Recession is presenting new opportunities for franchise start-ups
Those looking to start a franchise could be forgiven for thinking that due to the recession, this is not the right time and that plans should be put on hold.
However, many leading entrepreneurs are arguing that this is actually the best time to start a business. Richard Branson was recently quoted as saying that “fortunes are made out of a recession. A lot of entrepreneurs get going in the economic depths because the barriers to entry are lower.”
Why is starting a franchise now a good idea?
There are a number of reasons for starting a franchise now. For one thing the first shoots of recovery have kicked in. The last two months have seen growth in the UK economy in both housing and retail sales. Secondly the banks have money to lend now and the rates are good. Finally it is worth noting that cheap finance and a re-emerging economy are good news for any business.
Why start a franchise businesses rather than to own idea start up?
Both own idea business start up and franchise start ups are valid ways of entering into business. The key difference is that self start ups predominantly fail while franchise start ups predominantly succeed. The national franchise survey conducted buy the British Franchise Association and Nat West bank uphold this view. The survey declares that over 90% of franchise businesses are profitable. Owner idea start up businesses can suffer significant failure by comparison.
Why is franchise business start up more successful than own idea businesses?
Franchise business is built on the platform of proven best practise. A franchise brand owner will prove his business as profitable and replicable before rolling out his concept to others. The franchise buyer or franchisee benefits from this proven system by way of training, following the proven system and ongoing business development support from the franchisor brand owner or franchisor. In this way the franchise business system helps to ensure success for all involved.
10 thinngs to discover before buying your franchise business
1. Take a critical look at your strengths and weaknesses – are you sure you have the capacity, temperament and skills to run your own business? Marketing and selling skills are becoming more important in running a franchise.
2. Make sure you have the full support of your family – the additional responsibilities and demands on your time will inevitably cause some strain.
3. Choose some existing franchises and franchisees to talk to buy visiting www.SelectYourFranchise.com. Ask how the franchisee’s businesses are performing and what support and service is being provided by the franchisor.
4. For new franchisors, check they have run a pilot, how long did it operate, is it still trading and what has it achieved in financial terms? If no pilot was operated, how does the franchisor know the franchise and therefore will you be successful?
5. Examine how well known the franchise and its service/product are. A good reputation is a head start in business.
6. Look at the market as a whole – find out who your competitors are and how strong their position is.
7. Examine costs closely, in particular the franchise fee and monthly management fee, and whether they are reasonable and value for money; will the margins be sufficient to support the business after payment of regular fees to the franchisor? As a guide, the average franchise fee is £20,000, although this is skewed in view of a small percentage of higher figures. Ongoing fees average 11.4%.
8. Is the training provided by the franchisor sufficient to enable you to run the business successfully?
9. Seek professional advice from an accountant about income and profit projections and from an accountant about income projections and from a solicitor about the legal agreement. Both should have a good understanding of franchising and preferably be affiliated to the British Franchise Association.
10. Talk to the Franchise sections of the UK’s leading banks about the financial aspects of running a franchise and ask them to put you in touch with your nearest area franchise manager. You should also contact the British Franchise Association.
Tags: new opportunities, nick strong, recession, start-ups, why start a franchise
