Franchising has enjoyed a sustained period of strong growth in the last decade, which in turn has led to a large increase in the number of opportunities on offer to potential franchisees – more than 900 – and expanded the diversity of those options. But that also means there’s more to filter out too. Some ‘franchise opportunities’ are not franchises at all. In some cases, you’re buying no more than a job to sell a product or a licence to trade under a name, but without the business ownership, training or support that comes with a franchise.
To be clear: with a genuine franchise, the franchisor owns the brand, while the franchisee owns their own
business, trading under that brand, and can sell it on when they are ready to.
How do you know if a business is a proper franchise? All businesses that are members of the British Franchise Association have passed a strict set of standards to check they are running realistic, sustainable and ethical franchise operations. Those companies have chosen, voluntarily, to submit their business model to serious levels of scrutiny, which should show you the pride they take in supporting their network and the clarity with which they approach their prospective franchisees.
In addition, there are a number of franchise brands that are not bfa members. Some of these will never be able to pass the bfa accreditation checks, as their standards are not high enough. Others could, but choose not to make the changes or just choose not to be members even if their standards are high enough.The purpose of your research is to identify the good from the bad – the genuine and excellent franchises from the rest. And there are some checks that will help you narrow down your list. Genuine franchise opportunities include all of the following as a minimum:
- The business model needs to be proven for a minimum of 12 months. Franchising is based on empirical, evidenced business success, not concepts or ideas.
- The franchise opportunity is the same as the proven business model. For example, if the original business was a concession stall outside a train station, the franchise shouldn’t be a high street retail unit operating under the same brand.
- The brand will be protected by the franchisor to prevent unwarranted and unwanted misuse – ask
about trademark and IP registrations.
- The business model must be transferable and able to be duplicated in more than one location or area.
- The operation should be teachable and provide a full training programme to ensure new franchisees have the right skills and knowledge to run the business. In some franchises, this can be a short training programme of a few days; others can take several months.
- Franchisees will be supported by the franchisor in return for an ongoing management service fee, or royalty, payable by the franchisee. The fees provide the right for the franchisee to call on qualified support as and when necessary from head office.
- There should be a substantial operations manual, which clearly defines how the business works in practice and provides all the details needed to show a franchisee how to run the business according to the proven franchise model.
- A franchise comes with a franchise agreement, the legal contract that defines the nature, obligations and clauses of the relationship between franchisor and franchisee. This is a substantial document – if it’s a few pages long or sent in the body of an email, it’s not a franchise – which will be weighted in favour of the franchisor, as it has the brand and wider franchisee network to protect. This is a legally binding document, so you need a specialist franchise solicitor to review it before you sign on the dotted line.
- Finally, all genuine franchises provide the opportunity to run your own business under agreement, using the franchisor’s brand, system, training and support. It’s worth repeating: it’s your business. You are a business owner and not an employee. Every good franchise makes this clear and is structured in a way that allows you to build customer loyalty and brand awareness with your business locally. You are building an asset that, if you’re successful, appreciates in value, allowing you toprofit from its sale.
The best advice remains, as always, to take your time and research everything you can on the business, the people behind it and the franchise opportunity on offer.