My husband is set on buying a handy man franchise costing us $40,000 to join. He is very good around house and I think he can do it himself but he thinks he needs support and the brand. For us it is a lot of money and how do we know they will support him with new customers?
I am probably going out on a limb here, but I have never been a fan of franchises. For me I dont see a huge amount of value in the upfront and annual fees.
I gather that there is value in a recognised brand name, but exactly how much value is debatable.
I woud STRONGLY advise you to go and get advice from someone with experience in dealing with the franchisees: ask the franchisor for names and numbers, and then when you are talking to the accountants of the franchisees, ask them to talk to the actual franchisees. If they have invested $40k and are loving it, you probably wont struggle to find people to talk to.
Then get the figures looked at by someone who can advise you independantly of a franchisor.
then go home and talk it over A LOT.
if you are going to stump up $40k up front and then sign up to an annual committment of (say) $10k pa, that adds up to a six-figure sum very rapidly. So how much EXTRA turnover do you need to generate $100k??? my guess is a LOT!!
talk to a CA or CPA with small business advisory skills. they can help you go through the ins and outs of small business without any agenda or barrow to push.
The idea behind the franchise model is generall to provide the how to formats for the business, marketing support and an almost ready made client base. But obviously you pay for it.
Per BC above, try to speak to other franchisees - ideally not too close to your area so not in conflict. They may be more open and upfront. Speak to your accountant with numbers in hand, and consider having the franchise agreement checked by a franchise lawyer.
Biggest negative I have seen with some franchises is the selling out clauses (along with the cost of getting in). If they control the sale, and take a considerable percentage, you can build a strong business and find that selling at a higher value provides no end profit, as it is chewed up in fees.
Do you and your husband have much business background? You may be able to set-up and build a great brand in your local area for much lower costs. It is harder, with regular money going out for marketing etc.. Get your accountant/business advisor involved and work out your business plan. Measure what works and what doesn't, so you don't push the same marketing for no results.
All these issues are what the franchise will provide (through their experience).
It can be very rewarding to build it up yourselves, but is certainly harder and more stressful.
I have been involved in 4 franchise systems, twice as franchisee, once as employee of the franchisee and once as employee of a franchisor.
The system is amazing when it works and it is horrendous when it doesn’t.
As Brendan and Todd have said already, you are paying a significant amount to basically buy a system and a database. If your husband wants to be busy and have the flexibility of being self employed then great, but don’t expect big money. Most of these business make wages and then don’t even sell for what you paid after 5 years.
If he wants to build a profitable business and one day employ a couple of people, I would think that going it alone, whilst slow and painful to start may be a better option.
Speak to at least 5 franchisees and don’t be afraid to ask “what was your NET PROFIT for the past two years”. Remember every franchise has winners who make a great income and will rave about the brand. They also have a percentage of franchisees who are disillusioned, disheartened and bordering on bankruptcy.
Either way it will be hard work and you need to do lots of research and get plenty of expert advice.
Best of luck with it
Also, be aware of any "guarunteed work" promises. I would get a lawyer to check the fine print. I would read this first- https://www.accc.gov.au/business/industry-codes/franchising-code-of-conduct