10 hot tips for franchise success
Franchising offers a great way to become your own boss and own a business, while still retaining an association with a head office organisation that can provide the training, support and national presence that solo startups have to cope without. Stuart Anderson provides 10 tips for maximising your success with a franchise
1. UNDERSTAND THE SIZE OF THE FRANCHISE SECTOR
The franchise industry is becoming an increasingly important driver of economic growth in the UK. If you are considering becoming a part of the sector by investing in a franchise business, it is important to understand that you will be joining a marketplace where specialised media and the British Franchise Association encourage cooperation between franchises to market the industry as a whole to consumers.
In the last year the franchise industry was responsible for £14.4 billion of the country's GDP, according to a recent survey conducted by Franchise Development Services (Franchising in the UK 2009). The franchise industry has continued to grow despite the recession, with UK franchisors reporting an average of seven new franchised business opening in their networks in the last 12 months.
2. ANALYSE THE SUCCESS RATE OF FRANCHISING
It is estimated that there are over 75,000 franchised businesses operating in the UK. The survey found from a sample of these that 91.8 per cent are breaking even or better, despite operating in what is now being recognised as the longest UK recession (six quarters and counting) since records began. This success rate is reflected in the finding that nine out of 10 franchise owners say they would recommend franchising as a way of starting your own business.
If you're considering starting your own business, findings such as these will provide a welcome confidence booster. However, it is well to remember that a business ultimately rises or falls on the efforts of its franchise owner, not its franchisor, so it is vital that you ensure that you are right for your franchised business and that your franchised business is right for you.
3. DON'T LIMIT YOUR SEARCH BY SECTOR
"No prior experience required," is one of the most common quotes you will read from a franchisor seeking franchise owners. The reason for this is the commitment within the franchise industry to franchise owner training - in fact all business format franchisors provide it.
For the prospective franchise owner, what this means is that you can focus your search on a business that you feel will maximise your financial and lifestyle goals. Rather than looking at a narrow band of franchise opportunities, a full spectrum of potential avenues for business success are open to you.
The UK Franchise Directory identifies 13 sectors of franchising: Automotive; Business-to-Business; Cleaning & Maintenance; Delivery; Food & Drink; Health, Fitness & Beauty; Home Care; Leisure & Travel; Print & Design; Property Care; Real Estate; Retail & Fashion; and Sales & Distribution, plus Specialised to encompass the myriad of concepts that don't fit into these categories. For an impression of the variety of opportunities available via franchising, read through The UK Franchise Showcase.
4. CONSIDER WHAT TYPE OF FRANCHISE WILL SUIT YOU
Franchises can be divided into categories: Job Franchises, where the franchise owner operates the business hands-on; Sales & Distribution Franchises, where the franchise owner is on the road, selling and/or distributing products in his territory; Executive Franchises, where the franchise owner runs a one-man, white-collar business; Retail Franchises, where the franchise owner invests in commercial property, staff and inventory to help operate a shop-unit; Investment Franchises, where the franchise owner puts up the capital and appoints a manager to run the business; and Management Franchises, where the franchise owner manages a team of operatives.
These franchises offer very different occupations for the franchise owner, so it is important for you to be clear on how you want to focus your efforts as the owner of your business. Are you looking for a business that will allow you to operate outside or are you more focused on an office-based opportunity? Do you want the freedom to plan your hours around school runs and golf games or would you prefer a limited nine-to-five day? These and many other factors will affect the decision you make.
5. CHOOSE A BUSINESS THAT SUITS YOUR SALES ABILITY
The requirement for sales skills varies from franchise to franchise depending upon the role of the franchise owner within the franchise system. Most franchises require their franchise owners to take responsibility for generating sales for their own businesses and many identify sales and marketing orientated individuals in their franchise owner recruitment requirements.
However there are a number of franchises, mostly termed 'job franchises', where the franchisor takes some or all responsibility for winning accounts allowing the franchise owner to concentrate upon providing a high quality service. Similarly, some management franchises in-source this aspect to allow their franchise owners to devote their time to building the infrastructure of the business.
6. ENSURE YOUR FRANCHISE IS LEGALLY PROTECTED
All franchise owners sign a franchise agreement with the franchisor in order to secure their franchise, the main function of which is to clearly set out the extent of the rights to be granted, the territory in which those rights apply, the exclusivity of the rights in the territory and the term in which the rights exist. A typical agreement will outline the franchise owner's exclusive rights to market, build a business under, profit from and possibly sell sub-franchises under the brand within the territory for a reasonable term.
There are a number of specialist franchise lawyers operating in the UK and many are affiliated to the British Franchise Association. Because they are familiar with the nature of the franchising relationship, these practices will be able to judge a franchise contract that not only protects your business, but also keeps in mind commercial considerations.
7. TAKE FULL ADVANTAGE OF THE TRAINING PROVIDED
Comprehensive training opens up the availability of a franchise opportunity to a much wider population of potential franchise owners, enabling the franchisor to select the best candidates in terms of commitment, drive and enthusiasm for the business rather than searching for relevant experience.
For the franchise owner, initial and ongoing training provides an opportunity to expand the horizons of your occupation and develop new specialised knowledge in areas you may never have operated in before.
8. DRAW UPON THE SUPPORT OF YOUR FRANCHISOR
The somewhat clichéd claim 'in business for yourself, but not by yourself' has become a classic marketing line for franchisors marketing their franchise opportunities, justified by the support services supplied to the franchise owner network by the franchisor. By making available a franchise to individuals with no previous business experience, many franchisors recognise the need to assist new franchise owners in getting their business off the ground. This support is funded by the ongoing management service fee paid by franchise owners.
Basic pre-launch support will cover putting together the business plan, right the way up to pre-agreeing funding packages with lenders. Site selection is another area in which franchisors can provide assistance, while telephone support is practically a given when it comes to franchise owner support. Dedicated IT and operational support is usually offered for franchise owners in more complicated sectors, while technical advice is essential for specialist areas.
As franchise owners gain more experience they will require less constant advice and guidance from the franchisor, leading many franchisors to promise an intensive initial support system followed up by a more general programme for the more experienced network.
9. MAXIMISE YOUR GROWTH POTENTIAL
Franchising offers the franchisor a route to national expansion that is usually much speedier than company-owned growth, because a franchisor will not need to build up huge staff and premises costs - rather the franchisor's capital can be committed to developing a small central organisation with a few highly skilled staff.
By speeding up expansion through franchising, a network of franchise owners achieves higher economies of scale earlier, stronger brand awareness, is much sooner able to challenge for national contracts and, in the case of a fledgling market, is in a much better position to capture early market leadership and establish a dominant position over its non-franchising competitors. These benefits are experienced by the franchise owners in the day-to-day running of their business, with a franchise you are much better equipped to win large contracts, earn better margins and dominate the competition.
10. EXPLORE THE OPTIONS OF EXPANDING YOUR BUSINESS BEYOND ITS INITIAL TERRITORY.
A typical franchise will be limited by its territory, and a growing number of established franchise owners are investing in multiple franchises in order to continue their ability to develop growth in their businesses. However, for more ambitious prospective franchise owners some franchisors offer alternative franchises.
Area Development Franchises offer enlarged territories such as major cities or provincial areas in which the franchise owner can develop a chain of managed outlets. Regional Master Franchises offer a similar territory, but allow the franchise owner to sub-franchise - effectively becoming a franchisor in their area and earning a management service fee from their sub-franchise owners' turnovers. National Master Franchises are awarded by foreign franchise brands seeking a suitable indigenous individual or organisation to develop a sub-franchise owner network across the entire UK.