Is franchising right for you?
Franchising offers a potentially lucrative opportunity to trade using established brand names, but you should not dive automatically in.
There are advantages and disadvantages to this type of agreement, so you need to evaluate whether you are the right fit for a franchised business and which industry you would go into even if you like the idea of becoming a franchisee.
The first thing to say about franchising is that it takes a lot of hard work, but if it is done right then it has the potential to make a real difference, both for the brand and for you.
Franchising a Business
A franchise is created when a brand decides that it is happy for other people to operate under a replicated business format in order to achieve economies of scale and greater brand awareness across a wider geographical spread.
It is not a decision that can be taken lightly, as it means the owner loses a little control of their brand image. In order to combat such concerns, a franchisor will provide detailed instructions on how the franchisee should operate their business.
In addition to this, the franchisor will usually offer ongoing training and marketing support. Both sides win if the business succeeds, as the franchisor gets more royalties, while the franchisee will benefit form a better pay packet.
Are you suited to running a franchise?
Not everyone is well-suited to becoming part of a franchise; you need to have the desire to succeed as well as the practical skill to run a business. You will also need to be a hard worker to get the business going and be willing to abide by the rules provided to you by your franchisor.
If you are the sort of person who will want to take control and revolutionise operations then you may be better off starting your own business, as a major part of a franchise is the framework that comes with it – straying from this could dilute the brand.
This framework provides you with a sort of instruction manual on how people have previously made a success of the business in question – it is this kind of support that helps to make franchise operations much less likely to fail than conventional start-ups.
A franchise is like a cross between running your own business and working for someone else, so you will not have total freedom but you also need the business nous to take the reigns. More than anything, just make sure you like the industry you are thinking of getting into.
Starting your new business
You normally need to pay an upfront fee then royalties to take on a franchise, so make sure it is affordable to you both in the short and long term. Think about your regular bills as well as one-off payments that may be coming up; for instance, paying for your child’s education.
Some people use redundancy money or savings to fund the initial fee, but you could also borrow from family members or banks, which often have specialist franchise loan teams.
In order for your franchise to succeed you need to have a good business plan in place. So, research the industry, make sure you are comfortable with it and do lots of preparatory work on how your franchise is going to do well financially.
Your business plan should be exhaustive, with projections of how much you expect to earn and any problems you foresee – always be realistic with figures. You will also benefit from getting advice on commercial, accounting and legal issues.
With good research behind you in an industry you are suited to, there is no reason why you shouldn’t make a success of things. Especially given the added support, experience, expertise, marketing material and economies of scale that come with being part of a franchise.
For further reading our guide on questions to ask yourself before investing in a franchise, might help you decide on whether it is the right decision for you.