Interested in buying a franchise, selling a franchise or franchising your business? We’ve got you covered. We’ve compiled some of the top questions asked by people in the UK looking to get into franchising. Franchising is a big step in anyone’s career and its usually for the better. Franchising can help drive more sales for businesses through increased brand recognition and reach. It can help people get into business ownership while enjoying support offered by the franchisor. In this franchising FAQ we’ll answer some of the top questions asked.
General Franchising FAQ
Let’s cover some of the basics of franchising with these general franchise frequently asked questions.=
A franchise is a collective term given to describe a business which is expanding to provide its services through a Business-Format Franchising model through a network of franchisees. By becoming a franchise, the franchisor can license out their brand and proven business model to franchisees who will run their own business under the franchisor’s system of operation.
Franchising enables entrepreneurs to be their own boss by investing in a proven business to run as their own, while following the procedures set out in the franchise operations manual.
Franchising is where the business owner will make their business model available to investors as part of a franchise agreement. Entrepreneurs will invest in the franchise, and they’ll be able to run the business under the franchisor’s guidance in their own area. The franchise opportunities you’ll see on this website follow the business format franchising method of expansion.
Businesses listed on Franchise Planet are looking to recruit franchisees within franchising – motivated entrepreneurs looking to get into business for themselves but not by themselves.
Franchising offers a safer route to business ownership compared to starting up a business from scratch.
The franchisor is the owner of the intellectual property and branding of the business being franchised. The franchisor will license their brand and business model to franchisees. This is beneficial for the franchisor because it means that the brand reaches further parts of the country or world. It means that their brand becomes wider recognised and as a result, has a positive impact on the business.
The franchisor will be responsible for group marketing and the profiling of suitable franchisees. It is also the franchisors responsibility, to provide sufficient support and training to franchisees, so that a franchise network is successful.
The franchisee is an investor who has bought the rights to trade as the franchisor’s brand and run the franchise in their own territory. Collectively, a franchisee can be an individual – for example man/woman and a van operation, or it can be a husband/wife or business partners. If you’re looking to be your own boss and invest in a franchise, you would become a franchisee.
In the context of a “Master Franchisee”, this is when an investor purchases the rights to the franchise, to sub franchise the business in their own country. A Master Franchisee becomes a sub franchisor of the main franchise business, taking on franchisees for the business on the main franchisor’s behalf, but in their own country. The franchisor doesn’t recruit franchisees in another country – they recruit a master franchisee.
The master franchisee should and likely will have better knowledge than the franchisor of their own country. Which makes a master franchisee a better candidate for profiling and selling territories outside of the franchisor’s own country. For example, John is the Franchisor of Example Franchise. John sells franchises in the UK. Boris wants to run Example Franchise in Pakistan. As Boris has better knowledge of the market and demand in Pakistan, John sells a Master Franchise License to Boris. Boris then recruits and sells franchises within Pakistan, knowing more about the demand etc. John continues to manage their business in the UK, safely knowing that Boris is helping John to expand internationally.
A franchise business is any business which has been franchised and is following the business format franchising system. Franchise businesses follow the same setup as the franchisor’s business, and collectively, franchise businesses UK demonstrate a scaled approach to business expansion. This means franchises will utilise the same branding, the same marketing and usually will offer the same products and services. A streamlined approach, this is one of the reasons why franchising is a fantastic choice for business ownership.
The brand and its services are familiar in unison everywhere across the network.
The brand consistency is key and is bound by a franchise agreement and franchise operations manual. Violation of this can lead to termination of the franchise contract, because maintaining brand consistency is what makes franchises so successful. The success of a franchise network depends on its franchisees.
After the successful establishment of the initial business, the franchisor might make the decision to franchise their business. There are many reasons to why franchise a business, some such examples can be found in our FAQ for franchising a business UK section below.
When the franchisor decides to franchise their business, they’ll need a produce a series of documents which will outline the agreement between the franchisee, the franchisor and any other concerned parties. They’ll also produce a franchise operations manual which will define the brand and the methods involved in running the business effectively. The rules and procedures of running the franchise, including marketing, recruitment, services, everything that could possibly be need-to-know about running the business effectively – are in a franchise operations manual. This is a very bespoke document, so there won’t be a template online for this, nor should there be for a franchise agreement. These documents should be very tailored to the business.
After the documents are in place the franchisor should test the feasibility of franchising by using a pilot franchise. They’ll test out the franchise model by setting up the first franchisee. It should be successful, but any problems can be addressed for future. Herein, franchisees will follow the same practice. Using the documents to run their business effectively.
The franchisor will provide training and support so that the franchisee is confident in running the business. A franchise works by having all franchisees follow the same system of running the business. Offering the same products. And delivering a consistent experience.
Buying a Franchise FAQ
To buy a franchise you need to speak with the franchisor. After investigating the franchise opportunities out there and you have identified a few which are of interest, you should attend a franchise discovery day, or at least arrange a call with the franchisor. When you’re investigating franchise opportunities, this is called due diligence. Collecting as much information as you can – from franchise prospectuses to asking questions at franchise exhibitions. You need to research the company’s history as well and look at how many franchisees are trading successfully. Understand why any franchisees failed.
You should know exactly how much the franchise business is asking for in terms of investment and the amount of capital you should require. You should also speak to your bank about loans and franchise finance. If the franchise is a van based business, understand what options are available when it comes to purchasing a vehicle.
Before you sign the franchise agreement and place a deposit on the business, you should be absolutely certain that you can see yourself running the business and fully understand what is expected of you as a franchisee.
Depending on your financial circumstances, many banks are able to lend up to 70% of the franchise investment. You’ll also need working capital so if you’re expecting a loan just for the franchise fee, you should yourself whether you can really afford to keep the franchise running in the early days.
There are many other companies and firms that support the franchising sector aside from banks. Many other businesses favour franchising and can usually loan several thousand, maybe even up to £100,000 loan. You should speak to the franchisor to discuss the financial aspects of buying a franchise, because it will be a critical interest for both parties. Franchisor’s won’t take you on as a franchisee if they feel you’d get into financial difficulty, the success of both you and the franchisor is at play and of mutual interest. That said, franchisors usually have agreements in place and some can even assist with finance themselves!
Many banks in the UK are establishing specialist departments to handle franchising. Franchises are often favoured by banks over business startups, so you’re more likely to get accepted and get a better loan or deal when it comes to franchising. As mentioned before, some banks can lend up to 70% of the investment. Banks are becoming very well integrated in the world of franchising, and franchising is very well supported. Associations like the British Franchise Association help entrepreneurs and franchises alike, and there are a number of banks that actively work with the BFA to help people get in to franchising.
There is no exact cost for all franchises in the UK, because they vary greatly. You should expect to pay around £25,000 for some lower end franchises like management and cleaning. Van based franchises you should expect to pay up to £40,000-50,000 including working capital. Some franchises like vending machine businesses, can offer a really cheap entry point while still providing amble turnover. As you’d expect, some franchises like cafes and restaurants will cost in the hundreds of thousands. You’ll need a premises and store fitout, and greater working capital for ingredients and the like.
If you want to pursue business ownership and you want to be your own boss, franchising is a great investment. In other articles, we’ve covered the advantages of franchising over buying a business, plus we’ve also discussed the advantages of buying a franchise over starting up alone.
Starting up a business alone comes with many risks. You’ve got to do everything yourself and all bar the branding, you’re pretty much reinventing the wheel. There are over 1,000 franchises out there in the UK, chances are there is probably one already that would suit your interests. Both starting up alone and buying an existing business don’t have the same levels of training and support which franchising offers. The support is one of the biggest reasons people choose to invest in a franchise.
Of the three (business from scratch, buying existing business and buying a franchise), the franchising route is definitely one of the better investments. True buying an existing business is a turnkey solution, and you’re already aware of existing demand. But the upfront cost is usually considerably higher than a franchise because the former has the past reputation and business value added on.
If you’re looking to ditch employment and get into business, franchising is a good investment. You’re not buying a franchise either – its an investment. You can later sell the business.
This very much depends on the type of franchise and the demand. Most franchises are split up by postcode, others by county. Postcoding territories is a very precise way of mapping territories and it enables franchisors to maximise the potential clients, will ensuring franchisees all have a fairly sized demographic within their territory. As you’d expect, franchises like McDonald’s have considerable demand which is why you find many outlets in single cities. Oven Cleaning franchises for example, you might be allocated an entire county, for example Devon or Berkshire. This gives franchisees peace of mind knowing that even with competitors, they’ve still got a big enough population to work with.
Interested in buying a franchise? Speak with the franchisor to get an understanding of what sort of size their territories are.
Selling a Franchise FAQ
Yes you can sell a franchise. In both the context of a franchisor selling franchises, and a franchisee selling their business, it is possible to sell franchises in the UK. A Franchisor will sell franchises to entrepreneurs, who will trade as the franchisor’s brand name in their own exclusive territory. A franchisee can sell their franchise business when the contracted franchise agreement period ends, and this is known as a franchise resale.
It is impossible to say how much it costs to sell a franchise. You’ll need to pay for a valuation of the business, and you’ll also need to check the franchise agreement. The franchise agreement will usually outline conditions of selling the business and what expenses are incurred. There will likely be advertising fees to promote the sale of your franchise as well, bear in mind you’ll need to accumulate interest and the expense of that will likely be down to you.
Franchise My Business FAQ
One you have determined that franchising your business is a viable route for expansion, the franchise consultant will help you produce the necessary franchising documentation. That includes a franchise agreement, a franchise operations manual and any documents to advertise the franchise in the later stages. You may need the help of a franchise legal advisor or lawyer in order to produce the franchise agreement so that you’re not vulnerable to any legal issues later down the line.
When setting up a franchise, you’ll need to consider things like your proposed franchise territory size, what services and products your franchisees are going to offer, and the sorts of things included for the investment. You’ll need to put together the franchise package. Detail exactly what the franchisee gets for their investment. You should also produce a profits and losses sheet which details exactly where the money comes from and where it goes, identifying exactly how much turnover the business can expect to make.
To franchise your business, you should speak to a franchise consultant. The franchise consultant will help you franchise your business. This usually involves a franchise feasibility study – a project report investigating the potential for franchising the business. Determining whether or not to franchise should be the first step involved. By coming to a conclusion you’ll know whether or not to franchise.
If the answer to the feasibility study is yes – your business can be viable, you’ll probably ask then, how to set up a franchise?
The main reasons for franchising are:
Increased brand awareness, meaning the trademarks of the business resonate more and as more and more franchisees become established, the branding becomes better recognised.
As a result, this can increase the reputation and therefore drive more sales for both the franchisor and the franchisees. Buiding this reputation helps to secure more customers and clients.
As a brand name gets better known – like McDonalds and KFC – people are more likely to choose it
As a franchise network grows, franchisees contribute to a group marketing fund which can be used to run more powerful marketing such as newspaper ads and TV adverts. Single businesses simply cannot afford to do this, and its only really impactful on a national scale. Franchise networks can really benefit from the power of marketing.
Franchising provides a way to reach more clients. Some businesses experience considerable demand, and franchising helps to ease this demand by opening up additional units to serve and meet the demand.
There are many ways to advertise your franchise. The starting point should be adding your franchise opportunity to your website. That could be in the footer menu or in the main menu. Indicating to people that you’re franchising lets them know its possible to run their own business along side you.
From hereon in, where to advertise will be up to you. Some places work better than others. Some of the top places to advertise include:
Franchise Directories – Franchise Planet offers free franchise advertising to help franchisors overcome financial barriers imposed by some other routes of directory advertising.
Facebook ads – Many franchisors have reported better success using Facebook ads than anywhere else, but quality and quantity of leads will vary between franchises and the ad quality.
Google PPC – This can be a very expensive way of generating leads, but is very flexible and enables you to target specific areas and terms.
Franchise Exhibitions – Franchise shows and exhibitions can be a good way to speak to people interested in buying a franchise but you should be aware that your competitors will likely also be doing a similar thing. Stands can be considerably expensive, often upwards of £2000, and when you take in to consideration travel expenses and the fact that you may not even get any quality leads, franchise exhibitions can be unjustified. That’s not to say they’re a waste of time because they’re not. If someone’s making the effort to attend a franchise exhibition, they’re obviously interested in business ownership so it should be considered an opportunity to give people more reasons to buy a franchise.
Other ways to promote your franchise include franchise discovery days and advertising in local media.