Should I Franchise?

Thinking of Investing in a Franchise? Perhaps you''''''''''re lookins for a career change and always wanted to be your own boss? Are you seeking a new challenge? Do you want to improve your income? Maybe you're considering all of these things. Whatever your motivation and whatever your background, you may (like many others) be finding it difficult to know where to start. I wish there was a complete checklist or 'secret formula' to help every inquirer on their way. Let's apply the rules of common sense and possibly add another vital ingredient - the lessons we can learn from successful people. Having taken the journey into my own businesses a number of times, and also assisting others in the early stages, I'd like to share some of the major lessons I've learned - through both success and failure.

Where to Begin?
First, take some time out to assess yourself Think about what type of business you might find interesting, seeing as now you have a choice. What you are best suited to? (Don't just look for a business that fits your budget and assume everything will work out.) Ask people you respect and who know you well for their views on what kind of business they believe you would be most successful in.
Ask them to identify the things you do very well. Explore their comments. An objective point of view is likely to help you in your assessment. Like it or not, small businesses involve customer contact. Do you have good communication skills? Are you the kind of person who likes dealing with the public? Are you comfortable with selling?
Even if you are dissatisfied with what you are doing now, please understand that running your own business is very demanding. Some people are not cut out to be successful business owners. They may be successful in their current job but may need management. Many find it hard to operate outside the disciplines of a large organisation. These people are better off working as employees. Would you be better off simply making a career change?

Your Background and Training
What training and job experience have you already had? Are you likely to understand the basics of small business management, including bookkeeping, budgeting and the rules for employing people? If you do not have relevant training and experience in handling these issues then you may find a small business course at TAFE or another college to be of great benefit.
Successful franchisor organisations provide initial and ongoing training programs, to ensure that franchisees have appropriate operating knowledge and skills. When making inquiries, ask the franchisor about the training programs they provide.

Finding the Right Franchise Business
Naturally, you want a profitable business. But where do you find the right one? Read the businesses for sale advertisements and you'll see a vast array of franchise opportunities. Some of these will sound appealing. As you make inquiries, confronted by the range of choices, you may begin to feel like you're searching for a needle in a haystack. Some 'great opportunities' will turn out to be a disappointment when you do thorough research.
Start your search for a franchise by reading through this Directory. If you need to search further you should check out web sites. You may be surprised at the number of franchise opportunities listed. Such information will provide an overview, so you can then narrow down your search to those opportunities that fit your interests and skills, and the capital you have to invest.
Business brokers often have franchise businesses for sale and they are generally skilled in matching people to the right businesses. But remember, brokers are engaged by business owners to sell businesses. They act for the vendor not the purchaser. So you will need to obtain independent advice on any business you may be considering. We'll deal with this issue in more depth later on.

What Next?
Once you have a clearer picture of what type of franchise business will suit you and have gained an overview of the franchises available, it's time to examine specific opportunities on offer. For each franchise opportunity, ask yourself some serious questions, including:

• Do you have enough capital to invest?(The most common cause of small business failure is lack of capital.)
• Will the opportunity you have in mind actually earn you more than you are earning now?
• What level of profit do existing franchisees achieve? (Investigate this thoroughly.)
• Could you become passionate about this business?
• Would you be happy operating the business for (say) at least five years?
• How many hours do successful operators work?
• Do you have the health and stamina to operate the business?
• Will the workload fit your lifestyle?
• Do you have a family to consider and, if so, do you have their full support?

These are all critical questions, so answer them honestly. Many people considering the purchase of a franchise fail to shop around and/or compare the various opportunities available. They then make the mistake of not gathering enough detailed information before making a decision. Make detailed inquiries and gather information. Talk to existing franchisees about their views and experiences. Take this approach and you'll learn a great deal. Regard the research effort as part of your total investment. Try not to be too optimistic. When you see a franchise that looks fine on the surface, don't make an emotional commitment before weighing up all of the facts. In my experience, people are often swayed by emotion before all the homework is done. They then tend to overlook any bad news they may later discover.

Professional Advice
You've made many inquiries, looked at a number of opportunities and now you have a particular franchise business in mind. Perhaps you are already feeling some pressure to make a decision. Relax. A reputable franchisor, offering a good business, will be confident in what he/she is offering and will be prepared to wait for a reasonable period, until your homework is completed. If any pressure is applied then walk away and search for another opportunity. Successful people seek professional advice before making a serious decision. The fees you pay an adviser will be a worthwhile investment. But before you seek advice, gather all of the information you possibly can. Ask for comprehensive financial information and copies of all legal documents, including the franchise agreement and any contract of sale. Obtain a franchise Disclosure Document from the franchisor. If premises are involved, obtain a copy of the lease (and any retail lease disclosure document, if applicable). Gather your own information on the local market and performance of any competitors. If you do not already know who to turn to for advice then contact the Franchise Council of Australia. Alternatively, contact the professional bodies in your State - the Australian Society of Accountants and the Law Society. These organisations can offer contact lists of members (consultants, solicitors and accountants) who are equipped to assist you. Professional advisers will be pleased to inform you of the services they provide and the fees they charge.

Planning
While investigating the opportunity in detail and taking professional advice, you should also be preparing a business plan for your first three years of operation. Of course, you aim to be successful - now it's time to work out how you are actually going to achieve your goals. Ask for detailed input from the franchisor organisation, so that your plan reflects their operating experience. Yes, it requires effort, but consider all of the essentials, including: your financial goals, your personal goals, the capital requirements, the staffing levels required, the profit margins expected, your promotional plans, the insurance cover required and itemised operating expenses. Once you have worked these issues through you should prepare a budget with a forecast of income and expenditure, and a cash flow forecast. Your accountant or consultant will be able to assist you with your plan and information for any loan applications.

Having completed your business plan, stop and make sure that you are still confident. Ask yourself:

• Are you prepared to put in the effort and work according to the plan?
• Do you believe that the plan is achievable?
• What if you only achieve 75% of budget?
• What if you need extra capital for the business as it grows over time?
• What will be the taxation implications when you achieve the plan?
• What bookkeeping systems should you put in place?

Concluding Comment
Franchise businesses typically have higher prospects of success because they use proven systems and are supported by experienced franchisor organisations. Do plenty of initial research and you'll find the right franchise. Remember... success comes to the franchisee who puts in the effort and follows the system. You'll be glad you did!

By Robert McComb