Singing Pig

Hi,

Im new to this so forgive any lack of information.  This is something me and an ex colleague have been looking into and are excited about. 

OK, a bit of background.  We both work in the IT industry and have a good  technical knowledge of computers, networking and general IT.  One works within a technical support environment supplying support to end users within businesses and has a good Infrastructure knowledge.  The other works within Operations in a telecoms company, also has the technical support knowledge and some software experience.  We are looking at leaving the jobs we have to start an IT equipment leasing franchise.  There is about 20k capital between us and the necessity of a bank loan to start  What we have researched is generally an initial fee of about 30k. 

Here are my questions;

1.  What are the limitations of buying a franchise, new start or otherwise, with 2 of us?  I have looked and cant find much information on going into a franchise with 2 people.  They always lean towards 'individuals'

2.  How much Capital are we likely to need?  Do we have enough for initial, working and contingency or should this come out of the bank loan we would be looking at?

3.  In terms of training.  For the start up fee, would the franchiser train us both? or would this have a premium?

I have lots more questions but that will do for now, any advice would be greatly appreciated.

Thanks

Hi

Going into business with someone is always a tricky one. It has nothing to do with the type of business, e.g, franchise, but about characters and personalties:

1. Do you get on ?

2. Do your personalities and skills complement eachother ?

3. Are you going to have the staying power if/when things get tough ?

4. Whats your family situation, in other words is one single, no family to support and the other married with 2 kids and with much more financial pressure ?

From a business perspective a franchise business' turnover can and normally is always limited by the terriority you buy. Is there enough profit in it for 2 people ? Have you thought of ways of expanding the business as you need for more money grows as time passes ? Or is the turnover limited to an 'upper-ceiling' that you can never go beyond ?

Legally, get the proper structure in place when setting up the business, to ensure both partners are covered if you do decide to go your separate ways.   

Personally, if you think you complement eachother both personality wise and from a skillset perspective then your biggest issue is the limiting factor of the franchise's turnover, alot of franchises can only handle 1 person's financial demands.

Capital

Usual start up costs apply, rent, stationery, computers, telephones, advertising etc; if the terriority cost is £30K (??) then £20K with a £20K bank loan is clearly not enough coupled with your additional business start up costs. You dont say how much the bank loan is ?  If this is young franchise trying negotiating an interest free payment plan for your region that will help you manage cashflow for the first 6 months. Difficult to answer with the info you've supplied.

Training

This should be included in your franchise fee; any franchisor selling you a franchise and charging for training is a RIP OFF MERCHANT - I would WALK AWAY if this is the situation. If training is only for 1 person, negotiate with the franchisor to get your other partner included; you should at least get a discount for him ! Act as if your going to take muliple areas in the near future !!

Hope this helps.

Pukka

PS. I set up a franchise 14 months with 2 other partners, turnover in excess of £500K in year 1 and healthy NP, so its been going well and we have exceeded targets; it can work !