What is a Franchise Business : Part 4
Naz Daud - Owner, CityLocal
It is often perceived that when buying a franchise, you are more likely to be successful if you choose to go for a well established company. This however, is not the case. There is always an element of risk involved regardless of the popularity of the franchise. It is extremely important that you do as much research as possible before investing in a franchise business. You are only able to make profit, once you do the right things, given the right tools.
The reputation of the company is crucial to your decision making process including, the history of the franchisor, the marketing materials they use alongside training, support and realistic predicted financial projections. The franchisor should come from a strong business background, as this way they will have hands on experience of what it takes to run a lucrative business. It is also a good idea to ensure that the franchise has a registered trademark as this will prove that the business model is relatively unique.
You must also take into account, the requirements of the target market and see if the services provided by the franchisor meet these requirements. You should find out how long the franchise has been in operation and what has been achieved since, because this will give you an indication of where the business is heading. The support provided by the franchisor must match up to your own needs as sometimes, the franchisor cannot assist you as closely as expected, this is why you must evaluate the support given to franchisees and see if it is up to standard.
Another important factor when deciding on a franchise is the training involved. It must be adequate and comprehensive as without this, you will not be able to perform in the manner expected by the franchisor. You may also find that you are lacking in sufficient knowledge that equates to a healthy business as there is no real training process, in which case you should consider leaving the company as soon as you can.
The location of your business start up can massively impact the overall success you have. It is beneficial for you to understand if there is actually a gap in the market that your business will fill. In addition to this, you should investigate the competition in your area, so you may want to have a good look around your chosen location. Even if there are franchisees from your own network near to where you are, they are still competitors. Your location should expose you to your target market effectively which is the reason why you should choose the most productive area in relation to your business.
Something you will also need to know is the expected return on investment and if this stands coherently with the costs involved, as by year two of your business, you should be able to see your investment pay off. In most cases, the profit kicks in after a year as there are higher overheads when initially starting your business. You should look at your financial position before investing in anything as there are usually other expenses you will need to fund aside from the financial fee. Make sure you have the funds needed as the last thing you want is to face bankruptcy.
Naz Daud is the founder of CityLocal. This Franchise Opportunity is for people who would like to work from home and be their own boss – Read more about the CityLocal Franchise Opportunity.
Franchising during a Record UK Recession
Joel Caws - Technical Director, Select Your Franchise
I read in a BBC news article this morning that the UK economy contracted by 0.4% between July and September, according to official figures, meaning the country is still in recession.
The BBC report continued that this makes this current recession the longest since records began in 1955. This will likely come as bleak news for businesses up and down the country, especially in the retail sector with Christmas approaching.
So how does this news fair in the franchise market?
Historically, franchising has been resilient to recession and while no business, whether franchised or non-franchised, is not without its own risk the general feeling in the industry is still positive. In fact, some of the most popular franchise chains you can see on the high street saw growth during recessionary times.
The heart of a franchise opportunity is its proven system which if followed correctly, coupled with the backing and support of a good franchisor, results in an effective business which should be robust enough to ride out the down times as well as thriving when the economy is on the up.
Franchising could be a good route back into business for many that have already fallen victim of this current downturn, however as with any investment it should be considered and researched carefully. Anyone considering a franchise should take time to meet franchisors of interest, get to know their operation, study their background, speak to their existing franchisees and consult their bank and a good franchise solicitor for further help and support.
For a good list of UK franchises there are many online franchise directories as well as franchise publications and exhibitions that take place across the UK.
Tags: economy, franchise, franchise market, franchising, joel caws, recession
Franchise Advantages
Joel Caws - Technical Director, Select Your Franchise
When I first started working in the franchise industry back in 2002 I was amazed at the number of franchise businesses covering everything from your well known, high street brands to a whole host of man-and-van franchises that will pop round and give your lawn a quick trim or fix your leaky pipes. In fact my surprise was as much in the fact that I had used many of these companies without even being aware of their franchise heritage. Pretty much any service you can think of can be franchised and many already have. Browsing through many of the online franchise directories will soon give you an idea of the amount of franchise options available to almost anyone with some capital to invest, a willingness to learn, a dedication to follow the system and work hard.
So what are the advantages to a franchise business over traditional self-employment? On the surface it may seem like you are actually paying a franchise fee to another company to simply work under their banner but there are some significant differences which can make a franchise business a better option.
The Franchise Advantage
A proven business system
The heart of a franchise business its is proven system. A franchisor usually starts out as a traditional business who, after proving the business is profitable, will look for further ways to expand their already successful business. The essence of the franchise idea is, quite simply, the replication of a proven business model. This provides a significant advantage of self-employment in that the franchisor has already tried and tested the business and documented it so that it can followed by another giving them the ability to replicate their success.
Branding and Customer Perception
Obviously there are the big name, high street, food chain franchises which by the power of the branding and advertising represent significant advantages over setting up your own unknown named business. But even with smaller, lesser known franchise brands, the customer perception that it is part of a much larger network can in itself bring security and confidence to the customer that the franchise company is not just a here today, gone tomorrow outfit but there is a larger network supporting it.
Funding
Many banks look favourably on franchise startups because of their proven track record. This can be especially true for well established franchises since the franchise sections of the major banks usually keep records on what franchise systems appear to be performing well. This can be an advantage over traditional self-employed startups which can be more of a challenge to aquire funding and support from the bank.
Support
A good franchisor will provide support and training to ensure the best chance of success. It does mean that the business belongs to the franchisee and he or she is responsible for its failure or success. However when things are tough or motivation is low it should mean there is someone to talk to for advice and help.
These are just a few of the main advantages in choosing a franchise business over going it alone. However, franchising like any other business is an investment. Taking on any investment requires careful research to ensure well informed decisions and not throwing caution to the wind because a business opportunity has a ‘franchise’ label. Consider carefully, do your research, speak to existing franchisees and take your time.
