Suzie McCafferty, managing director of franchise consultancy Platinum Wave, explains why buying into a franchise could be the best business decision you ever make
If you’ve ever heard the expression ‘don’t reinvent the wheel’ then you should appreciate why there are huge benefits in buying a franchise business. At the core of franchising is the fact that the franchisor should have a proven business model and track record of success. Straight away this gives you an advantage over someone starting from scratch. Moreover, a good franchise should have invested heavily in building a brand, operational systems and proven marketing strategies so you don’t have to.
However, how do you know which franchise opportunity to choose? There is a bewildering choice of franchises out there. According to the most recent NatWest bfa Franchise Survey there are now 929 franchise brands operating in the UK, employing 594,000 people. Many larger franchise brands are well-known such as McDonalds, Subway and Domino’s Pizza, but you do not have to be in fast food or join a multinational operation to become a franchisee. There is a huge variety of franchise business opportunities from children’s sports coaching, homecare services and property lettings to vehicle repair, garden maintenance and family magazine publishing. And that’s just naming a few. The key thing is that for the majority of franchise opportunities, you do not need to have previous experience in that field. Franchisors like to train franchisees in their particular systems and processes so starting with a ‘blank canvas’ is often an advantage. However, you should be able to follow a system and be aware there is little room for mavericks in franchising.
The cost of a franchise can range from under £10,000 to in excess of £100,000 depending on sector, so there is something for every budget depending on the return you wish to make. The good news is that the banks are very much in favour of franchise-based businesses. Most of the main banks have specialist franchise units who will lend up to 70% of the franchise set-up costs (including working capital).
There is also much variety in the styles of franchise business. You may want to buy into a management franchise where you appoint a manager to run it for you once you have the business up and running profitably. This arrangement can be ideal if you have business or other commitments outside of the franchise. Alternatively, you may want to work from home or be mobile-based. There are plenty of opportunities to choose from depending on the environment you would like to work in and the required return on investment.
What other reasons are there that may make it preferable to buy a franchise rather than do it on your own from scratch? Firstly, franchises have a much lower failure rate than businesses in general. Independent research has shown that franchise businesses are six to seven times more likely to survive. The franchisor has to have proven that they have a sustainable and profitable business before they can offer it as a franchise. In effect, they have done all the hard work to develop systems and processes, which form the foundations for a successful business. Secondly, the majority of franchisors will help with such things as admin and marketing support, business development, property or lease acquisition and are continually developing the business model so that you can focus on your core activity: building a profitable local business.
So how do you go about choosing a franchise? There is a substantial amount of information out there in the form of books, magazines and websites. Your first port of call should be the British Franchise Association website and whichfranchise.com. Both websites have a wealth of information, contacts and resources relating to franchising. It is also worth visiting the major franchise exhibitions where you can meet franchisors and franchisees face-to-face – details of these and regional seminars can also be found on the bfa website.
Once you have shortlisted the franchise businesses you are interested in, the next step is to meet the franchisor. Many franchise businesses now host discovery days where you get the opportunity to meet with the franchisor and existing franchisees and find out about the business in much more detail. It is vital to prepare in advance what questions you would like answered. A franchise is a long-term commitment (normally a minimum of five years) so it is absolutely vital that the two parties can work well together.
Despite how it may appear, a franchise is by no means an easy option – it needs commitment and hard work from the franchisee to make it work. However, if you choose the right franchise business for you, the rewards can be enormous, both financially and personally. I can think of many examples of franchisees who have said buying a franchise has been the best career and business decision they have ever made.