UK: SME/Professional Counsel - Entrepreneurship - Franchising is not easy.

UK: SME/Professional Counsel - Entrepreneurship - Franchising is not easy. - The 50 questions that one needs to ask.

by Simon Wise.
Last Updated: 31 Aug 2010

The 50 questions that one needs to ask.

The principle of franchising is simple. One company (the franchisor) chooses to grow by granting a licence to others (the franchisees) to sell its product or service. The franchisor retains control over how products and services are marketed and sold and the overall quality and standards of the business.

For the franchisee, the business idea is tried and tested. Larger, well-established franchise operations such as McDonald's will have national advertising campaigns and a solid trading name. They will also provide training, product development and a specialist range of management services.

They may help secure funding and offer benefits such as discounted bulk-buy supplies.

The franchisee pays the franchisor an initial fee of anything from £3,000 to £500,000 as well as on-going management service fees. Franchising is not easy and potential franchisees should be realistic about their abilities, what they want out of the business and what they are prepared to put into it.

The British Franchising Association (BFA) publishes an independent guide, which includes a checklist of 50 important questions the franchisee should ask - how long the franchisor has been in franchising, how much the franchise costs, what on-going support the franchisee will get, and so on.

The franchisee must check out the franchise business and its financial projections. A BFA affiliate lawyer can advise on the agreement. Obtain a full list of other franchisees and talk with them direct or spend time at their business. National Franchising Week takes place from 5-11 October.

Simon Wise is business service manager for the BFA, 01491 578050.

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