Working with an established brand rather than creating your own takes much of
the risk out of what can be a substantial investment, said Patrick
Fitzgibbon, senior vice-president of development for Hilton. Access to the
Hilton system helps its franchisees set up and run their businesses and
offers a greater guarantee of success than if a hotelier acted alone. “The
franchisee knows that we will continue growing and marketing the brand and
growing their customer base,” he said.
Success is not guaranteed, however, and franchisees must do their homework,
according to Paul Thompson, who founded and co-owns Water Babies with his
wife Jessica. “Checking out the franchisor first is so important. You do
hear horror stories of people handing a cheque to the franchisor and never
hearing from them again.
“Make sure they have the correct documentation: a well thought-out operating
manual, the correct legal agreements and good infrastructure that will help
you when you need it.
“Ask them about the support and the systems they have in place. If they are
cagey about any of this, walk away. Work with open franchise networks, ones
where you can talk to and get advice from fellow franchisees.
“We also make our franchisees go on a day-long course at the BFA so they
can question us properly about what it takes to make a franchise work and
what they should expect from us.
“We advise our franchisees to think about whether they would be better off
doing what they do on their own. It’s a sure way to work out if the
franchise you are looking at offers a partnership that’s for the benefit of
both parties.”
Thompson said that writing a business plan was also important, as was valuing
a franchise — three times profit is a good starting point. “But you also
need to take into account the client base, how long the business has been
going and how much goodwill it has built up.”
Another advantage that franchising has over starting on your own is that it is
easier to secure bank lending against a franchise, said Thompson. “Banks
have helped fund two-thirds of our franchisees and offer anything up to 75%
of the money needed to buy a franchise, although typically it’s more like
50%.”
Despite the advantages of franchises, they don’t suit everyone, said Hilton’s
Fitzgibbon. “There are certainly different types of entrepreneur and some
can be very independent in their thinking. This might not suit the franchise
model, which only works when it offers consistency of experience. It’s
important not to fight the system but to work with it.”
For those with the right attitude, however, franchising offers the opportunity
to grow a business rapidly with less risk, said Lixton. “There’s a tendency
to see franchising as somewhere between a job and running your own business,
but in my experience it’s very much your own business.
“If you are buying into a good territory you can quickly recoup the money you
have invested and your franchise has a value just like any other business
when you decide to sell it on.”
