PJT Accountants & Business Advisors understand the Franchise industry. Our team has a good knowledge and experience working with clients on both sides so we can see things from both the Franchisor and Franchisee perspective.
Franchises are a really popular way of getting into business. There are many advantages of buying through a franchise arrangement, as many of the core requirements of the business are already set up for you – such as processes and procedures, and in many instances you have a known brand in the marketplace so can grow your business base more rapidly than a clean start-up.
Franchises do need careful consideration to ensure you pick the right one for your lifestyle goals.
Here are some good points to first check before you sign a franchise agreement:
- Do your homework – look at a range of different franchises. Check the franchise agreement, talk to current franchisees, check competitive businesses and potential market size, and have a good accountant look at the books if you’re buying an existing franchise.
- What franchise is right for you? What if your lifestyle like? Do you have a young family? What hours can you commit to the business and what hours do you need to be onsite? Consider what physical and emotional commitment you can give to the business, and then determine the type of franchise business that is a good fit for you.
- Running a franchise is hard work, building the business takes time and a continued effort to ensure the business ticks along. If you’re new to business, then often a Franchise can be a good business decision simply because the processes and training are there to get you started and keep the business working. The franchisor has a vested interest in seeing you succeed, so a good one will be like a mentor for you throughout your tenure. It’s a partnership, and you need to ensure there is a good working relationship and trust.
- Check the contract term available to you, and ensure you have an exit strategy should you need it. Investigate this before you sign up as you may not consider these things going in to the business, but they’re vital should your situation change and you need to exit.
- Contract specifics - ensure you investigate things like reporting to the Franchisor - how often and how laborious is the reporting process, is this system driven? Also buying stock off the Franchisor - ensure there is some flexibility and you're not tied in to high priced, high quantity or inflexible stock arrangements which will eat into your bottom line.
- Ensure you are set up in the best entity structure to suit your business and financial needs – one which will protect your assets no matter what the future may hold.
PJT can advise you if you are looking into a franchise business, we can perform a full due diligence looking at the financials, the agreement and the competitive marketplace, as well as ensure you are set up in the best entity structure before you take ownership. Call us for a chat before you sign anything.
Considering Franchising Your Business?
If you’re a mature business or one in a very fast growing market segment and are looking to perhaps franchise your business model, then there is much to consider:
- Accounting systems: the need for a more robust accounting system to manage individual businesses (franchisees) will be needed so you can track each business.
- Cashflow and Management: ensuring you can manage the costs of expansion is a first vital step in the process. What support will you need to provide a franchisee? How many franchisees and what geographic split will you consider? What will you charge per franchise? Do you have the capacity internally to manage the new operations?
- Marketing: franchisees will require you to manage much of their marketing, are you geared up to manage this internally, will you outsource? Is your website capable of expanding to include locations? Are you set up to manage a customer database on behalf of your franchisees?
- Your business model needs to be scalable to successfully franchise. If you’re considering going down this path, first get the right advice from accounting / business advisory, marketing and legal experts who specialise in franchise businesses.
- Consideration over the ownership of intellectual property of your business is crucial when franchising. Structuring your business in the right entity to protect your hard work in developing the business model is key to franchising successfully.
PJT can assist you in doing the business case to ensure such an option will have the financial benefits, and we can set you on the right track to get the process underway. Call our team for a no-obligation discussion on 0754139300.