Opening a retail franchise in recession
There are pros and cons of opening a retail franchise in the current recession. One of the key benefits of opening a retail franchise in the current climate is the softening of commercial lease pricing.
Now is certainly the time to negotiate good deals for lease agreements. While landlords are struggling to fill high footfall shop space there are deals to be done.
But what about the general fall in trade that has created the opportunity to achieve lower lease pricing. What kind of a threat is this to the new retail franchise owner?
Clearly the current economic situation cannot be ignored. It is vital for the would be retail franchise owner to do their homework. So what steps of due diligance can be taken?
- Research the market by visiting information rich sources such as www.SelectYourFranchise.com
- Identify options that suit your interest and investment budget
- Request information from franchisors of your choosing
- Short list franchise systems of interest and arrange to visit the franchisor at their head office
- Find out from the franchisor how they are helpping thier franchisees to trade profitably in the current climate
- Get a list of franchise owners from the franchisor
- Call the franchise owners and visit their shops – ask how they are trading in this recession and find out what support and innvoation they have received from the franchisor.
- Identify the systems you like and those that are perfoming well both in and outside of recession
- Remember that the economy moves in cycles so this recession will not last for ever
- Work with your chosen franchisor and, if required, lender to develop your business plan, secure best price property and launch your franchise outlet store.
Finding out which franchise systems are working well in and out of recession gives the would be franchise owner a great insight into the business before opening a retail franchise. This insight and research can clearly help the franchise owner choose a system that will suit his or her skills and run their own successful retail franchise unit.
Writing a franchise business plan
Nick Strong - Franchise recruitment advisor
At a recent meeting of the Affiliates of the British Franchise Association I attended the bank representatives expressed the importance of writing a robust franchise business plan. All bank representatives including those from RBS, NatWest, HSBC and Lloyds TSB franchise departments agreed that funds for buying and growing a franchise are available.
All bank representatives stressed that the business plans submitted by franchisors or franchisees must demonstrate clear understanding of the market they are in and how competition and the current economic climate might effect trading projections.
In addition to the franchise business plan the banks will look closely at the performance of franchise owner accounts it holds. This information gives a strong reflection of how the system is doing over all and does help the bank to decide whether to offer funding or not.
Banks look more favourably on a case by case basis where a franchise system has been accredited by the British Franchise Association (BFA). The BFA exists as a standards body primarily to protect would be franchise owners from franchise systems that lack the robustness to support franchisee businesses.
Franchise business planning software is available from the banks -
Most franchisors will help their franchise owners to prepare a business plan. They do this because they understand their system better than anyone else. The franchise owner should do their own homework and demonstrate ‘ownership’ of their own franchise business plan. Using the free software below can help you prepare.
http://www.hsbc.co.uk/1/2/business/info/resources
http://www.rbs.co.uk/business/banking/g2/planning.ashx
Carbon Reduction Commitment Awareness for Franchise Business
Geoffrey Sturgess - Partner, Blake Lapthorn Solicitors
You may already have heard about the Carbon Reduction Commitment (CRC) – either through the British Franchise Assocation’s (a technical bulletin was issued in May this year) or through other sources – but for those of you who have not it is a significant piece of legislation that will effect over 20,000 organisationsin the UK including the franchise industry. Representations were made to the government by the bfa to attempt to gain an exemption for franchising but to no avail.
The CRC will require organisations to measure and report their energy use on an annual basis to the Environment Agency and, for those in the top tier of participants, require them to purchase emissions allowances from the government for each tonne of carbon (or carbon equivalent) emitted from their organisation per annum. The EA will publish a league table each year of the relative energy performance of organisations in the scheme. The records submitted to the EA will be subject to independent inspection and audit.
The CRC has a wide scope of application. It will apply to any organisation who is party to a half hourly electricity metering arrangement. This includes, but is not limited to, the following:
- Local Authorities
- Public Bodies
- The Universities of Oxford, Cambridge and Durham
- Landlords and tenants
- Large property owners (hotel chains, leisure centres, care homes etc)
- Companies
- Franchises
If you are wondering how this will apply to franchised businesses, the Environment Agency website explains that, under the CRC, franchisors are responsible for the energy use of all their franchisees – even if the franchisee is legally owned by another CRC organisation (i.e. not the franchisor). The franchisor is known as the responsible person and each franchisee is known as an associated person.
Blake Lapthorn’s Climate Change team has produced a guide to the CRC and the implications for business – details below. If you would like further information or advice please contact Blake Lapthorn.
Information kindly supplied by Geoffrey Sturgess, Partner, Commercial Team, Blake Lapthorn.
