In my opinion there are a lot of similarities between buying a house or a franchise. Both can be significant investments, although you can no longer buy many houses for just a few thousand pounds, which you can with a franchise.
The investment you make in buying in to a franchise could be, except from a house purchase one of the most expensive purchases you would make. So my advice would be to undertake a similar approach but whereas a sought after house may be snapped up in hours in the current economic environment with a franchise you need to take your time to make sure you do as much research as you feel is necessary.
As you would do when looking for a house first look online to see what options there are. The best starting point for this would be the British Franchise Association (bfa) site www.thebfa.org rather than Right Move or Zoopla. There you can see all the accredited franchisors and you really should choose one of these given the accreditation process that is undertaken. Then make an appointment to see the business, which may be online, as it could be initially now with a house. You could also visit an exhibition and just turn up on the stand but if it is a popular franchise it might be best to organise a time, then there will be someone to see and will show how serious you are. However, do bear in mind franchisors may be in a sales mode at an exhibition, so even if you are happy with what they say there you will need to visit the offices to check it has substance and of course exists. Being able to visit the head office will enable you to meet other key staff that you will work with over your time as a franchisee. If you are able meet the management team and understand what direction the business is heading in the longer term. Relating that back to my house analogy in that scenario you would look at the house and enter all the rooms to see the state of them and what improvements you would like to make.
Once you feel it is a franchise you would like to purchase the next stage is to undertake some due diligence. When buying a house there are 2 things you do then; instruct a solicitor to undertake searches, etc. to ensure no planning is going to affect your view, the area, etc. and undertake a valuer/surveyor to check the building is sound. With a franchise you should find a solicitor with an understanding of franchising, a bfa affiliated one that can undertake an assessment of the franchise agreement and, where relevant, any lease. A good franchise solicitor will point out that whilst some clauses look onerous they are normal. However if they are not or unusually worded they will highlight them for you to investigate further.
You should also talk to as many existing franchisees as you can. To do this obtain a list from the franchisor. This list should have the same number of franchisees on it that they have already told you there are. Any less and there needs to be a plausible explanation. If it is not plausible be wary.
Whether you are buying a house or a franchise you will need money to do that. Whichever transaction you are doing there are expert teams at the banks – mortgage advisors or Franchise managers that can give you the right advice. Make sure you speak to the franchise teams at the banks, as they should know the franchise and already have a track record of dealing with other franchisees. If they won’t lend to the franchise you have chosen it’s probably because they have seen too many failures so be wary if this happens.
Finally with either purchase you will then enjoy years of enjoyment and may be a little hard work to achieve that.
Best of luck with your search.
This post was written by Mark Scott, Operations Director of the Azura Group