To run a profitable franchise it’s vital to be a hard grafter with good business and managerial skill.
If you’re thinking about setting up a business, the idea of joining a franchise may have crossed your mind. And it’s not just McDonalds and Burger King restaurants – there are scores of different brands to choose from covering an array of industries.
New figures from the NatWest/
British Franchise Association survey shows the industry is now worth a staggering £10.8bn – in 1999, it was £7.4bn. What’s more, 93% of franchises claim to be trading profitably – up from 88% in 2004. The sector is growing at twice the rate of the UK economy and employs 371,600 people.
Now consider the flip side of the coin: if you were to begin a business on your own, the likelihood of still trading after five years is down to a measly 20% – a massive difference.
Some of the benefits of joining a successful franchise as opposed to going it alone are obvious enough. For example, the market research will already have been carried out, the format of the business is tried and tested, and customers will feel more confident about buying a product or service from an already established name, as opposed to from a new, unknown company.
On top of this, you won’t have to spend as much on promoting your product or service because people already know what to expect from the brand. So hopefully, by the time you open your doors, you should have a small army of customers waiting. And if you don’t, no need to fret too much as a good franchisor should help you to find them and teach you how to retain them.
How it works
Franchising is considered to be a safer way of growing a successful business, at a faster pace, because you enter the market with an established brand and a well-liked format. And businesses choose to sell franchises because the method allows for expansion and market penetration on a scale which would otherwise be too costly and difficult to achieve in a small space of time. For example, property sales and lettings company Northwood has built up 43 outlets in the space of three years. It is difficult to imagine how that level of success could have happened via any other route.
You, the franchisee, will own the business and can start trading once a licence has been issued by the franchisor. There are some aspects of the business that you will have full control of – such as the number of staff you hire and the promotions you run. Others, such as the look of the premises, staff uniforms and promotional materials, will be determined by the franchisor. If you deviate from what is set out in your contract, it could be terminated.
Generally, the trading location is also out of your hands. It is chosen carefully by the franchisor as where you are situated is considered to be a key factor towards making a successful business. The franchise will make sure that their traders are not encroaching on each other’s territories and that new outlets will operate in areas where they have the greatest chance of attracting the maximum number of customers.
You will be able to choose your location from a selection on offer, but naturally, the best locations have the highest licence fees attached.
Working with a successful partner obviously has many advantages and financial benefits top the list. Good franchisors will often help with start-up costs and even if they don’t, banks will more readily agree to lend you the money to begin trading because you have the backing of a reliable trading name. You also gain access to the bulk buying power of the franchisor, and of course, you should begin to make a profit quicker.
By joining an existing franchise, you will benefit from years of experience and be able to avoid common pitfalls to ensure a shortcut to success. A good partner will also offer you training and work on enhancing the skills you have. For example, electrical goods company Bang & Olufsen’s induction training programme is available for both franchisee and their staff. It is an intensive five-week course and includes a trip to the international head office in Struer, Denmark.
It is in the franchisor’s interest to make you succeed and following initial training, you should be offered guidance and support on an ongoing basis either in the form of a helpline or visits from your representative. Providing you are willing to work hard, you have a profitable business within your grasp.
and the downside..
Naturally, there is a price to pay for being associated with a well-established name. There is an initial fee – which can vary enormously, from between a few hundred to tens of thousands of pounds.
Additionally, some franchisors will make sure you have set aside a certain amount of working capital before you are even considered as a possible choice as a franchisee. This is partly because you will still be responsible for your own overheads, like rent, rates, bills and employees’ salaries.
On top of this, the ongoing support is covered by a regular management fee, or royalties that are based on your turnover. Each time you renew your contract, you will need to pay a new fee, which is most likely to be based on how well your business is doing. This is often the point at which potential candidates decide a franchise is not for them.
Charanjit Toor, 39, from Berkshire, says: ‘My husband and I were considering a fast-food franchise and we were very keen to begin with. We had meetings and even spent two days working in one outlet to see if it was for us. Once we sat down and looked at the initial fees and monthly royalties, we felt they were too high. We felt it would be almost like working for someone all over again, so in the end we decided to launch our own business instead.’
Even if the costs don’t deter you and you’re ready to steam ahead, don’t assume that a franchise will automatically be offered to you. The big boys will need to be satisfied that you’re worthy of representing them. Don’t mistakenly think profits will automatically come to you. You must demonstrate your willingness to drive the business forward, and you and your family must be prepared for long, unsociable hours when needed.
Make Travel Your Business
Want to work but don’t want to leave the kids? Travel is one of the most exciting industries to work in and whether you want to run your own shop, call centre, or work from home, The Global Travel Group has the perfect opportunity for you – with fantastic earning potential! We provide all you need to get started, from licenses, training and support to award winning technology and contracts with suppliers. We also have our unique in-house tour operator allowing you to package your own holidays at great prices. To find out how easy it is to make travel your business, call or e-mail for our brochure.
Initial investment £14,995
Total cost £29,995
Finance available. Call 0870 429 8100; firstname.lastname@example.org
The right way is Subway
If there is a franchise success story to be told, the Subway food chain is surely one of the most impressive
Founded in 1965 in the USA, the first Subway franchise opened in 1974 in Wallingford, Connecticut. Fast forward to today, and there are more than 25,000 outlets in over 80 countries.
And the success story doesn’t stop there. The chain aims to increase the number of stores in the UK and Ireland to over 2,010 stores by 2010.
Bearing in mind that more than 70% of new Subway franchises are sold to existing owners, it offers a tempting opportunity for those who want to expand fast.
Subway to success Stephen Richards is a Subway developer and a successful franchisee. He has 65 stores to his name – 45 of which are franchised and 20 of which he manages. It’s all pretty impressive for an ex-building contractor.
‘I used to work in the family business and we were bought out by a large UK plc,’ explains Stephen. ‘I was 27 at the time and decided to go backpacking in Australia and that’s where I first came across Subway.’
When Stephen got back to the UK, he decided to investigate further and following plenty of research and six months of work experience in a Subway outlet in Sydney, Australia, in 1998 Stephen opened his first store, which was the 10th franchise outlet in the UK.
And the secret of his success? ‘You have to have huge passion, energy and commitment for the business,’ he says. ‘Don’t assume that because you are a part of a large franchise that it will come easily. Things can go wrong, but the drive you have for the business will get you through it.’
For those thinking of joining the brand, it’s important to know that it’s not cheap. The initial investment ranges from £45,000 to £245,000, depending on location. Each candidate is then required to attend a two-week training course, where the time is split between the classroom and on-site at a local Subway outlet. You must then pass a comprehensive exam before you can become a Subway franchisee.
‘Once you have made it through the initial stages, there is a very good chance of success,’ says Stephen. ‘Our failure rate is under 1%.’
- Agency Express Property ‘For Sale’ boards investment needed: £14,500
- Home and Away Mortgage and insurance brokers investment needed: £5,800
- Chips Away Car repaint specialist investment needed: £22,500
- Subway Fast food outlet investment needed: £150,000
- Bairstow Eves Countrywide Estate agency investment needed: £85,000
- Esprit Clothing investment needed: £150,000
- The Mattress Doctor Cleaning of mattresses, pillows and upholstery investment needed: £9,750
- Rosemary Conley Diet and Fitness Clubs Fitness club investment needed: £20,563
- ProntaPrint Print and design investment needed: £120,000
10 02 Mobile phone retailer investment needed: £134,000
Make caring count
Fancy running a profitable franchise? Home Instead Senior Care can offer you a great business opportunity
Sam Brocklebank, is a remarkable 38-year-old woman, who, in the last four years has sold her multi-million pound turnover IT consultancy
to one of France’s top IT companies, given birth to three children and set up a national care company, which has expanded to more than 25 offices across the UK in less than 24 months.
She has demonstrated that you can combine a very successful career with a great family life. And last November, she was runner-up in the 2007 Cheshire Business Woman of the Year awards.
Sam and her husband, Trevor, own the UK Master Franchise for Home Instead Senior Care, the world’s leading provider of non-medical care to older people in their own home. At present, 75% of the current Home Instead franchise owners in the UK are female. They are looking for successful business women (and men) to run their own Home Instead Care Business across the UK. No previous care experience is required, but a strong work ethic, a passion to deliver the highest quality of care and excellent people skills are.
As the UK population ages and baby boomers start to retire the demand for such services will increase exponentially.
The top performing
Home Instead franchises generate multi-million pound turnovers each year and the company is looking for people who want to build a successful business rather than be personally involved in providing care. This can in turn generate substantial incomes for the owners, but this is secondary to the fact they run a business that makes a difference in their community.
If you have the passion to deliver world leading standards of care, the empathy to deal with clients and caregivers from every walk of life and the energy and desire to build a very successful business, please contact Paul Edden on 01244 852693 or visit www.homeinstead.co.uk for more information.
Franchisees are getting older..Their average age has risen by six years in the past decade to 46, but graduates still make up almost one in three franchises..
Step-by-step guide to getting started
- Think long and hard about whether you really want to be self-employed.
- Consider the hours you think you can realistically keep.
- Calculate how much money you need to earn each month.
- Decide where you would like to work from, such as from a shop, in your own home, in a van..
- Visit franchise fairs and exhibitions, read franchise magazines and directories, and research various companies on the internet. Try www.whichfranchise.com
- Once you have shortlisted the sectors you are interested in, think about whether there is potential for your business in the marketplace.
- Study the financial states of a few franchises that appeal to you and check that business for them is on the up. Remember: if they fail, so do you.
- Have meetings with the company you are chiefly interested in.
- Research the projected returns figures provided by the franchisor. Do you think they are achievable and are they good enough for you?
- Talk to existing franchisees to check that anything you are being told by the franchisor is actually the case.
- Look into the history of the organisation and find out how many franchises have failed or been sold. Then find out why this happened.
- Assess whether you have the necessary skills to be able to partner the company you are interested in.
- Identify your strengths and weaknesses as honestly as you can.
- Find out whether the franchise will provide training and back-up to help you overcome any weaknesses.
- Look carefully at your finances and calculate how much money you have available, and how much your bank is prepared to lend you.
- Check the legal agreement thoroughly and consult a specialist franchise lawyer to look at it too.
For more information
British Franchise Association; www.british-franchise.org
The UK Franchise Directory; www.theukfranchisedirectory.net
Global Travel Group; www.globaltravelgroup.com
Well Polished; www.well-polished.com
Home Instead Senior Care; www.homeinstead.co.uk
photographs: istock, PA Photos, lewisimagEbank.com