The benefits of owning a franchise
The past couple of years have proven to be difficult for the British economy, resulting in mass redundancies and companies going into liquidation, so it is no surprise that more and more people are taking their careers into their own hands and investing in the franchise sector.
The odds for an independent new company to survive more that three years is less than seven out of 10 according to Small Business Service report, a disappointing statistic for potential business owners. However, earlier this year Franchise Development Services 'Franchising in the UK' survey estimated that some 75,000 UK businesses are in existence thanks to their owners choosing to invest in a franchise.
The annual NatWest and British Franchise Association (bfa) survey, which monitors the performance and impact of the franchising industry in the UK, has revealed promising figures. With the franchise sector now worth an estimated £11.4 billion and 90 per cent of franchise owners claiming to have profitable businesses, franchising is definitely an option to consider for those seeking both personal and financial security.
The average turnover figures rose by just under three per cent on last year's figure at £335,000 in 2009, with levels in some sectors strengthening as the year progressed. The survey also revealed that compared to the 1990s recession fewer franchise businesses today are trading at a loss, in 1990 only 70 per cent of all franchise businesses were profitable compared to 89 per cent in 2009.
With over 1,400 franchised companies in the UK, there is a franchise out there to suit each individual's requirements and skills. The main franchise categories are food and beverages, services and retail.
One of the main benefits of investing in a franchise is being able to operate your own businesses and be your own boss while receiving support and guidance from an experienced and recognised franchise. By investing in a recognised brand the potential customer base is partially formed as people already know about the product or service and confidence in the business has already established.
Successful business model
When buying into a franchise, owners have the reassurance of knowing that they are investing into a tried and tested business model, resulting in lower failure rate and financial risk. With the majority of independent companies going out of business within the first three years of trading, a proven track-record and successful business model is essential when recruiting potential franchise owners.
Easier to finance
The NatWest/bfa survey also found that estimated start up costs have declined slightly and new entrants can expect to pay £46,700 in franchise fees and other associated costs to their franchisor, down from £50,000 last year, and with 90 per cent success rate of applications for franchise loans it is becoming much easier and affordable to buy a franchise.
Today, many high street banks have specially trained franchise managers to assist new and existing franchise owners with financing their businesses. In some cases, established franchisors may have close relationships with certain banks and help potential owners secure finance.
Training and support
Along with the brand name comes the brands work ethic and methodologies. Most franchisors will provide new owners with comprehensive training, support and any business materials which may be required. Some franchisors offer new owners ongoing support, ensuring that staff are kept up to date with any developments and are able to seek help when needed. Franchise owners also benefit from the peer network which franchising creates, where colleagues can support one another and offer each other advice and guidance.
Easier to recruit
Having good staff is a key factor to running a successful business, which is why franchisors try to find the right people for their franchise. In some cases, franchisors will help recruit or even supply staff for new owners, depending on the business. A franchised business with a recognised brand will have greater recruiting power than an unknown business.
With many successful franchises, if the product or service is in demand, it will continue to expand its network. The opportunity for franchise owners to invest in multiple franchises is quite common in this sector, enabling individuals to widen their market and progress the franchise. Some franchisors also offer exclusive territory to franchise owners, the exclusive portion of land on a national or regional basis is allocated to the owner as part of the franchise package.
When entering into a franchise, individuals have to consider their own personal skills and interests. In most cases, franchise owners invest in a franchise which they feel passionate about. It may be hard work running a business but when it's for a company and brand that you believe in it makes the effort worth while. For some, after much dedication and hard work, franchise owners may even obtain such success where they are able to cut down their working hours and reap the financial rewards of owning a franchise.
Written by Tiffany Brooking