Why join a Franchise?

Being in business for yourself is not the easy option, in fact it is the hard option.  With many established competitors fighting hard for their share of the market, what possible chance does a new start-up business stand with little or no practical experience or knowledge.  Starting a new business is always a risk regardless of whether you are experienced in business or not and neither are there any guarantees, so how can you reduce the risks or even avoid failure altogether?

The ideal solution would be a safe route into your chosen new business, where the business format will have been fully developed and proven over a reasonable period of time utilising many pilot operations, to ensure that the business is truly viable and profitable and offers a long term proposition. Finally, the weaknesses of the business would have been identified and removed and the strengths maximised.  In other words, a totally proven business concept that removes the uncertainty and replaces it with confidence. This solution is known as a Business Franchise, and like with most things in life there are both good, and bad ones available.

Although the concept of business franchising has been around for many centuries, it really came into prominence in the 1930’s and has shown continuing popularity and growth to the present day. One of the fundamental reasons for this popularity is the encouraging statistic that 85% of franchise business start-ups result in success, as defined by profitability within one year, where as 90% of independent business start-ups fail completely. Why is this? Research shows that new businesses fail primarily due to lack of owner management skills, necessary in-depth knowledge of the industry and a weak or non-existent business model. In a successful franchise, franchisees are given the management skills and benefit from the franchisors deep knowledge of their industry, who will have developed a proven business model that offers powerful USP’s (unique selling propositions) and products which gives the franchise an advantage over its competitors in the market. An important indicator of a successful franchise is the ability of the franchisor to have demonstrated their business acumen by successfully and profitably running their business model over a period of time. As fundamental and obvious as this statement is, it is surprising how many prospective franchisees overlook this simple indicator when evaluating a franchise opportunity. Assessing your prospective franchisor is vital in ensuring you make the right decision, remember, not all franchises are equal, and worryingly, not all franchises are franchises!.

Is it a REAL franchise?

Due to the popularity of franchising and the trust people place in them, some companies have jumped onto the franchise band wagon offering under-developed or non-existent franchise opportunities. So how do you define a franchise and what should the franchisor and his franchise provide?

The following check list can be used as a basic indicator of whether a franchise is in fact a genuine and powerful business franchise or just merely a product reseller dressed to impress. These first few questions should weed out the high risk ‘Phoenix’ companies (rising from the ashes of their previous incarnation!) who should be avoided at all costs.

1. How long has the company been trading?
Look for a well-established industry leading company with many years experience.

2. When was the company registered at Companies House??
Are they a "Phoenix Company".

3. Can they provide at least 3 years accounts??
If not, are they hiding the fact their business is unprofitable or in trouble.

4. Do they have current or previous CCJ's registered against them?
You can purchase a company credit and status check from many companies such as Experian.

5. Are they profitable or have they failed previously?
If they can't succeed with their own business model how can you?.

6. What is the Franchisors reputation?
Check business forums and ask around.

7. Are their claims true?
Are they really as big or successfull as they claim - check their accounts and balance sheet to reveal the facts.

8. What are their Unique Selling proposition's?
Without several genuine powerful USP's the franchise offers no benefits against the competition and will be weak and probaly fail.

9. How many active Franchisees do they have?
Are they just 'customers' or real franchisees with a vaild Franchise Contract?.

10. Are you able to speak with their existing franchisees?
Speak with a varied selection and don't be afraid to ask searching questions.

11. Do they charge for their Franchise, or is it free?
Fees can be astronomical – are they exploiting you.

12. What initial and ongoing support do they offer?
Support is absolutely vital for for a quick and profitable start and future ongoing success.

13. Do they have monthly 'management fees' that are payable?
These will seriously eat into your profits.

14. Do they demand up-front deposits or payments?
A financial sound and genuine company will never demand a deposit for any reason - Beware!.

15. Do they have a Contract that protects your business?
Read carefully and make sure your business is protected.

16. Do you feel confident with the Franchise Company?
You need to work closely with them - do you have a rapport.

17. What guarantees do they offer?
Are they confident enough to put the "verbal promises" in writing!

18. Is your "franchise" saleable in the future??
Are you buying into a Bona-fide Franchise or simply buying machines and stock and little else of future value to a purchaser wanting to buy in to a TRUE franchise with USP's?

If you do your homework and choose the right franchise, you will benefit from a fully proven profitable business format with minimum risk, with a faster business start-up and return.  The ongoing support and business development will then ensure that any operational questions will be answered promptly and authoritively ensuring your business runs smoothly and your performance is maximised.

Is a franchise for me?

As you will have previously read in this section, a franchise is without doubt a safe route into a new business venture but is it suitable for everyone?

Generally speaking, a proven franchise is an excellent route into a business for any individual or existing company looking for a minimal risk entry into a new venture.  But what are the limitations and downsides?

The normal format for the vast majority of business franchises includes an initial substantial payment that is your entry fee into the franchise and would normally secure your operating territory, give you a licence to use the franchisors brand name, method of operation and use of any secret or unique processes.  The cost of this initial Franchise Fee varies enormously and can start from as little as a few thousand pounds to well over £1million. Unless it is clearly stated, this fee would not include the establishment costs of your business, specialist equipment, shop fittings, stocks or legal fees, which would all need to be budgeted for separately.

Another very common drawback of a franchise is the payment of a Monthly Management Fee.  This fee is the franchisors share of your profits for allowing you to benefit from their expertise and trading name.  Again this varies from as little as 5% to as high as 25% of your gross revenue.  This may sound rather harsh after you have paid your initial franchise fee, but this is the standard format and allows the franchisor to earn a percentage of the profits that their expertise is earning for you.  On top of these major costs there are usually a few other deductions that must be allowed for and might include a percentage towards the franchisors marketing and promotional budget or even an obligatory percentage fee to have your accounts completed by the franchisor.

The downside of this arrangement is that it is all paid for out of your bottom line with the consequence that your profits would be reduced.

Another potential limitation is the lack of autonomy that the majority of franchises allow.  The whole point of a franchise is that you will precisely follow the proven format and you will get the proven results, although this restriction will present no problem to most individuals, if you are a person who likes to do things your own way, then a franchise may restrict your creative desires.

What's the alternative?

If you really like the idea of the low risk and business benefits a franchise can offer, but are feeling a little shocked at the excessive entry costs and sharing your hard earned profits, and want to have more direct control over your own business direction, there is an alternative.

The Vending Revolution has created a renowned a proven business franchise format that gives ALL the benefits and security of the best franchises, but with NO franchise entry fee, NO monthly management fees and NO hidden percentages to erode your margins, you retain ALL your profit margin on your bottom line!  Yet despite the lack of profit sapping fees, the franchise package, and most importantly the ongoing support and business development is of the highest calibre to ensure your ambitions are fulfilled but not at the cost of your independence to run your business the way you want and fully benefit from all the profits.