Every year in the UK thousands of people get their start in business by buying a franchise. It’s the perfect way to own a business with significantly less risk than creating something from scratch.
When you buy a franchise you buy a proven business model. You don’t have to waste time finding out what works by trial or error. Someone else has already made all the mistakes for you.
The figures show the benefits. A recent annual franchise survey carried out by NatWest and the British Franchise Association showed that 9 out of 10 franchisees traded profitably.
The survey also revealed that estimated start-up costs have declined. Taking on a new franchise cost an average of £50,400 in franchise fees and other associated costs – down from £64,900 last year.
There are of course some downsides as well. You will be quite restricted in the way you brand, market and run the business and will normally have to follow a specific operations manual. Unlike your own creation, you can’t wake up in the morning and change everything on a whim (few business owners actually do this, but it’s nice to feel like you could do it).
Franchise owners also have to pay ongoing fees to the franchisor; typically a percentage of profit or turnover.
And just as it’s possible to start the wrong kind of business, you can buy the wrong kind of franchise. There are nearly 800 franchise opportunities in the UK. Here’s how to pick the perfect one for you.
Do something you are passionate about
If you’re stuck in a dead end job right now, the thought of being your own boss should be very appealing. And while you might think it would be OK to, say, clean ovens all day, you could be right. But what sounds like fun when you are working for someone else can soon stop being fun when it’s your daily reality.
Any business that requires you to do the same thing can soon become repetitive and boring. Are you buying a business or a well paid job?
The best kind of franchise to buy is one that you feel passionate about. That passion will get you through the inevitable late nights that go hand in hand with the first few years running your own business.
Make sure it is profitable
Just because a franchise makes money doesn’t mean it is highly profitable. And by that we mean it generates a very nice income without you having to do everything.
There are some franchise opportunities where you will struggle to find enough work for just one person (you); meantime others can be scaled up over time. It’s always better to invest in a business that you can build over time and ultimately hire other people to do the hard work, while you reap the rewards.
These kind of franchises will cost more money but give you a greater long-term return.
Get proof that it works
You should be especially cautious with businesses that are branching out into franchising for the first time. Just because a business works well for the original owner doesn’t necessarily mean that it will work for you.
Insist on meeting other franchisees first, and if you are serious about an opportunity, why not spend a day with an existing franchisee. If you go on to sign up they could become a useful mentor for you.
Consider only franchises that are members of the British Franchise Association. It is a voluntary scheme but asks franchisors to stick to a strict code of business practice.
Be clear what you are paying for
Some franchises show you how to deliver the service… and that’s pretty much it. Others show you how to market effectively, and some even generate leads for you.
You should be very clear up front exactly what you will get and check it is right for you. If you need to be out all day delivering your service, who will do the sales and marketing?
The best franchises offer ongoing support and training. They make it their business to help you get the most out of yours.
Have an end game in mind
As with any business you should have a rough idea of what you want to do with your franchise when you’ve had enough of it (and yes that day will come!). Most franchises can be sold onto someone else, but it’s worth checking this is allowed in your franchise agreement.
Don’t underestimate how motivating it will be knowing you’ll be able to turn years of hard work into a very attractive business that you can cash in on by selling.