If you’re planning to set up your own business, you could consider buying an existing franchise.

Not only will you become part of a larger company, but you’ll also have less of the stressful legwork and setup usually involved with coming up with your own idea for a business.

Before you decide if this is the best move for you, it’s best to know the process of buying into a franchise.

Do your research

As with any business venture, it’s crucial you do all of the necessary due diligence before making any decisions.

Firstly, you’ll want to decide what sort of franchise you want to become part of. Once you’ve decided, the next step is to take a deeper look at how it works and where its locations are.

Understanding how the business works should be your priority. This includes its supply chain, how the overall franchise is structured and what the market is like.

Research into the franchisor itself is also recommended. You need to find out how long they have been in business as well as the number of franchisees they own in the UK.

Before approaching the franchisor you’re interested in dealing with, check to see if they’re registered with the British Franchise Association (BFA).

Understand the finances

Before making any sort of business deal, you need to know more about the franchisor’s finances. This can be done by requesting a bank reference and studying their accounts.

The last thing you would want is to put your own money into a franchise in decline.

You’ll first need to have enough to pay for the startup costs, which can vary between each different brand and franchise depending on their size. According to the BFA, the average cost of buying into a franchise is £40,000.

It’s not only the initial upfront cost you need to budget for, but also the following:

  • The premises – if the franchisor has a physical location, you may have to pay rent and a deposit.
  • Equipment – there’ll be costs for any uniform or equipment you use during your day-to-day.
  • Insurance – as you become an employer, you’ll have to pay for liability insurance and building and contents insurance.
  • Payroll – you’ll be responsible for paying your staff once you’ve started trading.
  • Stock – any inventory you need will have to be purchased. You may have to discuss your supplier options with the franchisor.

In order to raise the capital to pay for your franchise, you’ll need to weigh up your options. A lot of prospective business owners apply for loans to help them get started. This is known as franchise finance.

You can apply for this loan through a bank or sometimes even the franchisor itself.

If you are planning to take out a loan, you should make sure you have a comprehensive business plan which contains sales forecasts and projections. This way, you will show lenders that you’re business-minded and a safe bet for investment.

As with any loan application, there are chances you may be turned down. Poor credit, or even the lender not believing in the franchise’s viability, can set you back. The team at PBA is happy to talk you through your finances and help set you on the right path.

Talk to us

Our team of friendly professionals has worked with hundreds of prospective business owners over the years. We can help you set out your business plan, advise on corporate finance or even assist you with your bookkeeping processes.

Get in touch with us today to find out how we can help you buy a franchise.


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