Introduction to Franchising
Is franchising the right vehicle for your future success? Stuart Anderson considers the framework of the franchise relationship - often referred to as a 'business marriage'
McDonald's, Dyno-Rod, Kall Kwik, Burger King, Mango, Prontaprint, O'Briens, Pizza Hut, Cash Generator, ChipsAway, Wimpy, The Body Shop, Subway, KFC... all high street and household names that have embraced franchising as the ideal formula for rapid and successful business expansion nationwide. Franchising has provided them with a network of highly-motivated, self-financing branch offices and outlets achieving a sustainable and manageable level of growth.
The attractions of franchising drew investors and entrepreneurs to open some 500* new units last year - that's almost 10 a week! These new businesses covered a range of industries, such as retail, business coaching, quick service and traditional sit down restaurants, automotive retouching, snack vending machine distribution, tax and accountancy services, lawn care and commercial cleaning. The chances are, 96* per cent of these units will still be in operation in five years - an unprecedented survival rate which is being achieved in franchising because of the nature of the relationship between the franchisor, owner of the established company, and franchisee, the owner of the new franchised business. This relationship could be described as a 'business marriage' which, in return for an initial investment from the franchisee, provides licensed rights to a business system that's tried and tested, including branding, management infrastructure and protection of the know-how underlying the system. This professional arrangement sets out an agreed territory for an agreed number of years on a renewable basis.
Because the franchisee is investing in a proven and developed business concept, there is rarely a requirement for relative industry or business management experience. Rather franchising is providing a route into business ownership for thousands of people across the UK who dream of breaking the chains of employment but still desire the security of back-up from a larger organisation.
The franchise agreement provides for training in the operation of a business and the implementation of the franchise concept. This is followed by ongoing franchisor support in such activities as launching the business, sourcing stock, marketing campaigns and attaining sales contracts. The franchisor maintains an interest in the franchisee's business through the collection of a management service fee - typically a small percentage of the franchisee's profits. This provides the incentive and the funding for the franchisor to maintain network support initiatives such as national marketing, ongoing training and product development, freeing the franchisee to concentrate on building a successful business.
Remember that not all franchise systems necessarily well thought out or well tested. Membership of the British Franchise Association - requiring the signing of a charter for ethical franchising - is a good indicator of an opportunity worthy of consideration but there is no substitute for properly checking out and researching a franchise. The first rule of investing in a franchise is 'check before cheque'.
As long as the business is soundly designed, has a genuine market, and all parties are committed and fair to each other, franchising provides a superb format for re-training people to change their life with their own business. Rather than suffering the insecurity of employment or kicking your heels in redundancy, franchising represents a superb route into securing a successful and profitable future for yourself, but not by yourself.