How franchising works: the two sides of the stor y

By Cathr yn

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When the word ‘franchise’ is mentioned, many people in the UK think of a series of blockbuster films or railway operations But, my two part article looks at the world of businessformat franchising, from the perspective of both sides – the franchisor (Franchise World Summer issue) and the franchisee

According to the British Franchise Association (BFA), business-format franchising, is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trademark/trade name of the franchisor and make use of an entire business package, comprising all the elements necessary to establish a previously untrained person in the business and run it with continual assistance on a predetermined basis

A strong and successful business-format franchise should provide:

● An established market for the franchisor ’s products or services

● Proven sales, marketing, and operational procedures

● The benefit of an established business name

● Training, ongoing support and help in running the business

● Where appropriate, help in finding, fitting out and furnishing premises

To be successful, both parties need to benefit from each other. In this issue, I am going to look at:

Franchising from the franchisee’s perspective

Starting a business on your own can be risky and there are a large number which fail However, buying a franchise can reduce those risks and give you a greater chance of success

As a franchisee, you have the opportunity to own and run a business under an established brand with a proven business format and market A well-established franchise should provide all the essential elements for a successful business, except the most vital piece, the person who will run the business The missing piece is you – the dedicated and motivated franchisee

Advantages

● You own your individual business but have the benefit of a recognised brand name and a blueprint to follow

● A good franchise offers business systems and products/services which have been market tested and proved to work. As a result, the risk of your business failing is usually greatly reduced

● The franchise package you receive at the outset will normally include training, operations manuals, book-keeping and accounting systems, marketing guidance and ongoing support You will, therefore, not have to spend time or money developing these

● You should also receive practical help in setting up and launching your new business, so you are more likely to avoid any major teething problems

● Depending on the type of franchise you are buying, you should benefit from bulk buying and the negotiating capacity of the franchisor, and have an established, reliable source of supply

● Your business will also benefit from the franchisor ’s advertising and promotional campaigns.

Disadvantages

● There will be costs to pay for the franchise licence and other start-up costs which you will have to fund

● The franchise is governed by a legal contract which will outline your obligations in detail and means that you must run your business in strict compliance with the franchisor ’s specifications

● As the success of your business grows you may want to expand and grow further, your neighbouring areas may already be occupied by other franchisees

● If other franchisees damage the brand name or image of the franchise, this could have an impact on your business too

So, how do you check out a franchise?

The first step is to assess the franchisor and its business When you take up a franchise you are entering into a long-term business relationship, so it is very important that you spend some time looking into the background and performance of your prospective “partner” You should check how long the franchisor has been in business and in franchising background and performance of your prospective “partner”.

About the author

Cathr yn Hayes is the Franchise Director at Revive! Auto Innovations and has over 25 years of franchising experience

Previously Head of Franchising at HSBC, followed by a shor t-term senior role at the British Franchise Association, Hayes has a high profile within the sector, contributing regular ar ticles to the franchise press and other business media cathryn hayes@revive-uk com www revivefranchise com