Franchises can be a great way to get into business under the umbrella of a big brand, but that doesn’t mean it’s risk free.
If you’re considering buying into a franchise, there are some key areas to look into before making any sort of investment. In this article we share our top tips, and the warning signs to watch out for during the consultation period. We also have a separate article which goes into more detail about paying tax as a franchisee.
Look into their past
It’s often worth doing background checks on the majority of people you do business with, especially if money is changing hands.
Make sure you’ve researching your potential investments heavily before you sign anything. A good start is to simply search for them online and see what their reputation is like.
Dig deep to see if there have been any legal problems, commonly occurring customer complaints, dodgy PR, or financial struggles. All of these could indicate that you’ll struggle to operate under their brand.
While you’re unlikely to find a company with a perfectly clean record, it’s important that you know what you’re getting into. Customer complaints happen at every business, but is there a pattern that could become a problem for you?
Missing information
If they’re glossing over the fact that important data is missing, or they promise to get it later once the paperwork has gone through, it could be a sign of much more worrying problems.
What are they hiding? You don’t want to find out the answer to that question when it’s too late.
High pressured sales pitch
If the high-pressured sales pitch leaves you feeling a bit uncomfortable or rushed, you wouldn’t be alone. Plenty of people will be turned off a sale if there’s a huge sales pitch.
Surely if the opportunity is that great, it doesn’t need a desperate sounding sales pitch that tries to push you into a quick decision.
Bold claims
Watch out for businesses that have only been running a year or two but already boasting they have hundreds of successful franchisees. There’s something that doesn’t sit right there.
Either they’re exaggerating or something else is going on. If they have so many franchisees, are they likely to have the capacity to support you as much as you’d like?
Training program isn’t great
While negotiating for a franchise, you should ask as many questions as possible. One of the key benefits of having a franchise is the support you (should) receive from the company.
A good franchise business will have a thorough training program to get new franchisees up to speed and a solid support system in place to ensure success.
If it sounds like you’d be dropped in the deep end once you sign the papers, then it might be worth looking elsewhere for something a bit more stable and structured.
Blaming franchisees
If the franchise company is quick to blame their franchisees for poor results, this is a bad sign. It means that franchisees might not be well respected in the company and will not be receiving much help once they sign the papers.
Changing methods
Any franchise company that boasts they’re always changing the methods and concepts of the company is a warning sign. You don’t want to have to change every five minutes to catch up to the latest new idea. It’s good to be adaptable, but not if that means a lack of focus and forward planning.
Whether you decide to open a franchise or not, make sure you research everything you can about the company, how they’re doing, how people react to their brand and how they present themselves.
Are you thinking about opening a franchise? Are there any other clear warning signs you’ve come across? Please let us know what you think.
