Whilst franchising is a safer route into self employment, it is not just a question of turning up, paying your money and being successful. The franchisor will not do your work for you and cannot be expected to. What is supplied is a proven format, name awareness, support and guidance. It will be still be your hard work and skills that make the business work in your area.
As a franchisee you will have access to market knowledge, established name awareness in the business sector that you will be operating in, training and marketing help. You will often take part in and contribute to national advertising campaigns which would otherwise be outside your reach.
Franchisors not only have sound training programs, but also knowledge of financial requirements, marketing, competition & buying contracts - knowledge that might take you years to collect on your own.
Financially
You will pay the franchisor an initial franchise fee and the costs of shop fitting (where necessary) together with the costs of equipment required to run the business. Once established, you will normally pay the Franchisor a further monthly payment based on your turnover. This is known as royalties or monthly management fees. Effectively this is where you are paying for the ongoing support of the franchisor and his team. As the royalties are based on your turnover, it can be clearly seen that it is in the Franchisor's interest to help you succeed.
Relationships
A successful franchise relationship is like a partnership. It combines your talents with the experience and knowledge of the franchisor. It is important that before you purchase a franchise you talk to existing franchisees. You need to establish whether the franchisor has fulfilled his commitments to them and what their experience has been. Talk to more than one and get a balanced view.
Franchising - What are the benefits?
Franchising first became a recognised force in the UK during the 1970's
According to the 2004 survey carried out by the NatWest Bank and the British Franchise Association, the overall turnover of the franchising industry last year is estimated at £9.65 billion, with the number of business format franchising systems growing to 665 an increase of 3.6%.
The 27,000 individual franchised units in the UK are growing to give total employment in the sector of more than 330,000. This makes franchising larger than the whole energy sector and almost as big as the whole of the armed forces.
So lets have a look at the benefits of franchising:
Better Chance of success
Government research has over the years shown that of all businesses starting today, only 20% will still be trading in 5 years time. With franchising these figures are reversed. The reason for this represents the other benefits of franchising.
Buying Into A Proven Business System
With franchising you are buying into a business that is already operating. The Franchisor will have made mistakes along the way and will have learnt from them. This knowledge is passed on as part of the franchise system. It enables you to start your business at a much higher point on the learning curve. By reducing the learning curve you will also reduce the time it takes to start making profits.
As part of your franchise purchase you will be provided with an operations manual which will provide the operating system for your business. It is based on the best practice to enable you to get off to a flying start. The majority of day to day problems will be covered and for those problems that aren't your franchisor will normally be able to help.
Support
Within a franchise there is or should be a great deal of help and support available. The support that you will need will change as your business grows. From day one you will need training and will be reliant on the Franchisor. This will take various forms but will include product training, the business system, marketing and assistance in setting up accounting systems.
As you become established, you will benefit from different types of support such as staff training and National account business. It may well be possible to collaborate with other franchisees on larger projects and just being part of a larger organisation can help. Most franchisors will hold regular ongoing franchisee meetings which are a great opportunity to benefit from the experiences of other franchisees and update product information.
An Established Brand
You do not have to buy a McDonalds or a Body Shop franchise to buy a franchise that is established in the market in which it operates.
An established brand, proven systems and a respected business name will give you a head start in getting your business off the ground and will attract customers from day one.
Accessibility of Finance
As a franchisee, you will benefit from the track record that the franchise as a whole has established. The banks will be able to make a more informed lending decision and the Franchisor may well have arranged a finance package. The entrepreneur trying to start a business will find finance more difficult to arrange and any finance will often be on less favorable terms.
Business Reviews and Business Planning
Many Franchisor's will hold review meetings with you to discuss all aspects of the business. You will be able to check your progress, celebrate your successes and plan for the future. One of the major reasons for business failure in the past has been due to lack of good business advice.
Buying Power and Research
When you are building a business it is difficult to be able to spare time on product research. As part of a franchise network much of the product research and testing process will be carried out for you. It is also possible to take advantage of group buying discounts and better terms from suppliers.
