Most people associate franchising with large brands, but it can also be an effective way for some smaller businesses, struggling to raise finance in order to expand in the present economic climate, to grow at minimal cost.
The Forum of Private Business (FPB) is campaigning to raise awareness of franchising as a way forward for many viable businesses.
“There is no doubt that businesses in certain sectors are being hit hardest by recession and restrictions in the availability of credit,” said Nick Palin, the FPB’s Director of Finance. “However, others are still capable of expanding because they are in less susceptible markets. It’s our responsibility to tell them about all of the options that are available to take their businesses forward.”
The FPB has launched an awareness campaign to spread the word, following its partnership with Franchise Development Services (FDS), which has six offices throughout the UK including one in Altrincham, Cheshire, run by Tony Urwin.
Mr Urwin had been instrumental in developing awareness of franchising, including an understanding of the size and scale of the industry and how franchises operate. The partnership has enabled the FPB to put together comprehensive information about franchising. This is now being made available to through the FPB’s website, www.fpb.org, and to members via its weekly eNewsletter.
“The FPB’s campaign to provide more information to its members is to be applauded because at times like these businesses up and down the UK need to know all the options that are available to them,” said Mr Urwin.
“The FPB holds a lot of sway with business owners and it’s one of the ways our industry can clarify a lot of the misconceptions about franchising and offer the right information and advice to businesses, as a significant proportion of them could use franchising as a route to expansion, even in the current economic climate.”
Essentially, franchising can be described as a ‘business marriage’ between the franchisor (the small business wanting to expand their brand) and the franchisee (who wants to take on the license).
In effect, it allows for a business to be ‘cloned’. Budding entrepreneurs bear the brunt of the costs for the privilege of opening and operating new locations of the established business, paying the franchisor an initial fee, as well as ongoing management service fees, in return for the training, manuals, and a launch package to help get them started.
Franchising can be a win-win proposition for both parties. Franchisees enjoy the opportunity to own and operate a proven business and enjoy training, support and other benefits that are often not available to other entrepreneurs.
While is not a process suitable for every business, for those that have proven to be workable and profitable with sound medium to long term prospects, franchising can mean the beginnings of a nationwide network. Five tips to help business owners decide if franchising is the future are:
- Is there a product or service that the market needs and wants in the long-term? There is no point in trying to franchise something that no one will want, so if a business is in an industry that is struggling, it is unwise to franchise.
- Has a proven business system been established demonstrating practical success? Franchising an idea is impossible – any potential franchisee will want to see that it works in the real world. The best franchisors use their own business as a model or develop a pilot product to make sure they get the process right before they launch a franchise operation.
- Is the business profitable? People who buy franchises invest thousands of pounds and are looking for a return on that investment. They are unlikely to settle for returns they could earn by working full-time in a salaried post.
- Is the brand suited to national expansion? The brand must be strong and exclusive. It is important to first invest in brand development in order to create something which people will want to buy into.
- Is there commitment to franchising as a separate business which will demand constant support and development? Franchising isn’t a ‘get rich quick’ option. The franchise network will need ongoing support and investment and may demand a completely different set of skills. It is essential to make the commitment before you start the process – and stick to it.