1. Do your research
Find out whether your chosen franchisor has a successful core business with a support network and strong finances in place to support you. Think about the sort of business you want to run and what you will be doing on a day-to-day basis.
Our guide to 'Starting a Franchise' is a great place to start as it has a list of questions to ask a franchisor, as well as questions to ask their franchisees. Asking those who have already bought into this franchise is usually the best way to get an accurate picture of your potential franchisor.
2. Plan ahead
You'll need to present a business plan to the bank to back up your request for finance and this needs to present your case in a compelling way. It isn't just about the figures - although they are important, see 3 below - the plan should also contain details about you, your background and experienceand how you are funding your stake in the franchise.
Think about your area/territory - will you be based at home or from premises? How much competition is there, what do you know about them and how can you stand out if it is a crowded market? Your franchisor should help you with many of these aspects, but you will need to understand and `own' your business plan.
3. Focus on the figures
If you are projecting turnover of say £100,000 in year 1, how will you get there? Will there be a few months of little or no sales/income as you build your business? How will you fund your personal expenses until the business is strong enough to allow you to pay yourself a wage?
Prepare a full list of your personal expenditure: mortgage, hire purchase, household bills, and so on. This will show how much money you will need to take out of the business in order to live.
What if the business is slow to build, how could you overcome that? What if sales come in much faster than anticipated, would you have enough working capital to cope? Again, a good franchisor will help you through many of these issues but as a franchisee and business owner, you need to fully understand the cash flow of the business.
4. Practice your pitch
Luckily, talking to a bank manager is nothing like being in the Dragon's Den. They certainly won't tear shreds off you but they will be looking to have confidence in you as a business owner. If you don't understand the figures, they won't be as confident in lending to you.
Think about the possible questions they may ask, learn the key metrics of your business and come up with some contingency plans so you can be prepared if you are asked difficult questions about how your business will operate.
5. Be confident
Once you're happy you have properly researched the franchise and have completed a comprehensive business plan, you should be in a good position to obtain finance. In broad terms, franchising is a safer option than going into business on your own. As a franchisee, you should have a tried and tested format to follow, receive training and support from your franchisor, and have access to a network of fellow franchisees for guidance. So although you'll own and operate your own business, you won't be doing it alone. All this support means that a bank is going to be happier to lending to start-up franchisees than other types of start-ups.
