Taking the leap

EB guest columnist Sarah Jackson explores how franchisors can support franchisees in taking the steps toward starting their own business

Taking the leap

Being a franchisee can be a scary experience – and I speak as”somebody who has been there. There”are so many questions racing through your mind: how do I find the funds for the upfront costs? How do I pay my mortgage and bills when the business is just starting? How can”I convince my bank manager to lend me money? Fears about making ends meet are”a worry for most would-be franchisees, but throw in concerns about how to run a business and the prospect of operating your own franchise and it can all seem overwhelming.”

As a franchisor you have two options:”either you act as a distant, all-powerful”head office and leave the franchisees to”sort themselves out, or you can structure”your business plan to make it easier for potential franchisees to enter the world”of self-employment. As a former franchisee”I know which one I would have preferred. Apart from anything else, it makes good business sense to be as supportive as possible to people who want to make that move,”and let’s face it – who doesn’t need a bit”of support from time to time?

At Extra Help we decided to structure”the business to make it much easier for franchisees to build a successful company with five key principles:”

Make it easy for franchisees to buy”the business

The first thing most people think when they consider investing in a franchise is that it”takes a chunk of money up front. Obviously, investing in a franchise is always going to”cost money, but we’ve put systems in place”to make that first step easier by liaising with”a high street bank to offer 70-80% of the money as a loan, and by accepting the remaining £3,000-£4,000 in instalments.”

Make it easy for franchisees to get”support from the bank

For a franchisee with little experience”of dealing with banks, it’s reassuring to know they can speak to their high-street branch”with no need to show them a business plan. After submitting our operations manual, franchise agreement, legal documents, financial statements, a five-year projection”and undergoing an in-depth face-to-face interview, we were approved by Natwest’s franchise team. Our business plan is deemed to be sound, meaning that franchisees can borrow up to 80% of the purchase cost,”which cuts out a lot of the legwork.”

If you have a franchise model that works, prove it to the bank and future franchisees will be able to buy into the business far more easily – it’s a win/win situation.

Make it easy for franchisees to handle ongoing costs

The first few months of running a business are unlikely to be profitable. No business really expects to make money initially, so we don’t expect our franchisees to pay any management fees for the first three months. This gives them the chance to build the business and invest any proceeds back into growing their franchise. After those initial months, when things should be moving a bit more, we don’t immediately hike up the fees because we understand it’s a gradual process. Instead,”we keep our management fees deliberately”low until the franchise is turning over £2,500 a month, essentially £30,000 a year – however long that takes. After reaching that level, the management fees are 10%.

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