If you’re thinking of investing your savings or lump sum into a new business, you might want to learn more about franchising. Here’s our quick guide:
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) 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 shortlist 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.
• 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.
• 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 marketplace.
• 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.
Where Can I Get Information?
The British Franchise Association (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.
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 with existing franchisees who are already up and running.
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.