The Franchise Coach

BUYING A FRANCHISE IS LIKE BUYING A CAR

Special supplements like this one, this weekend’s Business and Franchise EXPO, the internet, and franchise magazines, have enormous amounts of information on investigating and buying a franchised business. These sources of information will define franchising, detail the role of franchisee and franchisor and present a showroom of opportunities.

What are the similarities of Buying a Business or a Car?

New or Second Hand

Just like cars, a franchise can be either a brand new franchise (that is setting up a new outlet or operation) or a second hand franchise business. In franchising terms we call the new business a Greenfield franchise, but unlike a car the new franchise business will increase in value, as soon as it has a trading record and is showing a profit. Even the second hand franchise will increase in value if you show growth and improved profitability. 

With a car, there is something special about being the first owner. That unmistakable new car smell, the showing off to your friends, no worries of breakdowns. In franchising, the new and second hand businesses are equally appealing. It’s a matter of whether you want to be instrumental in the setting up process and endure the ramp up stage of a new franchise or if you want a walk in business.

Make and Colour

What make of car do you want, and what colour? What sort of business do you want and will it be part of a well known brand?  People often buy a brand of car because of its reputation of reliability, class, and resale value. You too can decide on a well known brand of franchise because of the same attributes. A well known mature, successful brand in franchising can also be a good option for a first time business buyer. Or you may decide on a brand and style of business that does not have such a track record but that has a better personal fit; hours that suite, passion for the industry or product.
 
Test Drive

When buying a car the salesperson will literality force you to take a test drive, try and ensure if it fits your wants and needs. They want you to become emotionally attached, even take it home for the night and let the family fall in love with it.

It is important that you test drive the franchise of your choice.   Not just for a few hours, but for a few days, and if your partner or family is involved, they should be part of the test drive.  Some franchisors will have test driving as part of the franchisee (that’s you) recruitment program.
                                                                                
Looking at the car groomed for sale in the yard, is a lot different than seeing it after 5,000km on a wet and windy evening.  Just so with a business. You need to lose the rose tinted glasses and see the good, the bad, and the ugly sides of the business.

 Look under the Bonnet

Every car buyer checks under the bonnet, and unless you are a mechanic you probably won’t really know what to look for or if it will run well. You need to have a look at the engine that drives the franchise business, so get a business mechanic to check out the business.  Any serious buyer should get an AA equivalent check and this may involve a number of advisors.

Exterior Look

The exterior look of a new car is not an issue, it will be 100% or you won’t buy. But for the second hand car it can tell a very different story.  So too with a second hand business.  Look deeper than what appears on the surface as scratches, rust and lack of care may be a warning sign. If you don’t get the right answers from the seller then ask the franchisor for a history of ownership, trading and customer feedback. 

Read the Instructions

The car will come with an ever increasing set of instructions, detail the onboard computer, regular maintenance, operation of the music, radio and communication systems.

You will be supplied with a full set of operational manuals when you take delivery of the business that detail the step by step process on how to operate the business.  But before you buy the business you should view the manuals as they will detail minimum standards and reporting requirements.  The franchisor will not let you take these away but you should allow several days to view them at the franchisor’s offices. 

Maintenance

Cars need to be maintained to keep them performing up to their optimum, so do businesses.  Regular checks and WOF are needed to keep the car going well, these are imperative for your business. Your franchisor and support team will be part of the regular check of your business and if you require help, they can give you guidance in the “maintenance” of your business.  

LMVD or FANZ

It’s the buyer’s choice to buy the car from a member of the Licensed Motor Vehicle Dealers Association which provides safeguards and creditability or to buy from an individual with no adherence to standards.  So too when buying a franchise business. Buying a franchise from a member of the Franchise Association of New Zealand provides you with some certainty of ethics and standards.

Shall I Buy or Not

Your decision to buy business should be based on the results of your 100 point checklist and not emotions.  Use the services of the franchise experts available to you at the banks, franchise consultants, lawyers and accountants and you are pretty well assured of making an informed decision. Ensure your advisors have a good depth of franchise knowledge. You should not stop researching until you fully understand both franchising as a business structure and the specific details of the actual business you are buying. 

Fiona Macky, Senior Consultant
“The Franchise Coach”
fionam@franchisecoach.co.nz
www.franchisecoach.co.nz
0800 COACHING

Fiona Macky is a Senior Consultant with “The Franchise Coach”.  This team of business advisers was one of New Zealand’s first organisations established specifically to provide high levels of support, services and mentoring necessary to advance business ambition to franchise reality.

"The Franchise Coach" is a member of the Franchise Association of New Zealand. Association of New Zealand Franchise Member
"The Franchise Coach"
Phone +64 21 943 776
PO Box 25020, St Heliers, Auckland, 1740, New Zealand

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Link Business Broking Ltd


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