Franchise View from HSBC: Out with the old, in with the new
Cathryn Hayes - HSBC Head of Franchising
As we say goodbye to 2010, our thoughts turn to next year and the challenges that lie ahead for the UK franchising sector.
Public sector cuts
Franchisors need to look at any existing public sector contracts they have, and the potential impact on their business and those of their franchisees if these are lost. The British Chambers of Commerce has warned that small firms supplying the public sector will be hardest hit by the Comprehensive Spending Review’s cuts, as local authority funds from central government will be reduced by almost a third.
BCC director of policy and external affairs, Adam Marshall, said that a lot of small firms are dependent on local authority contracts. “There is a high risk for businesses in public sector supply chains, which will see a number of contracts go, particularly those working with local authorities.”
However, he added there was a silver lining as some departments would outsource more work to cut costs – meaning additional income streams for franchisees. “Over the next three to six months the impact of the cuts will become clearer. Firms should keep an eye out for new opportunities,” said Adam.
Franchise owner recruitment
The other impact of the public spending cuts is that many public sector workers could lose their jobs. Are these the next generation of franchise owners? Many will have received redundancy payments and therefore have the funds to buy a franchise business – but are these the most suitable individuals to become franchise owners?
Many franchisors have commented that this pool of individuals could be looking at franchising as a last resort if they are unable to find full-time employment, raising concerns about their motivation and suitability for franchise ownership. They may also be tempted to pull out of the recruitment process if they do secure another salaried job, wasting the franchisor’s time and money.
Franchisors need to ensure their recruitment process is robust to avoid situations like this.
January VAT rise
George Osborne announced in his June Budget speech that the main rate of VAT would increase from 17.5 per cent to 20 per cent from 4 January 2011.
Franchisors will need to consider if their franchisees are to pass this price increase on to their customers, or absorb the cost themselves and the resulting affect on cashflow and profitability.
Looking to the future
Despite all this uncertainty, the UK economy enters 2011 with four consecutive quarters of growth under its belt and an overall annual growth rate which has not been bettered for over 50 years. Franchising has performed strongly, demonstrating resilience in very difficult trading conditions over the last year or so.
HSBC remains committed to supporting franchising, and looks forward to working with franchisors to overcome the challenges the New Year brings to ensure the sector remains successful.
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
Tags: cathryn hayes, economy, franchise business, Franchise Finance, franchise recruitment, franchising, spending review
When your right hand is missing
Dan Archer - Franchise Development Director, X-Press Legal Services - Director, BFA
OK so I admit it. After writing a piece for Venture Marketing Group’s Franchisor News on blogging I have been hoist by my own petard. In my “To blog or not to blog” article I advised that the art to successful blogging is regularity (amongst other things). I have since then not put fingers to keyboard in 3 weeks, a regularity problem which must now be fixed with the blogging equivalent of Turbo Lax TM.
The subject for this week is the team of people around you. If there is any defence for my wanton neglect in not writing for three weeks it is that during the summer holiday silly season, our business has like many others missed key staff. The impact on Aviva of employee number 2345 taking two weeks in Turkey is relatively light. For many small businesses coping when people take well-earned holidays is like having your right hand cut off.
So the crux of this piece is that when we recruit good people and empower those good people to make a difference to our businesses it is always going to be the case that when they are not around we are going to miss them.
Having read an excellent Blog last week by the BusinessGP Marc Lawn where he discussed the need for business people to look in the mirror first when considering business success. My extension of this would be to look in the mirror and realise what you are not good at, then recruit someone that is good at this.
The problem for many small business people is that the business oligarchy and decision making monopoly that comes from having created the baby can often lead control freakery that would make a public school headmaster blush. Being good at the business may not be the same as being good in the business and could also not be good for the business.
Mike Goddard the current Chairman of the British Franchise Association and Chairman of Belvoir Lettings refers to his art of delegation as finding people that do things better than him and letting them do it.
In franchising this is essential. Once the original business becomes a franchise it actually morphs into 2 businesses. Successful franchisors recognise that just because they are talented retailers or restauranteurs it does not mean that they will be best placed to recruit, train and support franchisees. The franchise side of the business has a requirement for resource and expertise and should be treated with the appropriate love to make it a success.
In coming back to my situation my right hand (lady) as it happens has now returned and all is well with the world. For the last two weeks I have been working with the sense that I have had my right hand cleaved at the wrist. It is amazing though what can be achieved with a bloody stump.
Dan Archer is Franchise Development Director for X-Press Legal Services and is a Board Member of the British Franchise Association. You can follow Dan on twitter by visiting www.twitter.com/therealdarcher
Tags: dan archer, franchise recruitment, franchisor, management, recruitment, small business, staffing
Positive Economic News is good news for Franchising
Joel Caws - Technical Director, Select Your Franchise
More and more positive stories are emerging of late in the business news. The housing market has been regaining some ground and UK unemployment figures falling unexpectedly in the latter part of 2009 as well as numerous positive profit reports from high profile companies.
So what does this mean for the franchise market? The heart of a franchise system is its ability to grow and replicate through the recruitment of new franchisees. Once setup and trading, these new franchise owners increase the overall turnover and thus strength of that franchisors entire network. This provides not just the resources for the franchisor to invest and grow its network further, but the strengthening of the brand and network by numbers can also add security for all its franchisees.
There are two points to note:-
- Job Security
A result of the downturn has meant the job security of many has been threatened. Many have found themselves redundant and out of work or at the least concerned about the possibility. A franchise opportunity can give the security of a brand and proven system while allowing you the freedom to build up a business for yourself. - Rising Confidence
If the positive news continues, confidence may soon return and more and more people will begin again to look at changing their jobs or returning to work. Although there is still an air of caution in the financial and economic markets… the banks maintain that finance is available where there can see it as a good investment. Franchising provides the banks with more confidence than a regular self-employed start up option due to its tried and tested system.
As with any investment, its prudent to do your research properly and not to jump without first scouting out your landing place. Take your time and talk to the franchisor to properly understand their setup and support networks. Talk to their franchisees to get inside information on how the franchise performs on the ground. Consult your bank and a specialist franchise consultant to ensure you are well informed on any legal and financial considerations. Finally, make your choice and dedicate yourself to following the tried and tested franchise system and making it work for you.
