Is franchising the right option for you?

If you want to be in business for yourself, but not by yourself, invest in a franchise, says Nigel Toplis

Franchising is neither an industry in its own right, nor even a business. It is though one of the fastest growing and most consistently successful methods for distributing products and services. It’s a crazy mixture of conformity and individuality that combines the best elements of big business and small operations.

To be successful, a franchisee must comply with the franchise system, yet such compliance will enable the franchisee to achieve a greater level of fulfilment and financial independence.

Willingness
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There is no template for being a successful franchisee, except perhaps the following:

* A willingness and propensity to work hard.

* An acknowledgement to follow and adopt the franchisor’s system.

* A desire to succeed.

Successful franchisees have possessed experience ranging from cattle ranching in Patagonia to being a greengrocer in Chiswick and a flight attendant on British Airways.

The phrase ‘in business for yourself, but not by yourself’ captures the essence of franchising. If you open your own business you are responsible for absolutely everything, whereas with a franchise the franchisor offers experience, know-how, proven operation methods, marketing tools, sales training and technical guidance, as well as a corporate identity, trademarks and the all important brand.

Nobody wakes up in the middle of the night and exclaims: “I must become a franchisee”. Rather, people come to the conclusion over a period of time that they want to own their own business for a host of different reasons, including:

* Stretch personal ambition.

* Rewarded directly for your efforts.

* Build a valuable capital asset.

* Greater job security.

* Learn new skills.

* Work with your family.

* Be a pillar in the local community.

With franchising, you get all the benefits of ‘corporate’ head office support and you’re part of a network of people who can share best practice, advice and insights. The franchisor is there to provide both guidance and advice, but also training, marketing tools, programmes, collateral, procurement (if relevant), plus technical and sales support, throughout your period in the franchise.

Advantages
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So apart from gaining from the experience of those who have gone before, what are the advantages of becoming a franchisee? Here are 16 specific benefits:

* Proven business model. The franchisor will be able to demonstrate that other franchisees are trading successfully through following its system.

* Tested concept. The business model will have been tried and tested to ensure it performs.

* System and tools. One of the most important benefits is access to a proven business model and the tools created to support the system.

* Ongoing support. A good franchisor will be available to offer guidance, advice and help throughout your tenure as a franchisee and will have personnel and systems to support key areas of the business.

* Investment in research and development. As an independent business owner, you may not have the funds, time or skills to research new opportunities, nor to launch new products. A good franchisor can and will.

* Training. New techniques, markets and products may require additional training. If you employ staff, they will need training and you may at times need a refresher course as well. A franchisor can provide all of this.

* Brand identity/investment. It is in the interest of the franchisor to build the brand and invest in its development and growth. As the brand and number of franchisees grow, the greater the benefit for each individual franchisee.

* Economies of scale. A franchisee can benefit from the franchisor’s group purchasing power, enabling franchisees to have a lower cost base.

* Sales and marketing. Getting access to sales and marketing concepts, tools and collateral - which are regularly updated, improved or added to - is one of the major benefits of being a franchisee. As an independent business owner, you will almost certainly not have the time or resource - or maybe even the skills - to develop these yourself.

* Improvements to the system. It is in the interest of the franchisor to continuously improve the system, which of course benefits all franchisees.

* Funding. Franchisors should have good relations with all banks and, as such, it is often easier to get funding as a franchisee than as an independent business owner.

* Formal business planning. Often the franchisor will act as a ‘non executive director’ of the franchisee’s business and work with the franchisee on regular business planning.

* Best practice. One of the most significant benefits of being part of a franchise network is the opportunity to share best practice with other franchisees.

* Management Information. It is often said that information is king in business and certainly the opportunity for the franchisor to collect, collate and distribute management information on anything from new market opportunities and levels of marketing activity to financial benchmarks is a huge benefit to franchisees.

* Exit route planning. Few franchisees stay in the business for the whole of their lives. The franchisor will have experience in this area and can provide a route for the franchisee, though it is not the requirement of the franchisor to sell the business on behalf of the franchisee.

* Leadership and vision. The franchisor will provide leadership, vision and strategy for the growth and development of the brand. Franchisees may not agree with every nuance of the vision or every aspect of the strategy, but nevertheless by following the leadership they will ultimately benefit as the brand becomes stronger and more robust.

Disadvantages
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Looking at the flip side of the coin, there are some disadvantages to being a franchisee. The franchisee must:

* Use franchisor systems to capacity.

* Work hard and dedicate fully.

* Treat customers, staff and suppliers well.

* Build market penetration.

* Build a high level of repeat business.

* Be honest in all dealings, including the payment of ongoing fees to the franchisor.

* Not use the excuse ‘I did not know what to do’.

* Cooperate with the rest of the franchise network.

* Take pride and contribute to the achievement of the franchise.

Note: mavericks do not make good franchisees.

Franchising is not for everyone, but when 80 per cent of start-up businesses fail within two years and over 90 per cent of franchisees are still in business during the same period there is an overwhelming case in favour of franchising.