UK Business Franchise Information

• What is a Business Franchise opportunity?
• Why do Companies Franchise?
• What are the Benefits for the Franchisee?
• Which UK Franchise Do I Choose?
• What About Me
• Why do I need Legal and Accounting Advice?
• Where Can I Get Help?

The dictionary defines it thusly :
fran-chise noun

• Authorisation granted to someone to sell or distribute a company's goods or services in a certain area.
• A business or group of businesses established or operated under such authorisation.

In plain language this means the granting of a license by one person (the Franchisor) to another (the Franchisee), which allows the Franchisee to trade under the trademark or tradename of the Franchisor, making use of a package, containing the elements necessary to establish a new business and run it with ongoing assistance from the Franchisor. Franchising is basically the permission from one person to another entitling them to use the Franchisor's tradename, trademarks and systems in return for an initial payment and ongoing regular payments.

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The essential principle is quite simple, some companies choose to grow by granting a license to others to sell their product or service rather than rely on their own organic growth. The advantages to the Franchisor are clear.

For a lot of companies, selling products or services, franchising provides the opportunity to expand without outlaying enormous amounts of capital. By replicating the original business model the core business benefits from duplicated efforts rather than relying on a single outlet. Consider a fast food outlet with only one store, they have spent so much money setting up the system that it is almost a waste not to use the process again, so they sell the rights to the system and name to benefit others starting the same business and in return receive ongoing royalty style payments. This same theory allows all the businesses in the group to benefit from the purchase power allowed the economy of scale.

One of the greatest advantages to a Franchisor is that they get 100% commitment from their Franchisees who have a stake in the business, as opposed to regular staff or managers who simply work for a salary and may be less motivated. Franchising enables them to utilise the entrepreneurial skills of the Franchisee network to achieve better results than might otherwise be achieved.

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First of all the Franchisor must understand that a Franchise is not a quick way to make money, but rather it is a sensible way to establish and grow a new business where you can get on board people that are equally committed to the business success.

Compared to starting your own business from scratch franchising can provide a relatively safer route into self employment. The Franchisor has established a tried and tested path through the maze, and will have eliminated many of the mistakes that are often made when starting a business. It is this experience and system that you are paying for when you buy a Franchise.

The real benefits from Franchising include :

• You don't have to come up with a new idea.
• You don't need to design everything from scratch.
• Someone else has designed and tested the process.
• The Franchisor has an interest in getting you up an running and should support you.
• Established Franchises often run national advertising and have an existing presence in the market.
• Franchisors normally offer training in all skills related to their business.
• Customers can rely on the knowledge that, although you are running your own business, your procedures and service are based on an established and possibly national standard.
• Economies of scale assist in lower overheads.

Apart from that, research has shown that of all businesses starting today, only 20% will still be trading in 5 years time. With franchising these figures are reversed. This is because with franchising you are buying into a business that is already operating. The Franchisor will have made mistakes along the way and will have learnt from them. This knowledge is passed on as part of the Franchise system. It enables you to start your business at a much higher point on the learning curve.

From time to time you are going to hit problems. Your Franchisor should be able to provide you with the necessary technical support. However it is invaluable to be able to talk things through with other Franchisees, or the support team who may well have dealt with the same problem recently.

As a Franchisee you must remember that, although your business outlet is owned and operated by you, the Franchisor retains control over the way in which products and services are marketed and sold and controls the quality and standards of the business. This is crucial to the success of Franchises in that the consumer public must have the assurance that each outlet, operating under the same brand name, will deliver the same services and standard of service.

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When examining Franchise opportunities it is important to establish exactly the nature of the role that you as a Franchisee would be required to carry out. Sometimes it is possible to dismiss an opportunity too easily because the product or service is confused with the Franchise concept. For example, the role of a Franchisee taking out a cleaning Franchise is to manage the business and take on new customers, but not necessarily to clean carpets.

It is also important to understand that you may not be acceptable to a company that operates in a field where you have previous experience. The Franchisees role is much more management and selling based. Here are some questions to consider when examining various Franchise opportunities :

• Does the product or service interest you and fire you with enthusiasm?
• Does the company have name awareness?
• Has sufficient market research been carried out?
• Does it have a successful operation and marketing system?
• Is it a viable proposition?
• Do you understand the role you will play?
• Does the role match your skills. If not does the Franchisor provide training?

Above all make sure you talk to Franchisees who are already operating the business. They will normally be only too pleased to help as they were in your situation once. When you take up a Franchise you are entering in to a long term partnership with the Franchisor It is therefore vitally important to check the background and business performance of your prospective partner. You need to make an informed decision so be prepared to pay for professional advice from Franchise Lawyers and Accountants, you will be making a decision that you will have to live with for some time.

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Firstly, establish what you want to do. Do you want to work in an office, from home or from a van? What did you enjoy most about previous jobs? Try to establish what business types really interest you. If you are doing something that you enjoy you will stand a far better chance of success. At this stage, when you are just commencing your search, it is important to keep an open mind and establish the basics.

• What are your motives for becoming self employed?
• How motivated are you?
• What business and inter-personal skills have you got?
• How prepared for you being self employed are your family?
• How much money do you actually need to earn each month?
• Do you have sufficient funds to meet cash shortages?
• What you have enjoyed most about previous jobs?
• Are you prepared to follow the Franchise system properly?

When deciding whether a Franchise is right for you, you must look closely at yourself. At your commitment, your expectations and your qualities. Then and only then can you make realistic judgements about a Franchise that will suit you.

Franchising is not a get rich quick scheme and it is not an easy option, you will need to invest hard work, as well as time and money over long periods of time as and when the business demands. You will take your work home with you and you may take your family to work with you. Either way the stresses and strains will be as much your family's as your own. It is your business and its success or failure depends directly on your efforts.

You must take responsibility for checking the financial projections, be sure you know the basis for those projections, be sure they apply sensibly to the particular territory you are considering. Ensure you check them against the actual experience of existing Franchisees. Do not base your investment on what you hope will happen, base it on a realistic assessment. If the difference between profit and loss hinges on a 1% point on interest rates then your business is at risk, don't be an optimist. Many Franchisees have risked their home, savings and family relationships by investing in business, consumed by dreams of becoming successful business owners. The secret is to err on the side of caution and do your homework.

Looking realistically at your own worthiness for any one Franchise proposition you will inevitably discover that you cannot offer every bit of knowledge, experience and financial clout that would make you the ideal candidate. Do not worry. Nobody is perfect and if franchising is about anything it is about training people with no experience of, for example printing, to manage a printing business. You should see in any Franchise proposition a well organised training programme that will fill in the blanks you recognise in yourself.

It is often said that franchising is running your own business, but not on your own. It is true. You should get lots of support from your Franchisor you are paying for it after all. But you will also have to do many things in the Franchisor's way whether you like it or not. He has after all paid to develop the most successful way of running his business format. Independence you will need a plenty - but bull headedness you will not need.

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Purchasing a Franchise is an important financial decision that could drastically affect your life. You should not necessarily believe a glossy brochure but instead seek independent, professional advice. You should always consult a Solicitor who specialises in Commercial and Franchising Law. A specialist Franchise lawyer will check out many aspects on your behalf from studying the Franchise agreement to checking through tenancy agreements. Whilst most Franchise Agreements are, and should be set in stone it is important that you understand fully the Agreement that you are going to sign and the obligations and restrictions that are contained therein. Most Agreements and most Franchisors suggest that you take legal advice.

The same is true for the accounting, you need to make sure that the projection figures you have been provided are realistic and do not contain errors or omissions. Even if you think you can work with the numbers yourself it is wise to engage the services of an Accountant who is familiar with Franchise operations and can spot something that may be missing. Also, objective third party advice is always beneficial in making important decisions as the Accountant will have your interested at heart and not be clouded by emotional influences.

Don't cut corners, always seek professional advice.

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The best place in the UK to start looking for professional help and support is the BFA (British Franchise Association) whose website is : www.british-franchise.org.uk

In addition, there are many resources on the internet to help you learn about Franchising. We have also created a centralised resource for Online Discussion about all kinds of self employed topics where people, such as yourself, can learn and exchange ideas with other like minded people.

Visit our Discussion Forum and see what you can learn.

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