ADVICE
BUYING A FRANCHISE
Manzoor Ishani, senior consultant solicitor with
Sherrards, details the 10-stage process
A
ny prospective franchisee
who seeks professional
advice will be advised that
once they’ve made one
of the most important decisions in
their life, which is whether to start a
business, the next decision is almost
equally important, which is what sort of
business to go into.
SERVICE OR RETAIL BUSINESS?
There are pros and cons. If you’re the
sort of person who doesn’t want to
work anti-social hours, a retail business
that operates during fixed hours would
suit you better.
However, a retail operation that
needs to operate from a fixed location
requires taking on lease obligations,
employing staff and carrying stock. On
the other hand, if you’re in the service
business, it’s quite likely that working
fixed hours alone will not be sufficient.
Much, of course, depends on the type
of service business. If you take a carpet
cleaning business as an example, this
will invariably mean working anti-
social hours. On the other hand, you’re
quite likely to be working from home
with little or no need to pay rent or
carry a large stock of products. DECIDE HOW MUCH YOU CAN
AFFORD
There is usually a choice of franchises
in the same line of business and they
don’t all cost the same.
For example, there’s more than one
carpet cleaning franchise available.
Moreover, there are many servicefranchises available, so the logical
thing to do is look at what’s available
for sale in your price range. DO YOUR HOMEWORK
Obtain as much detail from the
franchisor as possible. Where
the franchisor provides financial
illustrations, study these carefully to
satisfy yourself that the income shown
satisfies your needs and requirements.
However, bear in mind that they
are only illustrations and may be
optimistic. FINDING FUNDING
While reviewing the information
supplied by the franchisor, contact
your bank manager if you think you’ll
need a loan and discuss with them
whether, in principle, the bank will
lend you the money you require for the
type of franchise you’re contemplating
buying.
Most banks now operate fairly
sophisticated information systems,
whereby bank managers have access
to a central office from which they
can obtain detailed information about
many franchises, which will enable
them to make a decision. LEGAL ADVICE
Consult a solicitor, who’s experienced
in franchising, to review the franchise
agreement and advise you on it. FINANCIAL GUIDANCE
If you and your solicitor are satisfied
with the agreement, consult your
accountant for advice about the
financial aspects of the franchise.
By this time, you should have some
idea of the sort of premises you’ll be
occupying or your trading territory.Obtain as much detail from
the franchisor as possible