Getting the Right Advice

As with any business venture, franchising involves an element of risk and requires a significant financial investment. For many people, it may be their largest investment, second only to purchasing a home.

While you may feel overwhelmed by the complexity of franchising, it is important to remember that you are not expected to understand every detail on your own. However, it is your responsibility to seek clarification on aspects that seem unfamiliar or that you lack knowledge about.

Whether you are considering a low-cost franchise option or a multi-million-dollar retail opportunity, having key advisors by your side is crucial. There are several essential stakeholders you should include in the process of buying a franchise.

Firstly, it is vital to seek advice from experts with a background and strong knowledge of franchising. Franchising is a specialized field, and working with experts who have a deep understanding of it can make the process smoother and more efficient. This expertise can help you avoid unnecessary delays and additional costs. By ensuring your advisors are well-versed in franchising, you can navigate the complexities of buying a franchise more effectively and make informed decisions that benefit your investment.

Accountant

Before considering a franchise opportunity, it is crucial to assess your financial stability. Understanding how much you can afford, the associated costs of the venture, and the revenue needed to remain profitable are essential questions that a thorough financial audit can answer.

Consulting your family accountant may not be sufficient, as franchise models come with unique challenges specific to the sector. Therefore, it is imperative to seek advice from an accountant with franchise experience before purchasing a franchise.

As you launch and grow your business, this relationship becomes even more important. Resist the temptation to handle bookkeeping on your own. An accountant with franchise expertise, who has been involved from the beginning, can monitor your business’s growth and identify potential issues before they become problems.

Lawyer

When you first receive the franchise agreement and disclosure document, it can feel overwhelming. These documents are expansive, detailed, and often filled with legal jargon that can confuse the average reader. To navigate this complexity, take the documents to a lawyer who specializes in franchises and has experience with franchise documents and contracts.

A franchise-specific lawyer can help alleviate any concerns you may have about your chosen model and provide valuable insights into the sector as a whole. If you are unsure how the Franchising Code of Conduct applies to you or what documents you should expect to receive, consult your franchise lawyer.

Viewing your franchise lawyer as an investment rather than a cost is crucial. Their expertise can save you money in the long run by ensuring that the franchise documents you receive from the franchisor align with your expectations and what you have been told.

Before committing to purchasing a franchise, it is important to understand the key protections and requirements contained in the Franchising Code of Conduct. An experienced franchise lawyer will be able to advise you on whether the franchisor’s documents and commercial practices are standard and in compliance with the Code.

Your Franchisor

One of the most revealing and informative conversations a prospective franchisee can have is with the franchisor. This interaction can provide critical insights into the nature of the business and the potential relationship you will have moving forward.

Before purchasing a franchise, schedule meetings with the franchisor to evaluate the relationship as a long-term investment. Consider the following points during your assessment:

• Franchisor’s Demeanor: Does the franchisor appear friendly, inviting, and flexible? Assessing their attitude and approachability is crucial as it sets the tone for future interactions and collaboration.
• Support Structures: Inquire extensively about the support and training provided. Determine if these are ongoing services or limited to the initial onboarding process. Continuous support and training indicate a franchisor’s commitment to your long-term success and their dedication to maintaining high standards across their franchise network.
• Long-Term Goals: Understanding the franchisor’s long-term goals will give you insight into their vision for the brand and how they plan to support their franchisees over time.
• Consistency and Culture: Observe if the messaging and culture are consistent across different representatives of the franchisor’s office. Meeting various team members can provide a clearer picture of the organizational culture. Determine if this culture aligns with your values and if it is one you wish to be a part of.

Your interactions with the franchisor will give you a sense of how the relationship will continue beyond the initial purchase. It is important that you feel confident and comfortable with the franchisor’s commitment to supporting you throughout your franchise journey.

Additionally, consider asking for references from existing franchisees. Speaking with current franchise owners can offer valuable perspectives on the franchisor’s support, responsiveness, and overall management style. Their experiences can provide a realistic view of what you can expect as part of the franchise network.

Ultimately, choosing a franchisor is not just about the business model but also about the partnership you will enter. Ensuring that the franchisor is supportive, consistent, and aligned with your values is crucial for a successful and fulfilling franchise experience.

Bank Lenders or Finance Broker

No matter the business you’re considering, financing will inevitably become a pivotal consideration. Will you self-fund the venture, or opt for a business loan? If the latter, will you approach traditional lenders or seek alternative financing options?

The financial requirements for launching a franchise vary widely across models, influenced by factors such as location, brand reputation, fit-out costs, and equipment needs. Most lenders typically require franchisees to contribute a certain amount of their own equity.

Here are key considerations if you decide to pursue a loan:

• Investment Costs: Assess the total upfront investment required, which includes initial franchise fees, setup costs, and any additional expenses.
• Ongoing Costs: Understand the ongoing operational expenses, including royalties, marketing fees, and lease payments, to ensure financial sustainability.
• Loan Term: Determine the duration of the loan and how it aligns with your financial projections and business plan.

Engaging a proficient Finance Broker can significantly streamline the loan application process. A knowledgeable broker can shop around for competitive loan terms, ensuring that your application is meticulously prepared to minimize delays. Beyond securing the initial funding, a good broker will consider ancillary costs like advisory fees and ongoing cash flow requirements.

When selecting a Finance Broker, prioritize those with specialized expertise in business funding finance. This ensures they understand the nuances of franchise financing, unlike brokers primarily focused on residential mortgages. Their industry-specific knowledge and network can prove invaluable in navigating the complexities of franchise funding and securing the best financial arrangement for your venture.

Self-Reflection

The most crucial person to question is yourself!

Reflect deeply on the opportunity ahead. Why do you want to venture into business on your own? Is it driven by a desire for personal fulfillment or financial gain?

If financial gain motivates you, remember that like all businesses, franchises require time to grow and become profitable. It’s unrealistic to expect significant profits within the first year.

Equally important is considering the type of franchise you would be willing to immerse yourself in daily. Successful franchisees often thrive because they are actively involved, especially in the initial phases. Also, think about the franchise’s location. Long commutes from home can strain personal life, impacting your overall satisfaction.

While some franchise models accommodate absentee ownership, keep in mind the costs associated with staffing, payroll, and training.

Before purchasing a franchise, establish clear business objectives aligned with your goals. Choose an industry that ignites your passion and shape your business identity accordingly. Clarify your role in the business—whether hands-on or overseeing—and ensure it aligns with your lifestyle and aspirations.