What are the advantages of investing in a franchise? Firstly, let’s go over the basics of what a franchise is. By having the knowledge and understanding of what a franchise is, the benefits of actually being part of franchising should become a lot more apparent.
What is a Franchise?
A franchise has in its simplest form, two parties. The franchisor – the owner of the intellectual property of the business, and the franchisee – the party investing in the franchise in exchange for the rights to trade. A franchise is the authorisation to trade under the brand name and system of operation of a business. In the case of franchises such as McDonald’s and the businesses which you’ll find on our franchise directory, these are known as Business Format Franchises.
Each franchised business’s story will start off with the establishment of one unit. The franchisor (the owner of entirety of the branding, business model etc) will have set up their business and traded (hopefully successfully) for a duration, before choosing to franchise their business. Franchising is a rigorous process. A considerable amount of care needs to go into the business model before it can be franchised, including documentation such as the franchise operations manual. A franchise operations manual outlines how the business should be run. It is an important document because it explains the methods and system of operation to be followed in order for the business to be successful.
A pilot franchise will in most cases be the first step before opening up the franchise to investors. The pilot operation is where the operations manual and processes will be followed, to reproduce the business under franchising conditions. Any mistakes can be rectified, and the operations manual updated accordingly, so that future franchisees (investors) can follow the manual and not repeat those mistakes.
Why Invest in a Franchise?
For the franchisor, franchising enables them to spread their wings and get their brand name out there. For example, a cleaning business which has proven successful to the franchisor in their local community, may be franchised to expand the area which they cover. The same can be considered with food shops like butchers, coffee shops – in fact pretty much any business can be franchised.
Investing in a franchise means you’ll be a part of that brand. This is one of the benefits of franchising. Any trust in the brand name will be passed down to you. And this is one of the reasons why people prefer to go down the franchising route, rather than starting up their own business from scratch.
So why invest in a franchise? Let’s take a look at the benefits of investing in a franchise.
Let’s take a look at some of the benefits of franchising. Some less obvious than others.
An established brand name
The franchisor’s brand name will be recognised in their local area and with franchising, the trust of that brand name will be passed on to franchisees. The more franchisees that become a part of the brand family, the stronger the trust behind the brand name. As the number of franchised units grow, the brand will become more and more recognisable and national marketing will be more impactful.
You Will Be Supported By The Franchisor
There are many reasons why a business owner might want to franchise their business. Whatever the reason, they’ll want to make sure it is successful, not just for the benefit of them, but their other franchisees as well. A franchisor must be very careful who they choose as a franchisee, because they’ll want someone who will be motivated by the brand and have a desire to achieve and carry the brand’s ethos in their territory. That said, the franchisor will want the franchisee to be successful and that is why, for the franchise investment, full training and support will be provided.
When carrying out due diligence before investing in a franchise, check out the level of support provided.
Flexibility Being Your Own Boss
Some franchises will expect full time commitment, whilst others may only require part time commitment. So long as you are responsible and motivated by the business, franchising enables you to take control of your career by being your own boss. You’ll need to make sure that you follow the franchise operations manual and ensure the correct practices are followed, but this will often allow some leeway in your work/life balance. For example with home based franchises, you might choose to commit working from 10am onwards so you can take your children to school, and be there to pick them up, with a few more hours in the evening.
Do What You Enjoy
Coupled with being your own boss, the addition of doing something you love equals a very promising future. Maybe you love working with pets, and want to run your own pet business. Or maybe you’re sporty and want to perhaps run your own sports shop or maybe pass the enthusiasm on to children with a toddler soccer franchise or baby movement classes. The key ingredients of a franchise are doing something you enjoy, being backed by a successful franchisor and the motivation to be successful.
An Asset You Can Later Sell
If at the end of the franchise agreement you wish no longer to continue, you can sell the business. Franchise resales are opportunities to buy an existing franchisee’s business (which will usually be ready to run from day one) along with the existing client base and local awareness. All of the effort you’ve put into the business can be sold onto the next enthusiastic entrepreneur who will carry on in your footsteps.
Many franchises can be run on a part time basis. Some franchisors expect you to apply full time commitment, however like many businesses, the business owner is in charge and has responsibility to ensure its success, but within reason, access to a more flexible lifestyle. You should make sure that you give the franchise your all before you attempt to scale back your hands on involvement.
Typically the average investment of a franchise is around £40,000. Some franchises can be invested in for under £10,000 whilst others may be in the six figure investment range. The cost of a franchise will vary depending on the type of business. Fast food franchises are usually amongst the higher end range, whilst vending and entry point franchises are usually at the lower end of the scale, increasing in price the more the franchisee takes on.
Fast food businesses are amongst the top turnover franchises and are generally regarded as highly profitable. However any business’s profitability will depend on the work and effort the franchisee puts in. The more you put in to franchise ownership, the more you’ll take out.