Like any business, starting up as a franchisee requires some finance. The good news is that when it comes to buying a ready business model, you have a clear idea of how much is the initial price so that you can work around it accordingly.
When it comes to buying a franchise, there are few questions that you need to answer yourself, before taking any steps further.
On the first place, you need to evaluate your current financial situation – have you got any saving? How much can you afford spending without threatening your daily expenses?
The most important thing to keep in mind here is that even though you will be implementing a tested and proven business model, you will still need time before getting to a break-even point and even more time before making profits. Therefore, risking all of your savings is probably not the best of ideas.
Selecting what kind of franchise you will buy is your next steps. Currently, there are approximately 50,000 franchises in the UK, spread in different market sectors from small companies offering pet grooming to big fast-food and coffee shops.
Your decision on what franchise you buy depends on three main things:
► Your interests – choose something you are passionate about, and you find pleasure doing it. Your motivation and working spirit are essential for the development of your business, so you need to enjoy your job.
► Your environment – the success of any business is based on its customers. Some franchises required a constant flow of new clients, while others are based on consumers’ loyalty. Keep that in mind and apply it according to where you’d like to set up your company.
Additionally, make a research on the competition – if there are any other businesses with the same or similar operation and are there enough potential customers for everyone.
► Your financial abilities – as we mentioned, considering how much money you have will determine a big part of your decision. The cost of franchises in the UK can vary significantly.
Starting from as low as ₤5000 and reaching to ₤50 000, as you can see, the options are plenty. Once again, it all depends on your situation. Naturally, you don’t need to have all the necessary sum to buy a franchise as you can apply for a bank loan.
Getting a loan to buy a franchise
Having sufficient capital is essential when you want to buy a franchise. And while you might have some savings that you can invest, it is not unusual to need some additional funding.
The good news is that banks are more resilient when it comes to approving a loan to buy a franchise, compare to stand-alone startups. Franchises are considered a safer option as they come with a ready-to-implement format, responsible business practices to follow and a reputable brand.
Additionally, as a franchisee, you will receive initial training on how to set up and run your business, as well as ongoing support during the time of operation.
Still, getting a loan to buy a franchise requires a well-prepared application.
To start with, you need to present a business plan. Having as an example, the requirements of the franchisor, set up in their informational package that tasks should not be as difficult.
Your business plan needs to include some main points:
► A short resume of what kind of business you will run and how are you going to operate and manage it
► Your CV and persona information, including your motivation to why you want to buy the selected franchise
► A presentation of the established business, containing information on the size of the market, the customer base and the competition.
► A summary of your marketing strategy to attract your clients
► Your financial outlook – when do you expect to reach a break-even point, what is your estimated cash flow etc.
► Your capital input – how much you will be investing in the franchise
► The state of your current finances – including your income, expenses and if you have any assets or ongoing debts.
Don’t put all eggs in one basket.
When you polish your application, it’s a good idea to present it in front of several banks or lenders. Keep in mind that there are tens of other requests, and you are competing with them.
Submitting to more than one institution will guarantee you a better response rate, and you can also compare the conditions they will offer you.
There are a few good reasons to buy a franchise. You will do something that you enjoy. You will be your own boss. You will have a better balance between work and home.
Becoming a franchise owner will allow you to set up and run a business even if you don’t have an entrepreneurial experience.