Are you cut out for success with a franchise?
Be your own boss, build an asset for your retirement, correct your work/life balance...whatever the reason you have decided to look at franchise opportunities your first step must be to analyse your own suitability to owning and operating a franchised business.
LESS than seven out of 10...these are the odds of survival for more than three years - never mind achieving success - for a new business start-up in the UK today, according to survival rate statistics of VAT registered businesses released by the Small Business Service. That means that almost one third of the UK's entrepreneurs that plough their business loans and nest eggs into new businesses will lose out to poor marketing, bad organisation, wrongly identified markets, inaccurate financial forecasts, management mistakes, shifting economic conditions... or any number of other pitfalls littering the road to building a successful business.
Statistics such as these turn many aspiring entrepreneurs off the idea of starting their own business. 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 their money into a more proven avenue to business success by purchasing a franchise. By investing in a franchise, the majority of franchise owners will ensure that their business concept is:
- offering a product or service with proven demand
- capable of generating a significant profit
- nationally branded
- constructed with professional systems and procedures
- set up with realistic financial forecasts
- supported by experienced management staff
- opted into buying power greater than on its own
Their franchise provides them with exclusive access to the brand, systems and training of their franchisor in their protected territory for the lifetime of the agreement, all secured through the investment of an initial franchise fee and payment of an ongoing management service fee.
However, despite all these benefits a franchise does not guarantee success. Franchisors that are committed to building successful franchise networks put a lot of effort into qualifying franchise owner candidates. The individuals they are seeking will have the ability to soak up their knowledge and systems and develop a successful business through a mixture of hard work and the proper implementation of their business concept. So how do you know if you are truly suited to owning and operating your own business? Let's look at how franchisors assess franchise owner candidates:
One of the principles of franchising that elevates the potential for success above simple company-owned expansion is the personal commitment of the franchise owners. Most franchisors seek franchise owners that are looking to run their businesses in a hands-on fashion because they want to take advantage of that desire for business success inherent in a business owner, the desire that just cannot be matched by a salaried manager. This is why franchised operations will tend to offer greater quality of service and place more emphasis on customer satisfaction.
Franchisors are therefore seeking prospective franchise owners that have a genuine enthusiasm for their industry, their service or product and for building a successful business. This enthusiasm is usually prized more highly than industry experience - the franchisor's training and support should overcome any disparity in this area.
Operating the system
In buying a franchise, you are investing in a business blueprint proven and finetuned through a pilot operation and, with established brands, through the early experiences of the franchise network. Franchisors are therefore looking to award their franchises to individuals that fit into a certain personality-type - one which Americans have come to dub the 'in-trepreneur' in recognition of its combination of the business leading ability of an entrepreneur with a willingness to work within the confines of the franchisor's successful systems and procedures. This is partly because the franchisor has already gone through the trial and error development, learned how to avoid mistakes and performed the finetuning in developing its business package on behalf of the franchise owner. But this is also because the franchisor is seeking to encourage standardisation of its products and services nationwide - this ensures that no franchise owner is producing products or services to a different standard to the rest of the network which could spread a bad name for the brand. Think of the McDonald's commitment to the standardisation of its Big Mac worldwide to understand how important this is.
A franchise owner that comes to resent the authority of the franchisor is one that was never suited to become a franchise owner in the first place and these situations are easier to avoid than to remedy. If you are the type of entrepreneur that wants total control to tinker with the business, you may be better off considering other avenues of business ownership.
The decision to become self-employed involves a great deal of soul-searching - what prompts it can as often be the desire to escape employment as the drive to build a successful organisation. However, if you're interested in becoming a business owner in order to cut down your hours, think again. With the future of your business in your own hands you won't be able to switch off at 5pm, you may find yourself working six days a week until well past this time in the initial stages. Franchisors realise this but, while many will offer plenty of support to help you get your business off the ground, they can't do it for you.
Of course, you must be aware of keeping a balance between building the business and the rest of your life. With no boss to make sure you turn up on time or to tell you to go home, you must ensure you are neither distracted by nor neglecting commitments outside work. With franchisor support this is much easier than in a self start-up, as you can rely on the experience of the franchisor to guide you.
Franchises are very affordable, with some superb opportunities available for an initial investment under £20,000 featured in the pages of this very magazine. While lending toward business startups has suffered greatly in the credit crunch, there is a recognition among the banks - especially those with dedicated franchise departments - that lending to franchise startups carries a much reduced inherent risk.
However, the income derived from owning your own business will prove much more irregular than that which is earned through employment. There is no pension or sick pay - barring what you set up for yourself - and much of what the business does earn may be required for reinvestment as you grow your operation. Can you deal with this insecurity and are you able to support yourself through it until your business start-up finds its feet? Many franchisors will help you develop your business plan, but it will take determination on your part to see it through.
Franchised businesses employ just under 250,000 people in the UK according to the 'Franchising in the UK' report. With many franchise concepts you will need to either take on and lead staff right away or after the business has grown beyond what you can deliver on your own. Franchisors will deal with management skills during the initial franchise owner training programme, but there are many that are reliant on your own personal abilities. Reading through this magazine you will find that, while many franchisors point out the diversity of the backgrounds of its franchise owners, they still require candidates with communication/people skills.
These skills are not only useful in dealing with staff - they help in dealing with clients as well. As with any business start-up, a franchise owner will have to wear a variety of hats - that of manager, salesperson, entrepreneur, administrator and worker. An understanding of people and the ability to win confidence are vital to building a successful business.
The next step
Franchising is an exciting and growing industry which now turns over an estimated £14.4 billion per year according to Franchise Development Services, which has identified over 1,000 brands involved in franchising. The survey found that 91.8 per cent of franchise owners are reporting break even or better, even in the midst of recession. The rewards are there for the earning, so if you have the right stuff for operating a franchised business, turn to The Franchise Magazine's Franchise Buyer's Checklist to help you start researching the opportunities available and visit our website to register your details for more information on specific brands of interest.