Converting an existing business to a franchise can give yourself a better chance of weathering the economic downturn.
Many established businesses, some with tens of outlets, some with hundreds, or even one with thousands, are currently exploring the advantages of converting some, or all of them, from company managed outlets to franchised. In doing so, the costs and hassles of the day to day operation of the business are transferred to the franchisee who may be the previous manager, but is now more motivated to operate it more profitably because it is their own business.
One of the biggest benefits of conversion franchising is that it provides the franchisor with a team of motivated business owners, who will be dedicated to growing their own business for the personal reward it offers.
The assumption is that they will be more enthusiastic and energised than an employed manager, whose only financial interest in the business is the salary it provides.
Time and again our clients have demonstrated that almost as soon as a branch converts from managed to franchised that within weeks sales go up and running costs go down. When you consider the business often has the same manager (now running it as his own business), and is in the same premises with the same stock and staff, franchising can, and does, have a miraculous effect on a branch that may have previously have been only marginally successful.
Customer service usually improves because a franchisee is more likely than an employee to go the extra mile. Costs such as cleaning go down because the franchisee does it himself, and staf often rally down to support their new employer as they feel they are no longer just a small cog in a big corporate wheel.
The franchisee takes control of the business, providing yet another benefit to the franchisor. Not only does he take responsibility for sales, but also deals with all the administration and employment hassles, leaving the franchisor to get on with running the core business, developing new products and services and promoting the brand for the benefit of all concerned.
In my next article I will outline a two more forms of conversion franchising…
Brian Duckett is Chairman of The Franchising Centre with over 30 years experience in the franchise industry. The Franchising Centre helps and supports potential and existing franchisors. Click here to find out more.
As the economy bites many people are being affected by reduced access to cash and employment prospects. However, franchise business continues to offer the potential for a bright future for people wanting to beat the downturn.
Beat the downturn via a new self employed future in franchise business
Franchise business is a proven way to enter into self employment at a reduced risk for the new business person. The reason for this is that when you buy a franchise you buy a proven business system. As a franchisee/franchise owner you receive initial and ongoing training from the franchise brand owner. This will help to ensure that you succeed. In fact, according to the British Franchise Association/Nat West national franchise survey over 90% of franchise businesses trade profitably.
Follow the proven franchise system to achieve success
The key issue to help ensure business success as a franchisee is to follow the proven system. Franchise business is for people who want to take on know how and follow it. Franchising is not for people who want to invent their own system. The franchise branded system has many benefits. These include proven pricing, recognised branding, sales and marketing strategy and ongoing support.
No one can be good at everything but in business you need to control all aspects effectively to grow and be profitable. This is where the franchise support team comes in. The franchise brand owner will usually have a team of support experts to assist you with all aspects of business development and discipline. The support and training is both at the start of your franchise trading and ongoing by agreement with the franchisor.
Be in business for yourself but not by yourself
The franchise business model helps to ensure that all elements required to build your own successful franchise business are in place. With your enthusiastic following of the proven system and the franchise team’s support you could beat the downturn though buying and developing your own franchise business.
To find out more about franchises for sale in the UK visit – www.SelectYourFranchise.com
Ten things to consider before buying a franchise
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 franchisees to talk to – don’t just speak to those recommended by the franchisor – and ask how their business is 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 leading banks about the financial aspects of running a franchise and ask them to put you in touch with your nearest area franchise manager.