This year has seen high numbers of people starting a business. Analysis of Companies House data reveals that over 340,000 businesses were registered in the UK between January and June 2021, an increase of 32% over the same time period in 2019.
Perhaps these high numbers have been a reaction to the upheaval that the pandemic has brought to our lives. Many people have spent some time on furlough during the lockdown and restrictions of last year and earlier this year. This has given time for people to think about whether they are enjoying their normal work routine and shows that there is increasing focus on self-employment, as people look to take more control over their working lives.
If building a business of your own is attractive, but you are not sure you have the ideas or skills to make it a success, then you could consider franchising. A franchise provides a tried and tested format, with a blueprint to follow and training to ensure that you know what you are doing from day one. It should enable you to ‘hit the ground running’ with a much higher chance of success.
Franchises have a much lower failure rate than standalone businesses, evidenced by the latest British Franchise Association survey. It shows that the industry contributes £17.2 billion per annum to UK GDP, employing 710,000 people, with 93% of franchisees claiming profitability and less than 1% of franchisors closing per year due to commercial failure.
Before you make a decision about which franchise to buy, here are some ‘Do’s and Don’ts’ to think about:
Do:
- Take time to think about your own skills and most importantly, what you want to do! Being in business for yourself can be hard work, even with the support of a franchise, so make sure you really want to spend your working hours in the business sector you are considering.
- Think about what type of business you are interested in. Do you want to be very ‘hands on’ in the business or manage staff? Do you want to work from home or does a mobile franchise appeal? The franchise doesn’t have to be in the field you are currently working in as you should receive full training. You will have existing skills and experience which can be useful in a new type of business, for example sales skills or people management. The new business does however, need to be something you find interesting and will enjoy on a day to day basis.
- Research the franchise thoroughly, making sure that the franchisor will be able to provide the support you need and that the franchise costs represent good value. The British Franchise Association is a good place to start to check whether the franchise is a member.
- Look at how much funding you have available to invest in your new venture as that will drive the type of franchise you can consider. The fast food household name brands will tend to be premises based with much higher investment costs than something you are able to run from home or on a mobile basis.
- Talk to existing franchisees, find out what they have to say about the training and support they received and ask them whether they would do the same again!
- Make sure you have the support and encouragement of your family, especially your ‘significant other’ as this will help you as you get used to your new life as a franchisee!
Don’t:
- Get taken in by advertising hype. It can be easy to get carried away with the idea of a lucrative new lifestyle but you need to do your research and make sure the franchisor is exactly who they say they are! Don’t let your excitement blind you to the reality of what is involved in starting a business.
- Rush in without doing your research. The decision to buy a franchise is a big one, you will be signing up for a lengthy period of time so should take your time to research the proposition thoroughly.
- Underestimate your funding requirements. You will need to have a stake to put in and most people then borrow from a bank or finance provider to cover the rest of the start up costs. Your franchisor should help you plan out your financial projections which should include cash flow forecasts which will show how much you need to borrow or put into the business.
Franchising can be a great way to become self-employed, with good franchises offering support, structure and training. It is vital to do your research and choose the right one though, it is not a decision to be taken lightly.
There are lots of factors involved but the support of a franchise can help you get started. Be clear about what you really want, do your research and give yourself the best possible chance at making your move into franchising a success.
