Building the franchise bond

Franchise agreements are a lot like marriages. Get them right and they could lead to a long and fruitful relationship.

Foolishly rush in, and all you’ll be left with is a pile of broken dreams and third-party costs to settle. Ricardo Graham purchased recruitment franchise Executive Online two years ago and discusses his secret to entering into a healthy relationship.

Despite the recession franchising remains stronger than ever, with the latest figures showing a 3.6 per cent increase in networks compared with 2008.

The idea of franchising appealed to me because it appeared so much less risky than setting up a business from scratch and going entirely alone. What I discovered was that franchising leaves you less exposed to risk in all sorts of ways. For example, because the business is based on a proven track record you can check how successful other franchises are before fully committing to the deal.

The legal risk associated with setting up and developing a recognised brand name and trademark in most cases has already been dealt with and you also benefit from any advertising or promotion undertaken by the owner of the franchise – which should reduce the chances of making costly mistakes.

Choosing which franchise comes down to identifying the right market sector, the best location and the quality of the support provided by the franchisor. The decision needs to be made only after fully considering the prevailing market conditions and trends. When choosing a franchise it is important that you select an industry or type of business that actually interests you and one that demonstrates market potential. Accurate market intelligence is key to the decision making process and undertaking proper research is critical. It is important to carry out your own research into the parent company.

The single most influential aspect determining how successful your franchise might be is the relationship between you and the franchisor – invest time to get to know the parent company. It is all about relationships based on trust, mutual support, loyalty and joint view of a successful future. You need to be confident that the franchisor has your best interests at heart because trading conditions can fluctuate rapidly as we have seen in the last several years.

Do your long terms aims and objectives dovetail with that of the franchisor and are you comfortable with the corporate morals and values? If the answer to these questions is yes, and the model fits all the above criteria, then it could be the start of a beautiful relationship.

See also: Types of franchise and franchise structures

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