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BUSINESS - THE FRANCHISE OPTION

IF YOU'VE ALWAYS WANTED YOUR OWN BUSINESS BUT DON'T KNOW WHERE TO START/ THINK YOU MIGHT NEED SOME SUPPORT OR JUST WANT TO EXPAND YOUR EXISTING INTERESTS? THEN WHY NOT CONSIDER THE FRANCHISE OPTION. OUR GUIDE TELLS YOU SOME OF WHAT TO LOOK OUT FOR & WHAT TO EXPECT

A Franchise is basically a business where the franchiser licenses the format of a business to the franchisee.

Franchises exist across a broad spectrum of business sectors and in the UK approx. 900 businesses are currently run on this format, employing nearly 600,000 people. Average turnover for a typical individual franchise is nearly £350,000 amounting to over £13bn for the whole sector.

Typically single fee franchises range from £105,000 for a catering franchise down to £14,000 for a personal services franchise. Well known brands run on the franchise model incude KFC, Subway, Snap on Tools, Shell Retail, Cartridge World, Tax Assist Accountants, Redstones & Chips Away.

The franchise model is often seen in catering, construction & retail; Property services ranks no.1 with personal services coming in at no.2. Investment in a franchise averages around £60,000, often facilitated by borrowings. The British Franchise Association reports that over 90% of franchises are profitable 5 years down the line.

When you acquire a franchise, you will acquire the rights and commitments to run a small business allowing you to utilise the brand and systems of work supplied by the franchiser. You will usually be provided with on-going support including product & systems training, access to promotional/ marketing materials & campaigns, admin support and ongoing franchise development services.

Normally the cost of these services is a percentage of turnover but try to avoid franchisers who charge fees for these services regarless of your level of success. The main benefits arising from acquiring a franchise rather than starting fron scratch are:-

The business model will have been tried & tested and any major issues will likely have been ironed out.
You will have established brand with a pre-existing reputation.
Your chance of business failure will be lower due to the support available.
The ability to dispose of or assign your will be greater.
Banks tend to view franchises quite favourably due to the above & often lend upto two thirds of the required investment.
You will be self-employed.

There are of course, downsides which include the following:-

Making the right choice of franchise for you.
The often sizeable initial investment.
On-going feee commitments
Restrictions on the way the business is run & the rules and regimes that have to be complied with particularly in catering.
Being reliant on the franschiser/ fellow franchisees to maintain the profile of the overall business.

There are things that you can do to increase your chances of success:-

You can check with the British Franchise Association (BFA) that the franchiser is a member. Members of the association are bound by a code of conduct & you will able to check out their history.
Obtain financial information about the franchiser and ensure they are financially sound. If the franchiser is a limited company you can check out the latest filed accounts for just a £1 via Companies House .
Get the franchise agreement checked out by a lawyer who specialises in commercial law (please note that there are no specific laws relating to franchising).
Make sure that you know exactly what you will be getting for your money both at the outset & throughout the life of the franchise (up to 20 years).
Check out existing and past franchisees and ask them about any issues they have encountered and how their franchise has gone. Some franchisees will let you work with them for a week or so that you can get a real feel for whether you will like the business.
Checking out other franchisees will help you assess whether projections by the franchiser are realistic.