Is franchising for me?
Franchising is a big deal in the UK, with it contributing over £15bn to the UK Economy. Franchising presents a fantastic avenue for would be entrepreneurs to make the leap into the business world. Investing in an Established franchise model does come with added benefits such as the unrivalled support services, established branding, ongoing franchise training and the opportunity to follow a proven model that has made money for other franchisees within the UK. Franchising has always been an attractive proposition for many reasons, you’re effectively your own boss and it’s ultimately down to you how successful you make your business.
Where do I start when exploring the Franchising route?
Franchising isn’t an easy ride, it’s not a case of you just handing over a pot of cash and you’ll start earning money from day one, oh no! Franchising takes considerable effort, commitment and due diligence to ensure you’ve initially chosen the correct franchise that fits your profile. The rewards can however be highly beneficial and if you truly make a success of your franchise, you could be set for life!
I’ve decided I want to look at Franchising, so where do I begin?
The easiest and cheapest method for your initial franchise investigative research should be undertaken within the internet. It’s here where you will find copious amounts of franchise articles, information, franchise profiles, franchisee success stories and the very latest franchise news. Whether you’re seeking a high-street retail franchise opportunity or a home tutoring franchise there will be information available on all franchise sectors.
There are over a thousand known different franchise opportunities available within the UK, find the franchise sector that interests you the most and then identify the key successful brands within this sector. Every franchise is different, from the way they operate to how much potential is available, so it’s key that you speak with as many different franchisees as possible to gauge their experiences and opinions on the franchise network. Are the potential profit figures achievable? Signing a franchise contract is a big commitment (usually a 5-year term with the option to renew), so it’s vital that you instruct the services of a well-known franchise solicitor to help guide you through the agreement.
Truly understand what it’s like to be a Franchisee..
I know it’s easier said then done, but don’t be impulsive on the first franchise you see that presents healthy/attractive profits. It’s key to truly understand and appreciate the role of the franchisee, it’s not a case of you just purchasing the rights and earning money from day one, in some cases you will not earn a penny for the first quarter, and therefore working capital is so important. Ask if you can shadow an existing franchisee and experience a ‘Day in the life’ at first hand. The bfa do also offer a free franchise evaluation service ‘The Prospect Franchisee Certificate’ that helps you evaluate the potential of a franchise, finances involved and how best to expand your franchise business.
Franchising is for me, so how much will it cost?
The Franchise investment will depend and differ on the type of franchise you’re looking at. Chances are, the more attractive the profits are then the greater franchise investment to acquire the business will be required. As previously mentioned, working capital will be required during the first few months (whilst you get your slippers on) and you’ll need to allocate funds for fees;
The initial franchise fees
Ongoing franchise running costs
Franchise Licencing fees
Premises costs - including rent, business rates and running overheads
Communications - including phone systems, email addresses, hardware such as phones, broadband, landlines, etc
Franchise Vehicle costs – including lease or rental costs, fuel, maintenance and signwriting
Marketing – is marketing collateral included within the franchise launch?
Professional fees – including solicitors, accountants, estate agents, architects and surveyors
Membership fees to trade organisations
Insurance – including public liability, employer’s liability, stock and premises cover, vehicle insurance
Staff – including wages, PAYE and National Insurance contributions, compulsory pension payments
I’m ready, but need additional funds…
Don’t worry if you’ve decided that franchising truly is the route for you and you want to become your own boss but don’t have the sufficient funds. Franchising has a great reputation with the UK banks and most banks will support you with up to 70% funding if you can help raise the initial funds. It is key to note that the big banks will support you if the business plan provided by the franchisor is sufficient enough.
Smaller franchise brands that are just starting their expansion of their respective franchise network may struggle a bit, but in theory the start up costs should be lower than those of a more established/proven brand. The duration of a franchise loan is usually dictated by the duration of the franchise agreement, so for example, if the franchise term was for 5 years then the bank would set the loan repayment term as 5 years.
There are other funding bodies available such as Transmit funding that have helped investors with over £20,000,000! Transmit loans are only charged at 6% per annum and repayments can be made over a 5-year period. On top of this, transmit also provide free franchise business planning support and free mentoring for 12 months. There are no set up fees and the loan can be settled early at any time, without any additional penalty!
Take the leap of faith
There are thousands of franchises for sale within the UK, and with so many options available, it’s key that you undertake your homework to truly understand which franchisees are thriving, receive the best support and which presents the best opportunity for YOU. Ensure you have your finances in order prior to signing any agreement, and if required seek advice from the banks or government funded organisations.