Starting a Franchise Business is like buying a Car!
Joel Caws - Technical Director, Select Your Franchise
You’re looking to buy a new car and after a good deal of deliberation you find a lovely new model that suits your requirement. But wait, the car dealer informs you that there is a another option to achieve the same objective. He walks you into the warehouse and there you are confronted on one side by a shiny, spanking new car and on the other a very large cardboard box. The salesman explains that the box on the left contains all the parts to make the car and it works out much cheaper if you build it yourself.
What a dilemma! What would you do if faced with this situation? With utmost respect for those that are able and enjoy building a kit car from scratch, for the majority of us the prospect of building a working car from a box of spare parts is just too daunting. So much could go wrong. What if you put a bolt or washer in the wrong place? What if it never actually works when you think you have got it all together right?
Of course there are advantages for building a car from scratch:-
- Might well be cheaper than buying a ready-assembled model
- The self-satisfaction and sense of achievement of building something completely from scratch.
- You could customise it to work the way you want it to.
Despite this, most of us would pick the ready assembled car everytime! But why is this?
The ready assembled car:-
- Is mass-produced, based on a prototype which was tested to be working and appealing to the market.
- Is ready to drive – straight out of the showroom
- Is fully tested to ensure everything works
- Requires only that you follow its operating manual to make it work as it should
Compare this against the DIY alternative and you start to see why only those with a personal interest in actually building a car would go the DIY route. The fact is, for most of us, we want a car that performs a purpose: getting us from A to B, and we don’t really want to be getting our hands dirty with putting it together.
Starting a business can be very much like choosing a car. A new self-employed business start up can feel very much like a kit car that comes in pieces that you need to build. Of course, you can build it the way you want and have the sense of achievement from building something completely off your own back. However, it could be a daunting task and one that without careful attention to detail might not quite work as you originally expected it to.
On the other side of the coin, a franchise business is more comparable to buying a ready assembled car. Most cars are mass produced where a prototype was made, tested and then rolled out in mass production as a car that has already been proven to work. A franchise opportunity, similarly is based on a proven business model which was tested and then documented to provide an all important “franchise operations manual” that if followed correctly should results in correct operation and success.
Of course even the best cars can go wrong, whether its ready-assembled or a kit car so its important to maintain it correctly and pay attention if something doesn’t sound right when you are driving it.
So when you’re considering the future and whether to start your own business or look at a franchise, remember… ready-assembled? or DIY? … ultimately the choice is down to your ability and preference!
The role of the Banks in your Franchise Business
Steve Roulstone - Director, Castle Estates
When looking at any Franchise venture, is it important to speak with more than one Bank, or even any Bank at all if your finances are in good order? I believe the answer is a definite yes! By speaking to the Banks you will get advice from people who look at franchise opportunities in all available types and formats of Franchising.
They know what they are doing
Not only are you going to get good advice, but you will also get a good idea if the plan that you have put together makes good sense and follows the path that you would be expected to achieve from the organisation you are planning to join. I would say whether you need finance or not, this is a vital part of your Business strategy. To get the seal of approval from experts, I would suggest, should be part of what you need to achieve as you get closer to making that all important change in your life.
Because they know what you are doing
The reason is two-fold. Firstly, the Banks that we at Castle Estates would introduce you to, are the specialist Franchising Banks, where they not only look at business plans for Franchising, but understand the business itself, by investigating our systems, targets and objectives before you even speak to them. So they know us and can therefore tell you if your plan is in line with how the Franchise operates.
Because you know what you are doing!
Secondly, because they are so specialist, by getting that seal of approval from a Franchising department, it means that you will understand the operation you are putting together and therefore have good control of your whole business plan, costs and sales objectives. The professionals that will discuss your budgets and plans know what to ask and how to judge your work and will not give any approval without confirming both the content and you as an individual.
All assistance gratefully received
So why miss out on an independent review of your plans! I used this opportunity when I first started, even though I have did not need financial assistance from my Bank, because I recognised that the relationship could be both informative and important in the years ahead, which is exactly how it has developed. When I looked to purchase the Franchise, my Bank gave me the assistance I needed to get through the initial twelve months and I would state that it all started with that initial contact and seal of approval!
The Big Question: Self-Employed or a Franchise Business?
Joel Caws - Technical Director, Select Your Franchise
Many people who are out of work or considering a change look at the work-for-yourself option but I’ve noticed a question that pops up time and time again: “Whats the best option for me? Self-employment or buy a franchise?” (If you don’t already know what a franchise is then see this helpful posting on definition of a franchise.)
Both options do represent a way of working for yourself since whether you build a business based on your own idea or buy a franchise opportunity, you will still effectively own the company and be responsible for whether it succeeds or fails. So here are some of the main differences:-
Self-Employment
Pros
- All income is yours to administer.
- You get to work to your own ideas and find a structure that works for you.
- Satisfaction in knowing you are building a business for yourself, in your own way.
Cons
- Its known that self-employment in the UK has a high failure rate with around 4 out of 5 businesses failing within 3 years.
- You will be building a brand and reputation from scratch.
A Franchise Opportunity
Pros
- The NatWest/BFA annual survey consistently finds around 90% of UK franchisees are trading profitably in any given year.
- You are working to a business formula that should have been tried and tested by a franchisor.
- Most franchisors provide training and support backup.
- The franchise may have established branding and reputation which you might benefit from.
Cons
- There will usually be an upfront franchise fee to cover setup and training costs.
- The majority of franchises charge ongoing franchise management fees (usually a percentage of turnover or profit) which covers ongoing training and support.
- You will usually have a contractual attachment to the franchisor for as long as you run the franchise business.
These are really just the main points as there are others. The next post in this series looks at the type of people who might be most effective for the self-employed or franchise business options: The Big Question: Self-Employed or a Franchise Business Part 2
Tags: franchise business, franchise opportunities, joel caws, pros and cons, Self employment, start-ups
