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The lifecycle of a franchisee: Stage One – New Franchisee

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At each stage of the franchisee lifecycle, there are different considerations, over the next four franchise Sector Snippets, we will explore the essential considerations, concerns and motivations of a franchisee at each stage – and how a franchisor can support their franchisees. Venturing into the world of franchising can be an exciting yet overwhelming experience, especially for those taking their first steps into this dynamic industry.

Whether you're a promising entrepreneur seeking the support and guidance of an established brand or an investor looking to diversify your portfolio, navigating the complexities of the franchise business requires careful planning and informed decision-making.

Before diving in, it's crucial to conduct thorough research. Start by exploring various franchise options within industries that align with your interests, skills, and financial resources. Consider attending a franchise exhibition, which presents an excellent opportunity to meet the brands in person, or review the directory of brands on The British Franchise Association website.

Franchise agreements typically have a minimum five-year term, so entering into one shouldn’t be done lightly. It's essential to understand the rights and responsibilities of both parties involved in the franchise agreement, including the terms of the franchise fee, ongoing royalties, the support provided by the franchisor, and operational guidelines. The value of working with credible experienced franchise professionals should not be underestimated.

Due diligence

Before committing to any franchise opportunity, it's essential to conduct thorough due diligence to assess the viability and potential risks associated with the business. Review the franchisor's track record, financial performance, and litigation history. Seek out seasoned franchise owners who can offer practical advice, insights, and best practices for running a successful franchise operation (and also give you the inside track on performance and what to expect). By conducting due diligence, you can make informed decisions and mitigate potential risks.

Your business plan

Once you have selected your brand, build out your business plan, this will be a critical part of any lending application, but a well thought through plan will act as a road map for your business and a solid foundation for your franchise venture. Take the time – before the chaos starts – to outline your business objectives, target market, marketing strategies, and financial projections. Consider factors such as location selection, staffing requirements, and operational logistics. It can be an invaluable document to refer back to.

Support from the franchisor

A reputable franchisor will guide you through the process, helping you understand both your rights and obligations, and the support provided to get started: it’s in their interests that you feel fully supported and understand the commitment. Many franchisors partner new franchisees with more experienced and seasoned franchisees for the first 6-12 months, as they are best placed to help them get up and running successfully.

The right banking partner

A new franchise business can be a significant investment, depending on the industry or brand you choose to work with. It’s important that you have considered all of the funding required to sustain the business during the initial ramp-up period, and have built that into your cashflow forecasts.

To support their franchise network, many franchisors cultivate close banking relationships with one or two banks, building partnerships with banks that understand both the franchise industry and the franchisor’s business model. Choosing a banking partner is an important part of the process, so consider carefully who you want to work with in the short and medium term, who can support you as the business scales.

Closing thoughts

While entering the franchise business requires dedication, hard work, and perseverance, it also offers the opportunity for financial independence and personal fulfilment. Embrace the challenges, maximise the rewards, and enjoy the journey of building your franchise business into a thriving enterprise and entering into the second stage of the lifecycle of expansion and growth.

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