Franchising – An Alternative to Jobs
Before we dive into what franchising is, did you know there are alternatives to being employed, and starting up a business from scratch? The alternative is franchising.
Buying a franchise business enables you to become your own boss, offering you the luxury of running your own business, whilst being fully supported by the franchisor.
People choose to invest in franchises for many reasons. Maybe they’re tired of being an employee, or maybe they want to run their own business that meets their personal requirements. Many prefer franchises because there are so many diverse opportunities. From low cost to home based, part time to opportunities for expansion.
Could a franchise be right for you?
What is a Franchise?
In the context of business format franchising, a franchise is a business which follows a set of rules and procedures laid out by a franchisor for the successful replication of a business model. Franchising is a method of business expansion whereby the franchisor (the owner of the intellectual property) grants the rights for entrepreneurs to be their own boss and run their own business, under the franchisor’s branding.
In exchange for the franchise investment, the franchisee (the franchise buyer) will get trained up in all aspects of the business, and should receive support ongoing. The franchisee must follow the guidelines for operating the franchise, so that branding and marketing is in line with other franchisees to ensure brand consistency.
How Much Do Franchises Cost?
Running your own business could be cheaper than you think.
Firstly lets get something straight. Franchises are generally more successful than starting up alone. This is because of the training and support offered by the franchisor and the replication of an already proven business model. Thanks to this, many banks are able to help with franchise finance making it even easier to set up your own business compared to going it alone.
But how much do franchises cost? Well there’s no definite answer here because franchises could cost anything from a few hundred up to several hundred thousand.
There are some really affordable franchises out there. For example vending machine franchises, sometimes only costing a couple of hundred to start up. Then you’ve got home based businesses, with low overheads, minimal staff costs and flexible working lifestyle – saving you time and expense.
Then you’ve got the higher end franchises like restaurants which as you’d expect, require fit out and premises which can cost more than van or home based businesses.
What Types of Franchises are Available?
If a business can trade successfully, it can likely be franchised. There are around 1,000 different franchise businesses in the UK, operating in diverse markets. Some immediately obvious franchises include big-name fast-food restaurants (i’m sure you can think of quite a few), but there are also many smaller food franchises as well – from restaurants, to cafes, and even food delivery apps for your phone. If you’re the stay-at-home type, there are many franchises you can run from home too, from regional PR firms to estate agencies.
A term you may or may not have heard of before is management franchises. This is a type of franchise usually applied to businesses where the franchisee manages the staff and the day to day operation of the business, but doesn’t actually get involved with the actual function of the business. A good example would be cleaning franchises. A cleaning franchisee would often employ staff to do the cleaning, but not actually do cleaning themselves. In the same manner, restaurant and van based businesses could be operated management-style. Once the business has been established, depending on the rules set out in the franchise operations manual, the franchisee may be able to take a hands-off approach.
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Franchising is a big step in anyone’s career, but for many, it is one for the better. Many have bought a franchise and not looked back. Franchising is a widely used practice across the world, and is supported by many groups known as Franchise Associations. Despite it being lesser known than employment and starting up a business alone, franchising is still considerably widely recognised. Did you know, you can attend franchise exhibitions at places like The NEC and ExCeL London to discover opportunities?
The franchisor (franchiser in American) owns the intellectual property and makes the initial decision to franchise the business. They’ll be responsible for recruiting franchisees and ensuring the network wide success of the franchise and the business.
The franchisee is the entrepreneur or investor who has purchased the rights to trade as the franchisor’s branding, using their business model to get into business for themself, but not by themself (unlike starting up a business alone, from scratch).
Unlike employment, with being your own boss the more effort you put in often means the more you’ll benefit. Franchisors will usually estimate a franchisee’s profit to be anywhere from a few thousand up to potentially £50,000. But this all very much depends on the effort put in by the franchisee. The more you put in, the more you’re likely to get out. Franchises are a good investment if you want to be your own boss, because it bypasses many of the mistakes made when setting up a business by yourself. Mistakes will have already been made by the franchisor, and put right in a way that is successful for the franchisees.
You might ask, “if the business is so successful, why bother franchising at all?”. By creating a franchise, you’ll be raising brand awareness for the future of your business. You’ll be growing your customer reach through a wider territory, franchisees will benefit from being their own boss, and franchisors will benefit from scaled growth. On a national scale, through fees, franchisees contribute to a marketing fund to promote the brand and having a wider recognised business means the marketing will be more impactful, for the franchisees, and the franchisor.
No. While franchises are generally more successful than starting up alone, there is still the possibility of failure which is why anyone looking to invest in a franchise, looks deeply into the opportunities and does their due diligence. Franchises are built to be successful but their success relies on the franchisor and franchisee to give it their all.
Reasons for franchise failure include:
- Franchisees not making the effort.
- Franchisees feeling they need not follow the franchisor’s guidelines, or deviate away from the operations manual.
- Franchisees attempting to invest in the franchise but not having the capital to get the business fully off the ground. Whilst banks can help with funding, you need enough money to repay the loans and keep the business afloat until it generates profit – called a break even point.
Franchisors are usually very supportive, because after all, your success is the success of their brand. If you fail, it could have consequences on the rest of the franchise network. This is why franchisors will aim to give you as much training and support as you need.
Most franchises will cover training in areas like accounting, staff recruitment, and the day to day running of the business. Practice makes perfect, and some franchises may let you get hands on training with a nearby franchisee.
There is considerable support for the franchising sector in the UK. Franchise associations such as The British Franchise Association endeavour to help franchisees, franchisors and suppliers within the franchising industry. Through a series of memberships, the BFA acknowledge franchises as members, and by investing in a franchise backed by a franchise association, you’ll know that the franchisor has passed their accreditation processes. Most countries have at least one franchise association and the self regulation in the UK is predominantly done through the British Franchise Association.