While buying a franchise doesn’t guarantee a favourable outcome, pick the right one and it should radically reduce the odds of failure
At the start of every year, there’s a renewed interest in franchising. Despite the challenges of COVID-19 and Brexit, 2021 is no different.
Buying a franchise is not a guarantee of 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 the business model, documented the relevant systems and procedures and then, for a fee and an ongoing royalty, will provide you with comprehensive training, ongoing 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 own your own business why not just start one and save yourself the upfront fees, ongoing royalties and restrictions? It’s a good question and one with multiple parts to the answer.
In 2018, NatWest and the British Franchise Association produced their most recent report on the health of the UK franchise industry. It revealed the sector’s £17.2bn turnover and the fact that 93 per cent of franchisees reporting profitability, a third operate multiple units, 18 per cent are under 30 and 30 per cent are females. Given that a substantial number of start-ups close their doors before the end of their second year, 93 per cent of franchisee-owned units reporting profitability is an impressive statistic.
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 950 franchises operating in the UK. Choosing the right one takes time, planning, research and honesty from everyone involved, including you, the franchisor and even your partner or family.
Whichever sector you choose, one key part of your due diligence will be attending a discovery day, which is likely to be online for at least a good chunk of the year.
These early meetings are about fact-finding, but also about building mutual trust. You’re entering into a business partnership, which is expected to last a minimum of five years. It’s therefore important that you like, respect and trust the franchisor and vice versa.
Don’t be afraid to ask searching questions, either. A franchisor should be able to answer them all, unless there are valid reasons, such as company confidentiality, which might preclude disclosure of certain information.
Talk to franchisees
Also, while it will be trickier to do this year, speaking informally to existing franchisees about their experiences is invaluable. But be respectful of the franchisor’s guidelines - they are likely to want to at least know you are semi-serious before they let you disturb their franchisees at work.
Every franchisor and franchisee will have their own story to tell about how they’ve coped in the last 12 months and the changes they’ve likely had to make.
One thing is almost certain though: they will all feel lucky to have been part of a franchise network rather than left alone to fend for themselves. There’s a lot of strength in numbers and in shared experience. Remember, franchising is the ultimate opportunity to be in business for yourself, but not by yourself.
Suzie McCafferty is CEO of franchise consultancy Platinum Wave.