Toolkit: Taking out a franchise

Phil H · Posted: 24th May, 2007 7:59 am UTC Post subject: Toolkit: Taking out a franchise

Marketing & PR. Getting customers and keeping them without breaking the bank. (2007) Philip R Holden and Nick Wilde. London, A&C Black.

Toolkit: Taking out a franchise

If you’re planning to start a business, or you already have some business experience and you feel the need for greater support than going it alone, then franchising may be for you.

A franchisor is the owner of the business idea or ‘format’ whilst the franchisee owns the local business and pays a management fee to the franchisor – usually a percentage of turnover.

For some people, a franchise seems to be a ready-made business with many of the difficult decisions already taken. It can be in a wide range of industries from slimming clubs to the delivery of ready-mixed concrete (including some very well known brand names). The franchisor grants you a licence to operate a business that they have ready to go. You will be expected to pay (often a substantial amount) for the initial licence and probably for stock. Good franchisors may help you to find.

In theory, you should receive everything you need, including training, to run the business in the format specified and that means that the set-up time and the wait before you begin to earn something should be relatively short. You may be supplied with vehicles, shop fittings and national, sometimes local, marketing support. The one thing the franchise rarely gives you is guaranteed customers, although some generate sales leads for you

The brutal fact is that running a franchise business is tough. Even getting to be a franchisee is difficult since the licensee is looking for someone with capital to invest and enough entrepreneurial ability to make a success of the business. Think hard about whether you’d be happy with a significant ‘partner’ owning the name of your business and, crucially, be clear about what support you are getting. You will probably be allocated a territory which may or may not be exclusive.

There are clear advantages in being able to see the business you are buying into and having training and advice. If it is well established, you should have the opportunity to visit some of its ‘branches’ and see at first hand what’s involved.

A word of warning. Franchisors are selling their business idea, so will paint a rosy picture of the future. Check it yourself with what you’ve learned here. As we have suggested in Chapters 4 and 5 of 'Marketing & PR', you should check out the customers and see how many there are and what they are doing at the moment. Is there a need for another company delivering and collecting estate agents ‘For sale’ boards? (Yes, there is such a franchise.)
Of course, if you already have a business, you might consider that franchising is the way to grow it. So you will want to license your business idea to others.

Your can regularly read about franchise opportunities in the Daily and Sunday Express newspapers. The British Franchise Association (BFA) runs regular seminars around the country for both franchisees and franchisors.
You can contact the BFA at Thames View, Newtown Road, Henley-on-Thames, Oxfordshire RG9 1HG; telephone 01491 578050; www.thebfa.org.

Now, please post your comments and experience. Have you investigated a franchise opportunity? What do you need to know?

(c) 2007 Philip R Holden & Nick Wilde