If you’ve spent years following orders, you might well have developed a dream to one day become your own boss. On the other hand, you’ll already realise that starting your own business post Service is tough. Franchising is a way to be your own boss but with useful support mechanisms that give you a better chance of success.
What is franchising?
Not all branches of McDonald’s are run by Mr & Mrs McDonald and it’s unlikely that Mr & Mrs Starbuck make many cappuccinos these days. In fact, many of our favourite brands are run by franchisees. The franchisor (the ‘mother’ company) agrees to let franchisees run a small portion (a branch) of the business. Whilst the franchisee pays a start-up fee and a continual royalty on their profits, it’s regarded by many as a far more reliable way to get into business.
Large fast food and coffee brands are so well known that they’re able to charge incredibly steep start-up fees – although the returns on investment are at the top end too. However, they aren’t the only franchising shows in town, with any number of choices available from gardening services, car maintenance, care and cleaning to more or less any other service or product you can imagine. The double benefit here is that you can select a franchise option to suit your experience and skills as acquired in the Forces – or you could break free and take the opportunity to pursue a totally new career choice.
Many franchisors regard Service-leavers as the ideal franchisees. The fact that they have experience of following instructions and commands with given outcomes in mind is paralleled in the franchising experience. Whilst any business will require a level of initiative and decision-making skills, the franchise itself is likely to be the product of well-won ‘proprietary methods’ – indeed down to the minutiae: there is only one right way to stack a Big Mac!
The amount of start-up capital you’ll require will reflect your choice of franchise model. Small investments for a simple business where you’re likely to be the sole operative can cost just a few thousand pounds to get started – whereas with larger brands and bigger premises the price rises accordingly, with the sky being the limit.
The good news is two-fold: firstly banks regard franchising as a safer investment for any loan you take on to cover start-up fees (added perhaps to your own savings and lump sum on departure from the Forces). Secondly, just as franchisors have identified Service-leavers as the franchisees most likely to succeed, so have funding sources such as banks and lending companies, although naturally, there’ll be affordability questions during your application.
Find a good one
Sadly, for every decent opportunity, there’ll be somebody selling snake oil or magic beans so it’s important to do your homework. A good franchisor will be able to demonstrate your likely profitability and how it’s achieved but if you want an independent opinion you’d be sensible to discuss your ideas with your lender (who will probably want to see the figures for themselves anyway). Ideally, you’d be able to discuss the idea with an existing franchisee and perhaps take a few days to shadow them at work to see just what it’s all about for yourself.
Elsewhere there are advisory organisations that will accredit franchised organisations. Chief amongst these is the British Franchise Association who can also answer any questions or queries about any proposed deal you’re considering. Their website is a hub of information on franchising: www.thebfa.org
The principal reason why franchises are so successful is ‘branding’. Your fees/royalties as a franchisee will, in part, go towards advertising and marketing campaigns to help the brand gain as much recognition as possible. This is of most benefit when starting out since your potential customers will already know about your products. For others starting from scratch, customers will need to be persuaded to take a ‘chance’ – and it’s in the early days when poor cash flow can destroy businesses before they’ve become established.
Behind the scenes, being part of a brand can also be useful. You’ll have the benefit of dealing with reputable suppliers and ongoing financial/business advice from the brand. (These points are vital for those without business experience.)
You’re the boss
Taking advice isn’t the same as taking orders. You’re still the boss of your small part of the larger business. To that end, just as in any other business, the outcomes will depend on the inputs – effort, determination, initiative and so on. Nevertheless, a good franchise will support you with any difficulties you’re experiencing, not least because it’s in their best interest to do so, again for two reasons.
Firstly, the franchise makes the brand money and brings it local visibility. Secondly, a failed franchise can leave something of a scar, especially if there’s an empty shop with their name on it. This is hardly likely to inspire consumer confidence in the brand or indeed, encourage other potential franchisees to get on board.
It’s not impossible to fail at franchising but following the ‘mission details’ or formula gives you a far better chance of success than starting on your own, from scratch. Your reputation as a Service-leaver will also put you in a good position not only with the franchisor but also any lenders you approach.
Finding the right franchise model and the right advice are the crucial elements of success. The rest is down to you.