Franchising offers exciting opportunities if you’re seeking a different route to self employment, Jane Masih, managing director of Owen White Solicitors, says
Who could have predicted the seismic impact COVID-19 would have on many people’s working lives?
For some, one of the benefits of the lockdowns has been the time to assess the challenges and opportunities of self employment. The aftermath of the pandemic may prompt many to ask the question: if not now, when?
Franchising offers the benefits of being your own boss with the safety net of following a business system, know-how and brand provided by the franchisor.
What is a ‘franchise’? In this context, a franchise is a licence granted by one party, the franchisor, to another, the franchisee, to use the franchisor’s tried and tested business system, methods, experience and brand name. The licence is granted for a defined period of time and is to be operated adopting the franchisor’s policies, procedures and rules.
In return, the franchisee is required to pay an initial licence fee, together with the costs of training, the equipment necessary to operate the business, branded marketing materials and advice to launch the business.
Throughout the term of the franchise licence, the franchisee will pay an ongoing fee or royalty in return for support and advice from the franchisor throughout the term of the franchise.
The ongoing fee is usually calculated as a percentage of the franchisee’s sales, but for some franchise systems is a fixed fee.
In addition, the franchisee may be required to contribute to a central advertising fund operated by the franchisor and some other services, such as IT.
In 30 years of advising franchisees, I’ve come to the conclusion that successful franchisees, regardless of brand and sector, share some common qualities, including:
- A willingness to carry out comprehensive research into their choice of franchise and ask searching questions of the franchisor before signing the franchise agreement
- Access to the necessary funding to pay the initial fee and possession of sufficient working capital to support the business
- Understanding and accepting that a franchise business requires hard work and considerable effort from the franchisee
- An ability to follow the franchisor’s system and take responsibility to ensure their franchise is compliant with the system
- The realisation that the franchise is a business and not a job by another name
- A plan to build capital value for eventual exit from the franchise.
The franchise systems that offer success to a franchisee are to be found across a wide range of business opportunities and also have features in common, including:
- A willingness to invest in their franchise system to ensure it remains profitable for all participants
- Genuine interest in the success of their franchise network by providing continuous help and support
- Maintaining recruitment quality criteria as the network grows to ensure uniform standards of franchisees operating under their brand as far as possible
- Identifying franchisees struggling with their businesses at an early stage and offering realistic solutions while their remains value in the franchisee’s business.
Franchising offers exciting opportunities for those seeking a different route to self employment.
However, it’s important for a prospective franchisee to do their homework before committing to a legally binding contract and select a franchisor that demonstrates a genuine commitment to the success of the franchisees trading under its franchise brand.