To ensure that this is the case, the franchise agreement or contract is all-important. It is usually the only document that sets out all the legal obligations and rights that you have in terms of the relationship between the franchisor and yourself.

First of all, you should make sure that you are given a sample agreement by your franchisor to review and it is advisable to ask a specialist franchise solicitor to look at it and report back to you. You can then be sure that you are entering the franchise knowing all the risks and obligations that you will have to fulfil.

SmallBusiness.co.uk and Élise Billy, founder of franchise law expert EXB, offer this list of things to look out for in the agreement:

Is it comprehensive? – Does the agreement set out everything that you have discussed with your franchisor? Is everything that has been told to you included? It would be wise to avoid leaving anything to chance at the contract agreement stage, as you don’t want any surprises later on. Lastly, is the contract clear on all your obligations and any payments that you will have to make?

Fees – Check the initial fee, then look out for any ongoing fees. Are the ongoing fees fixed or do they vary as a percentage of revenue? This will be important for managing cash flow at a later date, and for forecasting. Are there minimum fees, or performance targets that you will have to achieve? What other costs might you incur?

Supplies – Ask whether you have to buy your supplies from the franchisor or from a named supplier, or if you can choose your own suppliers. If you are bound to a named supplier or your franchisor, will you be given a reduction in price?

Territory – Do you have an exclusive territory? If so, which area does it cover and is it clearly set out, for example by postcode? Is this also the case for any sales that you make? If you don’t have a clearly defined territory, and there are other franchises nearby, it is worth asking how direct competition between the two will be avoided – this is in both your and your franchisor’s interests.

Training and support – What initial training will you receive? Are there obligations on the franchisor for ongoing training and support? What exactly will the training involve? Remember that you may have to plan your time in relation to any training, so it is worth working out a timetable early on.

Term – Ask how long the initial term of the contract is and where this is detailed in the document. Is there a probation period? Once the contract expires, is the agreement renewable and are there costs incurred if you do renew?

Exit – Does the agreement cover your death or your sale of the business? On what grounds can the franchisor terminate the agreement? What does the agreement say about the period after termination or expiry?

Read our tips on day-to-day franchise success here.

Click here for more expert advice on becoming a franchisee.

How to buy a profitable franchise

Smallbusines.co.uk has teamed up with Robina Every, managing director at Card Connection, which specialised in the franchised distribution of greeting cards, to provide five east steps to make a franchise work.

In order to evaluate the potential profit of a franchise, the key is to remove the guesswork from the equation as far as possible. In other words, deciding if a franchise will be profitable enough to create a viable business opportunity on an ongoing basis needs to be based on factual information.

Step 1: Evaluating the purchase price
Firstly, establish the initial cost of the purchase. As well as the price tag, include the cost of any stock, equipment, licensing, transport and IT systems. Similarly, check to see if the price includes training costs to get you up and running. Is this a one off or will further investment be needed in the future?

Step 2: Calculating likely income
Research the previous sales history of the territory. Anticipate that your future income is likely to be slightly less that the previous franchisee initially, due to the inevitable learning curve involved in starting a new venture.

If it is a virgin territory ask the franchisor for the profit and loss accounts of similar sized areas and use an independent accountant to look at the books for you. For a small fee an accountant will be able to provide invaluable advice which may ultimately save you thousands by preventing you making any wrong decisions.

Step 3: Consider financial forecasts with care
Financial forecasts – which the franchisor will provide you with – are useful but remember they are only estimates as opposed to the hard facts contained in the profit and loss accounts. Keep in mind any forecast may not be realistic or may even have been bolstered to encourage you to buy the franchise.

Step 4: Borrowing
The next step is to work out how much money you will need to borrow to buy and run the business. This will be the sum of the purchase price plus any additional costs such as equipment, stock and training.

It should also include a provision for ‘working capital’. Depending on the business model of the particular franchise, working capital required for day-to-day cash-flow can amount to up to 20 per cent of the purchase price of the franchise.

It is likely you will need to borrow at least a proportion of the cash required to buy the business. Work out how much you can fund yourself and how much you need to borrow. All the main high-street banks have franchising departments and can lend up to 70 per cent of the franchise purchase price. However, it is advisable to avoid over-borrowing.

Step 5: Evaluating the cost of the franchise

The financial statements that you will have received will give you an idea of the profits the franchise currently makes. From this deduct the total cost of buying and running the franchise (including loans, working capital, stock, training and equipment etc) – spread over the term of your loan (say a year to five years) – from the likely income of the business over the same timeframe.

This important calculation will give a clear idea of the net amount of money you can expect to take home each month / year. The question is: does it match with the amount you need to maintain your current lifestyle? In fact, it should comfortably exceed the amount you need to live on to ensure your potential business franchise generates a profit.

The post A guide to franchise agreements appeared first on Small Business UK.

The rise of the “boomerpreneur” and “olderpreneur” has finally put paid to that old saying, “You can’t teach an old dog new tricks”.

It used to be unusual for someone in their fifties to set up their own business, but now those in their sixties or older are turning their back on thoughts of retirement – either through desire or necessity – to go into business for themselves.

For some, it’s not just a question of money, but a desire to achieve a long-held ambition to be their own boss.

The pandemic has had an adverse impact on the jobs of younger people and the over fifties. According to the ONS, three in five over fifties left the workforce sooner than anticipated after the pandemic started and it may be this older generation that struggles to return to salaried employment.

Many “olderpreneurs” turn to a franchise operation as a way of becoming their own boss in an area that they don’t have an existing skillset. Others have re-evaluated their lives and want to fit work around their lifestyle and families, rather than the other way around.

At our company, we have franchisees of all ages and backgrounds and there are numerous examples that support the maxim “age is no barrier’ when running a successful franchise operation. Between 2020 and 2025, the government estimates there will be an 8.2 per cent increase in those between 50 and retirement age (1.1 million people) – all well placed to take advantage of this fast-growing marketplace.

‘Being my own boss allows me to structure my working life around my family and not the other way around’

In addition, the ONS reports there are around 1.8m self-employed over fifties in the UK – an increase of 21 per cent since 2008 – which represents the highest figure of any age group.

Anyone unsure about embarking on a new career direction should remember that older people have many transferable skills, which can be used to their advantage.

Years of experience and expertise mean this age group is more likely to succeed, with over 70 per cent of those setting up independent start-ups lasting more than five years, compared with 28 per cent of younger entrepreneurs, according to research by over-50 business starter support charity PRIME.

Many older people come to us with no prior experience of the oven valeting industry, but despite this, their business will have a 99 per cent chance of success when coupled with a tried, tested, and trusted franchise operation.

As we’re an established brand, we provide the training, tools, marketing and networking support which has really paid off for our growing band of people.

Case study: Greg Clark, golf club manager turned franchisee

Greg Clark spent more than 40 years in the hospitality industry, most recently as house manager at a golf club, before setting up his Ovenu franchise in the autumn of 2021.

The pandemic and resulting lockdowns created uncertainties around his previous role and was the impetus he needed to go it alone.

Greg, who is in his sixties, was trained to an ISO standard and benefitted from the induction, which included a range of advice on running a business, from marketing and bookkeeping to pricing and data storage.

He says: “Rather than starting a new business from scratch, and all the risk that incurs, I decided that a strong franchise was the best and most straightforward, option.

“I’d always wanted to be my own boss and Ovenu provided me with the training package, support, and strong brand identity that only an established franchise can offer.

“The ongoing tried and tested support and the strength of the network of franchisees is vital for anyone starting out in business, whatever their age or background. It has given me the blueprint for success.

“Having worked in hospitality for so many years has meant I’ve missed out on many important occasions, but being my own boss allows me to structure my working life around my family and not the other way around.

“I’ve already built a strong customer base and I’m really enjoying the job satisfaction this business brings.”

While it’s a big step to strike out on your own, particularly if you’re used to the stability of a regular salary, our franchises report overwhelmingly positive experiences.

Many of the franchisees are considering expansion by taking on a new sub-contractor, getting an additional liveried van, or even buying a neighbouring franchise.

Age has been no barrier to their success with the most successful having taken completely different career paths until they started their franchise. Franchising has given them the opportunity of a second career, and the chance to become their own boss.

Rik Hellwell is managing director of Ovenu Franchising Ltd

Further reading

Setting up a franchise vs growing a business organically

The post Why it’s never too late to set up a franchise operation appeared first on Small Business UK.

A franchise, with its strong brand and support network, is often the best way to launch a business for those who are unsure of dipping their toes into the more uncertain waters of self-employment.

It’s a credible option for those facing redundancy, who wish to seize control of their career. While many people, who have had time to reassess their work-life balance during the pandemic, are also expressing a similar sentiment.

Franchise packages should provide a proven, well-documented earnings potential, and allow the opportunity to hit the ground running with support packages such as a comprehensive ISO9001-accredited induction training course. In our company, franchisees also benefit from flexible working hours and a scalable business model, allowing expansion into a multi-van operation should a franchisee wish to follow that well-trodden route.

#1 – There is no typical franchisee

It’s important to present a straightforward and accessible franchise offering to prospective franchisees following a tried and stress-tested pilot operation that has been demonstrated at two or three UK locations. A franchisee’s start-up package ought to offer a level of support, and promotional activity which is perfect for people from a wide variety of backgrounds, as there is no such thing as a “typical” franchisee.

In essence, a good franchise will offer a wealth of support and expertise, which sets franchisees up for success. This attracts people who are committed, motivated, who buy-in to the business model and are in it for the long-term.

>See also: Starting a franchise: From winning the master franchise to taking the brand global

#2 – Set out your franchise stall

Think through the process of how your business actually works. Franchisees will need precise details and guidelines to get their business up and running. Your franchise offering must be readily replicable. This process takes time, and you may need to seek advice from franchising professionals, but it is ultimately worth it and even if you decide not to franchise in the end, the groundwork you carry out now will help your business run more smoothly.

From marketing to signage to business cards to staff training, it seems obvious, but ensure that a robust and comprehensive business model is in place before bringing your franchise offering to market.

Starting a new business is never easy or straightforward but setting up in business as part of a larger and established company can be the best way forward for an increasing number of those making the leap into self-employment. Franchisees will look to you as the franchisor for lots of help and advice; so be prepared.

#3 – Broaden your appeal

Many existing businesses could be expanded nationally or even internationally by using the business format franchise model. The beauty of our cleaning business is that it’s accessible to most people, so that makes it an ideal franchising opportunity. I have franchisees of all ages and backgrounds in both the UK and Australia, ranging from ex-forces through to office workers. There are numerous examples that prove that you don’t require prior experience of the oven valeting industry to own a franchise and go on to develop a successful business. A bonus is that start-up costs are relatively inexpensive, and the process involved in getting the business off the ground are also reasonably straightforward.

#4 – Present the business argument

I run an oven valeting company, however there is a widespread perception that franchisees need to be “hands on”. Although some oven valeting ventures require franchisees to get involved with some level of the cleaning, getting your hands dirty is one of the common misconceptions about cleaning franchises. In fact, many are management-based and are often some of the most corporate franchise organisations around. Explore the ramifications of your franchise offering and broaden its appeal.

With a management franchise, franchisees have the option to employ staff to carry out the cleaning while they take on much more of an operational role, which is the case for many of our franchisees. That said, remember that you’ll be helping your franchisees to run and manage a business and not just teaching them how to excel at their “day job”

#5 – The role of a franchisee

Many franchisees choose to take on a more “hands-on” franchise, and as is the case with my business, I positively enjoy working at the coalface of the oven valeting business. Whether a franchise targets commercial or domestic cleaning markets, every postcode area offers hundreds – if not thousands – of potential clients. Almost everyone has an oven, but it is a good idea to target niche areas, if possible. For instance, it’s often a good idea to target commercial enterprises, such as letting agents, which already have established networks of customers to tap into. Many of our franchisees have excellent working relationships with such businesses, and they can prove to be an extremely fruitful way of getting established in business. A well-prepared franchisor will have a very strong marketing strategy mapped out for their franchisees.

#6 – Build and protect your franchise brand

As a franchisor the most important asset is your brand, so try to protect it at all costs. Your brand represents your culture, your beliefs, and your attitude towards your customers. When you franchise you are giving people the opportunity to represent your brand by investing into it. This can be one of the biggest risks of franchising.

Clear guidelines should be established for the use of all your brand assets. You want to be sure that you are sending one clear message from one clear source, and that this message is consistent.

Do monitor everything – pay close attention to videos and pictures and monitor all social media outlets to ensure nothing departs or detracts from that message. Establish a good working relationship from the outset with a specialist franchise lawyer as all the above needs to be put into a correctly formatted Franchise Agreement. A wise investment in this department in the early days can save numerous headaches in the future.

Rik Hellwell is managing director of Ovenu Franchising Ltd

Further reading on running a franchise

Six steps to franchising your business

The post Setting up a franchise vs growing a business organically appeared first on Small Business UK.

Although going down the franchise route still requires hard work and dedication, the backing of a successful, established brand and support structure from your franchisor makes it far more likely you’ll succeed, compared to going it alone.

In fact, a recent report by NatWest and the bfa found that 93pc of franchisees claimed profitability in 2018, with fewer than 1pc per year closing due to commercial failure. *

When evaluating your options, you firstly need to know yourself; your skills, and any gaps that a franchisor will need to help with.

See also: Types of franchise and franchise structures

You also need to be clear as to what you want from a franchise, whether you’re looking for a lifestyle change, the freedom to spend more time with your family or to grow a significant business. The possibilities are endless, and your destiny is in your hands.

‘Make sure you conduct as much research as possible and that you understand what support your franchise package offers’

A reputable franchise will be able to provide you with all the information before you make the leap, and when you do invest, continue to give you exceptional help and tailored support throughout your business journey.

Perhaps one of the most important considerations when starting your franchise journey, is how much and what type of support your franchisor offers.

First-class business support

All franchises offer different levels of business support and there is no one size fits all approach. However, it is key to find a franchisor who can offer a support network that you can utilise to help you run your business effectively.

When choosing your franchise, you need to understand exactly what the franchisor offers, and how it can help you succeed in business.

As a business owner, you must wear many hats – from industry expert, through salesperson, to accountant, marketer and everything in between – and having guidance and experience to draw from can be invaluable.

Readiness to share key information

When you’re looking to start your own business, it is not always easy to know if your idea will take off. Taking the franchise route to self-employment means you do not have to spend months testing your idea and can benefit from a proven business model from the get-go.

Find out everything you can about brands you’re attracted to, ask to speak to existing and past franchisees, and carefully examine all its marketing materials. A franchisor should be happy to arrange this and will make sure you have got all the information you need to make an informed decision.

‘The beauty of the franchise model means your business and profits are your own, but you also have a support network around you’

Your franchisor should make sure you have access to all the tried and tested materials – from business stationery and marketing materials through to your own branded equipment, such as helping you arrange a professionally liveried van, or premises. When choosing your franchise, finding out what’s included and what costs extra, can help you make your decision.

Exceptional franchise training programmes

Many people find it surprising that you do not actually have to have any industry experience before you set up in business. Your franchisor should ensure you have all the tools you need to get you to a professional level quickly and effectively.

At Franchise Brands, each of our brands has an extensive training programme to equip you with the tools you need to run a successful operation, including technical training, sales and marketing coaching, legal guidance and much, much more.

A great example of this is our ChipsAway car repair franchise, which equips franchisees with all the tools to run a successful operation – whether they’re a car connoisseur or have no automotive knowledge at all. All new ChipsAway franchisees complete four weeks of initial training at the group’s purpose-built facility, which is accredited by the Institute of the Motor Industry (IMI).

It is this kind of vital training and support that makes the brand so successful, and after operating for 25 years, it now has over 200 nationwide franchisees.

‘I had never held a spray gun before but felt confident after my four weeks of practical training to hit the ground running and established the necessary business turnover that I required very quickly.’

Alan Wilson, a ChipsAway franchisee

‘The training is amazing! It’s a month-long course to give you the skills, which is rigorously assessed and gives you an IMI qualification. The advanced course, which is completed a few months later, is also crucial and a great opportunity to reconnect with the basics too. The technical support is great – the team are always at the end of a phone, and their industry experience is invaluable’ 

Husband and wife team, Jim and Caroline Clennell

High-level technical support

Naturally, the type and length of training you will receive will depend on the type of franchise, but extensive technical support should always be guaranteed. Ovenclean is the UK’s original oven-cleaning franchise and offers a two-week training programme for their franchisees. This includes in-depth practical, sales and marketing courses, both in the bespoke training centre and out in the field with an established Ovenclean Business Mentor.

Ultimately, your franchisor should want you to succeed in your new business venture, and will provide you with all the training, resources and knowledge right from the very start.

‘My trainer was absolutely fantastic – we had a blast and still talk to each other regularly, even if it’s not about oven cleaning. I now act as an Ovenclean Mentor to new starters, and I am always hearing about how helpful and knowledgeable the team are at head office. Everything Ovenclean promise, they deliver. We couldn’t ask for more.’

Dean Wilson, franchisee and business mentor at Ovenclean, Portsmouth

A 360° approach to marketing

It’s all well and good knowing how to run your business, but letting people know of your existence is the key to a healthy bottom line. After all, if consumers don’t know your business exists, you won’t be in the running for their custom.

With that in mind, marketing is a number one business power tool that you need to be utilising if you want to supercharge your business. But we know that unless you’re marketing trained, it can be difficult to know where to start. What’s more, it can be difficult to find the time to plan and strategise without taking away from your core business.

See also: The advantages of opening a franchise business

When you’re in search of the perfect franchise, make sure you understand what type of marketing support will be available to you and your business.

• Does your franchisor support your bottom line with online and offline marketing? How do they advertise?
• How to do they help you with lead generation?
• Are online marketing and offline marketing catered for?
• What level of business or enquiry did the proposed territory generate in the previous 6 / 12 months?

These are all things to ask before you take the plunge.

At Franchise Brands, each of our offerings has a robust marketing and sales strategy that you can tap into. From national advertising campaigns and marketing initiatives, to expert guidance, PR support and more, we give our franchisors the tools that would be otherwise cost prohibitive.

For an idea of the kind of things you should be considering, it’s worth seeing what we include in our premium dog-sitting franchise Barking Mad.

‘The support I receive from head office is absolutely vital. I am so grateful for their guidance. Having never run a business before, franchising with Barking Mad has given me the confidence and knowledge to continue my growth, with tremendous support in areas such as IT and organisational skills.’

Barking Mad franchisee, Melissa Sincock

A supportive, all-inclusive programme

The beauty of the franchise model means your business and profits are your own, but you also have a support network around you when you might need it most. A good franchisor will have a strong central support programme with experts in a wide variety of business functions – from accounts and IT to marketing and legal support.

When you’re looking to buy a franchise, make sure you conduct as much research as possible and that you fully understand what types of support your franchise package offers, and of course, how you can best utilise that support for your individual business needs.

A team waiting to meet you

Before you invest, it’s always worth meeting the teams providing the core business support so that you can get a good feel for the brand and how it operates. With Franchise Brands, we offer open days across all our offerings, which gives you the chance to talk openly and freely with the teams and see the systems first hand before you make the leap.

Tricia Craig has been a Metro Rod franchisee in Macclesfield for nearly two decades, and says the support she receives is still as good as it was the day she first opened her business’ doors:

Craig says: “The support you get at Metro Rod is second to none – I can ask for guidance and advice if I need it, and there will always be someone willing to help. I sell the reputation of Metro Rod to new clients along with the guarantee that we have a network of franchises that can help if required.”

An existing franchisee support network

Existing franchisees can offer an invaluable support network and share their successes and challenges that will help supercharge your business and give you tried and tested tips and tricks. When choosing which franchise to buy, scope out the size of the network and even ask to speak to existing franchisees about their experience.

At Franchise Brands, each new franchisee who joins the Franchise Brands group, such as Metro Rod, ChipsAway, Barking Mad or Ovenclean, has a mentor. This mentor is an experienced, existing franchisee who provides one-to-one support during the first few months. In addition, with large networks such as ChipsAway, there are over 200 nationwide franchisees who can offer a helping hand, or even become friends. ’

According to ChipsAway franchisee, Tan Likiliki, “having a strong supporting network who have extensive experience and expertise in that area is paramount”. The ChipsAway network provides “all the help you need so that you can feel confident, instead of feeling the vulnerability and fear which comes with starting a business alone”, says Likiliki.

Making your decision

Overall, choosing the right franchise for you and your lifestyle is an individual process and there is no one-size-fits-all approach. But whatever your situation, undertaking the right research, asking the right questions, and understanding how a franchise works are the key factors that will aid your decision.

To start building your franchise business empire with Franchise Brands and to find out about the brands on offer, please find out more here.

Franchise Brands was founded in September 2008 by Stephen Hemsley (executive chairman) and Nigel Wray (non-executive director) and is an international multi-brand franchisor with a combined network of over 450 franchisees in 12 countries across four brands: ChipsAway, Metro Rod, Ovenclean and Barking Mad

Further reading

Writing a franchise business plan: 11 things you need to include

The post What franchise support should you get from a franchisor? appeared first on Small Business UK.

Many business owners consider selling their business at some stage for a variety of reasons. Before starting the process of selling – in particular, the selling of a franchise – a number of things must be considered.

Selling a franchise involves more parties than just the seller and the prospective buyer. This necessitates that you must properly plan the sale, to ensure that it happens as smoothly as possible.

Prepare for the sale

Once you have decided to sell, a number of things should be done early on to ensure that selling the business yields the best results for everybody. Get the assistance of professionals to look at the business from a financial and a non-financial viewpoint to provide a proper review of the business.

This will help to identify possible issues which can be addressed in time in order to improve the saleability of the franchise. An action plan that prioritises the issues that should be addressed first must be formulated and implemented.

Compile an information pack for prospective buyers. The pack will assist them to make an informed decision on the feasibility of buying the business at the asking price. This info will also assist the franchisor in determining the fairness of the asking price when having to approve the sale of the business.

Franchise agreement

The franchise agreement forms the basis of the agreement between the franchisor and the franchisee and regulates their relationship. As standard practice, it also contains a section dealing with the sale of the franchise. This stipulates that the franchisor must approve the sale of the business and the prospective franchisee.

In some instances, it also gives the franchisor the right of first refusal. The franchisor won’t be allowed to unduly withhold the permission for the sale. It’s a good idea to study the franchise agreement and engage the franchisor during the planning of your exit strategy, though.

This will help you to better understand their views on who they would like to take over your franchise. Look at restriction clauses that might limit your participation in the same industry.

Franchisor’s role

It is standard procedure that the franchisor has the final say on the suitability of the buyer to become a franchisee. You can find or identify a prospective buyer on your own, but many franchisors have a list of interested buyers and the areas they are interested in.

It might save time if the interested buyers have been pre-screened by the franchisor and will be approved by the franchisor as a buyer. Keep in mind that the franchisor can, however, charge a fee if they find the buyer.

Potential buyers

It is a good strategic option to identify someone in the business that you can potentially sell the franchise to. The selling process can be expedited if someone who has intimate knowledge of the franchise decides to take over the business.

This will also be reassuring to the franchisor when it comes to the future operation of the business. You should try to make identifying a possible internal buyer part of your exit planning, from an early stage.

If your business is well-run, you should be able to attract potential buyers. Any buyer will be attracted to a business with a good client base, meticulous record keeping and year-on-year profits being achieved along with well-maintained assets, premises and capable employees.

After a potential buyer expresses interest in buying and the initial terms of the sale have been agreed on, the buyer will check out the business information that was provided. This process of due diligence allows them to make sure that the information is all true. This includes material like employee contracts, contracts with suppliers and any financial aspects that influence the value of the business.

After the buyer is satisfied, a final sales agreement can be drawn up. The agreement should contain everything agreed on between the parties, ensuring that there are no unresolved matters.

An important clause that usually needs to be included is that the buyer must complete the franchisee training before the franchisor will agree to the finalisation of the deal.

Jo Thornley is head of brand and partnerships at Dynamis.

More on franchises:

• Types of franchise and franchise structures
• The true cost of running a franchise

The post Selling a franchise: the considerations appeared first on Small Business UK.

It’s a familiar story: you want to own your own business, but don’t want to risk everything by starting up a new business which may finish up as a costly mistake.

So instead, you’re looking at a franchise option where you’ll be running a proven business model and making profits virtually from day one. But once you have decided that this is the right path for you, how will you know which one is right?

Here are a few tips to help you arrive at that important decision.

Which sector?

First and foremost, which industry are you attracted to?

Many franchisors won’t require you to have previous industry experience and all franchises should include an element of training for the role. Nevertheless, think carefully about what industries match your skills, aptitudes and previous work experience.

Of course, you will need to find out everything you can about any franchises that are likely to get on your shortlist. And that research should not only cover what the work entails, but also issues such as how a career in that industry will impact upon your preferred lifestyle.

For example, if you like being out in the fresh air at all times of the year, how well will you cope with a predominantly indoor franchise?

Whatever you choose, remember that it’s a career which will define your working life for many years to come.

And in addition to that, any franchisor will want to be convinced you are enthusiastic and seriously committed to that franchise brand. So, take your time with this important part of the decision-making process, as a franchisor will be able to see through any kind of uncertainty you might have.

Making your first approach

Once you have decided on your field of interest, it’s then a matter of finding the right franchise in that field.

When you make your initial approach, expect due diligence to be a two-way process. Hopefully, you will have lots of questions about your future prospects as a would-be franchisee. But equally, the franchisor will want to find out everything about you in order to assess whether you have all the qualities they are seeking.

If your prior research has been thorough, you will be well-prepared for this encounter. You will also have given yourself the best possible chance of meeting your franchisor’s expectations.

Visiting existing franchisees

One of the most important parts of your research will be to contact existing franchisees.

This will also be more fruitful if you make contact after you have heard the franchisor’s own description of the franchise offer to compare and contrast.

Not only will such a visit give you a much better feel for the business and everyday working environment, it will also allow you to hear precisely what the franchise offer is like in practice – a first-hand account from the franchisee’s perspective.

It’s only natural that any franchisee you talk to will put things slightly differently – which, of course, is exactly what you want to hear. But if you hear anything of real concern, you will be much better placed to challenge any false promises which may have been made about the franchise model.

Possible red flags

Armed with your prior research and the provisional networking contacts you have made with current franchisees, you will be ready for a more in-depth discussion with the franchisor.

So, don’t be happy with vague descriptions, always make sure you understand exactly what you can expect from the moment your induction begins.

You should also be concerned if your franchisor prevents contact with existing franchisees, or wants to restrict your choice of locations to visit. Likewise, if you are being hustled to hand over large sums of money even before you sign up, that’s a sign you may be wise to look elsewhere.

In a similar vein, you would expect a tried-and-tested franchise to be running successfully and turning over profits. Alarm bells should ring if your research tells you there is a history of early reselling and/or territories closing down.

Once you have been accepted as a franchise candidate and provided what you have discovered gives your chosen franchise offer a clean bill of health, you can move on through the sign-up phase with confidence.

You will then be ready to take your first steps as a proud business owner representing a respected franchise brand.

Jo Thornley is head of brand and partnerships at Dynamis.

Further reading on franchises:

A guide to franchise agreements

What is a franchise? Advice for small businesses

The post Buying a franchise: the key considerations appeared first on Small Business UK.

Writing a business plan is essential for any entrepreneur.

Putting one together for a franchise business is different to a standard one though.

First of all, you need to be aware of the needs of both the franchisee and the franchisor. When you have signed the franchise agreement, the franchisor will give you vital info like start-up and running costs as well as a marketing plan and related materials.

Your franchisor can also help you write your business plan as they’ve likely helped other franchisees with theirs. They’ll give you a franchise disclosure document which has a lot of information to help you write a business plan. It’s worth mentioning that they don’t need to approve your final plan as this could be in violation of governmental and trade requirements.

“Your franchisor can help you write your business plan”

For some extra help, have a word with other franchisees about how they created their business plans and if you’re looking to finance your business, chat with an accountant.

There’s no set length for a business plan – but the more concise it is, the better.

Introduction

Give your reader a brief overview of what your franchise is and how you plan to run it.

Business structure

Use this section to deal with the who’s who of the business and their roles.

Outline who is responsible for what, whether the franchise will have sole or multiple owners and if you’ll be involved in day-to-day operations.

What your product or service is

Go into more detail about what you’re offering and why you think it’s the right time to put out what your product or service.

Market analysis

Examine current market conditions: whether it’s a growing market, who your competitors are and how future-proof it is. Remember to include relevant facts and figures as well as referring to expert forecasts.

Operations

Cite your sources of supply, labour and materials. It’s also vital to mention resources you’ll be using to operate your business.

Define:

• What you have and what you need to acquire
• Critical procedures and sensitive issues along with possible alternatives
• Current premises and future requirements
• Your health and safety policies

Marketing plan

Run through your marketing objectives, such as number of sales or market share as well as where your product will be positioned in terms of things like price and quality.

You should also cover planned marketing communications, how the product will be distributed/sold, what your customer care policy will be and how said policy will work.

Premises

Decide on the best premises for your business needs with your franchisor in advance. Consider location, business growth, running costs and uniform business rates as well as insurance and planning consent.

Financing

Are you looking at financing? If so, how much and where will the money come from?

Highlight your ‘break even’ sales figure shown as percentage of anticipated sales.

You’ll also need to include the amount of money you’ll need to take out of your business to live on.

When writing your financial projection, you should be conservative. Outline when the lender can expect the loan to be repaid by using graphs, figures and charts. Just note that for legal reasons, your franchisor might not be able to tell you about projected earnings.

Profit and loss forecast

Base your profit and loss forecast on anticipated sales, taking away direct costs and overheads. Include as much detail as possible about anticipated sales and direct costs like materials and overheads.

Cash flow model

Try and give an idea of how much money will be coming in and going out of your business. Remember to account for cash flow fluctuations like getting materials when you’re setting up versus volume of sales at launch and beyond.

Appendix

Use the appendix for items that will enhance your presentation. Include things you feel would be necessary – CVs of key management personnel, tax returns, media clippings – important nuggets like that.

Keeping your business plan up-to-date

Remember to continually update your business plan so that it reflects the developing needs of your business. At the very least, it should be updated when something in your business changes.

“At the very least, your plan should be updated when something in your business changes”

If you’re in need of some guidance on building your non-franchise business plan, head over here.

See also: What is a franchise?

The post Writing a franchise business plan: 11 things you need to include appeared first on Small Business UK.

What is a franchise? For would-be entrepreneurs, a franchise is a self-employment business opportunity.

You start your own company trading under an established brand with guidance and support on everything from marketing to financial planning to HR.

For small business owners, franchising is a way to expand more quickly and cost-effectively than opening further company outlets, by granting people (franchisees) the right to run their own business under your brand and systems. Legal safeguards are in place to maintain brand control, consistency and protection.

How does it work?

Franchising is like having a business blueprint. The idea is that the franchisor (original business) has gone through the process of establishing the brand, gained customer loyalty and, through experience, learned how to scale up the business.

Franchising shows someone else how to replicate that success. Domino’s or Subway have a proven track record, and if you’ve ever ordered food at these places in the UK, then the store you used was run by a franchisee, not a corporate brand. They’re responsible for the staff and the products, but they operate using a bigger brand.

Many other well-known brands are wholly or partly franchised, such as Clarks Shoes, Thorntons, O2, Water Babies, Marston’s, Toni & Guy and McDonald’s. There’s also an array of growing companies in just about every sector, from gyms to sports tuition and pet care to hair care, car care and health care.

“You’ll also need a great brand and differentiation of some kind in your market”

Franchisees pay a fee to start their business, and monthly royalties thereafter (most commonly a percentage of turnover but a mark-up on goods supplied or flat fee are other options).

In return for that, they receive comprehensive initial training and ongoing support whenever needed from the franchisor. Whatever situation a franchisee faces, they can turn to head office – as well as any other franchisees also in the network – for real-life advice and help on how to overcome a challenge.

When ready, the franchisee can sell their business to a buyer approved by the franchisor, so they are building an asset for the future as well as being self-employed.

What are the criteria for franchising a business?

At a fundamental level, to be franchised your company needs to be:

• Proven – not an idea, but demonstrable evidence of success
• Profitable – at a sufficient level for both franchisor and franchisee
• Teachable – there’s no point in franchising a business that only three people could operate
• Transferrable – suitable for different geographies (a surf shop in Leicester isn’t a great plan)

You’ll also need a great brand and differentiation of some kind in your market. And it’s important that your business has a long-term appeal, rather than being a temporary fad.

Why do businesses franchise?

Broad advantages include:

Faster expansion

If care is taken to set the franchise up properly from the beginning then growth can be as quick as the time taken to find, on-board and properly support franchisees to grow

Lower capital outlay

Once the model is established, expansion comes mainly through the investment of franchisees, meaning it costs much less to grow

Leaner ongoing costs

A franchise head office supports its network of business owners through a team of staff, but franchisees employ each outlet’s staff, maintain accounts and so on

Better performance

Because they have a vested interest in the business, franchisees will do what it takes to succeed, as opposed to a manager who is largely rewarded the same regardless. Retailers have reported as much as 30 per cent turnover growth after converting a company-owned store to a franchise

Strength in numbers

The best franchise brands are those that successfully integrate franchisees as a collaborative network of business owners, harnessing the considerable power of shared know-how, experience and ideas from a group pulling in the same direction.

How does the relationship work legally?

A franchise agreement is signed between franchisor and franchisee once both parties are satisfied it’s the right match. That’s very important – joining a franchise should be a two-way due diligence process, with time taken and clear heads. Selectivity is crucial on both sides for success.

The agreement is a legally-binding contract that sets out the rights and obligations of both parties. It is essential for franchisees to have it reviewed by a franchise solicitor before signing.

Most are for a five-year period with the right to renew, but some premises-based franchises offer ten-year agreements or even longer. The documents can be lengthy, with clauses covering just about every aspect of the relationship from start-up to eventual sale.

For franchisors, this document protects their IP, business model and brand from misuse, alongside an operations manual which outlines the day-to-day running of the business by the franchisee.

What are the advantages of becoming a franchisee?

• Someone else has gone through the trial and error period (and associated costs) of establishing and growing the business; you should be left with what’s proven to work
• Statistically better chance of self-employment success: annual franchisee commercial failures rates are under 5 per cent and around 90 per cent report profitability
• Back-up on any aspect of running the business from experienced people
• Access to technology that an independent wouldn’t thanks to economies of scale
• Being part of a bigger brand, generating recognition, loyalty and expectations
• Shared experience and knowhow, from both the franchisor and other franchisees.

What about the disadvantages?

• There are systems that must be followed; if you’re looking for complete independence, franchising isn’t for you
• Policies and procedures are set by the franchisor and must be adhered to
• You’ll pay ongoing fees to the franchisor
• Your business operates under the same brand as others, which means they could tarnish it.

What’s involved in franchising a business?

Franchising doesn’t happen overnight; it requires an investment of time and capital to get it right from the outset.

A good franchise model is bespoke to each business; templates or boilerplates could seriously harm your brand and should be avoided at all costs. This is particularly true of the franchise agreement, which is the heart of the protection for the brand you’ve given blood, sweat and tears to grow. Do not try to cut corners with it.

That said, there are common steps involved in franchising. They include a detailed business plan; ensuring IP protection and trademarks are in place; instructing a franchise solicitor to draw up an agreement; creating an operations manual, which covers the day-to-day running of the business for franchisees; a comprehensive training programme for new franchisees; a marketing strategy to find and recruit franchisees; and eventually setting up a pilot franchise, with an outlet run ‘at arm’s length’ as a franchisee will, to hone the model before you go to market with it.

Franchise development consultants can help with some or all of the process, and will often offer a free initial meeting to discuss viability. Taking the right advice from a British Franchise Association (BFA) accredited consultant is important, they have proven their understanding of best practice and have a track record of helping businesses franchise.

What is a franchise? It’s a business opportunity that is tried and tested and could well be the right fit for you. To find out more on becoming a franchisee or franchisor, visit the BFA website for impartial advice.

Pip Wilkins is CEO of the BFA. 

Tips from a successful franchisee

Anna Jordan talks to Jim Haran, franchisee of BBX UK. He originally started out as a customer of the company and became a franchisee of the business after bartering over £500,000 worth of goods through the platform.

Jim and Mary owned a florist and were one of the first wave of BBX’s customers. After Mary retired last year, Jim had enjoyed working with BBX so much that he went on to purchase the Essex District and Sales franchise at BBX.

I was particularly drawn to the model of the business and everything associated with it. Great opportunities are presented to you and as long as you put in the work you can grow and develop the business as much as you want.

I was a customer of BBX with my florist business before becoming a franchisee and found that it added about £500,000 to the value of our business, meaning that my wife was able to comfortably retire. It made a huge difference to our lives and I saw the benefits for potential customers.

Bartering leading to becoming franchisees

Not only did I see first-hand the benefits that bartering could bring to SMEs, I also knew the system in detail and I knew the challenges that could face clients.

With my first-hand experience as a customer of BBX I knew that my input would be valuable as I was able to see the business from all perspectives. The business is there for you to develop and change and adapt as long as you put in the work to do so.

Choosing a franchise region

Choosing a region was quite an easy decision for me. I decided to take over the Essex region as this is my heartland. I already have connections with many businesses in the area so when the franchise came up for sale, I jumped at the opportunity. Being just down the road allows me to be quite flexible with work.

I was fortunate when taking over the Essex franchise as the business was already well-established when I went in and had pre-existing customers and an awareness in the region that was extremely helpful for me when starting out.

“You are given back-up and support from the main franchisor, so you’re never left hanging”

The franchise very much has a family feel and the previous owners are still involved. I always appreciate their input and their thoughts on business challenges and issues that we face along the road.

Advice for hopeful franchisees

Do your homework. Many people think that taking over a franchise is simply purchasing a ready-made business but this simply isn’t the case. When deciding which franchise you want to be involved with, look for what input you can have on the business, what you can bring to them and what you can do to drive the business forward.

From my perspective, franchising is safer than starting up your own business as long as you’re prepared to put in the work and don’t expect success to come quickly. It’s a tried and tested model and you are given back-up and support from the main franchisor, so you’re never left hanging if there’s a challenge.

Once you’ve decided to go ahead with becoming a franchisee make sure that you utilise their support and advice.

The post What is a franchise? Advice for small businesses appeared first on Small Business UK.

Planning on franchising your business and looking for some ideas? If you have a proven business model that you think can be replicated across other locations, you could become a highly profitable franchisor.

Here are six steps to successfully franchising your business.

1. Choose excellent franchisees

Determine what kind of person you want to carry your brand forward as you expand your franchise business model and network. Consider whether your prospective franchisees should have any specialist experience, qualifications, or professional accreditations. It’s a good idea to create a detailed job specification that will list all the franchisees’ responsibilities and any key skills/attributes that will be required for the role.

Once you have a list of potential franchisees, you need to make sure they meet the financial requirements of the role and pass the relevant credit checks. Next, it’s time to conduct interviews, which will give you time to learn more about each candidate’s background and whether they’re the right fit for the franchise. You may also want to consider arranging practical assessments and on-the-spot training, so you can get a better idea of whether the person has the right skills for the job and an awareness of how to start a franchise.

2. Look for those willing to make a long-term commitment

Make sure your franchisees are happy to commit to the business for the duration of the franchise contract and that they understand they’ll be responsible for all its business operations. Ask the candidates what their long-term goals are and what they think they can bring to the network in terms of skills and experience.

An inexperienced franchisee may feel more comfortable and confident making a long-term commitment with a franchisor that has a professional accreditation. One way to achieve this is to become a member of the British Franchise Association (bfa), which promotes and accredits excellence in UK franchising. The association only allows franchisors to become members if they meet its strict accreditation criteria, which demonstrates to your prospective franchisees that you’re an ethical franchisor.

3. Select your locations carefully

If you’re planning to choose the franchise locations yourself, make sure you select a site where there’ll be enough footfall to make the franchise business model viable. For example, a restaurant franchise specialising in Italian cuisine will need to make sure there’s not too much direct competition in the local area from other Italian restaurants.

Many franchisors perform a comprehensive analysis of the local demographics to determine whether the new franchise will succeed in the area. Some will also provide franchises with exclusive territories, which are protected from encroachment by any other franchisee in the same network. This can make it easier for the franchisee to build and retain a large customer base over time.

4. Provide specialist training and support

All franchisors must understand that new franchisees may not have much (if any) experience of operating their own business. Therefore, to ensure your franchisees know how to start a franchise, you need to equip them with the skills and knowledge to make the right decisions and take your brand forward. This should include guidance on how to run the franchise, understand the target market, promote the brand’s products/services, and manage accounting, finance and any legal issues in the business.

Typically, the franchisor will provide a pre-training package, which will begin soon after the franchisee signs the contract and could include a training manual and setting up a business card. The main training could last from several days to several months, depending on the business, and will be followed by ongoing training as the franchisor continues to innovate its products and update its systems.

5. Charge an appropriate franchisee fee

When franchising your business, your franchise fee, otherwise known as royalties, needs to be high enough for you to cover your costs and generate some profit, but not too high that it deters highly skilled prospective franchisees from applying to your network. According to research by the bfa, the average franchisor fee is 11.7 per cent of total sales, so use this is a rough benchmark. However, franchisors may charge a higher fee for franchises that achieve very high sales, such as in busy urban locations.

6. Publish case studies of some of your franchisees

Publish testimonials and/or videos of your current franchisees illustrating how they built their businesses and benefitted from your training and support. This is a great way to inspire candidates that are looking for some motivation and have yet to learn how to start a franchise. Think of this as the perfect opportunity to demonstrate how your existing franchisees have transformed their lives and built thriving businesses under your brand name.

Case study: Rebecca Newenham of Get Ahead VA, discusses how she converted her virtual business support agency to a franchise model.

After a career in corporate buying for retail giants Superdrug and Sainsbury’s, I was looking for a more flexible employment solution. I saw the way the economic landscape was changing and an opportunity to provide flexible marketing and business support services to meet the growing needs of entrepreneurs and SMEs across the UK.

I first considered a franchise model in 2016. Until that point the business had been growing well, with new clients coming on board and new virtual assistants joining the team. The business had reached a point of critical mass, and I felt franchising was the next logical step to grow our regional presence. While as a team we have always been able to serve clients anywhere in the UK, I know that local, face-to-face relationships still make a massive difference.

Get Ahead VA suits franchising so well because it is service based, with no big investment in equipment required. It also suits people from a wide range of business backgrounds, with no specific technical skills required. What franchisees gain is a business which is quick and straightforward to set up, scalable at a pace to suit them and backed up with first class training and support. It’s the chance to go into business for yourself, but not by yourself.

To begin the franchising process, I firstly worked with a consultant to really hone our franchise offering, my contracts etc so everything was in place. I also designed a franchising prospectus and put information on our website.

“Think through exactly what you have to offer and use a franchising specialist for advice”

It was through that process that our first franchisee came on board. She was already one of our virtual assistants but was looking to grow her business and buying the franchise for her area was the perfect choice.

Our second and third franchisees have come from different avenues – one from the Mums Enterprise Roadshow that we exhibited at in Birmingham, and another through advertising on a franchising portal.

I haven’t focused on recruiting franchisees in particular locations; it is much more about finding the right person with the right skills and attitude to represent our brand.

Once recruited, training is vital, and I invest in both one on one training in our systems and services as well as external training on key networking tools such as LinkedIn to ensure our franchisees have everything they need to make their business a success. Mentoring them along the way is a hugely satisfying part of my role.

Advice for potential franchisors

If you intend to go down the franchisor route, make sure you think through carefully exactly what you have to offer and use a franchising specialist for advice. Although franchising seemed like a logical option for me, there were still plenty of things I hadn’t even considered in terms of budgeting for costs such as training, the amount of time required to recruit the right franchisees and some of the legal considerations.

While of course, you hope it will all go well, you need to be clear on your position if things don’t turn out as planned. Spending enough time to thoroughly research potential franchisees before signing the contract is vital. Although it can seem like wasted time if in the end their interest doesn’t convert into a contract, it is not worth the risk of damaging your brand and the business you have spent so many years building up.

Case study: Rik Hellewell, of cleaning business Ovenu, undertook a five-year pilot scheme in preparation for his switch to a franchise model. Here, he discusses how the process paid off. 

Ovenu is an oven deep cleaning and valeting business. I started the company in 1994 after having previously worked in the carpet cleaning sector.

From the outset I had always wanted Ovenu to adopt the franchise model simply because previous experience with contractors wasn’t great and the margins were too tight to consider employees. The model works very well as it is can be replicated in any location – every property is a prospect!

“Construct a road map, calculate the costs and never go in under-funded”

In preparation for franchising the business I embarked on a five-year pilot scheme, which allowed me to produce ‘an idiot’s guide to…’ operation manual. During this process I was able to calculate workable territory numbers and conduct market research to get all relevant geographical and demographic data.

From there, I was able to define a good franchisee profile, advertise opportunities, recruit and prosper! Today, Ovenu operates over 100 franchise territories throughout the UK, and has franchises across the globe, including in New Zealand and Australia.

For potential franchisors, I would recommend constructing a road map to what you want to achieve, calculate the costs and never go in under-funded. Having a strong brand and ensuring your franchisees adhere to the company’s values and processes is another crucial factor to establishing a successful franchise.

The post Six steps to franchising your business appeared first on Small Business UK.

It was considering the future for their young family that inspired Alan Jarvis and his partner Charlotte to start up as window cleaning franchisees.

Alan had always wanted to have his own business. ‘I favoured window cleaning – but with a full range of services. I wanted to work outdoors and work for myself. The time was right for me to try something different, without putting myself at major risk. I’ve got three young kids, so it was important to find the right opportunity for me and my family.

I had to make a decision on whether the My Window Cleaner opportunity and the people behind it were right for me – I had to ask, do I franchise or do I go out on my own? As I’ve never run my own business, it made sense to go with the franchise to learn the ropes and gain experience with a support network that’s robust and efficient.

“This isn’t about someone showing you how to clean windows – it’s about having the systems, guidance and support to grow a substantial business for yourself. Anyone can start up as a window cleaner but with My Window Cleaner I have a proven model to expand into a really strong multi-van business. I’m ambitious and that really appealed to me.”

From supermarkets to super service

A long career in supermarket management may not seem the obvious proving ground for launching a window cleaning business, but Alan says the skills he’s honed over 30 years are ideal for the couple’s new venture.
“When I tell former colleagues what I’m doing now, they think I’m mad!” he laughs. “But they don’t understand the opportunity and they have a very stereotyped image of what a window cleaner looks and acts like.

“Reputation, trust, integrity in your work, these are key skills and I’ve always used them. When you’re turning up at someone’s house they need to know that you’re clean, presentable and respectful. You’re on someone’s property and possibly around their family, I take that responsibility seriously.

“I’m looking forward to building and developing the business, recruiting someone as the first member of our team, and then hopefully a second and a third person over time. In the future my time will be spent on training, winning new business and perhaps even taking on another territory. The potential is huge.”

Training wheels

When it comes to the training before launching their business, Alan describes it as “brilliant”. Combining practical learning with how to run the business, he feels well prepared to succeed.

He explains: “I’ve spent plenty of time in Enfield and Barnet working with the company’s best window cleaner, it’s quite challenging because it’s very busy and a vast range of different properties to clean and different customers.

“I’ve also spent several days with the directors, Karen, Dave and Ian, training locally, covering everything we need. Karen and Dave flew over from Spain to spend those days with us, which for me is a really strong statement of commitment and togetherness. It’s been really good.

“And if there’s anything I come across that I’m not sure about, I’ve got phone calls, Skype and webinars that mean I can quickly get hold of people should that eventuality occur. I do feel really prepared.”

Growing gains

Despite only just starting out, Alan’s plans for the business are already advanced – both in terms of profits and the local community.

He says: “It’s about building and growing steadily. One of the reasons Ian and myself get on so well is because I understand what customer experience is like, I understand what growing and developing a business is like, internal communications, networking, and looking at how we can support the community. We have the same approach.

“We’re looking at getting into school fetes next summer and also how we can link up with a local charity, which I don’t think is all that common in window cleaning. In my previous career I was always working with charities and the local community, and that’s really important to me. I’ve been involved in raising over £100,000 for a local hospice in the past and it’s important to me to help others in need. This business gives me a chance to do that.”

When it comes to customer service, that’s another area where Alan says he and My Window Cleaner are aligned. He says: “I believe in building up a reputation and engaging customers, bringing a professional approach to the services we offer. Ian, Karen and Dave believe very strongly in that and it was great to see that we share the same views on that aspect of doing business.

“We want to establish ourselves as being well-known for providing the most reliable, trustworthy and customer-centric service possible.”

One aspect that will be different than he’s used to is being outside in the good old British weather. And while the rain doesn’t prevent cleaning it holds no fears for Alan.

“I am a golfer and a fisherman so the weather certainly doesn’t faze me in doing anything!” he says. “I see this glorious summer as an omen – after I started discussions with My Window Cleaner we didn’t have rain for over two months, so that’s got to be a good sign!”

The post Starting a window cleaning business: A franchise case study appeared first on Small Business UK.

The different areas of investment needed to start out in franchising come in many guises and sizes, so make sure you consider how to fund both up-front expenditure and the various running costs during the life of your franchise business.

The initial cost of a franchise will include the initial fee and, most likely, some kind of continuing fee (also called royalty or service fee). It’s hard to say what else a typical start-up package includes because there is so much variation from franchise to franchise, but the sort of items that could be part of the initial cost include shopfitting, equipment, initial stock and the initial franchise fee.

Initial franchise fee

The initial fee is what you are paying to be given the right to use the brand name within a certain territory and to be trained and provided with advice. The initial cost of a franchise falls within a huge range; it could be less than £10,000, for example, or as much as £5 million, but according to a survey by the British Franchise Association, it will typically be around £40,000. Usually, the initial fee is between five and ten per cent of the total investment but can be as much as 40 or 50 per cent.

Service fees

An ongoing service fee, payable weekly or monthly to your franchisor, can also vary quite a lot, from nil up to 20 per cent of sales, but is probably on average around 7 or 8 per cent. The fact that the service fee is nil does not necessarily mean that all you pay will be the initial start-up cost. Franchisors can also be paid by using mark-ups on products and equipment.

A low service fee is not necessarily an advantage for you. It is crucial that the franchisor retains an ongoing interest in promotion and improvement of the business format, and that will only be achieved by the reliance on some sort of continuing payment from the franchisee.

Franchisors usually prefer to base the service fee on sales rather than profits. This is because monitoring the franchisee’s accounts to ensure that the franchisor is receiving the proper amount can be time-consuming and expensive. If the fee is based on profits rather than sales, this monitoring has to apply to costs as well as sales, doubling the difficulty of the task.

“Franchisors usually prefer to base the service fee on sales rather than profits”

However, a fee based on sales can be disadvantageous to the franchisee. If the costs of the enterprise prove to be higher than forecast, paying the service fee could be an onerous burden for the franchisee.

You should not underestimate the size of the service fee if it is based on sales not profits. If, for example, your costs are 60 per cent of your sales value, a service fee of ten per cent of sales translates into a service fee of a quarter of the profits you make. Work out the figures before you sign.

One point to watch out for is what happens at the end of the original franchise contract if you want to renew. Does the contract allow the franchisor to increase the size of the service fee? Try to negotiate on this, as you don’t want a bigger percentage of your hard work to be passed over to the franchisor.

Case study: Warwick Snelgrove, international shipping consultant at shipping solutions company World Options, discusses the fee structure of the franchise arm he took on. 

World Options provides simple and affordable shipping solutions for businesses, with unique software that provides access to leading carriers from all around the world. As a franchisee I introduce new businesses to this platform, alongside my business partner Andy, and generate income each time they send parcels to domestic and international destinations. Previously I worked in the logistics industry but only had access to domestic carriers, so I began looking for a franchise opportunity that would open up the rest of the globe, which is how I found World Options. I became a World Options franchisee in 2015 and haven’t looked back.

The upfront payment fee for franchisees of World Options varies, but when I joined in 2015 I paid around £25,000. I also pay a monthly management fee of 20 per cent, but this is capped at a certain figure before dropping to 18.5 per cent, as well as a monthly IT fee of £250. Many similar franchises ask you to pay carrier costs, which can be tens of thousands of pounds every month. World Options pays the carrier costs for you, so this is definitely something I’d advise other potential franchisees to investigate if they are considering similar opportunities.

The fees associated with World Options are far lower than any other franchise opportunities that I came across, which is what made this so appealing to me, alongside getting access to every major carrier from around the world. I am from a transport background so I always knew I wanted to go into a franchise that was in this field, but many of them involve higher costs.

For example, you might have to invest in your own transport and vehicles, as well as staffing costs, warehousing and office space. With World Options, you can do the entire job from home and I actually started the franchise with just my car, a laptop and a mobile phone. I’ve since gone on to employ my eldest son who joined the business on a part-time basis alongside his university studies as it worked so flexibly with his schedule.

See also: Setting up a franchise vs growing a business organically

The post Franchise fees explained for prospective franchisees appeared first on Small Business UK.

Despite franchising being worth over £15 billion to the UK economy, many people do not understand what a franchise is or what sort of businesses operate as franchises, so what is a franchise and what types of franchise can someone operate?

There are several forms of franchising including using franchising to distribute films, music and games but for the purposes of this article we will focus on what is called business format franchising. Business format franchising is when franchise documentation, agreements and training is used to replicate an already trading and successful business. Some of the many documents used to franchise a business include;

• Franchisor (the business owner) business plan
• Franchisee (the person running the local franchise) business plan
• Franchise agreement – agreement between both parties on how each will operate and agreement of what will be paid to the franchisor and detailing each others obligations
• Franchise prospectus – Sales and marketing document used by the franchisor to recruit franchisees
• Operating manual – The document which explains how a franchisee will create/start their business and all day to day operations of running the business
• Training manual – Used by the franchisor to train each franchisee to understand their obligations as detailed in the operating manual.

What kind of business can operate as a franchise?

So what kind of businesses can operate as a franchise? Provided the business operating method can be transferred and the new local market is the same as the existing local area any business can be replicated using a business format franchise, these could include:

• Automotive – examples of this could be alloy wheel and smart repair businesses, scratch removal and dent removal franchises
• Home based franchises – This could be anything from B2B sales, finance, consulting, internet services and is an extremely fast growing area with many people seeking improved work/life balance
• Recruitment – Many covering sectors such as hotel and hospitality, domestic care and nursing staff
• Food and catering franchises – Everyone thinks burgers and fast food but there are many food franchises including corporate catering franchises, pizza franchises, Chinese and Indian food franchises and many mobile catering low cost franchises
• Hotel – Some of the largest global hotel brands franchise and have used this for decades to grow their brands without acquisition of properties
• Business advice & consulting – Everything from cost reduction, accountancy and business coaching is provided with these sorts of franchises.

Hopefully now you will be able to see the massive impact franchising has to the UK economy, helping assist new small business start-ups and providing valuable services to your local community.

This article was provided by Joel Bissitt of Franchise UK.

The post Types of franchise and franchise structures appeared first on Small Business UK.

You’ve chosen the perfect brand to invest in, you’ve completed your due diligence and are well on your way to setting up a franchise. So, what next? Well, the first thing you should do is write your franchise business plan.

Many entrepreneurs believe that a business plan is not needed when buying a franchise, but this couldn’t be further from the truth.

Even though you’re investing in a tried and tested operating system and will have access to comprehensive training and support from an experienced franchisor, it’s still your business. The most successful franchises will have started with a plan to develop and grow; and the responsibility for your business plan lies with you.

Here are five reasons why all franchisees should consider the franchise business plan as a crucial part of their franchising journey.

1. Focus on what’s important

A business plan is a great way to ensure you focus on the key details of your franchise. As well as consideration being given to controllable factors, such as the operating model and growth strategy, it also compels you to think about external influencers.

Who are your competitors? How will the economic climate affect your franchise? Will developments in technology impact your business model? Contemplating how your business will evolve over time just as you’re setting up a franchise allows you to better prepare to run an effective and profitable business.

2. Identify challenges early

The process of writing a business plan makes you reflect on some fundamental questions about the challenges you may encounter whilst building your franchise. Giving these potential issues some consideration before you start your franchise is a good investment of your time and effort. Overcoming a problem that hasn’t been previously deliberated will be much more difficult than coming across a situation where you’ve already thought of the solution.

3. Have a better understanding of how your franchise will perform

The financial projections for your franchise will form the main part of your business plan. It will document how much investment is required to start and run your business; the cash flow. It will also include financial projections for the next three years with an indication of when the break-even point will be achieved.

Not only will it contain profit and loss forecasts and cash flow projections, it will also provide you with a good understanding of how your franchise will perform. This should enable you to confirm to your lenders how you are going to pay them back.

Setting up a franchise compared to starting an independent business means that you’re already at an advantage when it comes to the finances. You’re investing in a business that already has experience of trading, and so the financial element of the plan is based on actuals rather than estimates.

4. You’ll find it easier to secure funding

A franchise business plan has many benefits, but none more so than the role it plays when you approach your bank to secure funding. Banks will almost definitely request confirmation that you’ve fully reviewed the opportunity before they’ll support you to finance your franchise purchase.

Most banks regard franchises as less risky than independent businesses from a financial perspective, as there is a much better understanding of when the franchise will become profitable. Even if finance isn’t required at the beginning of your franchise journey, you may need funding to grow your business in the future.

And so, it’s important to remember, that your business plan is a constantly changing document and should be updated often. If you then decide to expand your business and need to approach your bank for money later, you’ll have all the necessary documentation to hand.

5. Enables you to recruit quality employees

A well-composed plan is also an effective way to attract talent. Recruiting employees with the right characteristics will improve your ability to retain consistency within your franchise; which is a crucial element of the most successful franchises.

Many employees will aspire to own a franchise themselves at some point in the future. Joining a business where they can learn the ropes and develop the skills required of a franchisee will be an appealing opportunity.

So, if your objective is to become amongst the most successful franchises; get planning. There are heaps of books, websites, templates and software to help you write your plan. And remember, there’s no one better to support you then your franchisor, so don’t be afraid to ask.

Further reading

What franchise support should you get from a franchisor?

The post Five good reasons why franchisees should develop a business plan appeared first on Small Business UK.

The benefits of opening a franchise business are primarily related to an easier company formation process and management model, owing to relying on an existing company framework. Compared to starting a new business, the franchisee adopts an already tested business model which can provide for a higher success rate. Additionally, the party purchasing the franchise will also have access to advice and guidance from the franchisor. We summarise the advantages of starting a franchise and some of the locations that are worth taking into consideration.

The franchisor and the franchisee

For the franchisee – the company or individual acquiring the business licenses – the main advantage consists of lower business risks. In most cases, the franchisor will offer special training and support apart from the business model and know-how acquired when entering the franchise agreement.

On the other hand, the franchisor – the company that licenses its business model – has a significant advantage in terms of expanding its business. Franchising allows an already successful company to enter other markets, especially secondary and tertiary ones. Moreover, the franchisor is not directly responsible for the debts and liabilities incurred by its affiliate, as it would be in the case of a branch.

Jurisdictions to consider when opening a franchise business

The ability to expand their business to other markets through franchising is important for many international companies and this expansion can prove to be a lucrative business decision. In Europe, investors can look towards opening a franchise in Spain. The market is recovering well and franchises like cafes and restaurants can be particularly successful in Spain, together with retail businesses in the fashion industry. The United Kingdom is another attractive location to base a franchise in Europe and has an all-important advantage for many international companies: ease of doing business and communication due to the English language. Investors who open a franchise in London or another city in the UK are advised to seek the aid provided by a defence solicitor in case of any legal issues.

Two other jurisdictions worth taking into consideration for franchising purposes are Seychelles and Malaysia. Opportunities include jewellery franchises, cafes and restaurants. Foreign investors are advised to seek adequate aid when entering a new market particularly because the local requirements may ask for different special permits and licenses for businesses, franchises included. Investors who are interested in franchising in Malaysia can also look into other options apart from restaurants, such as spas and entertainment centres.

Franchising is perceived as a safer business option, compared to starting a brand new company. Investors should explore all of the available franchising opportunities in a particular jurisdiction and decide whether this business model is the one suited to their needs.

The post The advantages of opening a franchise business appeared first on Small Business UK.