Franchising is not a quick-fix solution or hobby. It is a serious business option and one that requires hard work, plenty of enthusiasm, dedication and business acumen.
A franchisee buys a licence which entitles them to trade under the trade name of the franchisor and gives them access to resources and ongoing support they need to set up in the business.
By opting for a franchise company with a successful track record, you are more likely to secure funding.
Here are some steps that should be taken when embarking on the possibility of a franchise investment:
Do the maths
Do your sums and find out realistically what funding you have available or potentially available.
If you are looking to raise finance it is worth noting that there are three major banks that the BFA accredits because they understand and specialise in franchising.
Ask yourself…
Ask the question “Do I fit this business model?” A business in travel will have its own intricacies and needs, so can you commit to them?
Do your research
Market research is vital. Take time to look at the businesses available. Be aware that when you sign up to any franchise you are buying someone else’s brand and they will want you to adhere to their systems.
Be honest
Make sure that you thoroughly investigate any franchise opportunity. The franchisor should be transparent about success, where in the country it has performed well and where it hasn’t.
Ask to speak to a number of their franchisees, not just the one the franchisor recommends.
Check the costs
Find out whether the franchise investment includes the cost of operating capital and stock. The last thing you need is surprise bills.
Get advice
With any business contract, read the small print and get legal advice if required. Franchise agreements are generally very large documents and can be very involved. Speak to a BFA-accredited professional adviser.
Case study
Travel Weekly spoke to Midlands-based Paul Graham, who bought an Explorer Travel franchise in 2005 after being made redundant
Graham paid £10,000 plus VAT for the package which included a generic travel website, a bespoke one tailored around Italy, training, support and membership of travel clubs.
“I bought the franchise at Christmas, but launched the website at Easter,” said Graham.
“It took about nine months to get a return on my investment, but the timing wasn’t great, as by launching at Easter I had missed out on the summer period for that year.”
He started getting enquiries for the Verona Opera, and his business blossomed into a niche travel company offering opera holidays to Italy, with the website passionateaboutopera.co.uk.
Graham added: “The franchise company’s aims are different to yours. They want to sell a franchise, but you sell holidays.
“You need to make sure they will manage you through the process. Some franchise companies talk big numbers, but you need to be very clear about what you are likely to earn.
“You also need to understand if you are going to be selling only package holidays, which there is not a lot of money in, as well as understanding the suppliers you will be working with. I chose Explorer because I had a lot of freedom in what I sold.”