How to buy a business franchise

Buying a franchise is not like buying other types of business. You need to go through an interview process so the franchisor can make sure you’re right for the network and the brand. But it does offer some big advantages over the normal purchasing process.

How do I find a franchise?

  • The British Franchise Association (BFA) lists all its franchise members
  • Franchise directories (which will include non-BFA members)
  • Various franchise exhibitions such as The National Franchise Exhibition
  • Franchise magazines such as The Franchise Magazine

What kind of franchise will suit me?

Consider all the following:

Personal interests & Employment experience.

You don’t have to have worked in the same sector as the franchise is in, but you need to make sure you managerial, accountancy marketing and other required skills are going to be good enough. Some franchise operations are easier to run than others, so pick carefully and speak to the seller for more guidance.

What you can afford.

Look closely at what the price entails, as you may be loaded with premises, equipment or stock costs on top of the initial fee. Talk to the seller to find out more. Figure out how much you’re prepared to borrow from a bank and whether the profits the franchise is predicted to make meet repayments with enough leftover to support you and anyone dependent on you.

  • How much time you have to put into the business.
  • How much support is on offer from the franchisor.
  • How much freedom you get with the franchise.

How do I buy a franchise?

Start with a shortlist of several franchises you like the sound of and can afford to research further. Research the franchisors. What’s their background? What’s the success rate of other franchisees? Have other franchisees stayed in the operation or left quickly? What are their profits like? Is that enough to support you?

You don’t just buy a franchise outright – you have to go through a selection process, akin to a job interview. (No surprise really, as you’ll be representing the franchisor’s brand.)  Be prepared for this when you’ve made a choice about what franchise operation you want to join – and remember you have the rest of your shortlist if you’re unsuccessful.  The intensity of the selection process should give you an idea of the success rate expected from you and the credibility of the franchisor. Be suspicious of anyone willing to hand over their brand to you without properly assessing your capabilities first.

If you’re successful you need to carry out due diligence and get professional advice from solicitors, surveyors and accountants before making any payments to make sure the business is sound. When you pay, there is usually an initial ‘finance fee’ that pays for the licensing agreement and the costs of training.  There are the on-going management service fees, often dependent on annual turnover. Make sure you know all the costs involved before committing.

Checklist

  • Make a shortlist of franchises you’re interested in.
  • Research the franchisors and market.
  • Choose the one that’s right for you.
  • Research and speak with other franchisees in the network to make sure it earns enough for you and is reputable.
  • Check the BFA Register.
  • Get the full breakdown of costs from the franchisor.
  • Make sure you have in place the finances needed to buy and run it.
  • Talk to your bank and or a reputable Commercial Finance Broker such as ourselves before applying.
  • Approach the company and start the selection process.
  • Agree costs, ongoing payment terms and type of franchise set up including what the franchisee has authority over.
  • Carry out your due diligence and advise your solicitor, surveyor and accountant before making any payment.

FAQ

What is the average price for buying a franchise?

Purchase costs alone are on average £15,000. But new franchisees need an average of £50,400 for everything needed to open (including premises, equipment, stock, and so on).

What support will I get from Wattsford Commercial Finance?

We’ve supported many franchisees with starting their business and have provided ongoing financial support.  Depending upon your circumstances there is a wide range of commercial finance and business support available from government backed start up loans, small business finance to securing finance to purchase assets and property.  Many of these services including business coaching were offered when the business was started.

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