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8 things to know before you become a franchise owner

21st June 2015 Print

According to some studies the failure rate for a franchise is around 5% - far lower than a ‘normal’ start-up business. The reasons are clear, as there are often fewer start-up costs and usually an existing blueprint for success in the form of other franchises in the network. 

The thought of taking on your own business, which could be working in any sector from sport, food and IT to a leisure enterprise such as a Phoenix e-cig franchise, might sound too good to resist. Caution should be exercised and the advice is to answer a few key questions before leaping in – such as these:

Is it a member of the BFA?

The British Franchise Association bills itself as helping potential investors recognise ‘the good and not so good’ opportunities. Formed by the major franchise companies in the UK, the association is keen to note that membership does not provide any clues as to likely commercial success for any given franchise, but if a franchisor is not a member questions should perhaps be asked.

The franchise track record

Strong national or global franchises speak for themselves, although finding someone who has run a franchise in similar circumstances and try asking for advice. This could be vital. Has the franchise system been pilot tested in a variety of locations, conditions and environments? What were the outcomes? Make sure you have enlisted the services of accountants and lawyers to carry out all necessary financial and legal checks before signing anything. 

Royalty fees

The franchise might take a slice of the sales, which varies greatly depending on many factors – it could be as little as 1% and as high as 50%, and taken weekly or monthly. Other franchises do not set a fee, but require franchisees to buy products or services from them, at a marked up price. Ascertain the depth and type of payments before investing.

The cost of investing

Your initial research should have provided a ballpark start-up figure for the franchise you’re opening, and although it might seem a little eye-watering one needs to put things into perspective. For example, Subway states that a franchise for one of its restaurants can be ‘as little as £100,000’, with 8% royalties and a 4.5% advertising fee – but on the plus side that’s for a 20-year agreement, and no equipment costs are needed.


You may already know the nuts and bolts of the franchise, but you will need training, and you may have to pay for it. That programme won’t come to you, so factor travel costs into the total package when doing the sums. Are there any other costs, such as property or equipment, that need to be considered?

Can I do this?

A wannabe-franchise owner will probably be relishing combining management and new initiatives with hands-on tasks. But according to you might be mistaken; since a franchise follows a common blueprint, and may not allow you to hire employees, you’ll probably end up doing much more of the latter than the former.

Do I have the commitment?

As well as ability and patience you may need staying power, as some franchise agreements last decades. Joining a franchise is not the same as getting a new job, where one can bail out after six months if things aren’t running smoothly. 

How do I present myself to franchisors?

Taking on the investment is a two-way street, as if the franchisor doesn’t think you’re right for the role you won’t be allowed to invest. You might have to undergo a fairly rigorous process including interviews, psychometric testing and analysis from recruiters. Researching the type of person that has fitted other franchises is a good step.