Franchising – In business for yourself but not by yourself

  • Industry Turnover: £10.8 billion
  • Number of opportunities: 781
  • Total Franchisees: 33,900
  • Total Employment: 371,600

Statistics also indicate that significantly more franchised start-ups (93%) claim to be profitable after 5 years, compared to only 20% of stand-alone start-ups. There are many possible reasons for this disparity and it does not suggest that franchising is a guarantee of success or an “easy option” – as any franchisee will tell you otherwise. However franchising does provide access to a ready-made and proven business model, with support and advice that stand-alone businesses simply do not have.

What is a franchise?

Put very simply, franchising is a business model designed to enable established companies to expand with the energy and ambition of enthusiastic franchisees. In return for certain fees and royalties, the franchisor gives the franchisee the right to market a product or service using the franchisor’s operating methods and intellectual property. The formal term for this concept is ‘Business format franchising’. This franchise model covers a wide range of businesses, including fast food restaurants, automotive services, estate agents, convenience stores, recruitment agencies and consultancy.

What is involved in researching the marketplace?

Typically, those interested undertake a number of activities before choosing a particular franchise. These include checking the franchisor’s website (72%), investigating a number of franchises (54%), attending an exhibition (30%), checking the bfa website (45%), obtaining an information pack from the bfa (25%), or attending dedicated seminars (18%).

The bfa website, contains excellent guidance for potential franchisees with six clearly defined action steps:

  • bfa membership
  • Your finances
  • You
  • Research the market
  • Research the franchise
  • Be sure

Also, a recent independent innovation, ‘The Franchise Show’, is a monthly podcast, sponsored by Auditel, a leading white collar franchise. This features industry news, interviews and “how-to” guides, with contributions from franchisors, franchise bankers, lawyers and consultants. The site provides up-to-date information on various topics related to starting a new franchise and can deal with any of your questions.

What about the finances?

As in any new venture, you’ll need a business plan. Often the franchisor can offer advice on this with their knowledge of likely costs and income. Banks maintain a watching brief on all franchises, and, based on their satisfaction with your choice, may lend up to 70% of the investment. The major cost will be the Franchise Fee which is paid to the franchisor. This fee covers the training in the business model of the franchisor and the right to use their trademark, trade name and business format in a defined territory. It may also cover the cost of stock, equipment and other items.

What can franchising do for me?

Anyone seeking a career or life style change or weary of corporate life, might be considering self employment. The potential rewards are evident. You choose your own hours, you may work from home, you earn what you are worth, you are in control of your own destiny, and so on. There are possible pitfalls and disadvantages too and you should investigate all your options very thoroughly.

One of the most important factors in your decision will be the long-term viability of your business. Is it something that will support you and your family? Does it suit your talents, temperament and ambitions? Will it provide you with the life you want in the long term?

What are the final steps?

Having selected a list of suitable franchises, the next step is to contact them, ask for further information, and then arrange meetings. Make a note of your questions before you meet. Check The Franchise Show website for more information on key points and the legal and financial aspects.

Good hunting!

By Norman Grossman
Norman Grossman Associates, Marketing & Publicity Consultants

This piece was previously featured by The Daily Telegraph Business Club