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8 steps to buying a franchise

Sarah Stowe

Investing in a franchise business can be a great way to build your future.

Franchising is particularly appealing to anyone who is inexperienced in running a business. But it also holds great appeal to more seasoned operators who appreciate a valued brand name and the investment by the franchisor to support and grow the network.

If you are new to the idea of owning your own business and are tempted by the benefits of a franchise, there are certain steps to take to ensure your purchase decision is not rushed. Here we outline the basic steps  – you can find out how to dig deeper into the topics in other articles on our website.

Analyse your motives

It is important to fully consider what it is that is driving your interest in a franchise investment. Perhaps you think you can run a business better than your boss, perhaps running a business is a lifelong ambition, maybe there’s a strong financial imperative or the attraction of managing your own time is overwhelming.

If you can pinpoint exactly whether franchising is right for you and what you need from this business, it will help you make the right choices as you journey towards business ownership.

What lifestyle do you want?

The term lifestyle is commonly used in franchising, conjuring up images of relaxed, contented couples or families enjoying free time. But when you think about lifestyle it’s advisable to reflect on how you want to spend your time while you are building the business. Will your family accept long hours and weekend work? Will you be able to afford to step back from the business and employ a manager? Will both you and your partner be involved in the franchise from the start or will one of you need to keep a job going to help the finances? Are you interested in only working a weekday business? Are you fit enough to tackle the physical aspects of some mobile franchises? Do you want to be tied to a retail store for seven days a week?

Learn more about franchising

Check out as much information as you can about how franchising works, the relationship between franchisee and franchisor, the legal requirements in the Franchising Code of Conduct. The hours spent gaining knowledge of the sector will be a good investment of your time.

Start looking for a business

Once you have some basics under your belt, it’s easier to search for either a business or the sector you want to work within, as you’ll have a clearer idea of what you want.

When you find a brand that sparks your passion, find out more about the franchising aspect of the business from the company itself.

The next step is to put in an application.

Check your finances

You have probably done the sums already, but financial institutions – whether that’s a bank or an alternative funding provider – have rules they stick to when looking at applications for funding. Find out what assets the  bank  will require and whether you are likely to fit its profile. You will need working capital to tide you over as you start-up the business.

The application process

The franchisor must give you the appropriate disclosure documents during the application process. Make sure you read them, and take them to a lawyer for further scrutiny.

You’ll need to undertake further research too, both on the company, the franchisor, and by talking to existing and former franchisees.

Get legal and financial advice

This is the time to find a franchise-experienced lawyer and accountant. It is worth investing in experts who can look after your interests, spot poorly worded clauses and raise the alarm if the numbers don’t stack up.

Sign up

There is a seven day cooling off period once you have signed your franchise agreement but it is advisable not to rely on this. Far better to be sure before you step up that being a franchisee with this system is what you want.

  • Are you happy with the legal and financial advice you have received?
  • Are you committed to the brand and all the work it will take to build your own business?
  • Are you confident you have done enough research?
  • Are your family and friends on-side with the decision?
  • Do you have the finance to purchase the franchise?

Great, you’re ready to sign up.

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