When you buy a franchise you pay the franchisor for the right to run a business under its brand and operating system. You own and run the business, and the franchisor sets the standards you must follow.
No specific franchising legislation applies in the UK, so your rights come from the franchise agreement and general contract and competition law. The checks below are how you protect yourself before you commit.
Compare the full cost
Franchisors describe their charges differently, so ask each one for every cost in writing, including any stock or supplies you must buy from the franchisor or its nominated suppliers, and set them side by side.
Check the franchisor
The British Franchise Association is a trade association for franchisors. It runs an accreditation process and a code of ethics, so accreditation is a useful signal, but it does not replace your own checks.
Ask the franchisor for a full list of past and present franchisees, not just the most successful, and visit new and established ones in different places. Ask whether the income matches what you were told, what support they get and whether they would buy again. Ask for three years of the franchisor's accounts and have an accountant read them. Question the information pack as you would any sales pitch.
Fund the purchase
A business plan is essential for raising finance, and banks with specialist franchise units can check whether your projections are realistic. A Start Up Loan is another route if you are starting out.
Read the franchise agreement
The agreement is the only thing that governs the relationship, so pay for a solicitor who specialises in franchising and is accredited by the British Franchise Association. Do not pay a deposit or sign anything until they have reviewed it. Check these points:
- how long the agreement lasts and what it costs to renew
- the territory you are given, and whether the franchisor can open or sell elsewhere nearby
- what happens if you cannot continue, for example through ill health, and what happens if you want to sell the franchise
- what support the franchisor gives you at the start and during the term, and which restrictions it places on how you run the business
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Set your budget
Work out the total you can invest and the monthly income you need, then rule out franchises that do not fit.
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Get costs in writing
Ask each franchisor for every fee and obligation, and compare them against the same list.
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Speak to franchisees
Ask for all current franchisees, contact several and ask about income, support and whether they would buy again.
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Review the accounts and the agreement
Have an accountant read three years of accounts and an accredited franchise solicitor review the agreement before you pay a deposit.
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Arrange funding
Take your business plan to a bank that has a franchise unit, or apply for a Start Up Loan if you qualify.
Legal basis
Primary legislation and key regulations