Escape the downturn by converting a business to a franchise
Brian Duckett - Chairman, The Franchising Centre
In my last article I looked at converting a business to a franchise. Now we can look two more ways to convert a conventional business to a franchise to improve its chance of success.
The second type of conversion franchising is where a franchisor persuades a competing conventional business to convert to its brand and system.
At first sight, one might wonder why this would be attractive to an independent business owner. The reason often is that there are many who are good tat the day-to-day operation of the business, but not so good at the creative process of marketing or development systems. They may also not have the time to research new ways of doing things, When they join a franchise all the background services are provided and they can get on with serving customers which is often what they do best.
So what is the third type of conversion that I suggest franchising should get more actively involved in.
The franchise sections of the bank specialising in the sector still claim, despite the economic downturn, that they are keen to lend to franchisees, not least because it is far safer than lending to independent star-ups. We have all heard that more than 50 per cent of independent business start-ups will not survive more than three years, whereas the failure rate for franchisees in properly-structured systems is less than five per cent per year.
A bank manager recently told me that he had opened more new business accounts this year than in the same period last year, probably because more people are losing their jobs and looking to take control of their own destiny.
But if these independent start-ups fail, why let them open a business account in the first place?
Why don’t bank managers, Business Links, and others to whom people go for advice when starting a business try to convert these people to franchising by at least suggesting they consider it as an option? This would result in much less heartache, many fewer failures, and greater franchise growth.
It is no good leaving it to the BFA. We should all be making sure that advisers know the franchising story. We should all be “Proud To Franchise” and contribute to its development.
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.
Beat Redundancy With a Franchise
Many people can often find the day to day routine of office life tiresome and somewhat repetitive. It becomes a difficult task to remain motivated and look forward to work in the current economic downturn therefore in many cases people are looking to become independent as they are no longer able to rely on their jobs.
Every day we hear how various companies have gone under and how there was nothing anyone could do to stop it from happening. When you go to work, do you feel paranoid about the possibility of redundancy? If you are made redundant, will you be able to find a job that matches your salary? The general consensus indicates that work is seen as a burden as opposed to a source of fulfillment and productive part of your life.
If you have always wanted to try your hand at running your own business then this may be the perfect time to start. This way, your success and earnings depend entirely on you so you have every reason to inject passion and enthusiasm in your work life. This may seem surprising but starting your own business can actually be stress relieving, as every decision you make will be your own choice and you have nobody else to answer to or worry about.
Starting your own business may seem daunting at first however, if you are to opt for a franchise, the risk is reduced significantly. Certain practices are put in place so it is easy for you to focus on sales and profit as the franchiser will deal with all new developments and marketing methods. Nevertheless, you are still your own boss as you can work at the speed you want to, start and finish at the time you wish to and work in a way which is comfortable for you.
There are a vast range of franchises available especially in current times where people are looking for a solution to eradicate work life stresses. It is definitely worth looking into franchise opportunities particularly if you have a desire for entrepreneurialism but are not willing to go at it completely alone.
For a lot of people, a traditional working environment is no longer appealing due to constant pressures from surrounding colleagues and management that seem to have no end of regular demands. Whatever the reason, you must seriously think about the choices that are available to you and ask yourself why you are considering investing in a business in the first place.
There are plenty of franchises out there it just comes down to finding one that is suitable for you and your personality. If you enjoy being around people in a customer orientated environment you could go for a retail business. On the other hand, if you prefer working alone in a quieter environment, then maybe you should look at online businesses as you can speak with customers by phone and maintain all business transactions from home. Whatever you do, make sure you go for a franchise that is part of a growing market so you have every chance to succeed.
Naz Daud is the founder of CityLocal, a franchise opportunity for people who would like to work from home and be their own boss… Read more about CityLocal
Tags: franchise, naz daud, redundancy, start-ups
Recession is presenting new opportunities for franchise start-ups
Those looking to start a franchise could be forgiven for thinking that due to the recession, this is not the right time and that plans should be put on hold.
However, many leading entrepreneurs are arguing that this is actually the best time to start a business. Richard Branson was recently quoted as saying that “fortunes are made out of a recession. A lot of entrepreneurs get going in the economic depths because the barriers to entry are lower.”
Why is starting a franchise now a good idea?
There are a number of reasons for starting a franchise now. For one thing the first shoots of recovery have kicked in. The last two months have seen growth in the UK economy in both housing and retail sales. Secondly the banks have money to lend now and the rates are good. Finally it is worth noting that cheap finance and a re-emerging economy are good news for any business.
Why start a franchise businesses rather than to own idea start up?
Both own idea business start up and franchise start ups are valid ways of entering into business. The key difference is that self start ups predominantly fail while franchise start ups predominantly succeed. The national franchise survey conducted buy the British Franchise Association and Nat West bank uphold this view. The survey declares that over 90% of franchise businesses are profitable. Owner idea start up businesses can suffer significant failure by comparison.
Why is franchise business start up more successful than own idea businesses?
Franchise business is built on the platform of proven best practise. A franchise brand owner will prove his business as profitable and replicable before rolling out his concept to others. The franchise buyer or franchisee benefits from this proven system by way of training, following the proven system and ongoing business development support from the franchisor brand owner or franchisor. In this way the franchise business system helps to ensure success for all involved.
10 thinngs to discover before buying your franchise business
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 franchises and franchisees to talk to buy visiting www.SelectYourFranchise.com. Ask how the franchisee’s businesses are 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 UK’s 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.
