What does a franchisee get for their investment?

The answer to this all important question depends very much on the franchisor, how long it has been trading, how successful its franchisees are and the terms of the franchise agreement.

Technically, what franchisees will receive is set out in the franchise agreement.  In essence that will (or should) amount to initial and continuing training, assistance with the launch of the business, continuing advice and guidance, perhaps the provision of stock, equipment, stationery and other items and a detailed operations manual which contains all of the franchisor’s know how and is sufficiently detailed to enable a franchisee to know precisely how to run his franchise business and is sufficiently “special” to give franchisees a competitive advantage.

In addition to the above you will, of course, be receiving the right to use a brand.  How important that is will depend on how well known the brand becomes. Clearly, for instance, in the early days of McDonald’s the brand had very little value, now it has huge value.  This does mean that when you take a franchise from a start up franchisor you are taking a business risk that the brand does not become well known. You would be taking a much smaller risk if you take a franchise from a very well established franchisor with a large number of franchisees all of whom are operating profitably because, inevitably, in that scenario the brand will be better known and, therefore your use of the brand will attract customers.

All of the above is all very well but the value of what you receive does depend on how good the franchisor is in practice. This means that you do, before you commit to a franchise, need to talk to as many of the franchisor’s franchisees as you possibly can and not only the two or three that the franchisor is happy for you to talk to. That way you can establish precisely whether there is any real value in the manual, advice, guidance and training that you receive from the franchisor.