Are you considering moving into franchising for the first time? If so, you’ll no doubt be keen to learn anything you can about how best to take advantage of all the opportunities, as well as how to avoid the pitfalls.
To give you a helping hand, we’re offering you the benefit of our experience in this FAQ guide to success. Covering everything from understanding the financial considerations to conducting market research, these FAQs tackle many of the crucial aspects at the start of the franchising journey.
Q: What’s the difference between buying a franchise and starting your own business?
A: At its simplest, it’s like comparing the concept of hitting the ground running with a standing start. An established and successful franchise organisation will already have tried and tested systems and practices in place that will reduce the risk of failure. Better still, they will help you avoid some of the basic mistakes that most business owners inevitably make when they first set out.
That’s not to say everything’s done for you as a franchisee. You’ll still need to find a way to outsmart your competitors in the local area. You’ll also be responsible for attracting customers and building brand loyalty. In that sense, even though you have the welcome safety net of supporting infrastructure, buying a franchise is surprisingly similar to starting your own business from scratch.
Q: How much should I expect to pay?
A: How long is a piece of string? If you’re looking to get on board with one of the big boys like McDonald’s and Burger King, then you can expect the costs to be as eye-watering as the potential rewards are mouth-watering. But there are currently around 48,000 different franchise businesses in the UK, ranging from dry cleaners to pest control specialists to couriers, and the cost to enter can vary tremendously.
You can expect to pay anything from £300 to £500,000 for an initial franchise fee, and then there will be other costs such as a one-off set-up fee, an annual royalty (usually a percentage of gross sales), as well as marketing and technology fees. These will be different for every organisation, and you need to make sure you’re fully aware of all potential costs before you agree to invest.
Q: How do you know which franchise to invest in?
A: There are a number of criteria you need to consider. For starters, you should think about practical considerations such as whether you want a business with an employee team or whether you want to work on your own. Do you want to be based at home or out and about, and how much time and labour are you prepared to invest in your own success?
To begin with, at least, it’s likely that you’re really going to have to put the hours in to build a successful business. So choosing a business in a sector you’re passionate about will help you stay motivated during those long evenings.
Q: What else do I need to look into before I invest?
A: The more you can find out beforehand, the fewer unpleasant surprises there will be along the way. Undertake some research on everything you can think of to do with the business that you’re considering joining. As well as checking out the franchisor’s financials, you need to have a proper understanding of their track record in recent years so you can identify any significant trends.
You also need to know what level, and what kind of support you’ll receive from Head Office, as not all franchises offer the same level of assistance. We’re talking about things like launch support, business guidance, marketing programmes and training modules.
Try to get to know the key individuals within the franchise as well as you possibly can. The franchisor should be a good role model and a useful source of knowledge, whenever you need it. As this relationship is key to your chances of success, it really helps if you like and respect the individuals running the business.
Last, but not least, you need to understand the marketplace, Try to establish what your future competitors are doing well, what they’re doing poorly, who their customers are and what could give your business the edge.
Q: Any other things I need to look out for?
A: Franchises are no different from any other business. When they’re endeavouring to attract investment, they’re always going to put their best foot forward. So, for example, in their marketing materials, the franchisor will tend to focus on the success of their top performers. That’s not surprising or unethical, but you need to try and find out what the performance averages are throughout the organisation as this will give you a better indication of the financial rewards you can expect, particularly in the early days.
Better still, ask for contact information of previous and existing franchisees who can talk about their experiences. Providing they have nothing to hide, the franchisor should be willing to share this information.
Q: What does a franchisor look for in a franchisee?
A: While most franchisors won’t insist on previous industry experience, they will be looking for prospective partners with a good general grasp of business. This is important because it will enable you to understand their model and replicate it successfully.
They’ll also be keen to find someone with a genuine passion for whatever field they’re in, as this will make it more likely that you’ll persevere if, and when, the going gets tough.
Q: What are my chances of success?
A: Ah.the most important question of all! The answer to this one largely depends on you and how much time and energy you’re prepared to invest in the business.
However, here are a few words of encouragement for you before you embark on your journey. According to a franchising survey, around 90% of franchisees reported trading profitably after just two years. You can compare that with approximately 50% of all independent businesses that will go bust within the same time period. The odds of achieving success would certainly seem to favour franchise holders.
