Investing in a franchise can turn the trauma of losing your job into the excitement of running your own business using a tried and tested format
Once you’ve recovered from the initial shock, redundancy can be the gateway to a new life. Many people dream of starting their own business and a redundancy payout invested in a franchise can deliver that.
Rik Hellewell, founder and managing director of oven valeting franchise Ovenu, says: “Many people find themselves redundant through no fault of their own. They possess an abundance of skills and experience that are an asset in running a successful franchised business.”
Franchisors do not usually require you to have previous experience in their particular industry, so you can change career - a huge benefit if you were made redundant because your previous sector is shrinking.
However, changing from being an employee to being self-employed is a big step. A franchise can make it easier, but there are several issues to think about first.
It’s not buying a job
People sometimes see investing in a franchise as like buying a job, but franchisors look for people who want to become their own boss, not employees. They want people with the ambition, commitment and drive to make a success of their own business.
Franchisors provide the business model, training and support, but want franchisees to ditch the employee mindset that involves having to be constantly told what to do and when. If that is something you prefer, franchising may not suit you.
Are you adaptable?
Franchisees have to learn new skills, as well as demonstrate a new attitude to work. If you have a tendency to be stuck in your ways, think twice.
Established franchises are based on a business model that has been proven to work, so you must be willing to follow it. That’s what you’re paying for and it’s the proven model that reduces the risk of your business failing.
On the other hand, if you’re the type that’s determined to do everything your way, you may be too entrepreneurial to make a great franchisee.
Things to consider
Corinne Mills, career coach and joint managing director of Personal Career Management, who offers advice at franchise shows to people considering becoming franchisees, says: “I see many people who have been made redundant and often they are most concerned about the change from an employee to being self-employed, though they are often excited at the prospect of running their own business.”
Before you buy a franchise, think carefully. Are you willing to invest the time and money required and can you live with the risk of self-employment? Even with a franchise, there’s some element of risk. Also, talk to your loved ones if it will affect them.
Identify your skills for franchising
For franchisors, the right attitude, enthusiasm and general business skills count for more than skills specific to a particular job or sector.
“Look at your transferable skills, which can be carried over from your job to your business,” Corinne says.
Franchisors commonly value:
- People skills. The ability to talk and build relationships with people. This is vital in franchising, as it’s the basis of sales.
- Communication skills. The capacity to explain your product or service to people and deal with questions and problems effectively.
- Numerical, written and IT skills.
“All these skills are transferable and in most jobs are used all the time, so we take them for granted and they become almost invisible,” Corinne says.
For prospective franchisees, it’s important to make them visible. Consider rejigging your CV with this in mind simply to demonstrate to yourself what transferable skills you have and you can use it when applying for franchise opportunities.
No franchisor will select you as a franchisee on the strength of your CV alone, but setting out clearly what you have to offer, with evidence, will help you in your meetings with them.
Find out what franchisors want
Research what franchisors look for in franchisees. Most do not expect you to have experience in their sector, though some do. Either way, they will be looking for business skills.
Karl Sandall, group chief executive director at TaxAssist Accountants, says: “You don’t necessarily have to be an accountant to join us, but most franchisees join with a recognised accountancy qualification and have a mix of industry and practice backgrounds.”
Franchisees who are not qualified accountants will come from senior management positions within the banking or financial services sectors and must possess good financial acumen.
Help making the change
Good franchisors know that swapping a regular salary for generating your own income takes some adjustment and will understand your concerns.
Janet Walmsley, franchise recruitment manager at pet food delivery franchise OSCAR, says: “We know it can be isolating going from a job, so we work with new franchisees to agree a behaviour plan.
“They set their own goals and decide the behaviours they are going to adopt to achieve them, then put a diary or structure in place to monitor them. If they don’t achieve them, it’s not a disaster as they can reassess them.
“What’s important is that they get used to not having a boss setting their goals. It’s about being their own boss and discovering their own motivation.”
Richard Brookes: TaxAssist Accountants
As a chartered accountant, Richard Brookes could have set up in business on his own, but he chose a franchise instead.
“I worked for two large multinationals for 20 years, but when the opportunity arose to exit my employer with a lump sum I decided it was time to work for myself,” Richard says.
He decided to use his accountancy skills and chose to invest in a TaxAssist Accountants franchise, which he launched in 2008.
“Running your own business doesn’t suit everyone, but owning a franchise in a successful network with a good franchisor provides great support,” Richard says.
“If I had decided to just be my own boss, I would have needed to buy things like technical support, systems, training and marketing support. Why not have them all under one roof as part of a franchise? It also meant my business grew much quicker than it would have done otherwise.”
Richard had funds from his redundancy but knew he needed more to allow for initial business development. He wrote a business plan and put together financials using a model provided by the franchisor and secured funding from NatWest.
“The challenges I faced were no different to those faced by any new business,” Richard says.
“Building a business involves more than just doing the work you are technically able to do. You have to look after your premises, finances and staff and in accountancy, there are constant legislative changes to understand. The support from TaxAssist head office has been phenomenal, especially during the pandemic.”
He advises others considering a franchise post-redundancy: “A quality franchise brings all the support you need under one roof and if you follow the franchisor’s model, statistically you have a greater probability of success compared to starting up alone. You should also be able to sell your asset for a better price when it’s time for you to exit.”
John Duggleby: Ovenu
John Duggleby, director of a York-based catering supplier, was made redundant in June 2020.
He says: “The only way of getting a job was starting all over again in a lower-paid position. I couldn’t afford that, so starting my own business seemed the ideal way forward.”
John has a wide range of skills, gained from a degree in business management and a previous job in IT. He also ran his own business as a cabinet maker and restored antiques before joining the catering sector.
John was attracted to oven valeting franchise Ovenu, which offered the chance to take over the reins of a well-established franchise from a franchisee who was planning on retiring.
“I have many skills that will help in this new venture, including previous business knowledge, experience in dealing with people and the patience, eye for detail and desire for excellence from my cabinet making days,” he says.
John could have started a business on his own, but says: “Any new venture carries a risk, but Ovenu provides the backing of a market leader with a recognisable and reputable brand and everything you need to get the business up and running straight away.”
He advises others facing redundancy: “A franchise offers an ideal opportunity, whether you have always wanted your own business or if you find yourself with few alternatives. You get a template for success, so you can take control of your own future.”
Rachel Knight: OSCAR Pet Foods
After 25 years working for a high street bank, animal lover Rachel Knight was used to a regular income. But when the bank scrapped her speciality - visiting farms to offer financial advice - she decided to take redundancy.
“Years working for a big company can mean you feel financially comfortable and protected,” Rachel says. “I was used to regular paycheques and bonuses, so I felt self-employment was too risky for me.”
While researching jobs with animals that also meant meeting people, she found the OSCAR Pet Foods delivery franchise: “I had been getting OSCAR deliveries of dog food for five years and the more I researched OSCAR, the more boxes it ticked.”
Rachel went on to invest some of her redundancy payout in an OSCAR franchise: “Being a franchisee combines the benefits of self-employment and a job.
“OSCAR supplies the products I sell, plus training, customer relationship management software, an accountancy package and support from head office, and there’s a network of other franchisees to talk to, but I’m responsible for my own business and can choose my own hours.
“Seeing my sales and customer numbers increasing is highly motivating and delivers a great sense of achievement. Because domestic pets are relatively long-lived, if you look after them you should soon build up a core of customers, which delivers a regular base income. Bear this factor in mind when choosing a franchise.”
Rachel advises others moving from employment to becoming a franchisee: “Build yourself a financial safety net before you start and patch it up regularly.
“Don’t forget that unlike some jobs, self-employment doesn’t automatically provide benefits like health and life insurance or a pension, so you need to buy those yourself.”
Six ways to protect your investment
Whatever size your redundancy payout, ensure it’s invested wisely when buying a franchise.
Paul Hansen from Hitachi Capital
Franchise Finance advises:
1. Research the total cost of a franchise.
You’re not limited to franchises that cost the same or are less than, your redundancy funds. You can invest in many franchises with just 30-50 per cent of the total investment and borrow the rest, subject to assessment and meeting a lender’s criteria. This way, a £15,000 investment could be sufficient to purchase a franchise that costs a total of £50,000.
2. Understand the full cost required.
The franchise fee may be only a portion of the overall costs. Consider VAT, professional fees, working capital and any premises costs.
3. Look at the returns the business is likely to provide.
Are they too low for you to live on? Speak to existing franchisees to understand how they performed. Seek appropriate professional help. A good business plan will help demonstrate viability.
4. Don’t invest all your payout in the initial franchise investment.
Maintain a contingency fund to cover unexpected expenditure or perhaps an enforced period of closure.
5. Draw up a household survival budget, so you know how much you need to earn from the franchise.
Include your earning requirement in the financial forecasts, as it could affect the working capital requirement.
6. Before investing redundancy cash in a franchise, discuss it with your family.
You’ll need their full support.
Linda Whitney writes about franchising for the Daily Mail, What Franchise and many other publications.