Is franchising your next step?

Tom Endean, Marketing Manager of the British Franchise Association

Franchising may be an option for you if you want to expand your own business or if you need a new career start after redundancy or a change of life.

With redundancies becoming more and more apparent across the UK, many employees are facing the possibility of losing their job and, along with it, their income. But amidst all of the negativity, is it possible that redundancy doesn�t have to mean the end of life as we know it? In fact, could it mean that although one door has closed, another opens? As a more secure, proven investment, franchising may soon start to be seen as a viable option for many newly unemployed individuals who are looking to start up their own business. However, investing in a franchise is not an instant pill for success. It takes commitment and professionalism, along with the need to plan and investigate carefully what you are looking to buy into.

Franchises remain inherently more successful than their non-franchise counterparts, therefore the banks or financial institutions will view franchising as a safer, more attractive investment. As a result, you are more likely to secure funding on a franchise, as a proven business model, than if you were trying to start up a small business from scratch. This attractive package naturally becomes a serious consideration for many individuals looking to start up a business, especially at a time when the number on the unemployment register is on the increase.

It is vital that the possibility of a franchise is taken seriously however. Franchising is not a quick-fix solution nor is it a part-time hobby. Today franchising encompasses a whole multitude of business disciplines and markets. It is a serious business option and one that requires hard work, plenty of enthusiasm, dedication and business acumen. That is not to say that there isn�t a suitable franchise business out there for you, but you do need to choose very carefully and with caution. The bfa suggests some steps that should be taken when embarking on the possibility of a franchise investment:

Finances: Do your sums and find out realistically what funding you have available or potentially available. If you are looking to raise finance it is worth noting that there are three major banks that the BFA accredits because they understand and specialise in franchising. Ask to speak to a specialist franchise department or advisor. By speaking to a bank that is familiar with lending on franchise investments, you are more likely to secure the funding you need.
Lifestyle hurdles: Ask the question, �Do I fit this business model?� For example, if you are looking to invest in a restaurant, are you able to work nights and weekends? If you are investing in a cleaning business, it will be difficult if you have an adverse reaction to certain chemicals. It sounds logical, but be sure of the chosen field. Those franchises that succeed tend to be those with close family and friends around them who are willing to provide help and support.
Do your research: Market research is vital, take time to look at the different types of business models available to you, because there are so many out there. Keep an open mind about what industry sector you are interested in rather than simply choosing a business sector that you understand or have experience in. Be aware that when you sign up to any franchise you are buying someone else�s brand and they will want you to adhere to their systems and methodologies. It may be that a completely new area suits you much better as a new challenge and it also means no preconceived ideas.
Honesty is best: Make sure that you thoroughly investigate any franchise opportunity that you are seriously considering. Look further into the franchise and get as much information as possible. The franchisor should be transparent about success, where in the country it has performed well and also where it hasn�t. Ask to speak to a number of other franchisees not just the one the franchisor recommends, they should be open and honest enough to allow you to speak to any one of their franchisees to ensure you get the information you need to make an informed decision. If the franchisor is a BFA member, you will already have a certain level of assurance that the business is independently measured against an ethical code of franchising practice.
Look carefully at all costs: Make sure that the franchise investment includes the cost of operating capital and stock, or at least if it doesn�t, that you are aware of it. The last thing you need is surprise bills and other charges cropping up. This is really about doing your own due-diligence.
Check the detail: Those franchisors that have been accredited by the BFA, have had to go through stringent tests on their franchise, so you know that it operates in an ethical way. However, with any business contract make sure you read the small print and get legal advice if required. Franchise agreements are generally very large documents and can be very involved. Speak to a BFA accredited professional advisors, as they will be able to check the validity of the agreement and identify possible problems.
Not a quick-win! Although franchises are generally more successful than other business types, it is by no means a license to print money. It takes a considerable amount of hard work and determination, but preparation is key and if you spend the time initially gathering as much information as you can, you will eliminate the possibility of making the wrong investment.

Growing your own business

There is of course the other side of the coin. What if you already have your own business and are looking at franchising as a model to grow and secure the business? It can turn a small business into a major brand, but what does it take?

To franchise a business is not something that can be done without thought. To start, the business needs to be proven - you can�t franchise an idea. You need to show potential franchisees that the business works in the way in which they will need to run it. It also needs to be transferable, by which I mean it can be run in multiple locations, using the same system, brand and quality. As a key point in this, the franchise also needs to be something that you can teach people to do. There is little point having a franchise that only three people in the world would be capable of running.

If your business passes these three simple, but vital, checks, then you can start to look at what you need to do in order to turn it into a franchise. This process will require the production of operation manuals, to show how everything must be done, and a franchise agreement will also need to be written to set out how the relationship and agreement between the franchisors and franchisee will work. It is also there to protect the network and your brand. This will require expertise from solicitors and consultants, which can be accessed via the BFA�s accredited Affiliate Members list online.

You will also need to think about territory: how you are going to set out what areas people may need to limit themselves to if they join your franchise. You will also need to think about the training and support that will be required. If you are investing into franchising your business, then you will need to make sure that your franchisees succeed. This will require thought about the core requirements they may have, both to get them up and running and then on an ongoing basis.

All of this planning, building and ongoing commitment will cost you money and so you will also need to think about how to finance the work. At this point you must make sure that you don�t underestimate the costs and try to cut corners. A franchise is a successful business model, but only when done well. Don�t try and cut costs in professional advice, otherwise it is likely to end up a lot more expensive down the road. At the point of speaking to banks, it is advisable to make sure you speak to the three BFA accredited banks. They will be able to get a better idea of your business and how it operates. This means that when your potential franchisees approach them to raise capital, the banks will already understand aspects of what will be required.

Assuming you have done all of your homework; made all the necessary checks; received all the necessary expertise; and are now set up, ready to franchise your business, there is one last aspect to consider � recruitment.

Recruitment takes two forms. The first is the staff that you may require to support the franchisees and ensure a healthy network. The second is the recruitment of the franchisees themselves. This can be done through a number of channels, such as your own direct marketing, advertising in the main franchise publications or franchise sections of newspapers. There are also websites to promote your business and even major franchise exhibitions, supported by the BFA. The important thing is to make sure that you look at all the options and make sure that you are investing in the selection of options that are going to work for you. It is good to try a variety of different channels, but support this by monitoring the responses and where your enquiries are coming from. Only then can you make sure you are investing wisely.

The franchise industry continues to grow and even in tough economic times it is proving to remain robust. There is now a multitude of different business types using franchising, and it continues to increase. As a business model to grow your business, or a new route to be your own boss, it remains successful, but only when done well.

For more information on franchising, educational seminars and the ethics of franchising, visit:
w: www.thebfa.org