Open a franchise
Apr 20 2011
McDonald’s Franchise | Happy deals in franchises
Email a friend
The success of McDonald’s shows how profitable franchising can be, but there are many other choices for the would-be franchisee.
If you’re eager to start a business but are unsure about your idea and are having trouble getting the bank on side, buying into a franchise model could be the best way to go.
A trusted name
The obvious advantage is that a franchise provides you with a tried and tested business and established brand recognition. Jo Tolley started a branch of infant swimming company Water Babies after having worked as one of their instructors.
‘I was thinking that I might set up a similar business of my own, but I liked this company and wanted to use their brand recognition – which I think is useful when people are spending less,’ she says.
Despite the fact that franchising takes away some of the usual pressures of setting up a business (for example product research), Tolley cautions against seeing it as an easy option. ‘However much time you think it’ll take up, double that,’ she says.
Tolley adds it’s also important to take your time to see the process through. ‘It took about eight months between first deciding to do it and then going through with it. We went to lots of seminars and met with the owners first. One of the main advantages for us has been the support involved.’
Sharing the load
Peter Ivens decided to turn his 22-year-old printing business into an online franchise through Netstationers because he also wanted the support of being in a network.
‘I’ve total control over how I run my business still, but have the advantage of not having to spend all my time worrying about invoice and credit control, warehousing and distribution,’ says Ivens. ‘I can now go after bigger and better contracts for the first time in a long while.’
He has also saved a lot of time and money in the process. ‘Now I’m able to go on holiday – working for myself wasn’t allowing for much time off. And in the process of moving online, I’ve also saved £80,000 by reducing my overheads.’
The right fit
Of course, being part of a franchise won’t be for everyone. Michael Evans, a partner at law firm Davenport Lyons, says that one of the most common reasons for a franchisee failing is because the owner isn’t suited to the arrangements. ‘You should think carefully and be quite searching about your own motivation. The legal obligations tend to be set in the terms of the franchisor. There tends to be very little wiggle room in terms of changing the contract, but there are advantages to having consistency in the running of the brand,’ he says.
Top tips on buying a franchise
Due diligence
The first thing you will need to do is visit the British Franchise Association (BFA) website. All the models are vetted by the association to ensure that you are buying into a proper opportunity.
Cost and terms
You can buy a franchise model for anything from £2,000 to £1 million. But the average amount tends to be £60,000. The franchisor will usually take an additional cut, say ten per cent, and insist that you buy supplies from them at a fixed price.
The terms will vary, but they allow you to run the business under that protected brand. They might also include some of the stock and use of a vehicle. Often they will involve help with marketing and sales support.
Homework
Do your research. Speak to a couple of existing franchisees, ideally to someone who has just started out and an established business and ask them their opinion of the franchisor to find out how well the model works.
Funding
Banks such as HSBC, Natwest and Lloyds have dedicated franchise teams in this area and will know the majority of networks. And the good news is it tends to be easier to get a business loan for a franchise because it’s something that’s tried and tested.
Specialists
Contact a franchise solicitor to look through the contract. They will be able to appreciate the complexities involved. You can find a list of them on the BFA website.
Moving on
Once you have built the franchise up and established a substantial customer base, you may be able to sell the franchise to another franchisee for a profit.
Comment by Dave Brown
Tuesday 14th September 2010When you own or start a franchise business, you’re in business for yourself, but not by yourself. And when you use FranchiseExpo.com, you’re setting yourself up for a franchise opportunity at http://www.franchisedirect.co.uk/franchisefocus/2009/08/.
Report this comment
Comments [1]