KFC, Burger King and McDonalds; these are probably the names that spring to mind when you hear the word “franchise”. However, in truth there are a variety of franchises out there offering you the opportunity to set up a business with an already tried and tested formula and you might find that this is the easiest way to move into self-employment.
So, what is a franchise? Basically it is where a successful business format is replicated and you are given the opportunity to be in charge. You will be expected to run the business in the way that the owner has found works best because this will give you the greatest chance of success. Prior to your involvement most stumbling blocks will have been overcome, giving you the ability to spend time on improving your particular branch of the business – not suffering sleepless nights wondering how you are going to make things work! This is what you are paying for when you buy a franchise, which is a good thing if you are worried about setting up alone, although don’t think it will all be plain sailing; while you will be taking on a known brand and proven systems that work, success will in the end come down to the hard work and commitment you put in.
When you decide to purchase a franchise you will pay an initial fee to the franchisor for the right to use the brand name, then there will be monthly royalty or management fees on top. You will receive training from the franchisor, who will continue to have an involvement in how your business progresses and also to offer you ongoing support. This process will give you the opportunity to gain firsthand knowledge that might otherwise have taken you a lifetime to build up on your own. In addition there could be the opportunity for your franchise to take part in activities such as national advertising campaigns, which would normally be out of reach for small businesses.
There are lots of advantages to taking on a franchise: You are taking on a recognised brand name with an existing customer base and will receive invaluable knowledge and training from the franchisor. Banks might be more accommodating in the lending of money and risk is reduced and shared by the franchisor.
The disadvantages are that if you consider yourself to be an entrepreneur who always wants to try new things you could end up frustrated. As a franchisee you will still have to follow rules and although your ideas may be considered, ultimately you will be following the system set out by the franchisor, to the book. You must also consider that the franchisor could go out of business or change the way things are run and there is also the risk that other franchisees could give the brand a bad reputation.
Before you take the leap, do your research. Look at the location of the franchise, assess the brand’s success throughout the UK and consider any nearby competition. Although the franchisor will give you an information pack, do not rely on this. Talk to other franchisees, ask questions and take advantage of other professionals. You might find that your bank has staff specifically trained in the area of franchises or ask your solicitor to check things out. Although you may see a proven business, don’t just walk into it blindly.