New Year review tips for your franchise from HSBC
Cathryn Hayes - HSBC Head of Franchising
2012 is set to be another challenging year, with growth seen as a major concern for all of us.
The beginning of a New Year is a time when we think of changes that we hope will make our business leaner, more productive and more profitable. Here are our 2012 tips to consider for your franchise.
Maintain healthy cashflow
Effective cashflow management begins with minimising cost. Only buy what you need and bargain hard with suppliers. Aim to maximise your margins and sales. Ensure your invoices are sent out promptly and chase when due. Request deposits on order or cash on delivery for high-value sales and consider discounts for early payment. Get into the cashflow forecasting habit. It can help you identify potential cashflow crises in advance — and act to avoid them.
Read advice about cashflow management.
Stop doing things that don’t work
Sometimes in franchising, as in life, things don’t succeed — whether it’s a product that isn’t selling well, or a way of doing something that doesn’t have the desired effect. Sometimes it’s better to accept defeat and find a better way. It’s a New Year, so ‘out with the old and in with the new’. Doing things differently or stopping something can often materially affect profitability.
Find out how to increase profitability.
Strengthen your brand
Successful franchises are built on strong brands. Does yours need improving, or maybe even a total overhaul? And we’re not just talking about your logo, website, leaflets and stationery. ‘Brand’ means the entire customer experience, including how you answer the phone. Your brand is your personality; it’s what you stand for. How can you take it to new heights?
Learn how to create a strong brand.
Win new customers (and hang on to your old ones)
Inevitably you will lose customers, often through no fault of your own. So even if you just want to remain where you are now, you must win new franchisees, and that requires investing time, effort and usually money. But you also need to stay close to your existing customers and keep them happy if they are going to stay with you. Where possible, find ways to sell more to your existing customers.
Find out how to build customer loyalty.
Try something different
Trying something new can prove shrewd, perhaps by developing or introducing a new product or service, which could enable you to outflank your competitors. You might try to target a new market or diversify within an existing territory.
Get advice on new product development.
Harness the power of online social media
If you haven’t done so already, why not make 2012 the year your business finally embraces the marketing potential of Facebook, Twitter and LinkedIn? It takes time to build relationships and reputation, but such sites can deliver many more visitors to your website and drive sales. For more information on Internet Marketing Strategies contact Nick Strong at Select your Franchise
Learn how to make the most out of online social media.
Revisit your business plan
A well-produced, regularly updated business plan can keep you focused on your development strategy and key business goals. And while you’re at it, why not revamp your marketing plan?
Get advice about writing business plans.
Work more on your business — and less in it
Allowing yourself to get bogged down in the daily demands of running your business is a common mistake, but it can mean your business fails to develop — at least in the way you want it to. Try to make regular time when you can step back from the daily grind to focus on the bigger picture and help your franchisees to do the same thing.
Find out how other businesses plan to achieve growth.
Good luck!
Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com
The Benefits of a Franchise Business
Joel Caws - Technical Director, Select Your Franchise
Back in 2002, when I initially began working within the franchise industry I was surprised on the huge variety of franchise companies out there, from the well-recognised, fast food chain restaurants that grace pretty much every shopping centre, to a multitude of home based franchise opportunities that you could call upon to have your boiler serviced, your garden tended to, your carpets cleaned, or the stone chips in your car paintwork repaired.
I think my biggest surprise was that I had, in fact, used many of these services myself with out even being conscious of their franchise heritage. Just about any service you can think can, and probably already has, been franchised. Browsing through any of the on-line franchise directories will quickly provide you with an idea of the quantity of franchise options accessible to pretty much anybody with some capital to invest, a willingness to learn, a dedication to stick to the system and put in some hard graft.
So what are the advantages to a franchised business over traditional self-employment?
A proven business system
The heart of a franchise enterprise its is proven business formula. A franchise is often born out of a traditional business which, after proving itself profitable, prompts the business owner to look for further ways to expand their already profitable business. The essence of the franchise concept is, quite simply, the replication of a proven business formula.
Having a business model which is already proven offers the key advantage over self-employment in that the franchisor has already done the hard work of trying and tested the business model. They have then documented the processes and procedures that makes it successful in order that it can then be adopted by another, giving them the power to duplicate their success.
Customer impression and the advantage of branding
Of course you don’t have to think hard to recognise the power of some of the big fast food franchise restuarants. This strategy of constantly enforcing a brand message means you go into any franchise outlet knowing what to expect… the same service, the same quality, the same product. This can provide a significant advantage over establishing your own personal unknown branded business. There are of course many smaller, lesser known franchise brands which even though maybe not as widely publicised, the customer impression that it is a part of a much bigger network can in itself deliver security and confidence to the shopper that can provide you with that all important edge over competition.
Funding
When providing funding for any business start up, the bank will always assess the most important thing – How likely is the business to succeed, and therefore, is the banks funding secure and likely to be repaid in a timely fashion.
Many banks look favourably on franchise start ups because they have a proven track record. Even in these more difficult economic times, the story from the banks is still one of being open for lending. The recession though, has put even more emphasis on the bank scrutinising any business plans to ensure that the chance of success is as high as possible; another benefit of choosing a franchise business since the franchisor can provide evidence of success to help backup the franchise business plans you go along with to the bank.
Training and support
Part of a franchise package is training and support to help make sure your business has the best chance of success. This doesn’t relinquish you of any responsibility, it is your own business after all, but it does mean that you are as equipped as possible to run a successful business or that there’s someone to talk to for advice and help when times are tough.
These are just some of the key advantages in selecting a franchise business over going it alone. However, franchising is ultimately an investment like any other business. Starting up a franchise business requires initial care and attention to make informed choices along the way and then working hard to ensure best possible chance of success.
Prospects for franchise lending in 2012
Cathryn Hayes - HSBC Head of Franchising
There can be no denying that 2011 has been a challenging year. However, HSBC lent at record levels to franchised businesses in 2011, and we are continuing to actively support the sector with the aim to further grow our lending book in 2012.
Banks are more likely to support a business with a well-researched and structured business plan, particularly those that demonstrate a strong understanding of their finances. Franchising has a number of advantages here. Although not recession-proof, the wide spectrum of sectors covered by franchising means that the UK franchise industry is likely to fare better in these difficult times. The failure rate for franchises is much lower than for standalone start ups. This is predominantly due to the support of the franchisor and other franchisees in the network, who can help new franchisees avoid the pitfalls associated with starting up a business.
So, how can franchisors help to support their franchise owners both new and existing? Monitoring and control is even more important than ever – knowing what is happening in your network has never been more important.
Planning is vital – even though none of us know what is round the corner, a robust business plan can help to keep a business on track and ensure that franchisees know which areas to focus on to keep their businesses healthy.
Try to ensure that your franchisees are working well with their bank. These are the problem areas – things which can lead to a breakdown in the relationship:
- not supplying agreed information on time
- failing to make loan repayments
- repeatedly exceeding overdraft limits
- unexpected or persistent trading at a loss
- not using facilities for the agreed purpose (such as personal expenditure)
Look at your own requirements as a franchisor too. We deal with a wide range of franchisors, from fairly small businesses setting out on the franchise route, to major corporates. Regardless of size, it is important to:
- Have a clear view of where the business is going – what are your aims for expansion? How much are you going to need to spend to achieve that?
- Keep good financial records and forecasts. In this way you can apply for new finance before you need it urgently. Banks will look more favourably on such requests as it shows you are in control and can plan.
- Understand how financial ratios work. They are good indicators of a business’ health and these are what banks use to assess your financial health and that of your franchisees.
Consider alternative methods of funding working capital, like invoice finance, which involves raising finance using your debtor book. The advantage of this is that cashflow is directly linked to business expansion. This method is not suitable for all businesses – your bank will be able to advise you.
Another funding method to consider is asset finance to fund the purchase of equipment for the business. This can help ease cash flow by spreading repayments over a period of time instead of making a one-off investment.
It is worth investing time to develop a strong relationship with your bank, making sure they understand your business model and can work with you to develop financial packages tailored to your individual needs and those of your franchisees.
To conclude, HSBC is definitely open for franchise business and finance will be available to quality applicants who can demonstrate they have a good understanding of their chosen franchise model and the financials of their business. We look forward to working with you and your franchisees in 2012!
Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com
