A recent survey from franchise portal TotalFranchise.co.uk that attracts over 40,000 unique visitors per month, confirms what I hear on a daily basis when speaking with franchisee candidates. Specifically, sourcing the franchise fee and working capital is the biggest challenge.
Beyond funding as an issue for 56%, the survey found that the primary concerns for franchisee candidates include:
- 21% lacking confidence in the franchise model to work as expected;
- 4% having a fear of failure;
- 4% having concerns over cash flow whilst building a business and
- 2% having concerns about their skills to run a business.
While these secondary issues can be successfully addressed by franchisors, overcoming the funding issue requires greater assistance from the banks. Of course, franchisee candidates needs to have a decent credit history and some cash to invest in a business. At least once a day I speak to a franchisee candidates who has little or no cash whatsoever, yet they are looking at franchise opportunities. In these cases I educate the candidate on all the options for sourcing funding (family/friends, pension/retirement fund, equity in the home, bank loan, etc.), but advise that they may want to put search on hold. As not only do they need to source the franchisee fee but they also need to have enough to cover business and home expenses for at least 6 months. Without this in place, they are most likely setting themselves up for failure which goes against what franchising is all about!
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