If you are looking for a business, you may have considered a franchise. You will need in the region of several thousand pounds to buy one, and you then benefit from support, national advertising, and a business model that has worked for other people. Read this article to find out more about the pros and cons of a franchise business.
A franchise is an opportunity for you to buy into a successful business. Someone else has come up with the idea, tested it out and hopefully made a foolproof plan you can use. If you pay for a franchise, you develop your business with the advantage of the franchisor’s experience. You decide how to run it, within the limits of the franchise agreement.
Business format franchising
The word ‘franchise’ describes more than one sort of arrangement. The most relevant arrangement for this book is Business Format Franchising where you pay for permission to use the trademark and logo of a business to sell a product or service. The package may also include training, product development, advertising and other promotional activities, and management systems for the business. You can run a franchise as a sole trader, in partnership, or as a limited company.
Fees for franchising
As a franchisee you are required to pay certain fees. These can include an initial payment, monthly fees for support, a percentage of takings and renewal fees. The British Franchise Association estimates the start up fee to be in the region of £40,000, but there are opportunities available for less than £10,000. Monthly fees vary. Some franchises require you pay up to 20 per cent of your sales each month, with an average of seven or eight per cent. Kumon study centre franchises are atypical, with an investment of just a few hundred pounds but monthly franchise fees of 40 to 45 per cent of the fees you receive.
How franchisors help
A wise franchisor wants to see your business succeed, as you are a source of revenue for them. When you sign up for a franchise, you will get help with setting up and running the business. They may help you find a site for your business. The franchisor may help with interior layout and design too, or could specify exactly how your premises should appear and where you should get your shop fittings from. You may get help with recruitment, marketing and advertising. Weigh up the advice and support you are getting against the fees you are paying.