Tom Endean from the British Franchise Association (bfa), the voluntary self regulating governing body for franchising, explains why franchising is increasingly seen as an attractive option and covers what you should look for in a franchise and how to obtain funding.
What are the benefits of franchising against starting a business from scratch?
Owning a franchise business under an established brand offers the experience, credibility, support network and structure of a proven business. This helps to overcome the uncertainties and difficulties commonly faced at the start-up stage.
It is not difficult to see why franchising is growing worldwide; new businesses based on franchise concepts are much more likely to succeed than other new business ventures. According to the latest NatWest and British Franchise Association survey, 88 per cent of all franchisees, including new start-ups, were trading profitably in 2009, contributing £11.8 billion to the country’s GDP. 2009 was also a year of expansion for many franchises, with the total number of franchise systems reaching 842 and the total number of franchisees growing from 34,600 to 34,800.
A franchise business has a proven business model, which is transferable and can be taught. This is then supported by the franchisor and training provided. As a franchisee you also own the business and so can eventually realise your capital investment by selling the business.
What to look for in a franchise
Having decided that franchising is an interesting prospect, the next key step is to find the right business. While websites such as www.thebfa.org and www.franchiseinfo.co.uk can provide many options and sources of information, meeting franchisors and existing franchisees face-to-face is also vital to gain a clear insight into a business and the reality of being a franchisee.
A visit to a bfa accredited franchise exhibition such as The British Franchise Exhibition at Manchester Central 10 -11 June is a good way to research this. It allows you to meet owners and franchisees from more than 50 businesses gathered together under one roof, and find out about the day to day realities of running a franchise. There are also experts to answer questions and seminars covering all aspects of franchising, alongside valuable and informative free seminars and an extensive conference.
The initial investment required can be a decisive factor. They start at a low level, sums that you may already have available, and go up to higher amounts for which you may need to take out a bank loan. Make sure you understand what costs are involved, both upfront and ongoing. One of the advantages of choosing to set up on your own as a part of a franchised business is that you are more likely to gain finance for a franchise in the first place as banks recognise the higher likelihood of success and are therefore more supportive.
The importance of business plans and how to obtain funding
A well-structured and prepared business plan is essential not only for the running of the business but also to show the bank when discussing finance. There will be a good chance to gain free advice on this at the Business Plan Clinic, sponsored by Lloyds TSB Commercial at The British Franchise Exhibition.
Although, with any new business, there are several options for gaining finance, the major banks are very supportive of good franchising, especially Lloyds TSB, RBS/NatWest and HSBC, who all have specialist franchise departments. However, before thinking about approaching a bank, you need to build a comprehensive business plan to allow the bank to judge the viability of the business.
To sum up: setting up a new business and making it a success is a tough and demanding challenge for anyone. Choosing to start up as part of a proven franchised business helps significantly in overcoming the challenge and makes success more likely.
To register for The British Franchise Exhibition, call +44 (0)844 257 8668 or visit www.franchiseinfo.co.uk. Callers can purchase tickets by credit card for £8 each or £7 each for two or more. Admission on the door is £10. Visitors can, however gain FREE admission by using the promotional code BFEMDD when they register on the website.
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