The Franchise Route to Business Success
Now, a lot of Creating Wealth members tell me they’d love to start their own business, but are too scared of taking the risk.
I understand that completely. It can be nerve-wracking, putting yourself and your ideas out there for public scrutiny, with no guarantee that things will work out the way you hope they will.
It’s a stark fact, but according to reports 20% of new businesses fail within the first year and 50% don’t survive beyond five years.
That’s not to say you should never give setting up a business a shot, as yours could well be among the 50% who do last the distance. And you’ll never know unless you give it a go, will you?
But what if you don’t want to take the risk on your own business idea? Or you don’t have an idea for a business in the first place? But you still want to be your own boss and run your own successful business?
Well, if that’s you, then the franchise route is well worth considering.
What is Franchising?
Franchising isn’t a business in itself, of course, but rather a method of “buying into” a brand and format devised by someone else. In exchange for paying a fee, you gain the right to trade under the franchisor’s name.
A huge range of franchises are available, and there’s something to suit most budgets. At the lower end of the scale, you can get started as a Kleeneze or Avon distributor for under £20. At the other end of the scale, you could pay from £150,000 to £400,000 to purchase a McDonald’s franchise.
In between these is a wide variety of businesses, from carpet cleaning to recruitment, gardening to children’s entertainment. While some franchises require business premises, many others can be run from home and/or a car or van.
The Pros
The main attraction of franchising is that you are buying into a ready-made business format — you aren’t starting from scratch.
While this does not guarantee success, with a good franchise you will be getting a format that has worked well for others and, with a little luck (and some hard work), should work for you too.
Not only that, you get a ready-made and, hopefully, proven business plan, along with training and all materials to run and market your business.
And you are never alone — if you have any problems or queries, the franchisor will be available to offer advice and support when you need it.
You may also be able to network with franchisees in other areas for mutual support.
The Cons
On the downside, running a franchise will require you to follow the franchisor’s format very closely. If you like to do things your own way, you may find the restrictions and rules imposed by the franchisor difficult to bear.
The other drawback is, of course, you have to pay the franchisor to trade under their name. Typically there will be an up-front fee and further regular payments for support, training, materials, and so on.
Obviously, with a good franchise you get plenty back for your money, but ultimately all these costs have to be covered by you and your business.
As mentioned last time, some big franchises such as McDonalds will set you back a six-figure sum. Finance deals may be available through the franchisor and other lenders, but you are still likely to have to fund a substantial chunk of the initial cost yourself.
And don’t forget that as the business-owner, you will be responsible for every aspect of your business’s operation. As well as providing a product or service, everything from marketing to book-keeping, purchasing to recruitment will become your responsibility.
Of course, you will get help with doing all of these things from the franchisor. They will have set procedures in place which you just follow day-to-day but nonetheless, you will need to oversee all of these tasks and ensure they are done properly, even if you don’t do them yourself.
Choosing a Franchise
It’s important not to rush into choosing your franchise. Nowadays a huge range is available, and it’s vital to take some time to assess the options and identify which might be the most suitable for you.
There are a few websites where you can find franchises for sale, like Franchise Direct, Franchise UK and Which Franchise.
These list franchises for sale across dozens of industries both in the UK and internationally. Each company has their own profile page, with all the details on what they offer and the fee they charge.
Another good place to look for franchise opportunities is at a franchise exhibition. These are held in cities across the UK (and elsewhere). They give you the chance to check out many different franchises and — just as important — chat with the franchisors.
This can provide invaluable insights into what a franchise involves and what the franchisors expect from franchisees. Entry is generally free as long as you register in advance.
The biggest exhibitions are those organised by the British Franchise Association. You can find out about upcoming exhibitions on their website.
Here are a few tips for choosing the right franchise…
- Choose something that interests you personally. You are more likely to succeed in a business you enjoy, as you will put more effort and enthusiasm into it. For example if you are in to health and fitness, perhaps look for a franchise in this sector.
- Look for franchises that will fit in with your personal circumstances. Sectors such as retail and catering involve long hours, often in the evening and at weekends. If that doesn’t appeal, look for a franchise you can operate on a part-time or work-from-home basis.
- Aim to pick a franchise with a good track record and reputation. Be wary of new franchises, especially those based around an unproven product or service.
- Once you’ve identified some franchises that interest you, ask the franchisors for contact details of existing franchisees you can speak to. Then contact those and find out how their experience has been and if they’ve had success. — If at all possible, arrange to visit one or two existing franchises and stay a few hours to see what the work involves and whether or not it would appeal to you.
- Ensure the financials stack up. Study the projections provided by the franchisor and see if they tally with your own research, bearing in mind local market conditions. If the projected revenues look too good to be true, they probably are!
- Also bear in mind that it may be 6–12 months until your business is fully established, and during that time you will need to have enough money to cover all your costs and expenses, including your living costs.
- Before proceeding further, an essential step is to draw up a detailed business plan. This should cover such things as the size of your territory, local competition, the national and local economic climate, trends affecting the product/service you will be supplying, and so on. It should also include a cash-flow projection showing anticipated monthly income and expenditure for at least the first twelve months.
Your business plan will be an invaluable guide when planning and running your business, and it will also be a necessity if you have to apply to a bank for finance.
Running Your Franchise
Having bought your franchise, you will of course want to get it making money for you in the shortest possible time. Here are some tips for starting and running a successful franchise…
- Keep in regular touch with your franchisor and act on any advice they give you. Whatever issues you may be facing, you can guarantee that someone, somewhere has already faced something similar, and the franchisor will be able to advise you how they dealt with it. Use the franchisor’s knowledge to your advantage rather than learning the hard way. That is, after all, why you paid for a franchise rather than setting out on your own.
- Improve your business skills. While franchisors will teach you their system, most also expect you to bring some basic business skills to the table. If you don’t know accounting basics or how to hire and manage employees, you’re likely to encounter problems.
If your sales, management or accounting skills are rusty (or non-existent), consider taking a course to learn or improve those skills.
- Market your business. Even with the franchisor’s name and system behind you, your business won’t sell itself. The fact is there is no-one better to market your business than you. Use the passion you have for your product or service to talk to people face to face. Enthusiasm is infectious and you will be more successful. Monitor carefully the results of any marketing activity, however. You don’t want to waste your money in future if a campaign has not proved profitable for you.
- Master time management. As a business owner you only have so many hours per day and it’s important to deploy them wisely. Planning and flexibility are the keys to success when it comes to time management. Time spent planning saves a lot more time in the long run. But be flexible as well, and constantly assess any task associated with running your business to see if it can be done more efficiently.
- Stay up to date with paperwork. Don’t leave it for a month then attempt to do it all in one day. Not only does this become a depressing chore, but by the end of that day you are more likely to be tired and make mistakes.
- Wherever possible invest in IT and developing your computer skills. Many aspects of running a business can be performed faster and better with the aid of computers, from invoicing to accounts, marketing to stock control.
- Recognise your strengths and weaknesses and use them to your advantage. If you really are terrible at managing one aspect of your business, employ someone to manage it for you. Your time will be better spent on the aspects of your business you are good at and enjoy.
- And finally, enjoy yourself. The chances are you decided to start a business because you wanted to enjoy your work more than you were previously.
Yes, running a franchise does require effort, determination and tenacity, but don’t lose sight of the reason you started. Stay positive, enjoy the challenges, and have fun.
If you want to start your own business, buying into a franchise is definitely something you should consider.
Not only will you be getting a tried-and-tested business format to follow, you will also have access to advice and support from the franchisor any time you need it.
You will still need to put in some hard work yourself, of course, and success is never 100% guaranteed — but your chances of success should be significantly boosted compared with going it alone.
What’s more, there are hundreds of different franchises available, in a wide range of industries, and at prices to suit all budgets.
If you are a franchisee or are thinking of becoming one, please do get in touch as I’d love to hear from you. Drop me a message on creatingwealth@agora.co.uk
Best wishes,
Michelle Roberts
Editor
Creating Wealth
P.S. Starting a franchise business is just one of the 57 Wealth Hacks we’ve put together for you in one handy little guide. Each of the 57 ideas are proven, easy-to-follow methods for building wealth.
If you are interested in finding out what the other 56 wealth building ideas are…
