Quantitative easing – franchise buyers could benefit
Yesterday the bank of England announced that it will inject £50 billion pounds into the UK economy. The goal of the bank is to stimulate bank lending, consumer borrowing and spending.
The money is being found by a method called quantitative easing. Quantitative easing is the printing of new money by the bank of England. The down side of quantitative easing is that it may weaken the pound. However, the upside is that more vauilable cash will be injected into the economy and may stimulate spending and export sales which is potentially good for UK business, jobs and taxation revenue.
The new money will help create access to cash for investments as well as consumer spending. Franchise business may benefit as it offers an investment and business opportunity to people wanting to become self employed.
Over the past couple of months in the opening quarter of 2009 consumer confidence has picked up. The banks are lending again, the stock market has picked up and consumers are spending.
Franchise business often grows robustly in times when job losses are high yet at the same time consumer confidence is improving. Franchise recruitment growth during such times as this boils down to two key factors.
a. Loyal hard working achievers are loosing their jobs through no fault of their own and are reluctant to subject themselves to employment again.
b. There is confidence with lenders, sellers, buyers and consumers which in turn gives franchsie buyer confidence to enter their own franchise business building.
This is a great time to focus on self employment via the proven route of established franchise businesses in the UK. Franchise buyers should make extensive searches into options available. They should go though the due diligence required to make well informed decisions before committing their future to their chosen franchise brand.
Below are 10 tips to help the franchise buyer in their search and decision making process
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. You should also contact the British Franchise Association.
