When you buy a franchise opportunity, you are buying much more than a just a business. A business which stands a higher chance of success compared to people who choose to start a business on their own. You are also buying into a business which has strict control and regulations as to what you can and can not do.



The franchisor will insist on certain quality standards being maintained. This is so that the end consumers receive a high standard product delivered in a way that they are accustomed to at other outlets.

You will be allowed to make small changes in the way you run your business compared to other franchisees, but the business will have to operate to a high standard and all the major decisions on the management of the business have already been taken.

Why is it like this? The franchisor has probably spent many years if not decades creating a business that works and can be sold successfully as a franchise. They have usually invested heavily in marketing materials, advertising campaigns, shop floor layouts logos and branding.

A poor franchisee can have a very detrimental affect on the group as a whole. The press loves it when something goes wrong in business and is quick to spread the news. It is essential for the franchisor to spend some quality time on the poor performing franchisees as the franchise network is as strong as the weakest link.

In return for all this support and ongoing training programmes the franchisee will have to a franchise fee at the outset and ongoing license (royalty) fees. These payments can make a huge dent in the profitability of the business so it is essential that you choose a franchise opportunity that not only has high margins but also decent turnover.

In the franchise business a prospective buyer has to tread extremely carefully. Not all franchises are the same. The market place is also evolving very rapidly. What may have worked as a business only a few years ago might not be a viable business opportunity now.

It is imperative that the franchisee takes advice about the current market place before buying into any new franchise. Trade reports are very helpful in this capacity and can be found very easily by a qualified accountant.

A decent franchise agreement is also essential. This should protect the franchisee as well as the franchisor. Too many agreements are biased towards the franchisor and these should be avoided at all costs. If you are not legal speak savvy then it is very important to get advice from a franchise lawyer.

Some franchise businesses which were very successful in the past are now struggling and a few will fold. Make sure that your accountant has a look at the financial reports of the franchise business that you are thinking of buying into. You need a strong franchisor on your side for many years to come.

There are even restrictions in the franchise agreement which cover in detail the processes involved in selling your business. The franchisor has to be satisfied that the buyer will make a suitable candidate for the business. They will charge the franchisee a fixed figure or a percentage of the final price achieved to cover their costs associated with creating new legal agreements, helping with the smooth transfer, doing credit checks on the potential buyer and providing long term support to someone who might not have any experience in managing a business.

What happens when a franchisor rolls out a new product that fails spectacularly? Usually the greatest loss is incurred by the franchise network. It is essential that these products are trialed in certain locations before a nation roll out.

Often the need for profit and the desire for turnover can lead to conflicts between the franchisee and the franchisor. This is usually due to the way royalty payments are calculated in the franchise agreement. In some case the franchisee could be forced into increasing their business even though they are happy with the current turnover and profitability of the business.

There are many other disadvantages to buying a franchise opportunity which I will cover in later articles. In all fairness though, if you can find a decent opportunity and take heed of all the advice in this article you should be on the way to a successful business life.