Paul Stafford of the British franchise association reveals some hard facts about the popular business model
Franchising is big business, offering opportunities to those dreaming of running their own company and reaping the rewards of their own hard work. Here are some facts on one of the best business models that can help you do just that.
A franchisee owns and runs their own business under the brand and systems of a larger company (the franchisor). It’s often described as being in business for yourself, but not by yourself - there is substantial training and ongoing support provided by the franchisor in return for royalties, usually based on turnover.
The idea is simple: a franchisee pays for the right to license a successful, proven business model from the franchisor, who has already tried and tested it. Franchisees are supported to leverage that model in their local community, with the support and backing of a known brand (and other franchisees) to call on any time. Franchisees are therefore also building an asset they can sell when the time is right.
In 2015, franchising was worth over £15 billion to the UK economy, generated from 45,000 businesses that collectively employ over 600,000 people. The sector has grown by almost 50 per cent in the last decade alone, including throughout the recent downturn, when the sector bucked wider trends by growing while the economy shrank.
For more than 20 years consecutively, annual independent research has shown around 90 per cent of franchisees reporting profitability and less than five per cent of franchised businesses closed because of commercial failure. Again, both trends held throughout the recession.
Support is available on all aspects of running a business. So if you don’t have any experience of sales pitches or profit forecasts, but you’d love to work for yourself, help is at hand.
Most people know McDonald’s and Subway are franchises, but there are a number of other big name brands using the model, including O2, Clarks Shoes, Domino’s, Thorntons, Water Babies and Toni & Guy. But that’s just the tip of the iceberg.
There are more than 900 brands using a franchise model in this country and the chances are high you used some of their services recently. The range is highly diverse and means whatever your passion and budget, there’s a franchise to suit you.
The initial and ongoing training and support on offer with any franchise worth investing in means you can go into business according to your passions, not necessarily your career experience. Transferable skills are all-important - leadership, work ethic and people skills, for example, rate highly in what’s sought after in a franchisee.
Tired of the office? Reached a corporate ceiling? Undervalued? Then find something you’re passionate about and turn it into your livelihood.
People invest in a franchise for many different reasons. It might be financial, to spend more time with their family, to escape the rat race, to work from home instead of commuting, to go into business with family or friends or simply to spend more time on the golf course. Understanding your motivators is a vital step in determining the right franchise for you.
Young or old, male or female, any religion or race, all are thriving in franchising. While the average age of starting franchisees is in their forties, 20 per cent of franchises in the last two years were started by under-30s.
Women enjoy a far higher rate of business ownership than small and medium-sized enterprises generally and older people are valued for their experience, calm head and ability to handle people and situation.
People who want complete autonomy over every business decision aren’t well suited to franchising. The sector revolves around systems, which need to be followed. The franchise agreement and operations manuals help achieve this by setting out the rights and obligations of both franchisee and franchisor.
Franchisees are encouraged to share, but there’s a system in place for a reason - it’s tried and tested.
If you’re considering starting a franchise then caution, research and due diligence are your watchwords. Don’t fall in love with something and sign a contract without exploring it thoroughly, including the people behind the business.
A well researched franchisee is likely to be a more successful one and a comprehensive understanding of the franchise and its culture is essential. Any good franchisor understands the last thing you should do is rush. If you feel pressured, don’t be afraid to walk away.