Reading Time: 3 minutesWhen it comes to the question, what is a franchise opportunity, many of us know that it is a form of business that uses branding from an already established business to help create a turnover. However, there is much more to franchising than you’d first assume, and it is this information that we want to share.
So many of us fall for misleading or conflicting information and the franchise world often comes with negative connotations. However, in the UK alone, the franchise industry makes billions of pounds every year that you could tap into with the right information.
The Legal Definition
A franchise opportunity is a business that an individual purchases from a franchisor. The business that you purchase allows you to use the logo, name and business model so that you can sell a well-known product to the consumer.
A franchise opportunity is not an opportunity to buy the entire business, but just the rights to trade using the businesses information. Franchising is a popular way for people to get into business without the pressure of building something up from scratch and will let you access a customer base that already knows and wants to have your product.
Seeking a Franchise Opportunity
Finding the right franchise can be daunting as there are so many options on the market. However, the best place to start is with your own experience and interests. If you can match a business to what you know and love then you are more likely to be successful when it comes to developing and maintaining your franchise.
There are many online databases of franchises available, and we would recommend that you use a franchise site that is well known and offers many different business types. Directories that only offer one type of franchise are often affiliated with the franchise it recommends, and this means that you will end up with biased advice.
Who Owns the Franchise Opportunity
When it comes to ownership, you own the rights to operate the franchise opportunity according to the specifics that are stipulated in your franchise agreement. You do not own the business itself, and if you want to sell your franchise, you will need to work with the franchisor to find a new franchisee.
The good thing about this business model is that the franchisor needs your business to work in order to reap the rewards as much as you do. To ensure this happens, you will find that they tend to offer mentoring and training packages as part of the franchise deal and will always be on hand to help you maximise profits.
Who Shares The Profits
When it comes to profits, you will first have to pay your fees to the franchisor. Most franchisors ask for a percentage of your sales plus a royalty fee that is payable each month. When this has been paid, and you have covered wages, stock and other costs, then the money left over is your profit to enjoy.
It’s important to remember that you will be responsible for paying your own tax return each year and it’s wise to open a tax account to save money ready for the tax bill you get. If you fail to save up and then don’t have enough revenue to cover your tax return, you will face hefty fines until your account is cleared with HMRC. It may seem like a pain to save a percentage of your monthly profit, but it will pay off in the end when you sail through filing your tax return each year.
What If Things Go Wrong
Sadly, not all franchises are successful, and many people say that they didn’t understand what they were taking on when they first became franchises.
If the worst does happen, then you will need to work with the franchisor to come to a mutually agreeable solution. Most franchisees have to sign up for a minimum term before they can consider selling their business on and it is important to know how much you need to cover the costs to your franchisor, or you risk being left in serious debt.
If you make the decision that you can no longer afford your franchise, you will need to:
- Meet your franchisor and discuss the situation to see if there is any support you can access to help you continue or to help you wind up your franchise.
- Agree on a sale plan with the franchisor so that the business can transfer to a new franchisee smoothly.
- Return everything that you have been given as part of the franchise programme.
- Finalise your accounts and pay all wages, invoices, tax accounts required to close down your venture.
- Work with the new franchisee to ensure the business does not need to close down before someone new takes it on.
In short, a franchise opportunity can be incredibly rewarding if you have the business acumen to make it work. Many people fail at the first hurdle because they look for a high profit, low effort business model, and this can lead them into scams. If you understand that you will need to put in a lot of work to make it a success, then a franchise may be a good choice for you.
Franchises require significant financial input from you and, in reality, you will need to wait to see a profit from your new business. This business area is a marathon, not a sprint and if that suits you and your budget then you may want to go ahead with getting your own franchise.
Finally, whatever you decide to do, you must complete thorough research before jumping in. Knowing your franchise inside out will help you to make it a success and so reading the fine print and understanding how much you will need to invest each month in order to see a return is imperative before you sign any document.
If, after all of this, you are keen to go ahead then we are certain you are the right person for this opportunity and hope that your new franchise prospers over the coming months.