Ready to be your own boss? What you need to know about buying a franchise
So you’re ready to be your own boss. Here are four things you need to know about buying a franchise.
The brand is the heart of the franchise system, and represents how an outlet looks and feels. The franchise brand is in some ways its public face and carries the consistent, standardised, familiar experience which consumers value. As a franchisee, you need to be confident that the brand is compelling and distinctive.
The franchise system or the network is generally used to describe the franchised business itself, the branding and front of house dimension, the brand specific offering of goods and services as well as the individual units which are part of the system. It refers to the behind-the-scenes of the investment - the business, management and operational systems which maintain consistency but also efficient and profitable operations.
As a franchisee, you need to be satisfied that the system is proven. Speaking to existing franchisees is a key part of identifying a proven franchise system.
A franchisee’s relationship with the franchisor is one of the key factors in successful franchise systems. The franchisor/franchisee relationship is a legal and commercial one as indicated by the franchise contract, but there is much more to it.
The franchising relationship is largely interdependent, relies on good faith, and lasts for an extended period of time. Some franchises start at five year terms. Like personal relationships, the franchising relationship certainly comes with challenges beyond commercial.
As a potential franchisee, you need to be confident with their due diligence from discussions with the existing franchisees that the relationship is healthy and respectful. Effective communication is key to getting it right.
At the end of the day, franchisors with a successful business model franchise the brand to improve their bottom line. Potential franchisees also buy franchises to get the most from their investment of time and money.
The combination of the franchisee's proprietorship and the franchisor's system is a proven formula to attain financial benefit for both parties.
But franchising is not magic – there is no magic moneymaking formula for either party. Franchisors will rarely provide definitive financial promises and the prospective franchisee must be satisfied that the numbers add up from their due diligence.