10 THINGS TO CONSIDER

FRANCHISE BASICS 10 THINGS TO CONSIDER

BEFORE PARTNERING TO BUY A FRANCHISE

Finding a business partner can be a way to start a new franchise by sharing risk, combining skills and pooling capital.

MAGDALENA SCHOEMAN

Belgravia Health & Fitness

Sometimes there are benefits to buying a franchise with a partner, or a group of investors. While this arrangement doesn’t suit everyone, there are situations where it may be advantageous

There are different types of partnerships. You may partner up and both work in the business day to day, while other arrangements involve “silent” financial partners.

If you are considering partnering up to buy a franchise, it’s worth doing some groundwork to understand how to make this sort of arrangement work as smoothly as possible. Who you partner with is as big a decision as what franchise to buy.

Here are 10 things to consider before entering a partnership to buy a franchise:

1. WHO WILL THE NOMINATED MANAGER BE? Most franchisors will need you to appoint one person to be their “go to” for communication and decisions. Each person in the partnership will need to agree with this arrangement. Discussions can happen behind the scenes between investors but ultimately that one person has the final authority with the franchisor. 2. WHO IS RESPONSIBLE? While there is a lot of head office support for franchisees for various aspects of running the business – from marketing to operations – there is still plenty to be done to keep a franchise running optimally. Who will be working in the day-to-day business, if anyone? And how will the other “back end” responsibilities be split? Map this out ahead of time as part of a business plan so it’s clear and everyone is happy with what’s expected of them. 3. PERSONAL GUARANTEES. Whether you’re working in the business or just a financial partner, most franchisors (and landlords too) will require all the franchisees to personally guarantee the agreement. Partners need to be prepared and comfortable with this or the arrangement may not progress. 4. TRANSPARENCY. Are all investors comfortable being transparent about their financial position? If those involved aren’t prepared to be honest and open about their finances, then it may not be a viable arrangement because transparency will be required as part of the purchase process and to avoid any surprises between partners. 5. COMPATIBILITY. Just because a potential partner may be a friend or a family member, it doesn’t guarantee a good partnership. Selecting a partner who complements your traits and skill sets will make for a stronger and more wellrounded business. Are you able to get along with a partner? Are you sure they will pull their weight? Ask yourself the hard questions before committing. 6. ALIGNED EXPECTATIONS. Make sure both you and your partner/s are clear on goals and what you’re hoping to achieve, in what sort of timeframes. Where do you want to be in five years? What about 10? Do you have an exit strategy? Make sure you both feel there’s a balance and that you are on the same page to avoid disappointments and disagreements. 7. LEGAL ADVICE. Nobody should ever go into any type of business assuming everything will go to plan. Get advice and have agreements drawn up that cover the most common hurdles you may encounter so that all parties involved have a level of protection. This should involve defining each person’s role in the business, figuring out what to do if one person wants to dissolve the partnership, determining how to share profits and brainstorming ways to handle disputes. 8. ON BOARD WITH THE FRANCHISE MODEL. A franchise is a unique business offering. It allows owners to get a business up and running quickly and efficiently with the confidence that comes with the backing of the franchisor, the groundwork that’s already been done to refine the business model and build the brand and the support that’s behind you when needed. The business model relies on some level of rules and framework to ensure consistency across the network, as this consistency is the strength of the franchise model. All partners need to be comfortable with this so that it doesn’t create any tension down the track. 9. ENTHUSIASM. It’s important that all involved have the same level of enthusiasm and dedication to making the business work, no matter what level they will be invested in. When energy levels are too disparate, it can mean more pressure and burden falls to one person, which isn’t fair and can, over time, wear that person down. 10. COMMUNICATE, COMMUNICATE, COMMUNICATE. No matter what happens or the nature of the arrangement, the best chance of success comes to those who openly communicate. There is no point partnering with someone who can’t take that approach, as it’s likely to fail.

Working with a franchise partner can help you ramp up business growth and expansion more quickly and easily, but it pays to choose a partner with the same care and attention you would when selecting franchise opportunities. Due diligence from the start prevents problems down the line. n

Magdalena Schoema is new business manager, Belgravia Health & Fitness, which has Genesis Health + Fitness, Coaching Zone and Ninja Parc Indoor Obstacle Course in its portfolio. It is also affiliated with Jump! Swim Schools and BK’s Gym and Swim.