Franchise handbook pdf download

Get BOOK. The Franchise Investor's Handbook. According to the U. Department of Commerce, buying a franchise is the average person's most viable avenue to owning a business. As a successful small-business owner, franchising your existing business plan to others is perhaps your fastest way to growth and enormous profits. The Franchisee Handbook. But franchisees are not puppets. They own their outlets and although they are not free to do just as they wish, they are nevertheless free enough not to be easily pushed around.

Salaried staff, on the other hand, can be fired provided of course that the procedures laid down in the employment laws are followed and disciplined. The ideal franchisee is one who is prepared to follow the laid-down procedures and systems, but still has sufficient initiative to spot and exploit business opportunities.

A tricky balance The perfect franchisee, like the perfect spouse, is an elusive being: the best will be diligent and devoted, the worst lazy and indifferent. In the franchise relationship, the most difficult kind of franchisee is the one who is lazy, but not so lazy that he or she breaks any of the terms of the agreement.

This leaves the franchisor in the awkward position of having a weak link in Franchise When sweetness and light become sourness and dark The relationship between franchisor and franchisee rests on a measure of mutual understanding and trust. As with all relationships, this is best achieved by maintaining regular, friendly contact and dealing with minor grievances before they fester and grow into something worse. Any breakdown in trust may exacerbate any rumbling discontent concerning the payment of management service charges.

Slimmer pickings As we have already noted, a franchised unit needs to generate a gross margin sufficient to provide a reasonable return to both the franchisee and the franchisor.

It follows that without the franchisee, the franchisor would make bigger profits. This, however, is hardly a serious disadvantage, more a case of the franchisor occasionally musing on what might have been had he or she chosen to expand without recourse to franchising.

The franchisor would like to have it both ways — a string of energetic entrepreneurs building the business, and all the profit, too. Reality has other ideas. Insiders can become outsiders Ingratitude and treachery are two regrettable aspects of the human psyche that might bubble to the surface in a franchise relationship. Such, alas, is human nature, and the wise franchisor plans for the black day when a deserter appears in the midst of the network.

Hence, many franchise agreements include a clause preventing a franchisee who leaves from setting up a rival operation within a specified time of his or her departure. If this goes undetected, the franchisor may receive a smaller fee income than he is entitled to under the terms of the agreement.

It costs real money to launch a franchise. There are costs of pilottesting, not to mention the risk involved, and the expense of recruiting and training franchisees.

Even then, it could be some time before fee income flows in to cover all the outgoings and enable the franchisor to reach break-even point. So, weighing up the pros and cons on both sides, it is plain that the franchise relationship is a peculiar, not to say unique, way of doing business. The franchisor owns the business idea and the systems, but not the individual outlets.

The franchisee has a business to call his or her own, but not the freedom to do as he or she pleases. The franchisor controls the business, but only up to a point. The more you look at it, the plainer it becomes that, provided the business idea is sound, success or failure hinges on the strange partnership that exists between franchisee and franchisor. While it is true that franchising is a proven method of cutting out much of the risk normally involved in opening up a new small business, it is wrong to believe it is failsafe.

Such risk as there is attaches more to the selection of franchisees than to the normal business pitfalls such as cash flow, marketability, slack consumer demand and so on though all these, and more, are present in franchising, albeit in a reduced form. It follows that for a franchise to fulfil its potential, the franchisor must choose the right franchisees, and the franchisees must choose the right franchise.

The rest of this book sets out to help you, the prospective franchisee, to make the right choice. It wad frae mony a blunder free us, And foolish notion. Depending on your point of view, Robert Burns was either the poet laureate of Scotland or the patron saint of the typographical error. Either way, there is no doubting the wisdom of his words: it would be both a revealing and an unsettling experience to see ourselves through the eyes of others.

Prospective franchisees, however, should attempt the next best thing — to stand back and attempt to make a cool and objective assessment of their own strengths and weaknesses. Far easier said than done, of course, but to buy a franchise is to embark on a life-changing experience, and although it is natural to assume the change will be markedly for the better, there is, alas, the possibility that it might be for the worse. To invest both money and considerable effort in a project that fails is, as the poet would say, a blunder.

And to kid yourself that you have all, or most of, the attributes required of a successful franchisee is a foolish notion. Franchising requires a peculiar combination of characteristics: you need to be independently minded, but not too independent; you need to be able to exercise initiative while sticking to some pretty tight rules; you need to be fiercely ambitious for yourself, but a good team player.

So how on earth can you discover whether you have the qualities sought by a franchisor? No one can be entirely objective about their own abilities, and so to be asked, in the way of most franchise manuals, to weigh up your virtues on one side of the scales and to deposit your shortcomings on the other is to ask the impossible. Plainly what is needed is a questionnaire that, if answered honestly, does the probing without you realizing it, that coolly sums you up through your responses to some cleverly constructed choices.

Fortunately, such a thing exists and we shall come to it soon. Before then, however, here are Franchise Would you be uncomfortable, or possibly downright infuriated, to be made to accept systems and procedures without modifying them to suit your own preferences?

Is yours the restless kind of mind that is for ever seeking different ways of doing things? Do you have a strong streak of independence? Asked to subordinate your wishes to those of a team of which you are part, would you feel frustrated and hampered?

Do you like to mind your own business and expect others to do the same? As we have already noted, franchisors have it written in their contract to be nosy parkers. Would your inclination, when they poke their head around your door, be to tell them to shove off? I need hardly tell you that if you answered one or more of those questions in the affirmative you would be better off being your own boss in the full sense of that term, rather than in the diluted version that is the lot of the franchisee.

Assuming, however, that you are sufficiently biddable to accept terms and conditions designed to help you make the most of an opportunity to run a business of your own, please press on to the next stage, which will test those claims more fully. Under each question you must choose one answer to the exclusion of the other two. Try it now: Question 1 Are you regarded by those who know you as: a Generally a fairly self-contained person?

The higher your tally, the better equipped you will be to make a success of franchising. A good score is in the 20—30 range. The questionnaire serves two purposes — it helps you to gauge your strengths and weaknesses and gives you a better understanding of the qualities sought by a franchisor.

Prof Stanworth sums them up as follows: Franchise Here are the issues looked at in more detail: Q1 Q2 Q3 Ability to cope with feelings of isolation — in contrast to being an employee, you have no boss, or other people in the same organization doing the same job, who can give help, advice and moral support. To put it more precisely, it is usually of little concern to anyone else whether you succeed or fail. Some of these you will almost certainly find satisfying, whilst others will prove highly frustrating.

There is no one but yourself responsible for allocating your time and you can, at your peril, neglect tasks such as paperwork, financial control, invoicing and chasing payment.

Ability to work long hours under pressure — in running your own business you are seldom off duty. Thus you require both mental and Franchise In the early days of a new business, there is little time for leisure activities, holidays or illness.

Some advisers go as far as to recommend that anyone setting up a new business should consult their doctor first. Q4 Ability to learn from failure — disappointments are inevitable in business and can lead to demoralization. A good businessperson, however, must possess the resilience to survive setbacks and learn from them. Q5 Ability to compete with self-imposed standards — when working for yourself, targets and standards need to be set which act as goals reinforcing motivation.

If these goals are set too low, they have little motivating force. If they are set unrealistically high, they will not be achieved and a sense of failure and demoralization may result. Thus, modestly ambitious, though not unrealistic, goals need to be set and used as markers of achievement. Q6 Ability to take unpopular decisions — it is impossible to remain popular at all times and any attempt to do so is likely to have costly consequences for your business.

Q7 Ability to resist impetuous or emotional behaviour — in the face of frustration, it is tempting to react in what might later be seen as a whimsical manner that is not in the longer-term interests of the business. This may be emotionally satisfying in the short term but should be resisted at all costs — emotions must be kept under control. Q8 Ability to take a balanced view of events — it is easy to yield to the temptation of feelings of euphoria or depression in response to good or bad news.

This can prove extremely stressful and wearing. Q9 Ability to tolerate uncertainty — in an environment dominated by large organizations, the setting up of a new business is a highly creative venture and requires a facility for surviving uncertainty. People with a low tolerance of uncertainty experience difficulties in coping with the resulting stress. Q10 Ability to take outside advice — having gone into business to gain a certain level of independence, it often requires a determined effort to be able to seek out and act on external advice, but, again, this capacity needs to be exercised.

Q11 Ability to demonstrate financial viability — though the clearing banks tend to lend to would-be franchisees more readily than to Franchise A large financial repayment overhead in the early days of trading can impose additional pressures. Ability to demonstrate support of spouse — most franchise outlets involve long hours of working and domestic disruption.

Thus, anything less than positive support can have very negative consequences. Ability to demonstrate enterprise background — despite the desire for self-employment being quite common, relatively few make the leap from aspiration to reality.

Those who have previous direct experience of self-employment or, alternatively, have had a close relative usually a father self-employed appear to find the transition easier. Some evidence exists to suggest that they may also be more successful as measured in terms of business growth.

Ability to demonstrate profit motivation — amongst small businesspeople generally, the desire for growth is of a rather low order and profit motivation is of a lower order than other goals such as independence and autonomy. Most small businesses, in fact, never employ anyone other than the owner.

In the case of a franchise, however, the pressures to push for growth of profits and size of business are usually quite strong. Ability to demonstrate sales orientation — despite national advertising and the promotion of brand awareness by the franchisor, sales skills on the part of the franchisee can still make a very substantial difference to levels of market penetration. Local advertising and good interpersonal skills and service at the customer interface can be crucial.

Ability to demonstrate growth orientation — the income of the franchisor is directly related to the growth of franchisees. Thus, franchisees easily satisfied with low levels of growth may require considerable motivating. This belief can become a self-fulfilling philosophy. Perfection in a franchisee is as rare and elusive as it is in any other form of human activity, so do not be dismayed if you fall short in some of the desiderata. The attributes that count for most are a willingness and a capacity for hard work.

That may sound glib, but it carries real meaning; running a franchise is not for the timid or the work shy, it requires single-mindedness and dedication of a high order, because for all that you are in partnership with a franchisor, the gap between happy fulfilment of your dream and bitter disappointment can be bridged by you, and you alone.

If, on the other hand, you genuinely believe that you have what it takes to be in charge of your destiny with no one to blame but yourself when things go wrong, read on. A self-analysis summary l l l l l Will I be willing and able to put in the hours and apply the dedication that this business demands?

Do those near and dear to me appreciate what I am letting myself in for and the strains that it might put on them?

Do I have their support? What do I want from this franchise? Job satisfaction, a higher income, or long-term capital gain? Is it likely to satisfy those needs? Have I got sufficient capital to cushion me while the business gets established? How much can I comfortably borrow? Looking on the bleak side, if the business were to fail, how would that impact on me and my family?

How will I handle the responsibility of being my own boss and possibly employing other people? Are my skills and abilities likely to be best suited to this business? Do I actually like this business? Interesting and exciting, yes, but painstaking and timeconsuming too. You should be in no hurry at this stage; time spent investigating and researching opportunities will repay the effort.

Not only will you learn much about what is on offer and the ways in which franchise companies promote themselves, you will also benefit from a process of careful elimination and selection. Let them go. Another reason for taking your time is that there are so many franchises to choose from — over , in fact. Broadly speaking, they break down into some half a dozen categories, listed as follows with one or two examples of each: l l l l l l hotels and catering — pubs, fast-food outlets; retailing — shoes, hi-fi, golfing equipment, second-hand goods; personal services — hair and beauty, tanning salons, fitness clubs, slimming; property services — office maintenance, plumbing, carpet cleaning, furniture repair; automotive — vehicle valeting and repair, tools; business services — accountancy, quick print, cost control advice, office supplies, recruitment.

As a franchisee you could be mowing lawns, renting videos, fitting kitchens, washing wheelie bins, teaching children to dance, selling sandwiches, pulling pints, grinding Franchise As with popular journalism, so with franchising — all of human life is there.

Now it may seem banal to point this out, but you should narrow your search to the business activities that best suit your talents, capabilities and interests. But you might be surprised by how many people pick a franchise, not because it suits them, but because it holds out the promise of the biggest financial return. To go down that road is to make a serious and potentially costly mistake.

Of course you go into franchising to make money — indeed, one of your primary considerations when assessing an opportunity should be whether it will provide a return sufficient to meet your needs and wants — but you also go into business to enjoy the experience. In self-employment job satisfaction is every bit as important as it is in paid employment. When you take on a franchise you assume an obligation that may last for 10 years or more; so before signing up you should be darned sure that you are going to be doing something you like.

Which brings me to an important aspect of running a franchise: you will have noticed from the six categories above that many franchise opportunities are in the service industries, and even those that are not will almost certainly involve dealing face-to-face with customers. So one of the most important skills you can bring to a franchise is the ability to get on with people and be personable.

A great attraction of franchising is that it takes people from a variety of backgrounds, and of varying ages and experience, and equips them to turn their hand to something quite new. But whatever your past line of work, you will have a head start if you can offer service with a smile.

So how relevant is your previous work experience? Perhaps the best answer is that it should not correspond too precisely with your chosen franchise. In fact, many franchise companies prefer applicants who have no direct prior experience of the activity in which the business is involved. There are exceptions — plumbing franchises, for example, Franchise If, for example, you have a sales or marketing background, look for a franchise where you can put that knowledge to use.

Similarly, if you have an artistic or creative bent, or if you are good with your hands, or if you are happiest working out of doors, look for an opportunity to make the most of those attributes and preferences. Also, take into account your hobbies and interests.

If, for instance, you are keen on DIY, you might be interested in a kitchen-fitting business or furniture repair; if you are a keen gardener, a landscaping franchise might appeal; if you are fond of animals, one of several opportunities in the pet business might suit you.

Be warned, however, that something that might be pleasurable as an occasional diversion can pall when it becomes a full-time occupation.

To introduce a personal note, I am an avid cricket follower and a journalist but the idea of being a cricket correspondent does not appeal in the slightest — it would make a chore out of what was previously a form of relaxation.

At any rate, the first step in making your choice is to scan the or so opportunities on offer and then to set about the daunting task of whittling them down to a shortlist of, say, six. So where to begin? Fortunately, such is the significance of franchising in the British economy today that there is no shortage of information about the many opportunities on offer. Formed in by eight franchise companies, the association set out with two main objectives — to act as a trade association and to dissociate reputable business format franchising from the disreputable activity of pyramid selling.

That said, an untold number of franchised businesses choose not to apply for membership; these outsiders may be bona fide franchises, but you should view non-membership with some scepticism. After all, why should a company be reluctant to submit itself to scrutiny by an organization able to offer it many benefits, not least the marketing advantage that being part of the BFA confers? All members must meet the following four general objectives: 1.

Viable: They will have proved in the marketplace that their product or service is saleable, and, furthermore, saleable at a profit that will support a franchised network. Most will have done so at their own risk through at least one managed pilot franchise operation.

Ethical: The BFA has joined with its sister bodies in Europe to devise a new and expanded code of ethics which all members commit themselves to abide by. The code requires standards of conduct in advertising for franchisees and in recruiting and selecting them, and sets minimum conditions for the terms of franchise agreements.

Those terms are both critical and complex. Disclosure: All BFA members agree that they will, in advance of any lasting contractual agreement, disclose without ambiguity to prospective franchisees the information on their business which is material to the franchise agreement.

Members submit their offer documents to the association as part of the accreditation procedure. Compliance with these four requirements admits a company to associate membership. Demonstrate that the franchise network has developed over time with a proven trading and franchising record. This requires a record of franchise openings, withdrawals and disputes which required external intervention to resolve , together with evidence of the profitability of individual units and of the network as a whole sustained over a period of 24 months.

The success of franchising in the UK inevitably attracted a host of ancillary organizations offering to provide help and advice both to prospective franchisees and to franchisors. In recognition of this burgeoning activity the BFA established a list of professional affiliates.

Over the years this category has grown from being primarily comprised of lawyers and accountants with expertise in franchising to encompass other categories, including exhibition organizers, financial services, insurance brokers, media and communications, bankers and franchise consultants. From the above, you will see that if a franchise is a member of the BFA it offers a measure of assurance that companies outside the organization cannot provide with quite the same conviction.

So, if the franchise that appeals most to you is a BFA member, that is a definite plus point. It is not a guarantee of success — franchise companies can and do make mistakes — but it is a form of proof that the operation has been well run in the past. However, if you choose to go with a firm that is not a member, you should first make every effort to ensure that it meets the criteria set out by the BFA, ie that it is viable, franchiseable, ethical and willing to disclose facts and figures that help prospective franchisees to make an informed decision.

You will find more on how to do that later in this book. We have not finished with the BFA yet: a very important part of its self-imposed remit is to foster the growth of franchising by attracting new franchisors and franchisees. It sets about this in a number of ways, many of which will help you in your search for the right business for you.

Franchise exhibitions: a company called Venture Marketing runs an annual programme of franchise exhibitions in Birmingham, Dublin, London, Manchester and Glasgow. The exhibitions are, of course, trade shows, and the main aim of the companies exhibiting is to attract business, which, in the case of franchise companies, means attracting new recruits.

You should do your homework in advance. If you have read right through this book, you will be well informed about what makes a good franchise and able to ask franchisors about matters such as the qualities they look for in a franchisee, the training they offer, the help they provide in finding you a suitable area and premises, and the finances involved. Since exhibitions are tiring events, you should draw up a list of no more than half a dozen companies that you want to see, and allow about an hour for your conversations with each.

Also, there will be opportunities to meet experts such as bankers, lawyers and accountants whose advice is free while they are at the show. Try, too, to take advantage of the daily seminars where advice on choosing a franchise is freely dispensed. Most important of all, never allow yourself to be swept along by events. Impose on yourself a cooling-off Franchise Go carefully through the brochures you took away, discuss the pros and cons with your partner, and then, if you are convinced an opportunity is worth pursuing, make an appointment to go and see the company.

Other sources of information l l l Directories, newspapers and magazines: there are two directories, each published annually and listing details of many franchise opportunities in the UK. Three specialist magazines are Business Franchise, published 10 times a year, the official journal of the BFA ; Franchise World, published every two months ; and The Franchise Magazine, published monthly These are designed to attract advertising from franchise companies, so expect them to accentuate the positive.

The banks: most of the big high-street banks are keen to lend to franchisees and have sections specializing in franchising. Almost all, in one way or another, are trying to sell you something, but many offer useful advice and information.

Four worth singling out are: — www. Can you afford the franchise of your choice and what do you get for your money? Having come up with a business idea, pilot-tested it and decided to Franchise He will achieve this in two ways: first, by charging an initial lump-sum payment — in effect a fee for joining his club — and second, by levying continuing payments in the form of royalties, sometimes called management fees — the price you pay for staying in the club.

Let us look at both these in more detail. The initial fee Ask a franchisor what this is for and he will tell you that it is to cover the costs incurred in setting you up in business — costs such as training you, helping with finding premises, providing an operations manual, assisting and advising in staff recruitment, getting you off to a flying start with an initial publicity splurge, paying professional fees and legal costs, and possibly providing a vehicle, computer, tools and equipment.

With a wellestablished mature franchise, the fee should cover those items and nothing more. But with newer franchises, the franchisor will probably include in initial fees a sum to help defray the costs he incurred in launching and testing the business. In so doing, the franchisor should never be greedy, since one of the worst offences in franchising is to seek to make a quick profit from selling a franchise — that is the sort of thing flyby-night disreputable operators get up to; by contrast, bona fide franchisors seek a continuing long-term income through developing the franchise network.

So, pitching the initial fee at the right level is both important and difficult. Set it too high and potential franchisees will be put off. Set it too low and the business may be starved of funds needed to set up new outlets.

Like all rules, however, general ones are there to be broken and the initial fee will vary from franchise to franchise: in some cases you could be asked for more than 10 per cent; if, for example, you choose a franchise at the lower end of the investment scale, the fee could account for a larger percentage of the total outlay in getting up and running. Regular payments from the network of franchisees serve two purposes: they reward the franchisor for his initiative and skill in setting up the enterprise and they pay for the continuing services he provides to the franchisees.

A franchise head office has many tasks to perform, including recruiting and training new franchisees, providing continuing support and advice to existing franchisees, promoting and marketing the product or service, and researching and developing new ideas. Management fees may take three forms: l l l A percentage on turnover: this is the most usual form of continuing fees.

That means that a franchisee might well find as much as 30 per cent of his or her annual trading profit going in fees to the franchisor, so you can see where the friction might creep in. In the interests of harmony, therefore, it is important that the management fee is seen to be fair and allows a reasonable income for both parties.

A mark-up on goods supplied: with this system, franchisees agree under the terms of their contract to buy some or all of their materials either directly from the franchisor or from a supplier nominated by him. The franchisor makes his money by charging a mark-up or getting a commission from the nominated supplier. A fixed regular fee: this is the least satisfactory arrangement because of its inflexibility. A fixed fee large enough to satisfy the franchisor could, in the early stages of a newly established franchise unit, prove burdensome to a franchisee whose business is still producing a relatively small income.

None of these fee arrangements is without disadvantages. A mark-up on goods restricts the franchisee to a single supplier, itself a possible cause of disquiet, and may arouse suspicions about the fairness of the sum being charged.

That in Franchise All in all, the percentage on turnover is the best and most transparent arrangement and therefore the one most widely used. Unlike the royalty fees, payments into an advertising fund do not represent income for the franchisor; rather, they are used to pay for marketing activity, including consumer research, advertising, public relations, merchandising materials and brand development.

Incidentally, the really good franchisor will want the contributions to be more than just financial: ideally, representatives of the franchise network should be involved in deciding how best the advertising and marketing fund should be spent. That kind of participation enables everyone concerned to see the benefits that flow from a focused marketing programme and forestalls possible criticism that the advertising levy is just another annoying outgoing.

So, looking to the future, the prospective franchisee must accept that he or she will be paying money to the franchisor for as long as the agreement lasts.

More immediately, there are the costs of setting-up, and in this respect a franchise is no different from any another small business startup. You will need to spend money on leases, fixtures and fittings, stock, working capital, plant and equipment, and so on. The total sums involved in start-up costs and initial fees vary widely from franchise to franchise and from sector to sector.

So, as always, your ambition, at least to start with, will be constrained by your budget. Unless you have redundancy money or substantial savings, you will have to raise finance from a lender to help you get started. How much you can borrow will depend on the security you can offer and the sum that you can advance from your own pocket. All it amounts to is getting a sheet of paper and totting up on one side what you own, and on the other, what you owe. Your net worth is the difference between your assets and your liabilities.

If when you deduct your liabilities from your assets the outcome is a positive number, you own more than you owe, which is of course a good thing. Calculating your net worth gives you a snapshot of your financial condition, a picture that may please or alarm and usually contains some surprises, and will help you plan for the future.

Also, banks and other lenders might ask for a statement of net worth. What they will certainly want to know is how much you can stump up in liquid assets, ie readily available funds such as cash, shares, bonds and bank deposits. This is because as a general rule banks will lend you up to three times your net liquid assets.

To sum up the story so far, you will have done your best to see yourself as others see you and, reasonably satisfied with the result, decided you have what it takes to be a franchisee. You will have read as much information as you can find about franchising, visited exhibitions, attended seminars, talked to experts, and sifted it all through a keen and inquiring mind. You will have worked out your net worth and totted up your liquid assets.

You will probably be exhausted. But bear up, the real work is just beginning. By now you will probably have an idea of the sectors of franchising that appeal to you, and possibly some target companies worth assessing in more detail. So what are you waiting for? Do I have what it takes? This can be summed up under three main headings: Franchise Insufficient capital in a new venture always spells trouble.

The experienced franchisor knows that a prospective franchisee will be on his or her best behaviour during the interview and will want to probe deeper to see if you really mean what you say. If you have not run a business before, can you demonstrate organizational skill?

Worse than that, the wrong species. But it can happen, and the danger arises because business opportunities sometimes disguise themselves as franchises. So how do you tell them apart? And does it really matter?

The answer to the second question is, yes, of course it matters. Although every franchise is a business opportunity, not every business opportunity is a franchise, and although the two types may shade into each other at the margins — they might, for example, have in common training policies and continuing support for people who buy their schemes — they are in truth quite different propositions.

The essence of a franchise is that you, the franchisee, have a continuing relationship with the franchisor: you operate as a quasiindependent outlet of an established business and brand with, it is to be hoped, a proven good name, and you carry on doing that for as long as the agreement lasts.

At best, these books might allocate a single chapter to the concept of franchising, and at worst the author presumes that franchises are the same as any other business start-up. In fact, well-meaning advice can often be.

Povides information on understanding the franchise industry and details on about 1, franchise companies. Books Franchise Opportunties Handbook. Author : United States.