smallbusiness.co.uk: Helping your business think big

If you do decide to start up as a franchise, thorough background research is crucial to success. Lloyds TSB recommends that prospective franchisees consider the following points to ensure that franchising is the right route to take:

- Find out whether the franchisor is a member of the British Franchise Association, as membership requires that franchisors comply with ethical standards governing their business practices

- Look for a proven franchise system, where the business is established in its marketplace. Your bank may be able to help here, through providing details of existing successful franchise systems

- Talk to existing franchisees, in order to find out how the franchisor supported them in establishing and building their business

- Understand all the costs involved in setting up as a franchisee and which items such as equipment, stock and vehicles will be provided as part of the initial investment

- Determine how much the management services fee will be, as most franchisors charge on a monthly basis to cover the cost of providing ongoing support and giving themselves a return on their investment in building the franchise system. Costs may include contributions to the advertising fund and a mark-up on goods supplied to you by the franchisor.

- Study any projected income figures carefully and make sure they are realistic. Consult an accountant if necessary, before incorporating them into a comprehensive business plan

- The Franchise Agreement is the legal agreement between the franchisee and the franchisor. It lays out the rights and obligations of both parties. Although most franchise agreements are standard in a company, it is still a good idea to get legal advice from a solicitor experienced in the field of franchising.

- Consider the type of franchise you want to operate. Whilst retailing and catering have traditionally been the major areas, there is now a move towards more domestic and business-to-business services. For example, with an investment franchise (typically hotels and major retail outlets), you would employ a management team to run the outlet on a day-to-day basis. A job franchise however is one where one person can run the business from home, for example car repairs or distributing sweets/greeting cards.

To find out more about how to become a franchisee call 0800 056 0181 or visit success4business.com