Special Relationship

Banks look favourably on established franchises. Mark Scott, director of franchise development for the NatWest and RBS franchise team, explains why

The UK sees the creation of thousands of new business start-ups every year, which represents a very important opportunity for banks.

The advantages a franchise may bring can help to mitigate against some of the threats a new business will face during its critical early trading period, as well as providing a framework for the medium and long term.

Delivering advantages

For decades, banks have seen that an established and ethically run franchise can deliver advantages such as:

Potential franchisees are screened and may undergo detailed training before being accepted.

It’s a proven business model. People with limited experience of running a business succeed in comparison with other types of start-ups, so the level of closures will be lower.

The costs involved in starting up is understood by banks, while business plans can be compared with those of existing franchisees.

The combined marketing power of a franchised business will help to raise the profile of the brand and service to a level an independent small business would struggle to achieve.

The systems the franchisee adopts will include controls and reporting, so a bank will have access to information on how the franchise is performing.

Product and service development is carried out, usually independently of franchisees, so that they can focus on their businesses in the knowledge that the future direction of the franchise is being catered for.

Franchisees themselves will have carried out a good level of research and due diligence in order to establish whether the franchise is the right one for them.

Benefits to franchisees

Banks should have a dedicated franchise team, making the process of raising bank finance and opening an account much simpler.

The amount of finance provided may be higher than that offered to a non-franchise start up.

There may be other related banking products that are offered on special terms to franchisees.

Next steps

Always fully research the franchises you’re interested in.

Make sure they’re run on an ethical basis and determine whether you can work with the franchisor and will enjoy the challenge, as starting up any business, franchised or not, is hard work.