If you’ve been out of the house today or, in fact, turned on a radio or television, or even used the internet – there’s a good chance that you’ve come across a franchise business. In the UK, there are 48,000 of these businesses and the franchise army is growing by the day.
Calling the shots
From McDonald’s to Kitchen Makeovers, franchising allows individuals to start up their own business with the backing of an established brand. This business model offers all of the benefits of running your own show without the inherent risks associated with starting a new business from the ground up. While there’s no doubt about the popularity of franchising, in this article, we’re going to tackle the big question – just how good is the franchise model business?
Making it count
To begin to answer that question, we’ll first take a look at those all-important numbers.
If you opt to start up your own business from scratch – say, a coffee shop – you’re going to need between £150,000 and £300,000 to cover all of your start-up costs. Needless to say, that’s a pretty big chunk of change to be shelling out without any guarantee of success. In contrast, you can get hold of a Triple Two Coffee franchise with a minimum investment of just £25,000 (although some start-up costs will come into play after signing on the dotted line). When it comes to financial risk, this is a huge difference.
Turning a profit
Once you’ve invested all of your hard-earned cash into your business and you’ve finally opened the doors, your hard work will hopefully convert into profits. Unfortunately, these profits will be consistently whittled down for many businesses by running costs and ad-hoc expenses, which are necessary to keep the lights on for your business. With the franchise model, on the other hand, profits tend to be higher and, more importantly, start happening more quickly due to the fact that your business is an established brand.
Lending a hand
Whatever kind of business you’re looking for, you’ll almost certainly need to seek funding from a bank or other financial institution unless you’re independently wealthy. This is the point at which many businesses fall before the first hurdle, as this crucial stage involves convincing the bank manager that your business idea is likely to make enough money to be considered a safe bet when it comes to a loan.
These days, everybody knows Jeff Bezos as the Amazon multi-multi-billionaire; however, this almost wasn’t the case as the mogul struggled to secure funding, to begin with.
Shopping around for a business loan can be tough but, your chances of acceptance are significantly higher when your proposed business is a franchise opportunity. Quite simply, the bank manager will see your franchise business proposal as a much safer bet than starting your own business as an unknown entity – and securing this funding really is more than half the battle.
Having your work cut out for you
Assuming that you’ve managed to get hold of the funding to start up your own business, you’ll realise that the hard work has only just begun. The biggest hurdle for any business is finding customers and persuading them to buy what you’re offering.
Unfortunately, this is a major stumbling block for many businesses, particularly in cases where there is a significant amount of competition. This, however, is where the franchise model really comes into its own.
Unlike introducing a brand new product or service into the market, the franchise model allows you to tap into an existing customer base. For example, you may decide to open a branch of the popular Japanese food chain, Wagamama, in your hometown. Even if Wagamama has not previously existed in your area, there’s a good chance that locals will know of the brand and will have even tried it when travelling to other towns and cities. For you as a business owner, this means that you’re likely to have a ton of eager customers even before you open the doors for the first time. While we’re not going to use the word fool-proof for any kind of business, opening a branch of an established brand gives you an excellent head-start toward success.
The support system
Running your own business can be a lonely place to be – particularly when things are going badly. For the business owner, ‘the buck stops here’ is a daily reality and can lead to stress, frustration and burnout. However, with the franchise model, your investment includes access to an incredible support network not just from the head office but also from your fellow franchisees. With this kind of model, help and support (including important technical support) is usually only a phone call away – saving you from the crushing sense of isolation that often comes with going it alone.
Broadening your horizons
If your hard work has paid off and you’ve managed to make a success of your homegrown business, you’ll no doubt be setting your sights on expansion. Easier said than done. Taking your business to the next level will usually involve a lot of expense, a huge amount of hard work and, in most cases, more than a few headaches.
This is particularly true when attempting to expand internationally, during which time you’ll probably find yourself spending a lot of time-fighting your way through yards of red tape.
So, what if all of this was done for you? When you have a franchise business, expanding is really easy. If you’ve made a success of your business, the franchisor will usually actively encourage you to expand your interest in the company by purchasing additional branches. This means that you can grow your personal interest in the brand really easily (even abroad), as your franchisor will already have the fundamentals in place to allow you to do this.
Up close and personnel
Before your business is even off the ground, you’ll notice that getting started requires people, lots of them. From hiring people to sell your products to employing somebody to keep your books in order, you’ll find yourself paying a wide range of people to help your business on its way; all of which cuts into your profits.
With a franchise business, you will, of course, have to hire employees to help you run your business, but these costs will be significantly lower as the franchisor will take care of a lot of the tasks and roles that you would otherwise need to deal with yourself.
So, to answer the question ‘how good is the franchise model business’? The answer is, pretty darn good. With a franchise, you get all of the benefits of owning your own business without the risks, never-ending costs and isolation. With a franchise, you’re able to get up and running with the minimum fuss and then scale your business as quickly as you like.
In 2021, there are endless opportunities available to franchisees – some of which will cost you less than £10,000 to get started with – making franchising a win-win whichever way you look at it.
