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Pro And Cons Of Franchising

Pro And Cons Of Franchising

Michael Hawkins, sales and marketing director for Mail Boxes Etc. (UK), assesses the pros and cons of franchising

Many thousands of people have been extremely successful in franchising over almost three decades, as the sector continues to expand and encompass an ever increasing choice of different business sectors, including, for example, fast food, hospitality, domestic and business services, car repairs, fashion and photography. Today there are over 930 franchised systems operated in the UK by 22,400 franchisees and their employees. Franchising enjoys an estimated annual turnover of more than £13.7 billion and the latest figures available confirm year-on-year growth, even during the recent recession.

Long-term commitment

Buying a franchise means making a binding, long-term personal and financial commitment, typically for a minimum of five years, so you need to be sure you understand exactly what franchising means, including the obligations and responsibilities of both franchisee and franchisor.

Research the industry thoroughly before focusing on any particular sector or individual franchise. Impartial advice and information is available from the British Franchise Association, as well as franchising websites, magazines, newspapers and exhibitions.

Weighing up the pros and cons will help you decide if you are suitable for franchising and also to identify the type of franchise that would best suit you.

You have a choice of business sector, investment level and whether you would like to be premises, home or van-based.

It’s very important to consider the future potential of a franchise and the opportunities for further growth and development or diversification into new markets. Is its management dynamic and forward looking?

In my own franchise, new franchisees are attracted as much by the variety and scope of our five main services and separate income streams, as by our status as a global brand that has been operating in the UK for 21 years and now has 150 stores throughout the UK and Ireland.

The pros

There are many benefits of being a franchisee. They include the opportunity to be your own boss and be independent, but have access to advice and support; the strength of being part of a nationwide network; group buying discounts; becoming part of a well known brand; comprehensive training; reaping the rewards of your own hard work; the potential to achieve a better income; and practical help in a crisis.

While all franchises adhere to the same broad principles, each one operates differently, even those in the same market sector. There should be no pressure to persuade you to make a decision quickly, so you can consider everything carefully in your own time. You are free to withdraw at any point in the initial part of the negotiation process.

The cons

Being a franchisee means being responsible for all aspects of your business, from the day-to-day running to forward planning and business development. While franchisor training will equip you with everything you need to know to operate and grow your business, you must follow the franchisor’s tried, tested and proven system, carefully documented in the franchise manual.

When setting up your franchise, you need to work hard and learn to be flexible. You must develop exemplary customer service skills - keeping promises, meeting deadlines and generally looking after and keeping your customers.

It is important that those closest to you and sharing your life will fully support your goals. It can prove difficult for new franchisees to succeed without the wholehearted support, understanding and encouragement of their nearest and dearest.

Start your quest for your ideal franchise by looking critically at yourself and analysing the kind of person you are. You must be honest and realistic about your own ability to run a business, manage staff and engage customers.

Choose a franchise you will enjoy, not least because you will be committed to it for some years. You are the only person who knows if the franchise will be suitable for you or not and whether it will offer the opportunity to realise your personal goals.

Examine your reasons for wanting to be a franchisee. Do you want to make a complete lifestyle change or stick with something more familiar? For example, running a sales-based franchise that requires being out and about meeting people could be difficult for someone who is shy. Similarly, an extrovert would find it hard to run a desk-based business in a closed office with no outside contact.

Buying a franchise is not the same as buying a job. Setting up a new franchise is just like establishing any other business, but one where you are following an established template that requires dedication and hard work.

If you’ve always wanted to have your own business, buying a franchise is a fantastic opportunity to realise your long-held ambition. Be realistic about how much you can afford to invest and ensure you understand the franchisor’s financial projections and franchise agreement. It is vital you take specialist professional advice on both, consulting the British Franchise Association’s list of experienced affiliated lawyers before engaging an adviser.

After your initial research, request a formal meeting at the franchisor’s head office. This is an opportunity for you to ask the franchisor questions, as well as answer theirs, and enables you to see how well you get on with each other. Since franchising is often compared to marriage, it is important there is a positive chemistry at the outset between the two parties.

Arrange to meet franchisees in their place of work to get a realistic feel of the business. You are sure to receive honest and useful advice from hands-on franchisees and their staff.

Strength of franchising

Be reassured by those companies who belong to the British Franchise Association, which admits only those franchises who adhere to its strict code of conduct and operate by the organisation’s ethical guidelines. Franchises undergo rigorous investigation before they are allowed to join the bfa to ensure the high standards of the industry are maintained.

Take time to consider carefully if you want to go forward and, if you continue to have doubts, ask more questions or repeat the original ones. One meeting with a franchisor may not be enough - you might need two or even more - so don’t be rushed. Follow your instinct to be cautious and if the overall deal seems too good to be true, it probably is.

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