Joel Caws - Technical Director, Select Your Franchise

Investing can be a great way of putting spare finance to work in order to make more. There are plenty of ways to invest money from simply placing it in a high interest bank account or investing into a business venture.

Generally, the higher the risk, the greater the reward or loss. When you place an investment into a savings account you know you money will be safe, however the return you will get on the investment is typically low. It’s also linked closely to the interest rates at that point in time, so when rates go down, your return on your investment will also be reduced.

Some people choose to invest in stocks and shares which is a higher risk activity. The returns can be high for those who have taken the time to understand the way company stocks and shares move, but for those who are uninformed it can be a fast way to lose your money.

Property is another popular investment option with a fairly solid track record. Although markets can dip up and down in the short term, they tend to rise steadily in the long term so investing money in property might realise a return if you are prepared to wait for it.

Investing in a business is also a popular option. There are several ways to do this by either starting up a new business or buying an existing one that is already trading.

Choosing a franchise business may help to improve the success rate further as a franchise is based upon a proven system. Many franchises can be run as management franchises which are perfect for those who want to invest but not get caught up in the actual day-to-day operation of the franchise business. By recruiting staff to run the business, you can effectively sit back and manage the business without getting your hands dirty.

There are also franchise resales which are franchise businesses that are already setup and have been trading for some time. Choosing a franchise resale can further reduce risk as there will be a trading history to look over before making a decision to invest.

No investment is without risk of some kind, however a franchise business has the added backing of a proven business formula and training and support. Generally the success rate is good with around 9 out of 10 franchisees in any given year turning a profit*. If you do choose to invest in a business or franchise option, one thing is for sure: the success of the venture (and the return on your invested finance) will be measured by your commitment, hard work and dedication. Without a determined and committed approach, any business will likely fail.

(* figures from by BFA/Natwest annual franchise surveys)

Joel Caws - Technical Director, Select Your Franchise

Whether you are simply dis-satisfied in your current job or just needing a change, self-employment is something that many of consider as an alternative to working for another company. Of course, its easy to see why: the money you earn is yours to keep, you are your own boss and can manage your own time.

The big challenge for many though, is that while self-employment is an attractive option, it does require a person to have a sale-able business proposition that people will want to pay money for, and it requires a wide set of different business skills. Of course the latter is easily fixed by outsourcing tasks that you don’t know how to do yourself. The most obvious is book keeping and accounts that many small businesses often outsource to a dedicated book keeper or company that specialises in those skills.

The biggest challenge for any new business owner will be the ability to manage their resources effectively and to market and sell whatever business idea you have. Many business owners can make the mistake of thinking they can simply start a business up, and of course customers will come flocking to buy whatever they are offering. Anybody parting with cash will want a convincing reason to buy whatever it is you are offering so its important to think: do people need what I’m selling, if not why will they buy it? Does you product and sales message provide a compelling reason for people to buy? This is all about proper market research and planning a solid marketing strategy prior to launching your business.

If that sounds quite in depth, that’s because it usually is! However, there is another way which helps to by-pass alot of the hard work in testing the market and finding out if what you have to offer really can form a viable business model.

A franchise business is a tried and tested business model which you can trade as if it was your own business. In effect, you buy the right to trade under the companies brand name and use their already proven business formula. The main differences to setting up your own self-employed venture are:-

• Much of the hard work of researching the market and testing the sales potential for the product/service has been done.
• You will be setting up a business with a tried and tested business formula.
• Some franchise brands are well known and recognised which can give you an edge against competition.
• You will receive training on how to effectively run, market the business and sell the products or services offered.
• 90% of UK franchisees trade profitably in any given year according to British Franchise Association/Natwest annual franchise surveys.
• You are you own boss! You will effectively be running your own business and you will ultimately be responsible for its success or its failure.

It’s easy to see why going the franchise route is chosen by many when considering self-employment. It offers many of the benefits of self-employment while helping to reduce the risks. Of course there is no such thing as risk free in business, however, with dedication to your chosen franchise system and a willingness to work hard you can make your franchise business a success.

Carl Reader, Dennis & Turnbull Ltd

In this second part on the likely affects of the emergency 2010 budget on franchise business, we will look at Business, Employment and some other changes.

To find out more about changes in taxation, please see the previous posting.

Business

The government is to focus on improving the flow of credit to smaller firms. This will include the possibility of establishing a loan guarantee scheme to replace the Enterprise Finance Guarantee programme and the use of net lending targets for nationalised banks.
Some backdated demands for business rates will be cancelled.

Pensions

The default retirement age is to be phased out, and a review will be held to establish the dates at which the state pension retirement age begins to rise to 66. There is a commitment that, in the case of men, this will not be before 2016 and, in the case of women, not before 2020.

Rules requiring mandatory annuitisation at 75 are to be dropped. At the moment, people who establish a pension savings fund must use the money to purchase an annuity, or an annual income for life, when they reach the age of 75, preventing them from passing on the capital to their heirs.
The link between the basic state pension and earnings will be restored from April 2011 with a guarantee that pensions are raised by the higher of earnings, prices or 2.5 per cent, as proposed by the Liberal Democrats.

Thus far, the government has not offered a policy on pensions tax relief. The Liberal Democrats had been in support of abolishing all higher tax rate relief, capping relief at the basic rate of income tax.

Employment

All existing welfare-to-work programmes are to end and are to be replaced by a single welfare-to-work programme.

Those Jobseekers’ Allowance claimants who must deal with the most significant barriers to work will be referred to new welfare-to-work scheme at once rather than after 12 months. In the case of those Jobseekers’ Allowance claimants aged under 25, they will be referred to the programme after six months.

The EU

There will be no further transfer of sovereignty or powers to the EU over the course of the next Parliament.

The government will work to make sure that the application of the Working Time Directive in the UK is limited.

Any future European treaty that involves the transfer of power will be subject to a referendum.

The environment

A green investment bank will be set up.

The government is to press ahead with a high-speed rail network but will reject plans for additional runways at Gatwick and Stansted.

A national planning statement will be drawn up to allow a process for replacing existing nuclear power stations with new ones, although Liberal Democrat MPs will be allowed to abstain on any vote on the plans.

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Joel Caws - Technical Director, Select Your Franchise

New business policies put forward by the new Conservative/Lib-Dem coalition government have come as a welcome morale boost for small businesses. Some of the policies indicate a reviewing of corporate taxation and easing of regulations which will help to promote new business start-ups as well as providing benefits to already established small businesses.

This is great news for franchise business which depends upon the small business model. A franchise business, in contrast to operating as a large multi-outlet single entity, operates as a collection of smaller independent franchise businesses which are owned and run by each individual franchisee. This means that many of the new policies now being put on the table by the new government could have a direct effect and benefit for each franchise owner.

For new franchise start-ups, there is a policy to look at reducing the time and effort needed to start a new company. This will of course mean that a new franchisee should be able to get up and running in a shorter space of time.

Other policies indicate a review of corporate taxation as well as an increase in employers NI thresholds which should benefit those who need to employ staff. A pledge to make small business rate relief automatic in England should also come as welcome news.

For further information and opinion on these and other policies which might affect your franchise or small business, check this BBC news article.

Naz Daud - Owner, CityLocal

If customers are not happy with the level of customer service, such as failing to have queries dealt with, having to wait excessive periods of time to wait for a response, having responses which make little sense, offer little support, express little concern or fail to resolve the issue quickly and effectively, then the chances are high that you will lose that customer.

More than this, by losing a customer, you are highly likely to lose any potential sales you may have acquired through recommendation. With so much choice available and so much variety, increasingly we are relying on personal recommendations, and online reviews, to help make up our mind on whether to commit to a retailer or service provider, especially if it is likely to be for a significant sum or a long term contractual arrangement.

Failing to provide adequate customer service can easily result in losing out on personal recommendations, and could easily result in publically viewable reviews advising against your ompany or service. The internet can easily work in your favour, but similarly it can work against you if you fail to meet expectations.

To a large extent, the importance and intensity of customer service is likely to depend on the nature of the business in which you become involved. If you’re seeking to start out as an individual entrepreneur, working from home with little direct contact with customers, then you may consider the importance of customer service to be less of a priority than those entering into a business arrangement which has massive contact with customers and relies heavily on customer loyalty.

This is turn may impact on your decision when it comes to deciding what kind of business to enter into, what kind of franchise opportunity to become involved with, or the nature of any solo business you choose to initiate. Are you a people person? Do you like solving problems and offering a high level of service to customers? If not, then a business model which relies upon this may not be for you, and the issue of outsourcing the service center becomes one to consider.

Ultimately it will be important to think about customer service not from the business point of view alone, taking on board the financing, the time, the means by which issues can be filed, dealt with, followed up and referred back, but also from the point of view of your customers. Happy customers equate to customer loyalty and recommendations, which in turn results in a more profitable and successful business. Get your customer service right and you’re more likely to see the business succeeding where other, perhaps larger companies are losing sight of the very blood which made them successful in the first place.

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.

Naz Daud - Owner, CityLocal

Customer service is an aspect of any franchise or business, whether a large corporate organization or small home business run by a single individual. The way a business presents itself to customers, either potential or actual, can make a huge difference in terms of promotion, loyalty and the likelihood of success.

No business succeeds without customers, and in order to attract customers, it is increasingly necessary for franchise businesses to be approachable, contactable, and interested in communicating with customers whenever there are any queries or issues relating to the products or services available.

In the modern world of internet technology, more and more customers today are often beginning to expect that businesses can be contacted at any time, and day, and in a way which is convenient. In the twenty first century we have shed the expectations that we had of only being able to contact a business or company between the hours of 9am and 5pm, Monday to Friday. With international time zones, more people working weekends, and working hours no longer traditional, we all expect to be able to pick up the phone, or send an email, and have our queries or concerns dealt with promptly.

If you are seeking to buy in to a franchise or business opportunity, it will be important to understand in advance what the customer service arrangements involve. Will you be responsible for any issues that arise, and need to provide a means by which customers can contact you directly, or is there a customer service center or arrangement already in place? If you will be relying on an outsourced service center, then you may find that giving them a call yourself, alleging to be a potential customer, reveals the level of support which your own customers could face.

Although outsourcing of service centers is increasingly common, primarily as a means to cut costs and long term overheads, it can sometimes cause problems for customers who have difficulties communicating with people who do not speak the same language fluently, or have strong accents, limited knowledge of the product or service, or limited access to relevant information about you and your account.

But the issue of providing support for customers will be something you’ll need to approach yourself if the responsibility with a franchise opportunity is left with you and if you are starting out on your own with your business idea as an independent entrepreneur.

Tomorrow we will look at the effects of Customer Service on your business and why its so important to get it right…

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.

Richard Holden - Head of Lloyds TSB Franchise Department

Lloyds TSB has been named Bank of the Year for the fifth year running.  The award has been given in the recognition of the support it has given to its business customers through the current downturn.

Richard Holden is the head of Lloyd’s TSB franchise department.  Below is an outline, provided by Richard, of why the bank wants to work with the franchise communitiy in the UK.

What is a franchise? In a nutshell, it is the granting of a licence by a business owner to another individual, which allows them to develop their own business using the trademark, name, know-how and business systems of the franchisor. There are a wide variety of franchise opportunities available in the UK across a broad range of industry sectors. Generally most well-established franchise systems offer a tried and tested business model with initial training, ongoing support, brand recognition and the collective buying power benefits that a network of businesses can bring.

Franchising is widely regarded as a less risky way of setting up in business, but it’s worth noting that it will not suit everyone. Following a business system which may include restrictions on products, services and suppliers may be unattractive to some entrepreneurs who are looking for more independence. There are also limitations as to whom the business can be sold on to, as the franchisor will need to approve the buyer.

Franchises are not immune from reputational damage either. Neighbouring franchisees delivering poor service or indeed problems with the franchisor can all pose challenges. Anyone considering franchising should thoroughly research the options available to them before making any commitment.

When considering whether franchising is the right option for you, one of the first decisions you need to make is what type of business you have an aptitude for – and what would you enjoy. Running your own business takes a lot of hard work, possibly long hours and a great deal of self-motivation. You must be prepared to follow the franchisor’s business system and accept their terms. It almost goes without saying that you should only consider investment opportunities that are within your budget.

Finally, don’t be pressurised into signing an agreement before you are ready to do so. Getting involved in a franchise is a big decision and it’s vital you understand exactly what you are getting into. Find lawyer who understands franchising and ask them to take you through the franchise agreement step by step, so you understand what it means. The British Franchise Association (bfa) provides a list of affiliated lawyers on its website www.thebfa.org as well as listings of franchisors that are members of the Association who comply with a Code of Ethics. Lloyds TSB has produced a helpful guide to support your research and provides a list of 35 key questions you should ask a franchisor. A free copy can be obtained through the bank’s Franchise Unit by using the contact form below.

Latest industry statistics show that franchising contributes £10.8 billion to the UK economy. The robust health of the sector is further demonstrated by the very low levels of commercial failures and the fact that nine out of ten franchisees say that their business is profitable. Failure amongst business starts ups is reported to be significantly higher and consequently franchise focused banks such as Lloyds TSB offer preferential banking services and finance terms to franchisees.

Top Tips

• Thorough research of a franchise opportunity is vital when making probably one of the most important decisions in your life.
• Attend one of the British Franchise Association franchisee seminar days which provide an unbiased view of the benefits and pitfalls of investing in a franchise.
• Get the Lloyds TSB guide ‘Supporting your franchise business’ which contains 35 key questions to assist you with your research.
• Be prepared to walk away if the franchisor just seems interested in taking your investment and does not ask you searching questions about your own skills, attributes and motives for setting up as a franchisee.
• The franchise agreement should be fully explained to you and checked by a British Franchise Association affiliated lawyer before signing.

Franchise business is built on a platform of success

Provided a franchise opportunity has a proven and profitable pilot the above heading can be claimed as true.

Every ethical franchise brand owner will have established a proven successful business in their local market.  They will then document everything that they do to make their business a success.  After that the franchise brand owner will enlist a pilot franchise owner/franchisee.  The pilot franchisee will be trained and supported by the brand owner.  Once the pilot is proven to be successful, by following the proven system of the brand owner, then the franchise brand owner is ready to recruit a wider network of franchisees.

Does franchise success vary from region to region?

When considering investing your money and time into buying and building your own local franchise, it is wise to find out how franchisees in your region are performing in their businesses.  Every franchisor that has franchisees should be happy to offer you access to franchisees for one-on -one questioning.  Asking the franchisee if he is profitable, if his expectations have been met.

Provided that you are happy with the answers you get from the existing franchisee in your region, and that you can see yourself building the brand and system locally, it is worth seriously focusing on taking the opportunity forward.

Remember, a franchisor can seldem go to market and be successful without first proving his original core business.  It is by following the proven system closely and enthusiastically that enables franchisees to build their own successful local franchise businesses.

90% plus of franchisees run profitable businesses

According to the British Franchise Association (BFA)/Nat West National Franchise Survey over 90% of BFA franchisees questioned operated profitable businesses.  Provided you are a good system follower franchise business could be your way into a successful business future.

For more information about franchise opportunities in the UK visit – www.SelectYourFranchise.com

For more information about franchise opportunities in the US visit – www.Franchises.US.com