Franchising: The Facts

There is a lot of information available on owning a franchise, however how do you know what is useful and what is not? To help you understand the main issues about franchising I have outlined the key points of owning a franchise.

First of all you must be certain that you have a sincere desire to own your own business. Starting up a business takes a great deal of committed hard work and you must be sure you are ready to put in the time and effort needed to succeed. By being a franchisee, however, your franchisor will be your partner not competitor, and as such will do everything possible to teach and help you succeed with your business.

As well as this, as a franchisee you will be buying the name of an already known brand and the proven business model of that brand, which puts you one step ahead of those starting a business from scratch.

The second key point is that you must have funding. Being realistic you are not going to be able to buy a franchise for £1,000 or £2,000. A basic management franchise where you work from home will cost you a minimum of £10,000 and the more elaborate the franchise the more it will cost. Taking McDonald’s as an example, buying a franchise will set you back at least £200,000, however it will also cost you a lifelong commitment as the company sells its franchises on a minimum contract of 20 years.

This McDonald’s example is a franchise at the higher end of the price scale and many people can buy one for much less, however most people wanting to purchase a franchise will need some sort of funding. Although many banks are reluctant to provide loans to those setting up their own business due to the high failure rate, they are much more willing to give loans to people buying into a franchise because statistics show the success rate is much higher.

Thirdly, as a franchisee you are not on your own but part of a team that works together to build a successful brand. Many franchises will offer ongoing support and training to its franchisees, and there is often a network of support franchisee have amongst themselves.

Even though not all franchises have the same lifelong commitment as the McDonald’s example given earlier, buying a franchise is a commitment, as you will be investing your money, time and hard work into your business. For this reason it is vital that you choose a franchise very carefully, and as such it is a good idea to do research before making this commitment.

There are many types of research you can do but it is a good idea to start by going online and searching for online franchise publications, such as www.thefranchisemagazine.net, and if there is a print version subscribe to the magazine. This is important as it will not only allow you to see what franchises are available but will also give you advice and knowledge about the industry. Going to franchise exhibitions is also a good form of research as it will not only enable you to see what franchises are available but will let you talk to the franchisor face-to-face. Additionally there are companies that specialise in helping potential franchisees find a franchise suitable to their needs, such as Franchise Development Services.

Once you are ready to draw up a shortlist of potential franchises I suggest you first find out which have British Franchise Association (BFA) membership, which can easily be done by going on the BFA website www.thebfa.org. Franchises with BFA membership will have been scrutinised to make sure it is offering a genuine format and there is a 90 per cent success rate of those who join a franchise with BFA membership, whereas it is reported that there is a 60 per cent failure rate for those who are not BFA members. Additionally NatWest carry out an annual study on franchising, the results of which can be found at www.natwest.com.

It is important to remember that to succeed as a franchisee you must be 100 per cent dedicated to the franchise, do not try to run more than one until you have built up your business and gained the experience and knowledge you need to be capable of running it without needing your daily input.

If your business is looking to franchise, many of the above methods of research will be of assistance as well. Franchise publications often include sections dedicated to businesses wanting to franchise and Franchise Development Services has a free guide available for those looking to franchise their business.