Bizstartup.ie - Start Up Kit

Are you a risk taker and a real innovator?

If you have run your own business before or see yourself as a real innovator then maybe franchising is not for you. Franchising is ideally suited to people who want their own business but don’t want to be on their own. They want the comfort of knowing they're not the first to try something.

While there are no guarantees franchising is a lower-risk investment and banks will more quickly fund proven franchises than new start-ups. Statistics show that 91pc of franchises are profitable whereas in non franchise start-ups up to 80pc have closed within five years of starting up.

Why are you looking to buy a franchise?

It's important you understand why you're looking to buy a franchise. If you want to get more control over your life and do something you love doing then buying a franchise can be the most rewarding decision you ever make. However, if you are looking to buy a franchise because you don’t want to work as hard then think again. You may be able to work less hours in the long term, but make no mistake, any franchise needs significant focus and hard work to make it successful.

What are your skills and experience? 

If you can combine your interest with your skills and experience and identify a franchise that fits with all of these elements then you're on the road to success. It's important when looking at your skills that you “take the blinkers off” and don’t think of yourself as ‘an architect’ or ‘a solicitor’, instead think of the skills that you have, such as:

The answer to these and many more questions will help identify whether franchising is right for you and if so what franchises out of the hundreds or thousands that might give you the best opportunity to be successful and enjoy doing so.

What investment levels are you looking at?

It’s important to understand how much money you can afford to invest in a franchise. You can borrow up to 70pc of your investment in a franchise from a bank which can include working capital.

Any bank will want to see a detailed business plan supporting the business opportunity and will want to see that you have done your due diligence, understand the business and are capable of delivering against the plan. They will expect you to have done some analysis and you have the capability of adapting if the plan does not come true.

What return are you looking for?

You need to understand what return you need in the short, medium and long term and what return you would like to get. In general terms franchises that require the highest level of investment generally give the highest level of return, so you need to be realistic; you are unlikely to get a €100,000- a-year return from a €10,000 initial investment, or if it is possible it probably requires high level of skill and a probably has a lead time before you will be bringing in these levels of income.

Are you looking for a well-established franchise or are you open to new franchises?

There are pros and cons to choosing a new franchise versus a well-established franchise. A new franchise carries with it more risk as it has may not proven to work in all locations or in all economic environments.

There are however upsides to choosing a new franchise. Firstly you will probably get an opportunity to work directly with the founder of the business so will get a first-hand view of the business and what has made it successful. You will have the founder as a mentor and coach and will also probably pay less for the franchise than you would for a well established one.

If you are one of the first franchisees your success is also far more critical to the franchise than if you are number 1,250 and will therefore get far more support and help than would be normally the case. The new franchise owner needs you to be successful in order for them to be able to fulfil their dreams of developing a franchise network.

On the downside due to the increased risk, the banks generally will not provide as much of the funding so you will have to come up with a larger percentage of the finance directly.

Franchise Connections provides free franchise selection advice. More information can be found here.