available to help you grow and expand your business. Many franchisees will have made their initial investment back by this stage. Many franchisees may be obliged to pay franchise fees and follow the outlined systems.

By now, you will be working the hours that suit you, and you as a successful franchisee!

Take a look at our success stories. It could be you this time next year!

BUT if it wasn’t for that first date, you would never have found your wife, and without a job interview you would never have gotten the job that has given you the experience and knowledge you have today. So we’re all going to be nervous asking for a loan to start up a new business, but it’s the first step to business success.

We’ve complied a list of Dos and Don’ts to help you glide in the bank manager’s office with the confidence and composure of a talented and prepared entrepreneur.

Do

• Know your figures inside out, have them checked and double checked. Asking the manager for a pencil whilst working out percentages on the back of a Tesco receipt won’t showcase you as the thoughtful and organised business person you are. This is even more important if are meeting the manager on your own.
• If possible, bring a charming accountant or well-versed liaison officer from your potential franchisor. You still need to know your business plan and financial documents by rote, but they have years of experience dealing with figures and accounts.
• Sell yourself. Include your CV and a small personal history about yourself. Explain why you’re passionate about this business model, your experience and your motivation. If you have been a truck driver for the last decade what has pushed you to open a gardening franchise? Convince the manager that this is the right franchise for you.
• Use the bank’s planning templates and documents. You can download these from their websites, or pop into your local branch to pick some up.
• Research what start-up grants (if any) are available from the government. How much are they, have you applied for them? If you’re not entitled to a grant why not?
• Prepare a worst-case scenario projection along with the more positive ones. Be honest with the manager and with yourself. If things turn for the worst you may be liable for a large repayment.

Don’t

• Forget to bring ID, a utility bill and three months of personal bank statements if you need to open an account.
• Ask for the entire amount required to start your business. Banks can provide up to about 70%, but you must have a cash stake in the business. Why do you think most racing horse trainers back their own horse to win?
• Be late, impolite, impatient, dirty or disorganised. No-one wants to deal with unorganised people. These are an instant turn-off. Act like you would on a first date (avoid playing footsie however…)



• Leave without arranging another meeting with either the manager or someone else in the bank. Hearing “I’ll be in touch”, can often be the last words you hear before an impersonal rejection letter graces your letterbox weeks later. Convince the manager that this is a great idea, and if he has any misgivings that you are prepared to work through them to produce a solid business model.
• Give Up. It is far more difficult to get a penny out of the banks for start-ups these days, so don’t loose faith if you don’t get to draw down your loan straight away. If you are rejected, arrange a meeting to discuss where the pitfalls were. Go back to the drawing board and revisit your research.

I was freshening up our YouTube channel recently and I noticed we have a lot of really helpful and informative video interviews with franchise consultants. So, I’ve compiled them together into one playlist for your viewing ease and pleasure!

Franchise Consultants vary between different skill sets, some are particularly good at recruiting new franchisees, others are great at developing a franchise model and then there are franchise law consultants such as Darwin Grey Solicitors and also financial experts such as Mark Scott from NatWest. Click on the following link to find out more about franchise consultants operating in the UK.

The playlist features:

• James Eades from FranchiseYourBusiness Ltd.
• Dan Archer from Franchise Seminars (in association with Lloyds TSB)
• Mark Scott from NatWest
• Brian Duckett from Howarth Franchising 
• Steven Thompson of Darwin Grey Solicitors