It’s important to look at the advantages and potential disadvantages of franchising before committing to what could be a life-changing investment
Franchising offers the chance to enjoy a healthier work-life balance and be more fulfilled in the long term. You get to take control of your own business and, in turn, decide your destiny.
Lisa Law, franchise recruitment manager at Snap-on Tools, says the company’s franchisees enjoy the best of both worlds. “Our business offers you the chance to realise that dream of being your own boss while being supported by an elite team of industry specialists,” she says.
Many franchise businesses operate in ways that enable the franchisee to work outside the typical nine-to-five regime. There are opportunities to work flexible hours that suit their lifestyle; they can work from home, on the road or in the great outdoors.
Frank Milner, president at Tutor Doctor, says the company’s franchisees can choose to operate their business across various locations. “Franchisees can work from home for added flexibility and our tutors work on a self-employed basis so there’s no staff costs to worry about either,” he says.
A recipe for success
There is generally less risk involved in buying a franchise than starting an independent business from the ground up as each company operates in line with an established business model.
“When you invest in a franchise you buy a business model that is proven to be successful. It’s been replicated many times over by people just like you and refined to be the best, most effective version of itself,” says Mr Milner.
You’re never alone – franchising means being in business for yourself, but not by yourself
Clive Sawyer, managing director at Business Options, points out that, according to the British Franchise Association Franchise Survey 2015, 97 per cent of franchisees are profitable, whereas around 50 per cent of businesses fail within their first three years. “You trade under an established brand which should bring more customers and business in than creating a new brand from scratch that nobody has heard of,” he says.
With a proven business model comes ongoing training and support, both from the franchisor and the company’s network of existing franchise owners.
For example, Leanne Lynch, resourcing partner in the franchise and corporate division at Marston’s, says: “As the only pub company to hold full membership of the British Franchise Association, we’re committed to ethical franchising, and ensure that we offer extensive support to our franchisees and provide them with the guidance they need to build their businesses.”
Ms Law adds that there is constant support for franchisees within the Snap-on Tools system. “You’re never alone – franchising means being in business for yourself, but not by yourself. You don’t just get the training and support from your franchisor; you get the added benefit of being part of a network of people all running the same business. It’s business with a safety net.”
From a financial perspective, it can be easier for franchisees to obtain a bank loan when compared to independent business owners. “Because of the reduced risk, franchisees often benefit from easier access to financing, often at more favourable rates,” says Phil Sullivan, group operations director at TaxAssist.
But franchisees are required to run their business in line with the franchisor’s expectations, which means there is little room for creativity. “The risks are much lower than if you started your own business. However, if you do not put the effort in and follow the model, you are unlikely to be successful,” says Mr Sawyer. “Although it is your business, you have to follow the operating procedures of the franchisor. There is little flexibility in how you are allowed to operate.”
Franchising is not all smooth sailing; running a franchise requires hard work and commitment, with long hours expected of the franchisee, particularly in the early days.
Ms Lynch explains Marston’s franchisees need to be customer focused and passionate about delivering excellent service. “Running a pub can be tough, so prospective franchisees need to be prepared to work hard. That said, the pub environment is a fun and vibrant one, and the hospitality industry is always an exciting place to be.”
Franchisees are subject to an agreement that requires they commit to a business for a specified period, which can prove difficult to exit early. “Just remember that you’re going to sign an agreement to be in business for a minimum of five years so you can’t just change your mind if you decide you don’t like it. Take time to understand what you want from your business and look for a model that will help you to achieve these goals,” advises Ms Law.
“The only way to get out of a franchise is to sell and it can often take a long time to find a suitable buyer,” Mr Sawyer adds.
A franchise tailored to you
Like the sound of franchising? Now it’s time to consider which franchise sector or type of franchise is the most suitable in which to invest.
It is perhaps most important to select a franchise that enables you to pursue your genuine interests. Ben Sole, channel director at Reed Commercial, advises people to consider what their dreams or goals are and then think about the ways in which they can achieve them.
“What do you love doing and what do you dislike doing? Use your employment experience and passion, and ask your friends and family when you have been happiest and unhappiest at work. Figure out what you were doing and what you would like to do again,” he says.
“What lifestyle will you be working towards achieving? Are you working towards building your wealth, are you leaving a commute behind, do you want to spend more time at home, do you want to spend time producing a product or service and talking to customers? What is your end-game?”
Many franchisors place a high level of importance on personality traits rather than experience, and an interest in both the franchise and sector in which it operates is key.
Ms Law says this is the case at Snap-on-Tools. “Our franchisees come to us from all walks of life, but all share a passion for the brand. So long as you have a great attitude and the motivation, we can teach you all you need to build a profitable, rewarding business.”
On the other hand, franchise businesses such as TaxAssist will only accept those with prior experience or qualifications in a particular field. “Franchisees will either be qualified accountants, typically working in the industry as finance directors, financial controllers or management accountants, or come from a banking or financial services background,” says Mr Sullivan.
Budget is a key consideration as this will determine the type of franchise in which you can invest. Importantly, it needs to account for ongoing royalties and marketing fees, which will be dependent on the franchise system, as well as working capital.
“When acquiring a franchise you have to plan around the cost of the purchase and working capital to invest in growing your business,” says Mr Sole. “Consider what your current expenses are, how you can change them and what you can afford. And remember many franchise systems can help you arrange finance due to the success of their business model.”
While it has been mentioned that the franchisor and a company’s broader network of franchisees can provide back-up, a personal support network is equally important. “Having that family support for any franchise is critical and we encourage potential franchisees visiting us to bring their partners with them,” says Mr Sullivan.
Now that you know what to look out for when it comes to choosing a franchise business, it’s time to conduct the relevant research.