Your Guide to Buying a Franchise

If you’ve ever considered working for yourself or running your own business, you may have come across the option of buying a franchise. But how sensible is this option? What does buying and running a franchise involve – and is it the right choice for you?

In the below franchise guide, we’ll explore the steps to open a franchise while answering some of these questions.

For many, purchasing a franchise appears to be a very good move. Annually, less than 1% fail – while 90% report that they make a profit. With more than half of other new businesses collapsing within five years, the choice to buy a franchise has clearly proven a smart one for many.

How Does a Franchise Work?

Before you submit a franchise application, it’s important to know exactly how this kind of business model functions.

The exact approaches and processes vary from company to company and from sector to sector, but, for the purposes of this guide, we’ll use an example of an individual who has taken advantage of one of the many restaurant franchise opportunities available across the UK.

Upon taking ownership of the franchise and paying the relevant fees, the new franchisee will receive guidance on how to operate their new business in accordance with regulations and processes set down by the franchisor, as well as access to all relevant systems (for example, stock taking and ordering systems or the company’s HR provision).

They will also receive support and updates from the franchisor.

Upon making the initial purchase, most franchisees receive the right to utilise the franchisor’s name and branding for a set period – and this must be renewed to prevent those rights from lapsing.

Pros and cons of a Franchise

Becoming a franchisee may be an excellent decision – but is it right for everyone? Here, we explore the pros and cons of jumping into the world of franchising.

Pro – Reduced Risk

Everyone knows that launching your own business is an action that brings with it a considerable amount of risk. However, the right franchise can provide you with a ready-built reputation and audience, with marketing approaches, supplier relationships and branding already developed to a high standard and tried and tested systems and processes already in place. This means you’ll need to do minimal research and development, saving you a great deal of time and money.

Pro – an established market share

When you buy a franchise, you’ll benefit from the existing standing that your franchisor organisation has already developed over previous years.

As a result, you won’t need to spend money and energy on establishing yourself – that work is already done.

Pro – a recognisable brand

As a franchisee, you will also be able to enjoy the advantages of an existing reputation and well-known brand image. Of course, it’s important to select your franchise carefully to achieve optimal benefits from its level of credibility.

Pro – ongoing support and training

A good franchisor will provide you and your team with accessible and beneficial support and regular opportunities to improve your skills and develop your knowledge of their systems and processes.

Pro – exclusivity

Many franchised brands offer their franchisees exclusive rights over a particular area – which means that no other branches will be permitted to open within a certain radius of your own.

Pro – access to finance

If you need to take out a loan or similar, you may find it easier when taking ownership of a franchise, as the established status and reputation of your franchisor is likely to be more attractive to banks and other lenders than an independent business. Some franchises also offer their own attractive financing options.

Pro – networking opportunities

You’ll be part of a thriving network of franchisees operating across the country, which offers exciting opportunities to give and receive support, to share ideas and to enjoy easy and fruitful communications.

Con – expenses

It’s important to undertake extensive research into your franchisor well in advance, as some seemingly affordable opportunities may come with unexpected or higher-than-anticipated costs – including the need to purchase new product lines from your franchisor or sudden hikes in management or service fees.

Con – a potential lack of flexibility and control

Different franchises come with different levels of autonomy. While a level of guidance can be helpful, there is the risk that your franchisor’s management approaches may begin to feel stifling and inflexible.

Con – difficulty selling

In some areas and sectors, it can be difficult to sell your franchise on. Most franchisors will need to approve the transaction and the new owner, which can hold things up significantly.

Con – shared reputation

Buying a franchise with a great reputation will naturally do wonders for your own business. However, if that reputation were to take an unfortunate turn – or if other franchisees within your network fail to operate their branches well – you may find yourself struggling to shake off a negative image that you did nothing to earn. You’ll be tied to the overall fortunes of your franchisor in a similar way. If the overall brand goes under, all of its branches and outlets will follow. It is, of course, vital that you research relevant franchises before you decide whether to move forward with an organisation that suits you.

7 Steps to Open a Franchise

Follow these steps to begin your franchising journey.

1. Find the right franchise for you

There are several factors to consider when choosing a franchise. You’ll need to research a number of brands offering franchising opportunities to ensure that their products, services and approaches suit your strengths and interests.

It’s a very good idea to attend a discovery day for each franchise in which you are interested. This is an event held by the franchising organisation that will introduce you to the brand and the way in which its individual branches and franchisees operate.

Once you’ve found a promising organisation, be sure to evaluate the franchise as extensively as you can to make sure you have a full appreciation of what you will be taking on.

2. The business plan

You should never submit a franchise application if you do not have a strong and achievable plan in place first.

When it comes to franchising, it is vital that this plan ties in neatly and effectively with the aims, processes and methods of operation of the brand you will be joining.

3. Legal considerations

We’ve mentioned location-based legal questions that may arise – including potential competition with existing franchisees within your franchised company – but there are also factors such as branding, insurance, employee rights, hiring, human resources provision and other issues that must be taken into account.

While most franchises will offer clear guidance on these elements, you must do your due diligence to make sure you have everything in place before you take charge and open to the public.

4. Financing

What are you required to pay in order to take on a franchise? You must ensure that you understand all monetary implications well in advance, as well as the options available to you if you need to apply for financing.

If required, you may well be able to take out a bank loan or similar to cover your costs – or the brand you are joining may have its own financing options. Where possible, you should contact other franchises to discuss this matter and discover which are the best options for you.

5. Spending

What will your franchise cost you on an ongoing basis? From management fees and the purchase of new products, you’ll need to develop a thorough understanding of all ongoing expenditure that is to be expected as operations continue.

6. Restaurant location

You’ll also need to decide on the location, basing your choice on availability, audience, market and competition – and, of course, your own commuting requirements.

In many cases, if you already own premises or plan to buy or rent a building, it may be possible to fit it out to serve as your franchise branch, but this depends on suitability, position and whether you will be encroaching on the territory of other franchise holders.

7. Equip the kitchen and furnishing the restaurant

Whether you’re taking over an existing branch or opening a new one in a building that you own or rent, you need to make sure that the premises are properly equipped to handle the operational and aesthetic requirements of the franchise. You will need to take this into account when considering your finances.

8. Recruiting

You’ll need to define your recruitment processes and approaches and ensure that they are in line with the requirements of your franchisor. You should clearly define the positions and responsibility of all employees and ensure that everyone you take on holds the correct levels of experience and qualification. For example, if you are planning to promote fast food franchise opportunities, you may decide to recruit for individuals with sufficient food service experience.

You are ready!

Once you’ve followed all of the above steps, then your franchise will be ready to open! Be sure to follow all guidance from your franchisor carefully, but don’t forget to add your own specialist touches and apply your personal areas of expertise within the permitted parameters. That additional insight could make all the difference to your success!

For more information about franchising, and to learn how to apply to purchase a local Quick Serve Restaurant (QSR) franchise for sale, get in touch with the franchising team at Subway today.

Our experts will be happy to give you all of the advice and guidance you may require.