Michael Johnson, managing director of Card Connection, explains what a franchisee gets for their money
Purchasing a franchise is a big investment in terms of your time, financial commitment and emotional involvement. So you need to be sure you know what you’re getting in return for that investment.
The cost of buying a franchise varies significantly between sectors and the level of support, degree of brand awareness and relative stability and longevity of a franchise is different for each one. Some have been proven over many years, while others are in their infancy. These factors all contribute to the price tag of the business. So what else are you paying for?
System and infrastructure
At its most basic level, you are buying into a system. You are stepping straight into an established infrastructure with, for example, a tailor-made IT system, human resources staff, accounting set-up and marketing department, who are all experienced in the industry.
This set-up will have been proven by the success of other franchisees many times over and it’s access to this know-how and infrastructure that is potentially of most value. Therefore, although not foolproof, the franchise should, with the right training and commitment, enable you to be up and running with a viable business in a relatively short period of time.
Initial and ongoing training
The right execution of a brilliant business idea is key so, as part of your franchise agreement, you are paying for training too. The franchisor will have spent time developing a detailed franchise manual that sets out procedures in order to make the process of starting out and running your franchise as smooth as possible.
This will be combined with hands-on training, more than likely at head office, plus learning practical skills in the field. Regardless of your background, your franchisor will help you develop all the skills necessary to get started. Ongoing training is usually also provided.
If your chosen franchise supplies a product, the franchisor will have spent time sourcing the best and most cost-effective components and developing the offering for you.
At Card Connection, for example, we have an in-house design department and staff dedicated to managing contracts with various suppliers such as printers, so we can supply the best quality greetings cards and display equipment at the best prices to our franchisees.
This is something that can only be developed over time and is an important element when starting out in franchising. If your customer base is aware of your product and service and has positive associations with it, you are well on your way to securing sales.
On the other hand, trying to sell a service or product from scratch, however brilliant it may be, is always much more challenging and the reason why so many start-ups fail within their first year. Buying into a franchise means you are able to take advantage of brand awareness, which has been built up over a sustained period of time.
Existing or accessible customer base
Winning new business is said to be seven times more difficult than upselling existing clients. In addition, an existing customer base enables you to earn money from day one. Therefore, if you’re buying a resale franchise, you are buying into an existing customer base that is a highly valuable asset. For virgin territories, the franchise needs to demonstrate how you will access a potential customer base.
This will be related to the demand for your product or service, based on levels of brand awareness nationally.
Franchisors usually have staff dedicated to helping franchisees develop their customer bases. At Card Connection, we have a team of franchise development managers, who spend most of their time on the road helping franchisees grow and secure new accounts.
At head office we also have staff focused on developing and managing relationships with around 100 national retail accounts to ensure our franchisees continue supplying greetings cards to big names in the industry such as Costcutter, WHSmith motorway services, Nisa, BP and SPAR.
So far, your franchisor has provided the business idea, trained you, supplied a product your market is already familiar with and given you access to a ready customer base. It will also be supporting you throughout your life as a franchisee.
This will be through ongoing training, being at the end of a phone if you have questions, guiding you through processes, arranging franchisee conferences and enabling you to meet other franchisees within the company. This support network is essential in order for you to remain motivated and help keep you on the path to success.
On the face of it, the cost of a franchise may seem a high price to pay to buy a business. However, you are far more likely to see a return on your investment with a franchise than starting a new business alone. This is because you are buying into a proven model, as well as the established infrastructure and dedicated support provided by your franchisor.
Yes, you must do your research and understand precisely what you’re getting as part of the deal, yet at the same time this will reassure you how much effort franchisors put in behind the scenes in order to help give franchisees every chance of success in their businesses.