40,000 UK business failures every month drive more people to franchising


Feb 10, 2017

On average, between 40,000 and 50,000 new companies are incorporated each month but here’s the shocking news, between 30,000 and 40,000 companies are also dissolved each month. That’s up to 80% of businesses failing and normally before they reach five years old. It’s no wonder that many people turn to franchising to be their own boss and here’s why…

•Turning UK business failure rates on their head, less than 20% of franchises fail in their first 5 years
•No need to spend large sums of money on brand and product development – it’s all been done for you
•Take your existing skills and build on them with training from your franchisor

Transworld Business Advisors have been working in the world of buying and selling businesses for over 30 years and here are their 9 crucial steps to buying a franchise.

1. Gathering Information.
In order to find the right franchise for you, you need to ask yourself lots of questions. Why are you interested in buying a franchise? What makes the most sense given your background and experience? Where do you want to be in 10 years’ time? It’s a good idea to spend some time with a third party who can challenge you more than you can yourself.

2. Research your options.
There is a vast number of franchise opportunities out there and creating a shortlist of brands can be a time-consuming process. Things you need to find out include whether your local territory is available, will typical turnover figures support your lifestyle, and if it sounds like something you would enjoy to do every day in the long term.

3. Present and compare.
Once you have created your customised list of franchises, you need to present them in a way that you can easily compare them. Understanding why each of them could be the right match for you, the brand’s position in their marketplace and what information you are missing that you really need to know.

4. Time to get in touch.
If you have prepared well in steps 1 to 3 then you will now have a great idea of what you want to ask the franchisors of your shortlisted brands. However, don’t forget that they’ll also have a lot of questions for you – the partnership needs to be win-win! Be prepared to spend at least 45 minutes on each initial exploratory call or they may ask for a face-to-face meeting.

5. Evaluation.
After speaking with the various franchises, you will typically receive a Financial Information Memorandum (FIM) in electronic or paper copy for your review. This document typically contains 23 items with essential information for you to make an informed business decision. This is another good time to speak to that third party to help you review the information and it is normally at this point that you will take your shortlist to just one final franchise.

6. Validation.
After reviewing the FIM, it’s time to start enquiring and validating the information with current franchisees. This is such an important step and the franchisor should offer you free reign to contact anyone within the network, not just a few hand-picked names. From our experience, it’s worth asking to speak to franchisees whose financial performance range from weak to strong.

7. Assurance.
At this time, you may still have questions regarding the franchise you have chosen and these can often be around the more detailed financial aspects or development strategies of the business. A call with the franchisor will normally have been offered as part of the recruitment process and keeping the lines of communication open is a good sign of how they will support you should you become a franchisee.

Many franchisors offer a discovery meeting or event where you can meet the franchise support team, other franchisees and see a franchise operation up close. This can be offered at an early stage or once you have had time to review the FDD but we always recommend the experience.

9. Conclusion.
After the previous 8 steps, it’s time to make a decision. This will either be to sign the franchise agreement or to keep searching, going through process again. Interestingly, it takes most franchise buyers around 3-6 months to complete these 9 steps and at Transworld Business Advisors, we have a service that leads you through this 9-step process so you are not alone.

You can receive a full information pack on support in your franchise search by contacting Transworld’s - Click here