The changing face of franchising: what would-be franchisees need to know

2020 has been a year of transition for the franchise industry and prospective franchisees must adapt to this new normal

The face of franchising has changed. The ‘new normal’ is bringing opportunities in sectors that are surging now, but it also means other sectors are a less attractive option - at least in the short term. How do you know which is the best way to go?

First, be assured that there is no need to abandon your plans to start a business by investing in a franchise. The franchise sector as a whole is known for weathering economic storms well because an established franchise will have been tried and tested already.

Franchisors have experience of choosing the best places for outlets, the franchisees most likely to succeed and the products and services that sell well. Meanwhile, clever franchisors have been reexamining their business models and making changes to ensure they remain successful.

That means aspiring franchisees need to evaluate franchises more carefully. They must also evaluate themselves, as redundancy - or the fear of it - has driven more individuals to apply to be franchisees, so franchisors can afford to be more choosy.

Here are the new questions you must ask before you invest in a franchise now:

Which sectors are most likely to thrive?

Franchises in sectors that stand to gain from changes in customer behaviour.

These include food and parcel deliveries, driven by the huge increase in online ordering; online tutoring, boosted by parents desperate to ensure their children keep learning; cleaning, both commercial and residential; and website development, as many small businesses move online or increase their web presence. There are many more.

For example, the personal care sector has been boosted by an increase in demand. As have service franchises, where social distancing can easily be maintained between the franchisee and customer.

These are likely to be more popular among prospective franchisees and include outdoor franchises such as garden maintenance, mobile tree stump removal, gutter cleaning and estate agent sign erection services.

What about sectors facing more challenging times?

Some hospitality brands, especially those that rely for large parts of their income on dining in, will be finding times hard.

Nick Williams, managing consultant at Ashton’s Franchise Consulting, says: “They face having to meet the costs of premises, employees, food supplies and in some cases shorter opening hours at a time when people are more reluctant to eat in anyway.”

Prospective franchisees need to ask what they are doing about these issues. They also need to look carefully at any franchise that depends on bringing together groups of people indoors, such as gyms and some sports and children’s franchises.

Which franchise brands have best adapted their business model to succeed in the new environment?

Many franchises have had no option but to adapt the way they do business. In some cases, the changes have been so successful that they’ve resulted in a new client base and a stronger business model. Rather than just surviving, these franchises are thriving.

Kevin Haswell, managing director of mobile coffee and snacks delivery franchise Really Awesome Coffee, says: “Our franchisees had mainly targeted people working in offices, but in lockdown, of course, many people swapped to working from home. So we had to think fast.

“We set up a new online franchisee forum via Zoom and discussed ideas about ways we could adapt to the new situation - and the franchisees came up with some excellent ideas.”

Really Awesome Coffee refocused its service to target essential workers in places such as schools, hospitals, doctors’ surgeries and care homes and then started targeting people working from home.

“We supplied social media content to our franchisees about our home delivery service and encouraged them to share it locally and talk to friends and neighbours about it - and it worked,” Kevin says.

The franchise’s social media reach grew by over 700 per cent and it’s still doing home deliveries, as well as returning to business and industrial parks where possible.

“We would probably not have made these changes without the pandemic, but we’ve emerged with a stronger, more flexible business and launched five new franchises,” Kevin says. “The lockdown changes have delivered a long-term benefit.”

How long will the business boost last?

Look for evidence that the increase in business post-lockdown will be more than just a short-lived bounce back.

Rosalyn Hastings, expansion manager for the Schmidt Kitchens and home interiors franchise in the UK, points out: “A survey by the Institute of Directors shows that 74 per cent of 1,000 firms said they planned on maintaining homeworking even after the pandemic.

“People now need multifunctional homes that provide an office, a study space for children, a workshop and a kitchen suitable for home baking.”

During lockdown Schmidt promoted its Creativ’Box online design tool, which allows people to design and order home makeovers, including home offices, kitchens and bedrooms, from their sofas.

It’s led to record months for Schmidt’s franchisees: August sales figures were up 139 per cent on August last year, September figures up by 146 per cent and footfall in its 28 UK showrooms increased.

Rosalyn expects the move to multifunctional homes to drive permanent increases in sales for the franchise network.

Are there any new incentives to attract franchisees?

Lockdown saw the launch of a ‘No Money Down’ offer by the Wilkins Chimney Sweep franchise, designed to help those who had been made unemployed, redundant or seeking a career change as a result of the pandemic.

Darren Taylor of Taylor Made Franchising, which owns Wilkins Chimney Sweep, says: “The scheme means the initial investment of £13,000 can be paid off over four years, with the first instalment not due until September of your second year.”

Razzamataz is giving stage performers whose careers have been devastated by COVID-19 the chance to start their own theatre school without paying the usual franchise joining fee of £7,995.

Denise Hutton-Gosney, founder and managing director of Razzamataz, says: “Theatres are closing and many employed in performing arts will be forced to look for alternative employment, so we will lose many talented people forever.

“We have waived the normal franchise fee to make it as easy as possible for suitable candidates to start their own theatre school with a Razzamataz franchise, regardless of their financial position.”

The number of prospective franchisees is soaring

People made redundant - or even just fearing the possibility - often decide to take the opportunity to open their own business.

Meanwhile, many people with existing businesses are choosing to use a franchise as a way to diversify, reasoning that it’s less risky than going it alone. Both trends mean competition for franchises will be higher.

Jon White, UK country manager for InXpress, the logistics management franchise, says: “We’ve been inundated with prospective franchisees. We had 600 new enquiries in the lockdown period alone and currently have nearly 70 prospective franchisees going through our filtering process.”

Anyone applying to be a franchisee now must be extra mindful about meeting franchisors’ requirements.

Can I still get funding?

Yes, says Andrew Brattesani, head of franchising at HSBC.

He adds: “It’s possible to get funding, but naturally the banks will be even more careful than in the past to ensure prospective franchisees meet all the criteria.”

John and Maria Pritchard, Really Awesome Coffee

How being pulled over by the police helped boost their franchise

Really Awesome Coffee franchisee John Pritchard was driving his delivery van along a quiet Scottish road when a police car started trailing him.

“I was doing nothing wrong, but they were getting increasingly close,” recounts John, who owns the Lanarkshire franchise with his wife Maria.

“Then suddenly a police van joined them and started giving me the blue light. I pulled in and they stopped behind me. I was shaking as I was surrounded by about eight policemen. When I lowered the van window, they asked: ‘Can we have a coffee?’.”

John served them all at the roadside and they left happily, but not before asking him to pop into the police station to supply some more coffee whenever he could.

“When I called the franchisor to tell him I was stopped by the police, he was shocked - until I told him they were just looking for some coffee,” John says.

The incident helped John and Maria, and the Really Awesome Coffee franchise network, to flex the business model.

“We started delivering to police and ambulance stations, hospitals, nurseries and care homes,” John says. “We started home deliveries too, promoting our service on social media with help from head office.

“We went from 50 followers on Facebook to 1,600 and as word got around on the streets neighbours would come out into their gardens for our coffee delivery and make it a socially distanced occasion.”

As lockdown eased, the percentage of home deliveries fell, but with the arrival of the second wave of COVID-19 home deliveries rose again to 60-70 per cent in October.

“We’re also seeing many requests for ‘treat days’, where employers provide weekly coffee and treats to employees,” John says.

“The changes have created a stronger business for Maria and I. In February we had one delivery van and now we have three, so the business has grown too.”

Christopher Chubb, The Wheel Specialist

Why an established business chose to expand with a franchise

Christopher Chubb, his dad and brother own an automotive body shop in Birmingham and when they decided to expand into alloy wheel refurbishment they chose to do so with a franchise.

Christopher says: “We chose The
Wheel Specialist franchise rather than expanding our business alone because that can take years of hard work building up a customer base.

“The Wheel Specialist’s central website lead generation and CRM system would be a far quicker way to gain customers, so we became franchisees in July 2019.”

The family now run the franchise alongside their existing business.

“It was full on from day one,” Christopher says. “We were getting 14-20 leads a night. Even now it’s 12-15 some nights and about 25 on a weekend.

“We were closed at the height of the lockdown, but The Wheel Specialist’s central internet booking system stayed up and running and many people used their time at home to make bookings for wheel refurbishment.

“As soon as lockdown lifted, we had a huge surge in business and we expect an ongoing increase as those customers recommend our services.”

Christopher and his family had never been franchisees before, but he now rates franchising as a good way to add to an existing business.

“The Wheel Specialist is a well known brand and its lead generation system saved us lots of time and work,” Christopher says. “I’ve learnt a lot from them about sales, marketing, work scheduling and how to operate an efficient system to grow your business.

“The franchise package includes the systems and training needed to operate it successfully. Head office is always there to answer your questions and you can call on the experience of more established franchisees in the network.”

Matt Strutt, InXpress

Being made redundant has made my life better

After a 15-year career with a car rental company that culminated in the post of EMEA head of sales and development on a six-figure salary, Matt Strutt was made redundant as a result of the pandemic.

Undeterred, he’s just bought InXpress Gatwick, becoming the global shipping solutions specialist’s 100th UK franchisee. Matt says: “I wanted to make sure my four children were going to be okay, as well as finding a business I could pick up quickly. “My particular strengths are customer service and sales.

InXpress is built on this, which was also a big motivator for me to invest. I’ve learned new techniques for my new business and can’t wait to start.

“Although I was made redundant - an incredibly painful time - I’ve since realised it has made my life better. There’s no way I would have taken the step out of a well-paid job otherwise. It would have been too risky, even though I always wanted to run my own business.

The author

Why an established business chose to expand with a franchise Linda Whitney writes about franchising for the Daily Mail, What Franchise and many other publications