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Franchising- an opportunity for growth in the current climate

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A franchise opportunity can be a highly effective business model, especially with considering the current challenging economic conditions. Buying into a franchise limits your exposure to risk whilst also providing you with the framework to achieve real business growth.

Such a business opportunity should allow you to replicate the success a franchisor has already had, the same success that has enabled them to offer a franchise for sale. It should be running with a robust business model and the potential for growth in it’s own market should have been recognised before a franchise opportunity is offered. There should also be a clear structure for the new franchise and appropriate resources and support should be available to ensure the business start’s with strong foundations.

An important part of this is the relationship between the franchisor and the franchisee. This should be a close relationship. The franchisor should be approachable and willing to spend some time working with the franchisee, especially at the start of the new franchisee. Also the franchisee should have a clear understanding of the franchisor’s expectations and understand how the franchise brand & resources should be used. An example of this is the amount of freedom a franchisee has to make use of intellectual property, something which varies between companies.

Of course all of these things should be established from the outset. As a formal business opportunity a rigorous franchise agreement should be prepared. This should protect the integrity of the business and be fair to both parties. These are the foundation stones of trust that a successful franchise is built on. There should also be a strong procedure and documentation system in place. This ensures that the franchise set up runs smoothly and that all the necessary information is captured and recorded. It also means that the franchisee should be running the business in the way in which the franchisor intended.

It’s been said that franchising is like a marriage and this analogy rings true in many ways. It should be a long term commitment founded on trust, transparency and integrity. As with marriage it takes time for to build upon these qualities and both parties must adapt and learn from each other. And like a marriage the rewards continue to grow as the relationship matures.

However just like a marriage if the relationship becomes stale you can expect the franchisor’s head to be turned by a younger model who flashes a few firmer bits and promises to perform all sorts of exotic acts to make their relationship more exciting and dynamic.

To buy a franchise or not buy a franchise, that is the question

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Taking up a franchise opportunity is an extremely big decision, so there are several factors you need to take into account so that you don’t end up losing money and wasting your time.

The first step is to make sure you are looking at a proven franchise business that will offer you a high chance of success. There will be plenty of bad franchises out there trying to lure you in with good deals, but no real potential. Franchises require you to pay a fee to buy into the company and usually a percentage of your sales. But for this money you will get an effective business strategy you can follow and make a success from and secondly you get brand value from advertising the company will already carry out.

Plenty of research should be taken with potential franchisors; find out if there is training available and whether it costs and the quality of it, what support they will provide to you, whether you will need to perform marketing yourself or will they cover that. How much control you have over the business in regards to company policies will differ with each franchise, some businesses will be very protective of their brand and will give you no creative control on how thing are run.

As well as research into the franchisor and their company, you should conduct local business research. See if the proposed franchise will work in your area. There are plenty of local organisations and council departments you can contact to find out how many similar businesses are in the area and how they are performing. These organisations can provide information on how well they area is doing economically as a whole so you can judge whether it is a good market to enter.

Don’t just take the franchisors word for it, go and visit other franchisees for advice and how they feel about the franchise opportunity that you are looking at.

Getting legal advice from someone who has experience with buying franchises is advisable as they can tell you what legal areas you should be covering before making any decisions.

But this advice we have covered in this blog post is just the start of things, so make sure you cover all aspects as at the end of the day, this is your money you are investing.

How to make a franchise work for you

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Many people make the mistake that a franchise is a way to earn money quickly. But just like any business you need to put a lot of time and effort in to make one work. The obvious main advantage you have is you have the backing of a brand and the benefits they bring. This can be design, marketing, advertising, advice and training.

There is an organising body called the British Franchise Association, the makes sure franchisors follow certain guidelines.

So what things do you need to think about before purchasing a franchise, Here is our 8 part guide.

1. Does the franchise opportunity have potential and is it viable. Many new franchisors may come over from other countries to find that their product/service is not needed in the UK. You also need to bear in mind competing business and whether you will be able to compete with them.

2. Is the business legitimate? It seems obvious, but there are a lot of unethical and illegal businesses going around trying to con you into parting with your money. You should do plenty of research before you part with your money.

3. Have other people made a success out of a particular franchise? Talk to them and find out whether they consider it a good idea to invest out and find out how successful they have been.

4. Any legitimate franchisor should show you financial records so you can see how well their franchisees are doing. This will allow you to make further decisions on whether it seems like a good investment. Are the franchisors as successful as they claim? The proof will be in the financial records.

5. There are plenty of franchise exhibitions where you can see lots of potential franchisors and can compare your options.

6. Another obvious one but compare you options. If there are rival franchise opportunities in similar areas, compare them and see which one does better business, offers a better package, who has a larger customer base.

7. Look at the fracnhise financial projections as you will need to make stage payments to the franchisor whether you are doing well or not. So if you are not performing well you will be losing a fair bit of money. Have an accountant check out your figures to help see if they are viable.

8. Don’t worry if you don’t have experience in the business area before starting your franchise. Training will be provided and as long as you have a good business sense they you will be fine.

Have you ever wanted to run your own business?

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property franchiseHow about an estate agents or a property lettings company? Well you could start from scratch, but that would take a lot of research, time and resources. The easier way to start a business is to find a company with franchises for sale. There are many famous ones that people immediately think of such as Mc Donald’s or Subway. But there are also plenty of other franchise opportunities in other business sectors.

How do you choose which company to go with when buying a franchise? Well obviously you would narrow the selection down by the sector you would like to work in. You should do plenty of homework and make sure any business model a franchise company provides is right for you. The benefits of using a franchise system is that you essentially run your own business, but you get the benefit of buying into the brand and getting support and resources from the existing network of people and information.

Experience is not always required when purchasing a franchise as a lot of companies will provide relevant training to give you the knowledge needed to run your business. Obviously having some experience in the field will give you an upper hand, but with plenty of hard work and the drive to succeed, anyone can make it running a franchise business.

When you decide on a franchise opportunity to purchase, you will probably be checked out by the company to ensure they believe you will be able to run the business successfully as you will be running a business under their branding. You will also pay for a franchise fee, which can range wildly between companies. How you get this money is up to each individual person. Some people will have the cash saved up from previous businesses, but if you are starting out you may need to take the money from savings or re-mortgage your house.

Banks generally will not lend you the whole franchise fee amount for your franchise opportunity, but if you pay the franchise fee and have a good business model you maybe able to secure additional funding from banks for things such as working capital.

Once you have bought a franchise, sorted out your business plan and acquired a property to run your business from then you will be set on your path. The main thing to bear in mind is you should take advice from your franchisor, they have had plenty of experience and want to see you be successful.