The Civvy Street Guide to Franchising

1. Take proven business format. 2. Execute with Military precision. 3. Profit.

Let’s start this off with some cold, hard stats. According to figures from the Natwest/British Franchise Association (bfa) Franchise survey of 2013, the franchising sector in the UK had: 930 brands operating 39,000 outlets that, in turn employed more than 560,000 people.

That all adds up to almost £14 billion in annual turnover.

Maybe the most important stat though is this: the percentage of units that are profitable (including new businesses), stands at 92%

Due to these sorts of figures, franchising is often described as a far safer way to start up a business than doing it on your own but for the right people, those who are disciplined, well motivated, not afraid of hard work and very good at following structures and procedures it should take serious consideration when thinking of your future career.

So, What Is Franchising?

Basically, business format franchising is the granting of a licence by one person or company (the franchisor) to another (the franchisee) which allows the latter to operate their own business using the trade name, trademarks and business system of the franchisor, usually within a defined territory or area. In return, the franchisee makes an initial payment to cover the cost of setting up the business, an ongoing royalty payment (usually a percentage of net revenue) and may also be required to make contributions to national advertising campaigns.

What Types Of Businesses Are Run As Franchises?

With the explosion in sophisticated branding methods and advertising campaigns in recent years there are very few sectors that aren’t franchised. Once the realm of fast food, hotel and automotive sectors, now it seems to encapsulate almost anything you can think of.

Franchisees can be van based, home based, or operate from retail/commercial premises; they can be sole traders, partnerships, or limited companies with one or more outlets. From dog grooming to house removals, global brands to local entrepreneurs, it quickly becomes apparent that finding a franchise isn’t the hard part of the journey – it’s finding a good one.

This can be a very daunting task, however, if you approach it systematically, you should eventually arrive at a short list of suitable opportunities. It’s a question of matching the skills and experience required to run a particular franchise, with what you like doing, and are good at.

Where Can I Get Information?

The bfa website has well presented and easy to follow guides on assessing your suitability for a franchise so you should certainly make that your first port of call.

The bfa is a voluntary regulatory body and also publishes guides to franchising that will answer many of your questions. Other useful reference sources can be franchise magazines and exhibitions – the latter allow you to see what’s available, have informal conversations with participating franchisors, and attend expert-led seminars. See our 2015 exhibition list on next page.

What Kind Of Franchise Should I Go For?

It’s vital you pick a franchise that suits you; one you feel comfortable with and where you are confident the franchisor will provide an appropriate level of training and support. Aim to find a fit for your experience and your skills, something that will still be of interest to you five years down the line. Although it’s easy to get carried away on a wave of enthusiasm, you need to check out the business very carefully. When you can, speak to existing franchisees who are already up and running.

Suzie McCafferty, Managing Director of Platinum Wave, a BFA accredited franchise consultancy with 15 years experience of running successful franchise networks as well as helping other businesses to franchise and recruit franchisees gives you her tips:

Are you suited to being your own boss?

Although you should receive excellent training and support from any reputable franchisor at the end of the day the development of the business in your franchise territory is your responsibility. It will require hard work; dedication and you will have to make sacrifices. Can you follow a system? – franchisors do not like mavericks! It is fine to use your initiative but the franchisor has already developed a business system, which is proven to be successful and profitable – there is no point trying to reinvent the wheel.

What type of franchise would suit you?

Is there an interest or hobby you are passionate about? Why not try and find a franchise that could incorporate it? Do you like an outdoor or office working environment or would you prefer a van or home-based franchise? Do you want to work in the franchise or would you prefer to employ and manage others to run the franchise once it is up and running? Do you want to work full-time or part-time?

Make sure you have the financial resources available to succeed in the franchise.

Apart from the initial franchise fee you will need sufficient funds for working capital especially in the early stages. Remember that there may be some time before the franchise starts to generate profits so you must have sufficient contingency funds available for day-to-day living and business operating expenses. The good news is that you may not have to find the entire amount of the franchise fee yourself. The banks still look very favourably on ethical franchising businesses and most are willing to lend up to 70% of the franchise fee – contact your bank’s specialist franchise division for advice.

What sector or industry do you want to work in?

Franchise opportunities exist in every field from fast food, retail, accountancy and childcare to name a few. Most franchisors will give you extensive training and coaching in their specialty and many prefer to start with a ‘blank canvas’ in terms of your experience. However, if you have a specialist skill or experience that you can use in the franchise that is a bonus.

Do your research.

Attend franchise exhibitions, read all you can in the trade press/websites and make sure you visit the British Franchise Association (bfa) website (www.thebfa.org) which has a wealth of information, help and advice. The bfa also runs regular seminars throughout the country offering an insight into franchising. Once you have shortlisted your franchise opportunities attend a Discovery Day if possible to have more in-depth discussions and learn more about the franchisor.

Carry out due diligence – check with Companies House that the financial performance of the franchisor is as claimed.

Ask yourself if you want a brand new franchise or to invest in a ‘going concern’ resale opportunity.

Buying an existing franchise has many benefits such as an immediate income stream and existing customer base but obviously you will need to pay a premium for this. There are numerous brokers and websites specialising in selling existing franchises but as always, take professional advice from an experienced independent franchise lawyer or accountant before you commit to purchase.

Do you have business acumen?

Many people have successfully made the transition from the Armed services and public sector into the franchising world so commercial business experience is not absolutely essential. Nonetheless, franchises are commercial enterprises whose aim is to make profit. Also, all franchises involve some element of selling your product or service – if you are not comfortable with this find someone who can do it on your behalf.

Do not feel pressured to take on a franchise.

It is a major decision, which will affect you and your family so it is important that you take time to do thorough research into the opportunities which are available as well as due diligence on the franchisor. Most franchise agreements are a minimum of five years so you must feel comfortable with the people you are going to work with. It needs to be a ‘win-win’ for both parties. If you feel you are getting the ‘hard sell’ from a franchisor be very wary – do not proceed if you have any doubts.

For further information please visit: www.platinumwave.co.uk

Money, money, money…

Finances are usually a major factor in determining your choice of franchise. Many ex-Service personnel are able to use their savings or lump sum to start up their own franchise business. And the good news is that banks look favourably on the model, and on bfa members in particular.

The strong links between leaving the Forces and becoming a business owner with a franchise are well-known; brand owners actively target the skills learnt from a Military career as they are highly transferrable to becoming a successful franchisee.

These links are welcomed by major banks when it comes to funding applications for starting a franchise. They too understand, and have seen first-hand, the positive connections between the Forces and franchising.

Banks accredited by the bfa are: HSBC, NatWest, RBS, Lloyds, Barclays and Metro Bank. All have their own franchising departments, who you should ask for from the outset.

Top franchise funding tips:

  • Research, research and more research
  • Approach the bank’s franchise department and not your local branch. These departments can offer guidance and support with researching franchises
  • Create a sound business plan
  • Be prepared for the meeting with the bank manager (practice your pitch)

Do I Need To Have A Business Plan?

In a word, yes. Banks will certainly demand one. Most businesses fail through a lack of proper planning; having a defined business plan also allows you to check the progress of the business. The process of building your business plan also forces you to consider the franchise from a full 360 degrees, something that can easily be overlooked in the excitement of it all.

What Support Is On Offer From The Franchisors?

A franchisor is trusting you with their own brand, so they should give you proper training; this will vary depending on the franchise format, so could last days, weeks or months. They should also provide plenty of other support while the business is getting established.

Is It A Safer Way To Set Up A Business?

Business failure rate figures would suggest it is. “Those partnering a franchise system have more than a 90% survival rate in their first year, compared to an 80% failure rate for non-franchisee business start-ups” according to Peter Luff MP, Chair of Parliament’s influential Trade and Industry Select Committee. Quite apart from the available support, you’re buying into a business that has been tried, tested and proven to work. But that’s no guarantee of success; you will still have to devote a lot of time and energy to the business for it to be successful. Something to keep in mind is that the figures are for all types of franchisee, not just ex-Forces. Our hope and belief is that with the skillset that you bring to this marketplace, your percentages would be even higher.

Summing Up

+ For

  • About 91% of all franchisees reported profitability over the last 12 months.
  • The business format is proven.
  • You have the opportunity to build your capital as well as your earnings.
  • It is your business and you are the owner manager —
  • providing you follow the system, you decide what goes.
  • The major banks are very supportive of good franchising.

– Against

  • Running any business is hard work, demanding the highest level of personal and family commitment.
  • You make a financial investment; however, no investment is guaranteed, especially when it depends on the efforts of both you and your franchisor as well as the vagaries of the market place.
  • You buy into a proven business system for its benefits but you also take on the responsibility for following it – not doing so may result in you losing the business.

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