Guide to Buying a Franchise – Interview with Affandy Faiz from FranCorp Malaysia.

There are many factors to consider. Among the things that you need to look that is the investment level of the franchise you are targeting to buy. Bear in mind there are three investments that you need to have. The first is the franchise fee, the second is the initial investment and the third is the working capital required. Now, you need to make sure that you have the necessary investment to get involved in that business. Typically, in Malaysia the average franchise fee is about RM30,000. If you're looking at the retail concept to a restaurant concept, you’ll be looking at an initial investment in the region of RM250,000 to RM500,000. Usually the business owners or the franchisors will tell you that you need about 3 months to 6 months working capital, so it varies from one franchise concept to another. You will need about RM80,000 to RM100,000 working capital there. So, all in you’ll be looking at a total investment of easily RM300,000 to half a million ringgit.

Most of the people that are looking into buying a franchise know what’s in it for them, they know what kind of investment they are looking at. Some do get shocked, it depends on which concept though. From our experience when people ask the business owners or the franchise owners about the franchise fees, Malaysian generally tend to not really appreciate the value or intellectual property or brand recognition that the business brings to the table. The other factor that is of concern is how to find financing. Now some people, buying a franchise, they think they want to get started immediately and they are looking for financial assistance from the banks. Bear in mind, in the current economic situation right now, banks are squeezing credit therefore banks are more cautious about lending money to people. Therefore, many franchise candidates need to have in reserve at least RM100,000 to RM200,000 to get started in the franchising business.

Part 2: What are the benefits and responsibilities of franchise ownership?

Part 3: What are the considerations before selecting a franchise system?

Part 4: How do you investigate franchise offerings?

Part 5:What are the tactics these franchise companies use to lure you in?