What are my chances of succeeding as a franchisee?

Franchising offers a route into business ownership that is often less risky than starting a business from scratch. By buying into a proven system, franchisees gain access to established branding, operational know-how and ongoing support.

But how successful is franchising in practice, and what should you know before investing?

How successful is franchising in the UK?

Brian Duckett, former chairman of The Franchising Centre, explains that “the annual British Franchise Association survey regularly publishes good news. This includes more franchisors, more franchisees and greater total sales than the previous year.

“It usually claims that a large majority of franchisees are profitable and are happy with their relationship with their franchisor.”

According to the most recent BFA survey, 89% of franchised units are profitable. 60% of units operational for five or more years are highly or quite profitable.

Does franchising reduce the risk of going into business?

Brian Duckett explains: “For a properly prepared franchise, the risks of failure are very low compared to going into business on one’s own. Something like 50% of independently started businesses are no longer trading after five years.

“The figure for franchised outlets is around 2% a year, so say 10% after five years. However you look at it, that makes becoming a franchisee, as opposed to starting your own business, five times less risky.”

Vicky Wilkes, head of legal at Aston Villa Football Club, adds: “A franchisee has the advantage of starting with a successful brand and business model. Plus, they’re carefully screened by franchisors before they’re appointed.”

Franchisees receive much more guidance, training and ongoing support than independent business owners do. They should therefore be much more likely to succeed.

Does investing in a franchise guarantee success?

John Pratt, senior partner at Hamilton Pratt, cautions: “There are few things in life where success is guaranteed. Investing in a franchise is not one of them. Having said that, the whole point of franchising is that a franchisor is able to say: “I have created a system that works and which can be replicated successfully.””

He recommends thorough evaluation: “Prospective franchisees need to have a full list of all franchisees who they can talk to, plus information about their turnover, profitability and start-up costs or the average position across the network.

“All that a franchisor can do is say that if you follow its system, you will not fail. How successful you are will depend on a combination of how good the franchise is and how much effort and skill you bring to it.”

Alan Wilkinson, head of franchise development at The Franchising Centre, emphasises that no franchisor should guarantee earnings. “They should make available average figures, or even figures from their most successful units, so long as the data is clearly identified as ‘average’ or ‘best’.”

Are there franchise formats that will generate a six-figure income?

Wilkinson outlines three types of franchise that most likely to generate a six-figure outcome:

● Owner-operator – you work in the business yourself and usually complete all or most of the jobs within the business. With careful consideration and due diligence [...] this type of franchise will typically give you the earnings level you’re looking for, while operating it yourself.

● Management franchise – you employ staff in your business and typically take the role of manager. A management franchise is typically larger, and therefore has more potential to generate higher revenues.

● Investment franchise – you may have multiple units, or indeed multiple brands in your portfolio. By definition, this is likely to be the largest type of business. Therefore, it’s more likely to generate the highest revenue.

Wilkinson also notes that the industry sector can also play a big part in the revenue potential for a franchisee. “For example, a single food and beverage outlet in an area with good footfall and the right demographic of customer may generate higher revenue than a multi-van management franchise.”

Final thoughts

Franchising in the UK offers a proven path into business ownership, significantly reducing risk compared to starting independently.

While you can never guarantee success, choosing the right franchise opportunity, performing thorough due diligence and committing personal effort provide the best chance of achieving long-term profitability.