Franchise: buying one, or selling yours
Weigh buying a franchise, or franchising your own business, with the questions that decide whether it pays.
6 min read
Franchising comes up from two directions. Someone with savings and no idea is offered a franchise as a "ready-made business". Someone with a successful shop is asked, "Why don't you franchise it?" Both can work. Both are also where a lot of money is lost, because a franchise is a long contract between two parties who want different things from it.
What a franchise actually is
A franchisor lets you use their name, products and way of working. You pay for that — usually an upfront fee and an ongoing share of sales or a fixed charge — and you agree to run the business their way. You still put in the money for the premises, fit-out, staff and stock, and you carry most of the risk.
Buying a franchise
The appeal is real: a known name, a tested menu or product, supply arranged, training given. The questions are about whether the numbers work for you, not for the franchisor.
| Ask | Why |
|---|---|
| What is the total investment, all in? | Fee, fit-out, deposit, equipment, first stock, working capital |
| What do I pay every month, and on what? | A share of sales is paid even in a loss-making month |
| Must I buy supplies from the franchisor? At what price? | Supply margins can quietly eat your profit |
| How long is the agreement, and how does it end? | What happens to your investment if you want out |
| Is my area protected? | Can they open another outlet next to yours? |
| What support do I actually get, after opening? | Training, marketing, help when things go wrong |
The most useful thing you can do is talk to existing franchisees — not the ones the franchisor sends you to, but ones you find yourself. Ask what they invested, what they earn, how long it took to break even, and whether they would do it again.
Then do the same sums you would for any business: cost your first months, work out break-even, count footfall at the location. A brand does not change the arithmetic; the franchisor's share comes out of your margin.
Be wary of any franchisor whose income comes mostly from selling new franchises rather than from the outlets doing well. Promises of "guaranteed returns" or pressure to sign quickly are warning signs. Have a lawyer read the agreement before you pay anything.
Franchising your own business
If your business is working and people keep asking to open one like it, franchising lets it grow on other people's money. But you become a different kind of business: instead of serving customers, you are supporting franchisees.
Before you consider it, check:
- It works without you. At least one location, ideally more, that runs well when you are not there. The second-location lesson is the test.
- It is written down. Every part of how you run it, in a manual someone else can follow.
- Your name is protected. A franchise is mostly a licence to use your name. Without a trademark, there is little to license. See the lesson on protecting your name.
- The numbers work for both sides. A franchisee has to pay you and still make a living. If your margin cannot support that, franchising will fail.
- You can support them. Training, supply, quality checks and help when things go wrong take people and time.
Alternatives worth weighing
Franchising is not the only way to grow beyond yourself:
- Your own second location, if you have the cash and the person to run it.
- A partnership with one trusted operator for one new outlet.
- Supplying others — selling your product to shops or restaurants instead of opening your own.
For either side, a franchise agreement is a long and expensive commitment. Get a lawyer to read it and a CA to check the numbers before you sign.
Tell the tool below about the franchise you are considering, or the business you want to franchise, and it will help you work through the numbers and the questions to ask.