Why you should consider franchising your business
Do you have a successful business that you would like to expand? Currently over 1,000 companies in the UK are using franchising as a route to business growth, and your business could be suited to taking advantage of this proven methodolgy too.
The definition of franchising has been muddied by the various licenses, business opportunities and pyramid schemes that have co-opted the term. The franchise industry proper has therefore adopted the term 'Business Format Franchising' to differentiate properly structured franchises from other opportunities on the market.
Business format franchising is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.
- The British Franchise Association
Franchisees are attracted to the opportunity to own and operate a proven business concept with training and support. But what are the benefits for you as the franchisor?
Network Growth
Franchising often enables companies with one or a few locations to quickly establish a national presence within a few years, achieving a rate of network growth which would be inconceivable through company-funded development. The resources you will need to contribute to the opening of a franchised outlet are far less than if you were opening a company-owned store - the franchisee funds the premises lease acquisition and fitout, recruits and trains the staff and implements the local marketing campaign. This enables you to develop a compact management base focused on assisting multiple franchisees to launch their business simultaneously, rather than methodically opening store after store, and sourcing new startup capital for each.
Motivated Localised Management
By granting a franchise licence you are placing a store under the ownership of an individual with specialist local market knowledge who is in essence his or her own boss. Their earnings depend entirely upon the success of their own endeavours, as opposed to a salaried manager whose earnings - discounting bonuses - are unrelated to their performance. Also, the Franchise Agreement includes a clause preventing the franchisee from leaving and using your business concept and systems to set up in competition for a significant period of time, whereas a staff member is under no such restriction.
Fair Capital Return
Franchisees pay an initial investment to purchase a franchise, most of which will be to cover the costs involved in franchisee recruitment, training and launch support. Your true financial incentive will be the ongoing Management Service Fee, which is a percentage of the franchisee's turnover paid to cover the costs of ongoing support, product research and development, national marketing campaigns, plus to provide a fair reward for the use of your intellectual property and ongoing efforts. Because there is less capital employed, your profits are generated on a much lower capital investment. Although the revenue received from franchised units is logically less than that from 100 per cent company-owned outlets, a higher percentage of the revenue is actual profit.
By taking the franchise route you cut overheads and, unencumbered by staffing and administration issues, can focus more time on developing the business. By speeding up expansion your business network achieves higher economies of scale earlier, stronger brand awareness, is much sooner able to challenge for national contracts and, in the case of a fledgling market, is in a much better position to capture early market leadership and establish a dominant position over its competitors.
To find out how FDS can help you transform your business into an established national franchise with our complete, one-stop shop of products and services for franchisors, visit the Using FDS section.
Alternatively, to discuss your franchise development goals call FDS on 01603 620 301 or email us today.
If you would like to register your business as a prospective franchise in order to qualify for special offers from FDS, complete the form below.
Franchise Your Business:
Please complete the short form below for more information about how to franchise your existing business. If you are looking to buy an existing franchise, please register your enquiry with The UK Franchise Magazine or Franchise International instead.
