Everything you need to know about running a franchise

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Couple going over paperwork

The UK is a nation of would-be entrepreneurs, with more than three-quarters of young people saying they'd like to start their own business one day. And in the first half of this year, more than 90,000 people took the plunge and did exactly that, according to Barclays and the Business Growth Fund.

But for many people, going it alone is just too risky - which is where franchising comes in. It's a way of becoming your own boss while exploiting an existing brand and getting help and support from the start. The odds of success are significantly higher than starting a business from scratch: more than 90 percent of franchises report a profit every year and only four percent fail. And the vast majority of franchises - 85 percent - show a profit within two years.



"Because franchising offers substantial initial and ongoing training, most franchises do not require previous experience in an industry - most important are dedication, tenacity and transferable
skills," says Pip Wilkins, head of operations of the British Franchise Association (BFA).

"That allows you to potentially re-focus your career on something you have a true passion for, whether that's children's coaching, pet care services, hairdressing, vehicle repairs, web design and so on."

There are now over 900 franchised brands in the UK, with over 40,000 outlets. Franchisees have to buy in, with costs varying from around £5,000 up to over £100,000 for a major catering franchise - plus ongoing fees. But for this, a good franchisor will offer a brand, an established business model, initial training and ongoing support. As a result, according to research by the BFA and Natwest, four out of five franchisees believe they have a competitive advantage over other small businesses.

It was this prospect of start-up help that attracted Janis Anderson, franchisee for the Caremark personal care service in Aylesbury and High Wycombe.

"I was in a completely different industry doing a lot of travel and it got to the point where I wanted to do something closer to home - my daughter was coming up to ten - and that gave me more job satisfaction," she says.

"I decided that franchising was a good way to do it, because then you've got the support - and you're also not reinventing the wheel. There was initial training from the franchisor at their offices together with four or five other franchisees; and they have regional managers so that when I started looking for an office, for example, there was a lot of support."

The first step in taking on a franchise is, of course, research. While the BFA accredits franchisors against strict membership criteria, there are still unscrupulous - or merely over-optimistic - operators out there. And remember that the franchisee has obligations too, and will be expected to follow existing operating procedures, so it's important to be clear about this from the start.

"Take your time and do substantial due diligence, making sure the opportunity is both what it says it is, and is right for you," says Wilkins. "Understand what will be required on a daily basis; get to know the people behind the brand at head office; check that you understand the financial commitment required, including working capital; and speak to existing franchisees to make sure forecasts are mirrored in reality."

Potential franchisees should check out the history of the franchisor, taking up bank references and asking, for example, how many other franchisees have failed. They should make sure they're entirely clear about the costs involved, as well as requirements over the purchase of goods. It's then also vital to get the franchise agreement checked out thoroughly by an independent specialist solicitor.

Most importantly of all, franchisees need to recognise that they are still starting their own business, with all the hard work and financial risk that this entails. "Don't be fooled into thinking franchising is a 'can't miss' scenario. You're going to need huge amounts of work, potentially long hours and a never-quit attitude to succeed - it's not a silver bullet," says Wilkins.

A reputable franchisor should be happy to allow new recruits to speak to existing franchisees and get an objective view of what lies ahead.

"It's hard work," confirms Janis Anderson. "Over the years, I've talked to some potential franchisees who thought you pay your money up front and then you've got a business that runs itself - but you really have to work hard."

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