What is a franchise?
For those new to franchising, a franchise is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade as their own business under the brand of the franchisor, following a proven business model. We are already familiar with many franchise offerings e.g. McDonalds, Costa.
The franchisee also receives a package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis (including a predetermined agreement length, with renewal options).
The principle is simple - some companies choose to grow, not by developing in the conventional way but, by granting a franchise license to others to sell their product or service. There are clear advantages to this:
Who is in control?
Each franchise business outlet/unit is owned and operated by the franchisee. However, the franchisor retains control over the way in which products and services are marketed and sold, and controls the quality and standards of the business.
What are the cost implications?
The franchisor will receive an initial fee from the franchisee, payable at the outset, together with on-going management service fees - usually based on a percentage of annual turnover or mark-ups on supplies. In return, the franchisor has an obligation to support the franchise network, notably with training, product development, advertising, promotional activities and with a specialist range of management services.
The franchisee will also need enough 'working capital' to finance operations until they are profitable. The length of time this takes and the working capital required varies per franchise.
What makes a successful franchisee?
The franchise route is no easy option. As with any other new business, hard work, long hours and commitment are required. Not everyone is suited to franchising, so before you take the leap, as yourself a few questions:
Are you self-motivated?
Can you work within a prescribed business model?
Are you well organised?
Do you have realistic expectations of business growth and timescale?
Can you afford it?
Have you support of your family?
Are you a positive person?
Does the franchise suit your skills and experience?
Are you prepared to sell?
Have you done your research, not only on the franchise but also on the local demand?
This site makes no recommendations about any franchise. We do though recommend thorough research including talking to existing franchisees, taking professional advice and attending workshops such as the British Franchise Association's 'Prospective Franchisee Seminar' which is held at various locations throughout the year.