Becoming a franchisee can improve your odds of start-up success, Suzie McCafferty, managing director of Platinum Wave, says
Buying a franchise is not a guarantee of business success, but pick the right one and it should dramatically improve your odds.
Why? In a nutshell, someone has already built a viable business, created a strong brand, proven their business model, properly documented all the relevant systems and procedures and then, for a fee and an ongoing royalty, will provide you with comprehensive training, support and everything you need with which to replicate their success in a new location.
That’s the theory of course, but if you want to have your own business, why not just start one and save yourself all those upfront fees, ongoing royalties and restrictions? It’s an excellent question and one with multiple parts to the answer.
In 2016, NatWest and the British Franchise Association produced their most recent report on the health of the UK franchise industry. Given the painfully high failure rates for independent start-ups, the report makes attractive, if not essential, reading for anyone considering going into business for themselves.
Here are some of the highlights:
- The contribution of franchising to the UK economy is £15.1 billion, an increase of 46 per cent over the past 10 years.
- The number of franchisee owned businesses has increased by 14 per cent in two years to 44,200.
- The total number of people employed in franchising in the UK is 621,000.
- A record 97 per cent of franchisee owned units reported profitability.
Given that a substantial number of business start-ups close their doors before getting anywhere near their fifth year, 97 per cent of franchisee owned units reporting profitability is a staggeringly impressive statistic.
Choosing the right franchise
Franchising is all about the replication of a successful business, but how do you know which one is right for you?
Figures vary, but it’s widely accepted that there are at least 900 franchise brands across the UK. Some of these will be excellent, some of them won’t.
Choosing the right one for you takes time, planning, research and honesty from everyone involved: you, the franchisor, even your partner or family. So while the banks can all supply you with a list of great questions to ask a prospective franchisor, I think it’s crucial to start with some questions closer to home:
- What are you good at?
- What do you enjoy doing?
- What kind of environment do you like working in?
- Do you like building teams or working alone?
- How much money can you invest?
- How much money do you need to make in return?
- Are you prepared to put the work in?
- Are you able to commit long term?
- Do you just want to be your own boss or are you driven to build a successful business?
- Are you a born entrepreneur or are you prepared to follow a strict model dictated by someone else?
That last question is a particularly important one. We meet prospective franchisees all the time who profess to be filled with entrepreneurial spirit.
But here’s the thing to consider: if you want to own a fast food business, for example, and want to be able to give it a great name, design the menu, create a logo, choose the staff uniform and set your own prices, then you will need to start your own business. Becoming a franchisee will not tick your boxes.
As I said at the very beginning, the reason you invest in a franchise is to get training, ongoing support, a proven business model and marketing systems to follow and a brand name to operate under - ie, a ready made business in a box complete with instructions.
Selecting a sector
Assuming you’re happy to embrace the notion of following a system, there’s the question of what kind of franchise you should consider. Many people look for something completely different to what they may have spent their career to date doing.
For example, you might think that what you really want to do is get outdoors and build a business that keeps you active and healthy and enables you to learn new skills. You could look at a garden maintenance franchise.
You might want to put your management skills to the test in a brand new sector, so perhaps a food franchise could be the way to go. Or if you simply want to keep more of the money you make for yourself and be your own boss doing what you know, there are plenty of white collar franchises that will suit you perfectly, like accountancy, recruitment or business consultancy.
Whichever sector you choose, one key part to your due diligence process will be attending a discovery day. It represents a great opportunity to meet the franchisor, the support team and often existing franchisees, as well as gain a more thorough understanding of the franchise opportunity and the culture of the business.
Discovery days are also about building mutual trust. You are entering into a business partnership, which is expected to last a minimum period of five years. It’s therefore important that you like, respect and trust the franchisor and it will be looking for those qualities in you.
Don’t be afraid to ask searching questions when you’re there either - the franchisor should be able to answer them all, unless there are valid reasons such as company confidentiality, which would preclude disclosure of the information.
Speaking informally to existing franchisees about their experiences is invaluable, but be respectful of the franchisor’s guidelines - it’s likely to want to at least know you’re semiserious before it lets you disturb its franchisees at work.
Also, it’s unrealistic to expect everything to be 100 per cent perfect right across the network, but if anything negative raises concerns it may be worth further investigation. The bottom line is to trust your instincts and walk away if it doesn’t feel right.
Take all the advice you can, but it’s far better to consult organisations like the British Franchise Association or check out the many articles in Making Money or What Franchise magazines, rather than be turned off franchising by the bloke in your office who once heard a story about a friend of a friend of a friend who bought a franchise back in the eighties.