Franchising
Franchising
can help to give you the confidence you need to start a business on your
own.
The most famous franchise is probably MacDonald's but
there are numerous kinds of franchises out there. In relation to any
other small business, franchising has proved to be successful, with 94%
of units still operating profitable businesses 5 years down the line
whilst it is estimated that more than 40% of small firms cease trading
within 3 years.
We are basically talking about a Business Format
Franchise. It is where a business has established a successful way of
working and in order to grow it licences the rights to their methods,
know-how, name, goodwill and product or service to others for a certain
period of time. They are the FRANCHISOR and the local operator is the
FRANCHISEE.
Some Advantages of using a
Franchise...
-
You don’t have to go through the learning curve of
working out what works;
-
Their is a proven market for the product;
-
You get to use the goodwill and established name of
the franchisor;
-
You normally have an exclusive area in which to
operate;
-
All necessary training is provided by the
franchisor;
-
Marketing assistance is provided by the franchisor;
-
Bulk buying powers of the franchisor can be used;
-
Banks are often more willing to lend to franchisees
where the business plan is more likely to be as predicted.
Franchise Costs
The franchise costs are normally the main
downside of choosing to operate as a franchise and consist of the
following...
Who's business
is it?
Each franchise is a separate business in
its own right and is the business of the franchisee over which they have
control. However, the franchisor is likely to retain control over the
method of operation and marketing. It is important that franchisor and
franchisee get along and work together as a team.
Choosing a
Franchise
The British Franchise Association (BFA)
is a good place to start when choosing a franchise and they are the only
independent accreditation body for franchising within the UK.
It is also useful to attend franchise exhibitions to
compare different franchisees.
They have a free video 'Your Introduction to
Franchising' which provides a wealth of information - more than 33% of
franchisees buy this unique, independent guide before making their
decision.
BFA members are recommended as they have volunteered to
be 'vetted' by the BFA and adhere to its codes and standards, based on
the European Code of Franchising Ethics. They are also re-accredited on
a regular basis.
Before deciding on the franchise you are going to choose
you should consider...
-
Can you commit to the time and money needed to get
going which are both likely to be significant?
-
How viable is the product or service or will it be
easy to sell in your area?
-
Can you speak to other franchisees to verify how
they have done?
-
How well has the franchise been tested?
-
Does the franchisor have the resources to provide
the support you need?
-
How well do the franchisor's systems work in
practice?
-
What are the trends in the market likely to be?
The Franchise
Contract
A franchise is a long term arrangement
and you need to take legal advice on any franchise contract, ideally
from a solicitor who has a lot of experience with franchise contracts.
The franchisor will have a lot of control over how the
business is run and you need to ensure you are happy with this and what
is in the contract.
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