Franchises 


What is a Franchise? 


It's buying a tried and tested business model. Most companies offering a franchise provide training, equipment, the licence to use the franchise name, promotional material, start up support and ongoing general support.
Buying a franchise may involve just making a one off payment, but it is likely that you will also pay ongoing fees or a percentage of profits to cover licencing fees and ongoing promotional and administration support.

There are hundreds of franchise opportunities to choose from but in general there are two basic types;
1) Job Franchise - you would actually do the work that provides the service, for example you may wish to set up a photography business as a sole trader but you buy a franchise which gives you the benefit of having a national name behind you.
2) Management Franchise - these are generally on a larger scale and you are likely to have people working for you. Many popular high street brands are often franchise operated in part.

Like all business ventures there are advantages and disadvantages to investing in a franchise.
Advantages
  • Companies offering franchise opportunities should have a proven track record of success.
  • All franchised companies offer support to their franchisees - you need to check how much or little they provide.
  • Successful franchise companies already have 'brand awareness'. This will give you a running start so you can concentrate on the operational side of things rather than advertising and promoting.
  • Many overhead functions such as accounting and legal support may be supplied as part of your franchise package.
  • You may benefit from reduced costs of stock and equipment by buying centrally.
  • The best franchise providers will not take you on if they do not think you are up to the challenge. Equally, they won't take you on if they think the area that you will be operating in will not be profitable. In both cases a good franchise provider will want to maintain the integrity of the 'brand'.
Disadvantages
  • You may own the business but you are not completely in control. You may have to send financial reports to head office and may have targets to set.
  • Particularly for 'big brand' franchises you will have to conform strictly to their operating procedures. This lack of freedom may feel too much like just working for someone else.
  • You will most likely pay ongoing royalties, fees and possibly a share of your profits. Make sure you are clear on what you are getting in return.
  • The initial start up costs can be as great as if you are buying a complete up and running business, whereas if you were starting up on your own you could build up the business gradually.