The lure of franchising can be rather attractive for an entrepreneur.

For starters, a franchise often builds off of an already established brand meaning customers may be more inclined to shop or make use of its services.

But is a franchise the right fit for you?

Head of franchising at FNB Business, Morne Cronje has some advice for entrepreneurs looking to take up a franchise.

“Despite the sector having a higher success rate compared to its counterparts, franchising has its pros and cons and will not necessarily be suitable for every entrepreneur. Entrepreneurs who are considering or have decided pursuing franchising as a business opportunity should perform due diligence to avoid making costly mistakes,” Cronje says.

The head goes on to outline key considerations for entrepreneurs looking into the space.

Firstly, you should be comfortable operating in-line with the business license, rules, procedures, requirements and standards as they are outlined by the franchisor. While you might be tempted add your own personal flair to the business, it’s worth keeping in mind that a franchise often works because the aforementioned guidelines give customers an expectation that if they go into one store of a franchise it will be similar at other locations.

There are franchises in almost every industry and Cronje advises that entrepreneurs take time to find a franchise that is the right fit for them.

“Almost every industry can be franchised, which can be an advantage should the entrepreneur have a certain preference. However, the challenge is finding a brand that is aligned to your core values as an entrepreneur,” Cronje says.

Of course one of the key questions to ask yourself is whether you are financially ready to become part of a franchise. Often, a franchisor will require an franchisee raise a large portion of the franchise costs up front. These costs may be higher if the brand is more prominent.

In terms of funding one could approach a bank for a loan. According to Cronje, banks will often consider the following before granting a loan:

• Detailed franchise description and system.
• Business plan.
• FICA and personal balance sheet of all prospective shareholders and sureties.
• Contract and franchisor approval letter.
• Detailed description of all set-up costs and estimated cash flow forecast.
• Own contribution to purchase the franchise and collateral if required.

You will of course need to have approval from the franchisor before applying for a loan.

But even before parting ways with your money, Cronje advises folks do their due diligence.

“Interview and determine if franchisees are satisfied and whether they are experiencing any challenges. This will give you a good indication if you are the right fit,” the head says.

Finally, when you have all of that in place its time to approach the franchisor and notify them of your intention to join the ranks. There will be a vetting process and each franchise will differ in what those requirements are.

Should the franchisor agree you will be given a contractual agreement. Here Cronje advises you go through the contract thoroughly and understand the terms fully. Should things be unclear, seek out advice from an expert.

“Taking the above factors into account while doing additional research based on the franchise opportunity you want to pursue will go a long way to ensuring that you make a sound business decision,” concludes Cronje.

[Image – CC 0 Pixabay]