Opening the doors to new possibilities

The recent news around the employment numbers in the public sector and the number of people that may soon be looking for new career routes is a message that needs to be seen wider than the obvious trepidation.

Over the past two years the UK has seen several occasions of large redundancies and rises in unemployment. This can be severely demoralising for many, sometimes causing real hardship that we can not ignore. However, occasions like this also open up other doors of possibility.

When unemployment rises, it is not uncommon for a rise in the number of people looking to start their own business as a way to take control of their own employment and future. This, however, does come with one main hurdle: the success rates of small businesses. Starting a business from scratch is no easy task and many more will fail than succeed; floored by unrealistic business models, lack of cash flow or problems with the day to day running. This is where franchising comes in to its own and has the ability to help countless people start their own business.
 
Franchising success
Time and again, franchising has greatly out-performed other start-up businesses. Its formula of a locally owned and run enterprise, driven by a small business owner, with branding, economies of scale and support from the wider network, gives the business a far better chance of success. However, this is only the case if it is done well, so you need to ensure you do your homework when looking into franchising.

A good franchise will offer you a proven business format with the initial and continuing support that you will need. Your business will work under the brand established by your franchisor using the business system they have developed and proven in the marketplace. You will pay an initial fee to set up using the brand and the business format. You will then pay continuing fees for ongoing support that will help you operate and allow you to build the business and eventually build a capital asset that you can sell.

These ongoing costs, which provide the ongoing support, is one of the major reasons behind the success of franchising. The franchisor has already gone through the pain of finding out what works and what doesn’t. They have invested in the systems and are now willing to teach you how to replicate it. However, don’t think you can pick and choose which parts of the systems you want to pick up. It is very much all or nothing. However, if you are paying for a proven system, why wouldn’t you follow it?

How do I know if a franchise is good?
Membership of the British Franchise Association (bfa) is the first thing to look for, but it is not a replacement for your own work. You will want to find out what experience of franchising the company has, their success rates and what you get for your money. You are also strongly advised to ask for a list of franchisees to speak to and find out what the day to day realities of running a franchise in that network are like.

You also need to meet them at their offices and get an idea of what their plans are for the future. One aspect to consider is how many other franchisees they have recruited recently and how many they plan to recruit. The number itself is not the key aspect, but you need to compare this to the support they have in place. If you are the 20th franchisee, but they only have a support system to cope with 18, how will this impact on your chances of success?

You will also need to think about how fussy they are about who they bring on. If they see a pulse and cheque and aren’t too worried about the rest, walk away. You will want to make sure the whole network is a good standard, if you are going to be part of the brand, so think about how stringent they are being in their recruitment process.  

At some stage you will also come across a franchise agreement. Before you sign it, make sure you take it to a franchise solicitor. Don’t just take it to a solicitor you used to buy your house or have a long standing acquaintance with. Franchising has some very specific characteristics, especially with regards to contracts, and you don’t want to waste your money on advice that turns out to be no good. There are over 50 solicitors across the UK, who are accredited by the bfa, so it is very easy to make sure you are using someone with the right knowledge.  

Previous experience
Would I need previous experience in the sector? Not necessarily. Many businesses actually seek those that haven’t worked in the industry as it means they haven’t picked up bad habits from other ways of working. It’s best to speak to the business to find out.

Do I ned previous experience of running a business? Franchising involves training, so it is more about your attitude and aptitude. Some franchises will need more experience than others, but most will be set up to give you the skills you need.

Am I guaranteed to be able to buy a franchise? No. A franchisor is going to be just as choosy about whom they take on, as you should be about which company you want to join. There will be an interview process and you will want to make sure they are diligent about the quality of those they recruit, as this will tell you a lot about others in the network.

Usually, you can’t choose where the franchise is based. Franchises are split over set regions, or based in planned locations, so it may be that the only opportunity available is in a very different location. Have this talk with the franchisor at the start as you may need to move.

How much does it cost?
This is very dependent on the business that you may be looking at, as it may range from less than £10,000 up to hundreds of thousands of pounds. What you need to be sure of is that you understand all of the costs involved and what they cover. You will want to check that you fully understand what you will need to invest or borrow from day one, plus what money you may need to see you through until you start making profit.

HSBC, Lloyds TSB/Bank of Scotland, and RBS/NatWest are the three major banking groups who have specialist franchise departments. If you approach these bank departments, they will be able to give you the best information and support about finance in franchising.

The industry today covers a wide range of businesses: from home cleaning to high street retailing, from car repair to business services, and from lawn care to hotels. The bfa have full lists of accredited businesses on their website.

What are the advantages?
• About 90 per cent of all franchisees reported profitability over the last 12 months.
• The business format is proven. You don’t ever make expensive mistakes yourself.
• You have the opportunity to build your capital as well as your earnings and build a future for your family.
• 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.

What are the disadvantages?
• Running any business is hard work, demanding the highest level of personal and family commitment.
• You make a financial investment. No investment can be guaranteed, especially when it depends on your own efforts as well as your franchisor and the market place for your product or service.
• You buy into a proven business system for its benefits but you also take on responsibility for following it.

Where can I find out more?
The British Franchise Association provides various educational seminars and has links with media, exhibitions and websites. Take some time to understand what franchising is, attend seminars if you can and do as much research as possible on any franchise you are interested in.

Franchise exhibitions are a fantastic start as they provide a lot of information, all under one roof, including franchisors, industry experts and free educational seminars. There are three main bfa accredited exhibitions that you should look at, as all of the exhibitors have been checked by the bfa – this is not the case with others. The bfa accredited shows are:
• The British & International Franchise Exhibition, Olympia, London 18-19 March
• The British Franchise Exhibition, Manchester Central 10-11 June
• The National Franchise Exhibition, NEC, Birmingham 30-1 October

There are also four main industry magazines that provide excellent insight into the industry and some national newspapers such as the Daily Express carry regular information on franchising. In addition, the web is a non-stop machine for producing educational information, but beware, some websites do not always provide the best advice. Check the bfa website at www.thebfa.org and this will give you a sound starting point.

Further reading
For information on the different franchising options available, please click here