T
here are currently more than 900 brands using a franchise model in the UK, and if you ask the average person on the street to name a few
they’ll most likely come out with the usual suspects – McDonald’s, Subway, Domino’s and so on.
These global giants, however, make up only a fraction of the options available to prospective franchisees. There is, in fact, a multitude of brands large and small out there, all with tempting and very real business propositions.
Some of this multitude is made up of other household names but ones that are not typically known as franchises – Clarks, Thorntons, O2, for example – and others are much smaller businesses, perhaps just starting out in franchising or beginning to further their expansion. In addition, there is, of course, everything in between those two extremes.
“There are very clear advantages to both the familiar, established brand and the new kid on the block”
So what does this mean for you, the
prospective franchisee? There are very clear advantages to both the familiar, established brand and the new kid on the block when it comes to assessing the most suitable opportunity for you. Like so many considerations during your research, the type of personality you have and the lifestyle you want to lead are also critical in your decision-making.
Big business Franchisees of renowned national and international brands benefit from significant consumer knowledge of their products
and services; often with brand loyalty and expectations already ingrained within a core base of customers, which keep them coming back time and again. Most franchises at this stage have national marketing campaigns in place and your chosen brand will be seen on a regular basis. A larger network of franchisees also means there should be vast quantities of expertise to call on – in addition to head office resources – from franchisees at every stage of development and size. Those franchisees will also be able to offer you, the prospect, an abundance of historical data that could inform the expectations of your own business and its potential profitability. Head office back-up should be plentiful, with dedicated business development staff and systems, and the proven infrastructure to support franchised outlets up and down the UK. The operational structures will be quite rigidly controlled, too – while it’s true to say that the Big Mac was the invention of a franchisee, brands the size of McDonald’s are by now very successful at determining what works for them (and what doesn’t), and therefore you’re going to have to follow the franchise system very closely, with less day-to-day entrepreneurial freedom. Still, when that system has been shown to work time and again, that’s exactly what you are paying for! Those are some of the reasons why
renowned brands come at a premium price. As a general rule, the most established brands will have higher startup costs precisely because you’re buying into a more proven model, and because the turnover potential can be highly lucrative with less perceived risk involved.
Good things come in small packages A relative newcomer to the market and/ or to franchising comes with very different considerations. There is little or no historical precedence when a business begins franchising as to what may be achieved by a franchisee, so accurate forecasting and enormous due diligence are critical in
assessing the opportunity. With few or no trading franchisees to check on aspects such as turnover potential and the support offered by the franchisor, your research and your instincts are vital. Usually, you’ll be paying a lower fee to join while the franchise tries to attract those early-adopters who can propel it forwards. If you find the right opportunity, there can be significant rewards for taking the risk on a newbie when, later down the line, the brand under which you operate suddenly becomes the next big thing in its marketplace. Plus, on a personal growth level, there are also opportunities to branch out – whether through buying a vacant neighbouring territory to expand your own business or by becoming an experienced mentor to the next wave of franchisees. An established brand already has significant infrastructure in place, whereas in a newer brand you might get involved in shaping the network, and will usually be dealing with the business owner(s) in the beginning at least, giving a personal touch that some find appealing. It also means more freedom for you to input your own ideas – but remember, they’ll still have to fit within the overall business model! At the bfa we have a category called
‘Provisionally Listed’ to distinguish those brands that are newer to the sector. That means that the business has demonstrated a commitment to ethical franchising, taken the right advice and has a proven pilot system in place. Those are important signs you should be looking out for in a newer franchise brand to help you identify the good from the rest.
At its heart, the choice of known versus new franchisor comes down to a risk versus reward equation; how comfortable you are with each type on a personal level is important to establish. Also remember: though they may be inherently less risky, there are no guarantees even with the bigger brands – dedication, hard work, tenacity and a strong will are vital to your success in franchising, no matter the size of brand you’re operating under.
April 2017 |
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