How to become your own boss by investing in a franchise opportunity

Over 30,000 people in the UK have realised their dreams of owning their own business by investing in a franchise. Stuart Anderson reveals why franchising offers investors a 93% success rate

If the prospect of self-employment appeals to you, but that of risking your own (and your bank's) capital on an unproven idea does not, franchising could offer a serious alternative. Still a relatively misunderstood method of going into business in the UK despite its growth here, the concept has set light to the 'entrepreneurial culture' in the USA where franchises account for 11.1 per cent of the private-sector economy and 14 per cent of its private sector growth (according to the International Franchise Association's report 'The Economic Impact of Franchised Businesses'). This represents an industry with a $506.6 billion turnover and over 18 million jobs.

In fact, in the UK franchising contributes £10.8 billion to the national economy and employs over 370,000 (as reported in the NatWest/British Franchise Association 2007 UK Franchise Survey).

There are nearly 34,000 franchised stores, offices and home-based business operating in the UK, and the survey found that the majority of franchise owners ('franchisees') chose to invest in their franchise for its 'growth potential' (33 per cent), while other benefits identified are a well-known brand, successful existing franchisees, available support and a perceived low risk. The low risk relates to the fact that with a franchise you are purchasing a tried and tested business model supplying a product or service with proven demand, a track record of replicable results and supported by a central head office under an established brand identity. This naturally leads to a much higher success rate than is normal for new business launches - 93 per cent of franchisees surveyed claim profitability.

In return for an initial investment all true franchise opportunities ('business format franchises') include a Franchise Package, which provides the franchisee with an exclusive territory (defined in the Franchise Agreement), use of intellectual property (brand and methodologies), initial training, set-up assistance and launch support. The company that granted the franchise (the 'franchisor') then collects an ongoing Management Service Fee (usually a percentage of the franchisee's turnover) in return for providing ongoing training and support.

Both new and established brands in a range of industry sectors are adopting franchising as their preferred method of national expansion. Take a look at any high street or business park and you can spot a range of franchised businesses - if you eat a Subway sandwich, drink a Coffee Republic cappuccino, trade your television in at Cash Generator, have your accounts done at TaxAssist Accountants, buy a car at Ford Motor Dealerships, get your drains cleaned by Dyno-Rod or sell your house through Your Move, you are a customer of a franchise.