Here an expert from from Lloyds Bank answers the essential questions on the types of personality that do and don't suit being a franchisee.
1. Higher success rates, not having to come up with a business idea, support and training…surely everyone wants to be a franchisee?
There are over 900 franchised brands in the UK, so the opportunities are plenty and varied. It is safe to say that there is almost something for everyone. But there are also many pitfalls. Franchising is a long-term commitment so joining a franchise is undoubtedly one of the most important decisions you will ever make.
Although only 1 in 10 franchisees are reporting losses according to the 2012 NatWest bfa Franchise Survey, a figure considerably lower than the 1 in 3 non-franchised UK businesses who fail within their first three years (2012 Inside Startup census). It is important to make sure you make the right decision so you are not unlucky number 10.
Franchising is a great opportunity to start your own business with the support of a well-known brand and support network behind you but there are also things to be mindful of. Some franchisors may promise you all of the above but may not always deliver to your expectations. So it is important to identify the right franchise that will allow you to create a successful business for yourself, having set realistic expectations.
It is also important to bear in mind that you’ll be paying franchise fees and/or royalties to the franchisor and will be operating within the franchisor’s operating systems, standards, policies and procedures. This is what makes franchisees successful but also reduces the freedom within which you operate and manage your business. It is also important to note that upon the expiration of your franchise agreement the ownership of your business is often transferred back to the franchisor.
So, there is a lot to consider but, if well thought through, becoming a franchisee can be very rewarding in more ways than just a great bottom line.
2. What types of personality suit franchising?
Far too many people forget to judge their own suitability for a franchise opportunity, yet this mistake can lead to years of unhappiness for you and your family. You must consider whether a franchise suits you, your needs, your wants and your family.
If you were writing your CV for a job, what are the skills and attributes you know you possess that would make you suitable for that position? Now, knowing that you are committed to making a franchise business succeed, how will those skills be best utilised in a business?
In general, a good franchisee should have:
- A proven business history
- Documented systems
- Effective training
- Security of tenure
- An ongoing support structure
- Membership of relevant accrediting bodies.
So, bearing in mind that you can learn many processes of a new business from your franchisor, what type of franchise business is going to flourish with your core set of skills?
And most importantly, what type of business do you think you will enjoy running for the next 10 years or more?
3. What types of personality should stay away from franchising?
There is no simple answer to this question. In general it is always a good idea to make sure your personality fits with the culture and regulations of the franchise you are considering joining. A franchise agreement often lasts 5-10 years or longer, so you will be operating within their business culture for a considerable time. So ask yourself, will this be something I’m still happy with 5 years down the line?
Although you’re operating your own business, being part of a franchise also means being part of a wider network. Your success is their success and vice versa. You won’t be in business by yourself but you will need to be able to embrace the rules and standards of the franchisor to be able to make your business relationship a success.
4. Personality aside, what practical traits (finance, location, work experience etc.) should be taken into consideration?
A franchise is an investment, not a job with a guaranteed salary at the end of each month. So, before you investigate franchising, you need to establish the level of investment you can comfortably afford to make considering that, when you start a business, you are unlikely to take a significant salary from it during at least the first six months.
Ask yourself how much you need to earn to support your current lifestyle and financial commitments over the first 12 months of your new business; will your partner be able to meet these costs or will you need to make provision yourself?
One of the biggest reasons for business failure in the UK is the proprietor not having the correct levels of funding.
5. How do you know if being a franchisee is right for you?
Making your decision to join a franchise should be easy. Ask yourself these final questions:
- Do your strengths and weaknesses match the success criteria?
- Can you afford the business?
- Will the ongoing rewards meet your expectations?
- Are you confident in the franchise’s key business proposition?
- Will you enjoy running this business and following the franchisor’s system?
- Are you prepared to work hard and make this business a success?
If you have answered yes to all the questions above then you have probably found a great franchise for you and you are well placed to proceed to the final stages of due diligence. However, if you don’t feel 100% sure, simply start the process again.