The UK franchising industry is worth over £13billion and it saw a 20 per cent growth during the last recession, compared with the economy in general, which shrunk by 2.5 per cent. Because successful franchise concepts have a strong and proven business model behind them, your chances of failure are much lower if you buy into a franchise than they are if you start up your own concept.
Most people are aware that some of the world’s biggest brands operate a franchise model; McDonald’s, Subway and so on. But franchising is everywhere in the modern UK business landscape, with nearly 1,000 brands in the sector from consultancy to retailers, supermarkets to auto repair, catering to pet care. You’ve probably brought from a franchise in the past week, even if you weren’t aware of it.
Because it’s a business model based on proven systems and brands, it can also be lucrative – but it’s certainly no picnic. It’s not the sort of investment that runs itself; though there are plenty of management franchise opportunities where you will oversee operations rather than getting involved in the daily hustle and bustle, you will still be responsible for the ongoing development of the business.
Remember too that those systems are in place for a reason, and need to be followed. Innovation is strong in franchising, with mechanisms for franchisees to feed back ideas and development to head office and the wider network – most famously, for example, the Big Mac was invented by a franchisee.
But if you want to have complete control over every single aspect of the business, then it’s fair to say franchising may not be the right option for you. Franchisees pay for systems and a brand that has been proven to work: they’re expected to use them!Success rates are higher because the franchise system revolves around replicating a business that the franchisor has already tried and tested in the marketplace, shown there is a demand for, and borne the costs of making mistakes along the way. A good franchise offers significant initial and ongoing training and support, and an established franchise usually also offers a substantial network of franchisees working in the same direction for the good of the brand.
Of course, it’s very varied: while many franchisees have successfully become their own boss to escape the day job, some run multiple outlets and turnover tens of millions of pounds. One of the big attractions of the sector is its diversity – there’s something suitable for almost every budget and lifestyle.
It’s worth stressing that while it is the franchisor’s brand, it is the franchisee’s business; which means you can build up a capital asset which can be sold on at a later date for a profit. These ‘franchise resales’ now make up around half of all UK franchises sold each year and often come with an established customer or client base, so can be profitable from day one.
When joining a franchise it’s important to approach things calmly, do an abundance of due diligence on the brand and people behind it, and speak with existing franchisees to find out what life is like from the coalface. Franchising is a serious business proposition and must be approached as such – you’re usually signing up for five or 10 years, so get the contract checked by a franchise solicitor first too.
The British Franchise Association is the non-profit trade association for ethical franchising accrediting franchises against a strict set of criteria before they can join. Those businesses offer franchisees the best chance of success because they have been judged to operate ethically and provide the right support. The BFA’s website, www.thebfa.org, lists all current members and also contains plentiful advice on how to research properly.
Investing in a franchise has been a smart option throughout the downturn. With the sector set to flourish further in a growing economy, it might just be the perfect investment for the future too.