Franchise business vs start-up business
Deciding to take on a franchise or set up your own business is a dilemma entrepreneurs face the world over. Professor Roy Seaman, CFE QFP, of Franchise Development Services, about the pros and cons of both.
Starting your own business can be a double-edged sword. On the one hand the odds are stacked up high against the success you crave, while on the other, there are ways you can stack them heavily in your favour. Having started and maintained his own business before franchising the enterprise himself, Professor Roy Seaman, Managing Director of Franchise Development Services, is no stranger to the predicament.
Roy comments: “There’s no doubt that the rewards of owning your own business are surrounded by risks, so it does make sense to try to have those odds in your favour. How does one do this? The answer is to consider franchising as your option. “Any aspiring entrepreneur can turn to franchising as means of starting their own business and combine their background, skills and capital with the strategies and profit potential of a well-proven franchise operation.” With more than 1,000 different franchise brands currently operating within the UK market alone, it should not be too difficult trying to shortlist the brands that may be of interest. In this edition of The Franchise Magazine, opportunities range from sásta, with its proven weight loss formula, through to famous brands like McDonald’s, Mac Tools and feet technology specialists Foot Solutions. However, franchising is an endeavour to approach as cautiously as if setting up a business alone. Roy continues: “Take a moment to consider your own background, your unique skills and the capital you have available. “Once you have done this, you can start to make a shortlist of which franchises you think are worthwhile of your serious consideration.” The evidence suggests franchising may well help you to make the dream of owning your own business a reality. A study entitled The UK Franchise Industry Research Report 2013 and produced by MBA students from the Norwich Business School at the University of East Anglia (UEA), reveals that the number of franchise systems operating in the UK has increased to more than 1,000. Based on the report, it is estimated that some 500,000 jobs will be created within the franchise network before the end of next year.
Franchising is, by definition, a business arrangement in which the franchisor licences its name, marketing and business knowledge to another person or organisation. The new licence becomes that franchisor’s business ‘partner’ – or franchise owner – in exchange for a predetermined investment and ongoing revenues, to fund the continuing support to achieve a maximum turnover. Franchising is a method of sales and marketing, whereby the profits are shared between you – the franchise owner – and the originating franchisor. Roy says: “The model makes sound business sense. A company that has spent many years designing, developing and perfecting their method of trading is more likely to be successful than you trying to guess what’s likely to be the route to success. “However, franchising still requires careful evaluation because not all brands follow a genuine business format franchise system and nor have they really thought through the formula for success that can be replicated time after time.” “Brands like Subway,” says Roy, “have replicated their success to nearly 40,000 locations. With the right guidance there is no reason other brands cannot, and will not, do the same.” Throughout this edition of The Franchise Magazine, you will see well-known franchise brands, those that have been trading for 10 years and longer as well as those that are new to franchising. For prospective franchise owners, Roy has this advice: “One of the keys to your success will be to shortlist those that meet your predetermined criteria. Therefore, take full advantage of the checklist on page 152.
Roy has seen all different types of franchise in his 32 years at the helm of Franchise Development Services. He says: “You will soon discover that some franchisors will offer prospects a low investment level with high profit margins and a fast break even point. Others require a more substantial investment, offer lower margins and a longer period of trading before that break even point. Make sure you thoroughly research every aspect of the franchise you wish to become a part of then follow its turnkey guidelines to the letter. Roy concludes: “In franchising, there is no value in you paying the franchisor for their system and then trying to create your own. Franchising is a partnership in which you, the franchise owner, agree to follow the rules. “Since you want to learn from the franchisor’s many years of experience and replicate their success, do not try to reinvent the wheel. “Taking time to evaluate the most suitable franchise to match your future ambitions is likely to reward you well. While there can be no guarantee of success, there can be many advantages in joining a brand that has a well-proven and profitable system and formula to follow."