How to Choose the Right Franchise
Over 36,000 small business in the UK are franchises, including big name brands such as McDonald's, Cash Generator, Northwood and ChipsAway. Could franchising offer you a route to a prosperous future?
Want to be your own boss? Earn an income while building an asset? Every year thousands of people start their own business in order to take control of their own productivity - and every year a proportion of these people's ventures fail. There are a host of reasons for failure: insufficient demand, poor marketing choices, ill-judged pricing, poor customer service, stronger competition - the list of causes is almost endless.
Certainly then, starting your own business carries an element of risk. Your own capital is being put up, plus probably sizeable loans from banks, family and investors, so naturally anything you can do to eliminate as much of this risk factor as possible is desirable. Exhaustive market research, a strong brand name and logo, comprehensive training in service provision and product knowledge, access to all the advice and guidance from people in the industry you can muster (which is rarely forthcoming if you're a potential competitor), a meticulously planned marketing strategy and, perhaps most importantly, an A-star business plan are all vital to ensure your business achieves the best launch possible.
This is why investing in a franchise offers a seriously attractive alternative to starting out on your own as a small fish in a giant pond. In return for an initial investment all true franchise opportunities ('business format franchises') include a franchise package, which provides you with an exclusive territory (defined in the Franchise Agreement), use of intellectual property (brand and methodologies), initial training, set-up assistance and launch support. The company that grants the franchise (the 'franchisor') then collects an ongoing Management Service Fee (usually a percentage of your turnover) in return for providing ongoing training and support.
Both new and established brands in a range of industry sectors are adopting franchising as their preferred method of national expansion. Take a look at any high street or business park and you can spot a range of franchised businesses - if you eat a McDonald's cheeseburger, drink a Coffee Republic cappuccino, trade your television in at Cash Generator, have your accounts done at TaxAssist Accountants, get your car paintwork repaired by ChipsAway, get your drains cleaned by Dyno-Rod or sell your house through Northwood, you are a customer of a franchise.
With over 1,400* companies engaged in franchising and over 36,000** stores, offices and home-based business operating as franchised businesses in the UK, franchising is becoming an incredibly popular method for companies to rapidly achieve national networks and individuals to get into business ownership with the proven business concept and handholding support of a parent franchisor.
Are You Cut Out For Success as a Franchise Owner?
Despite all these benefits a franchise does not guarantee success. Franchisors that are committed to building successful franchise networks put a lot of effort into qualifying franchise owner candidates. The individuals they are seeking will have the ability to soak up their knowledge and systems and develop a successful business through a mixture of hard work and the proper implementation of their business concept.
So how do you know if you are truly suited to owning and operating your own business? Let's look at how franchisors assess franchise owner candidates:
One of the principles of franchising that elevates the potential for success above simple company-owned expansion is the personal commitment of the franchise owner. Most franchisors seek franchise owners that are looking to run their businesses in a hands-on fashion because they want to take advantage of that desire for business success inherent in a business owner, the desire that just cannot be matched by a salaried manager. This is why franchised operations will tend to offer greater quality of service and place more emphasis on customer satisfaction.
Do you have a genuine enthusiasm for the franchisor's industry, service or product? Are you driven and committed to building a successful business? Your attitude is likely to be prized more highly than relevant industry or business management experience - after all, the franchisor's training and support is designed to start you off from scratch.
Operating the System
If you buy a franchise, you are investing in a business blueprint proven and finetuned through a pilot operation and, with established brands, through the early experiences of the franchise owner network. Franchisors are therefore looking to award their franchises to individuals that fit into a certain personality-type - one which Americans have come to dub the 'in-trepreneur' in recognition of its combination of the business leading ability of an entrepreneur with a willingness to work within the confines of the franchisor's successful systems and procedures.
This is partly because the franchisor has already gone through the trial and error development, learned how to avoid mistakes and performed the finetuning in developing its business package on behalf of the franchise owner. But this is also because the franchisor is seeking to encourage standardisation of its products and services nationwide - this ensures that no franchise owner is producing products or services to a different standard to the rest of the network that could spread a bad name for the brand. Think of the McDonald's commitment to the standardisation of its Big Mac worldwide to understand how important this is.
A franchise owner that comes to resent the authority of the franchisor is one that was never suited to become a franchise owner in the first place, and these situations are easier to avoid than to remedy. If you are the type of entrepreneur that wants total control to tinker with the business, you may be better off considering other avenues of business ownership.
The decision to become self-employed involves a great deal of soul-searching - what prompts it can as often be the desire to escape employment as the drive to build a successful organisation. However, if you're interested in becoming a business owner in order to cut down your hours, think again. With the future of your business in your own hands you won't be able to switch off at 5pm and you may find yourself working six days a week in the initial stages. Franchisors realise this but, while many will offer plenty of support to help you get your business off the ground, they can't do it for you.
Of course, you must be aware of keeping a balance between building the business and the rest of your life. With no boss to make sure you turn up on time or to tell you to go home, you must ensure you are neither distracted by nor neglecting commitments outside work. With franchisor support this is much easier than in a self start-up, as you can rely on the experience of the franchisor to guide you.
Franchises are very affordable, with some superb opportunities available for an initial investment under £20,000 featured in the pages of this very directory. Despite the credit crunch, additional funding is readily available from banks with specialist franchise departments such as HSBC, Lloyds TSB and NatWest, who recognise the reduced risk inherent in franchising.
However, the income derived from owning your own business will prove much more irregular than that which is earned through employment. There is no pension or sick pay - barring what you set up for yourself - and much of what the business does earn may be required for reinvestment as you grow your operation. Can you deal with this insecurity, and are you able to support yourself through it until your business start-up finds its feet? Many franchisors will help you develop your business plan, but it will take determination on your part to see it through.
Franchised businesses employ 383,000** people in the UK - that's more than 10 per franchise owner. As your business grows you will need to take on and lead staff. Franchisors will deal with management skills during the initial franchise owner training programme, but there are many that are reliant on your own personal communication and people skills.
These skills are not only useful in dealing with staff - they help in dealing with clients as well. As with any business start-up, a franchise owner will have to wear a variety of hats - that of manager, salesperson, entrepreneur, administrator and worker. An understanding of people and the ability to win confidence are vital to building a successful business.
The Next Step
If you feel you are a suitable candidate for franchise ownership, it's time to start researching the market, drawing up a shortlist of opportunities and arranging visits to the franchisors' head offices. The franchisors will treat these visits as an opportunity to test you against the above criteria, but don't confuse this with a job interview. As a prospective franchise owner, you should be testing the franchisor just as much as the franchisor is testing you. A successful franchise relationship is in essence a 'business marriage' and only if both partners are satisfied should the ceremony proceed.
More information on choosing a franchise can be found in The UK Franchise Directory 22nd Edition.
- According to The UK Franchise Directory, 22nd Edition
**As reported in the NatWest/British Franchise Association 2008 UK Franchise Survey