smallbusiness.co.uk: Helping your business think big

A good franchise scheme is not just about having a good idea, it’s about the franchisor’s ability to prove the idea, have the available resources, both human and financial, and build the infrastructure to ensure the brand can be replicated by franchisees. SmallBusiness.co.uk and Suzie McCafferty, international development director of Smart Cartridge, offer some practical advice on starting a franchise:

- Research the market thoroughly – read the franchise trade press, check out the numerous internet sites and sign up to industry newsletters.

- Do you know anyone who is currently running a franchise business? If so, ask them what the pros and cons are, and whether you could spend time with them in the business to find out if franchising is right for you.

- Ask the franchisor for a list of current franchisees to speak to. If they are reluctant to let you contact them freely, try to establish the reason.

- Always check the validity of the business model and the projections with your own research into your local market – variables such as location, disposable income, product and buying trends can all affect your projections. Your accountant, bank and existing franchisees can help to verify your findings and assumptions.

- Bear in mind your initial start-up costs will need to be deducted from your revenues. Don't leave yourself short, you may need to secure enough working capital for up to 12 months until your business becomes more established.

- Ensure that you have taken into account all fees that may be charged by the franchisor, and what these fees include. It is also important to check whether there are any other ongoing fees such as training, the purchase or upgrade of equipment, commitment to a minimum advertising expenditure on a monthly/annual basis and so on.

-When running a franchise you may experience good times and bad times due to factors such as seasonal fluctuations or slow payers. Like most businesses it is wise to have either cash reserves or a line of credit to see you through any challenging times.

- Ask yourself what your long-term goals are. Do you hope to eventually sell your business? How long will you run the franchise for? Set yourself solid targets which can be achieved.

If you have considered all of these factors, and are sure that you still want to go ahead, it is essential that you prepare a comprehensive business plan including your own research and trading projections.

Click here to read our business plan dos and don'ts.

For further information about Smart Cartridge visit www.smart-cartridge.com or call 0131 445 7607.

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