If you’re looking to step away from employment and take on the responsibility of being your own boss, then you’ve likely heard of, or will hear of, the term “franchising”. If you’re looking to be your own boss, there are several different routes you can go down, but the main two are starting up a business yourself, and investing in a franchise.
What is Franchising?
In the context of entrepreneurship, business-format franchising is where an established business expands their reach, by allowing other entrepreneurs to trade as their business. The two primary parties involved in franchising are the franchisor and the franchisee. By investing in a franchise, many of the risks of running a business are eliminated. This is because the franchisor has made mistakes, and worked around these and implemented changes to ensure the success.
The franchise business will follow a structure which is simple to replicate, allowing for consistent expansion through franchisees.
What is a Franchisor?
The franchisor is the party that owns the intellectual property of the business being franchised. The franchisor owns the business and makes the initial decision to franchise the business, by granting the rights for franchisees to trade under the franchisor’s brand. The franchisor will go through a considerable amount of work to set up the franchise and ensure it is successful. Part of setting up the franchise will include establishing a Pilot Franchise.
The franchisor will be responsible for delivering brand positioning, group marketing and onward development of the business. This might be through research and development of new products and services, delivered through franchisees. The franchisor will also be responsible for profiling and recruiting new franchisees. But what is a franchisee?
What is a Franchisee?
The franchisee is the party investing in the franchise. If you’re looking to be your own boss and buy a franchise, then you’ll be the franchisee. This could be a local area franchisee, or a master franchisee, but the definitions for master franchising are out of the scope of this article.
The franchisee will purchase the rights to trade as the franchisor’s business. This will usually be called a license fee, a franchise fee or part of an initial investment. The investment which the franchisee pays will often cover aspects such as startup equipment, training, support and rights to trade. Ongoing, there might be a royalty fee or management service fee to pay, because this will often cover ongoing marketing, support and R&D.
Similarly to the franchisor, the franchisee also has responsibilities. It is important that the franchisor’s rules and operations manual is followed, so that the entire franchise network deliver the same message.
What is a Pilot Franchise?
Whilst not compulsory, a pilot franchise is strongly advised. A pilot franchise enables the business owner to set up a first franchisee to determine whether franchising is feasible. Once the franchising documentation has been compiled, such as the franchise operations manual, the franchise can be tested through a pilot operation. Assessing the success of the pilot franchisee, changes can be made to the business, so that future franchisees can also trade successfully.
Why Invest in a Franchise?
There are many benefits associated with franchising, but as with anything, there is still the risk of failure. But as we’ve discussed, franchising cuts out a lot of the risks. If you can see yourself running your own business, then franchising is a fantastic route to go down.
When starting up your own business, you’ll be starting from scratch. You’ll be making mistakes, many of which will cost either time and/or expense. But with the franchising model, you’ll be benefitting from training, support and a proven brand.
Luckily for many, there are already a hugely diverse range of franchises out there. Most businesses can actually be franchised in some form. If you have a passion for customer service, then maybe a pet franchise could be for you. Or if you have a passion for food, then there are a range of food franchises out there. One of the reasons many people start up a business themselves, is because they are unaware of the franchising concept, or feel they can go it alone! However it’s important to emphasise that by going it alone, you won’t have the training, support and help that you get with a franchise.
How Much Do Franchises Cost?
This is an impossible question to answer. Because franchises can include absolutely anything in the way of support, equipment and marketing, franchises could cost anywhere from £0 right into the millions. If you’re looking at a simple vending franchise, the investment could be anywhere down to less than one thousand pounds. You’ll be buying some initial stock, some machines and the rights to trade. From there on, your responsibility would be building clients and restocking machines.
However higher end franchises such as restaurants, will in most cases, require store fitout. From ePOS systems to customer seating, and depending on the credibility of the brand, investment for higher end franchises could be upwards of £200,000.
Franchising is a fantastic way to own your own business. One of the myths of buying a franchise is that you need experience, and that’s simply not true. Franchisors will provide training and support in aspects such as finance, marketing and recruitment. Speak to the franchisor to decide whether a franchise is the right option for you! The opportunity to meet and speak with franchises presents itself at franchise discovery days and exhibitions, as well as through the contact forms on this website. Take the next big step in your career with franchising.