Advantages of Buying a Franchise
- As long as you get the right franchise and do your homework, you will be copying a business model that already has a proven track record of success.
- Depending on the franchise you buy, the brand might already be recognised in the market.
- You will get support including training, help finding the right location, an operations manual, and ongoing advice.
- You will normally have exclusive rights to an area or client base.
- It is often easier to get financing for a franchise than starting a brand-new business, particularly if the franchise has a good record.
Disadvantages of Buying a Franchise
- Start-up costs are often higher as you probably won’t be able to build the business up like you would if you start a business on your own.
- There are ongoing royalties, management fees, and other costs to pay.
- There will be some restrictions on what you can and can’t do. For example, it might be difficult to alter the business by, for example, introducing new products to enhance your appeal in the local market.
- You are tied to the franchisor so are exposed to the risk of them, for example, going out of business or selling the business to a new owner.
Researching Franchise Opportunities
Start by thinking about what you want to do. This includes asking yourself if you have the right personality to run your own business but it also includes evaluating whether you want to do the work involved in running the franchise.
With the popularity of the franchise business model at the moment, there are plenty of places to find franchise opportunities – a quick search on Google will give you several options. You can also attend franchise trade shows or talk to friends or family.
Once you have found a potential franchise, get as much information as possible on the opportunity from the franchisor. This will give you a good starting point for your further research. It is important to note, however, that this is just a starting point.
For example, you should verify everything the franchisor says about the business by talking directly to other franchisees and evaluating accounts and annual returns. You should also find out answers to questions like:
- How long has the business been in operation?
- Who are the directors and what is their background?
- Are their finances secure?
- How many franchisees do they have in Ireland and how many in total around the world?
- How franchises have failed in the past and why?
You also need to find out in detail about the support the franchisor is offering as well as what is required from you. For example, what level of ongoing support will you get and what help is available if you run into difficulties?
In addition, you should carry out your own market research to find out if the business is viable in your area. Look at who the competitors are, evaluate the financial projections, and plan out issues like marketing strategies and staff recruitment/retention.
Finally, check the legal agreement thoroughly looking for things like:
- What is the contract length?
- Is there an option to renew?
- Do you have exclusivity?
- Is that exclusivity for the full franchise term?
- What are the conditions of the franchise?
- What restrictions will you have to work within?
- What happens if you cannot continue running the business?
- Can you sell the franchise?
If you need help with buying or running a franchise, or anything else to do with your business, please contact a member of the Gilroy Gannon team today.