A well-proven business model

Owning and running a franchise business is all about transferrable skills. And that’s perhaps best illustrated in the abundant and diverse range of businesses that operate under the ‘management franchise’ category.
    
Essentially, a management franchise is a business that is own and run with a broad oversight, rather than being involved in delivering the day-to-day activities. The franchisee’s role is to use the experience and expertise gained during their career to lead a company, manage a team effectively, with a keen focus on business development and a strong steer on the financials.
    
Options
That encompasses a lot of options in franchising: homecare providers, procurement experts, cost management services, commercial cleaning, recruitment, financial services, property services – and that’s far from an exhaustive list. If someone has the right skills, then the chances are that they can find a franchise to fire their passion and inspire them.
    
Even better, this is a potentially lucrative sector: many white collar franchises have six-figure turnovers, and turnover of more than a million is not uncommon for more established businesses, with attractive profit margins.
   
And with an ethical franchise, the franchisee will have initial and ongoing training, support back-up to call on when needed. Then when they decide to move on, retire or realise the investment, the business can be sold to an approved buyer, allowing the franchisee to retain the profits from the valuable asset they have created.
    
Entrepreneurial flair
There are of course no guarantees and it requires a lot of hard work. The franchisee is likely to work long hours at the beginning as they establish the business; they’ll need a certain degree of entrepreneurial flair to grow; very strong self-motivation, drive and determination; and a great set of skills from your career to date.

For those wondering if they have what it takes, it’s worth examining exactly what those skills are, and why a public sector background can be ideally suited to management franchise success.

Skills Test
The franchisee will need to look at their management experience and demonstrate how it will switch across to business ownership success. That might include skills like people management, leadership, problem-solving, recruiting and budgeting – all are highly transferrable, are regularly demonstrated by public sector managers, and are very sought after by franchisors seeking their next franchisee.
    
The more boxes someone can tick, the more attractive they’ll be as an ideal prospective franchisee. Keep in mind that joining a franchise is a two-way process; the franchisor needs to make sure the appointment is a good fit, and if there’s no quality control check on the franchisee, signing up is not advised. A brand that allows anyone to become a franchisee without making these checks is likely to be going downhill.
    
It’s often said that franchising is suited to people with an enterprising nature rather than an entrepreneurial ego: it revolves around proven systems, processes and procedures that someone else has demonstrated can lead to success. That’s usually a huge plus point for a prospective franchisee from a public sector background, where systems and processes are routine and there are clear reasons for following them.

Contribution
And that’s not to say that the franchisee can’t contribute – a good franchisor (the owner of the brand) welcomes the ideas of their franchisees and has two-way communication channels to encourage them to be shared. It’s important to remember that what is involved is paying for a business model that has been tested in the marketplace and working within its parameters, whilst adding innovative ideas where possible.
    
It’s also worth remembering that franchising is set up to let people run their own business in a field in which they have little or no direct professional experience. Its model provides support in running a business as well as training, so even if the franchisee has little or no such direct career history, help is available via telephone, email and in person to plug any gaps they may have. Interchangeable skills are all-important, and should be considered carefully when looking to make the right impression on a franchisor.

Healthy Lifestyle
Lifestyle is one of the key considerations to think about when looking to transition to franchise business ownership. Even within a broad category like management franchises, there are numerous and sometimes substantial variations on the day-to-day life of the operator depending on whether their customers are other businesses or individual people.
    
For example, a franchise that specialises in B2B products and services such as a procurement or recruitment consultancy, will generally operate during normal office hours, Monday-Friday. The franchisee is likely to have some administrative duties outside those times, but the business will effectively close when clients do. On the other hand, a gym or retail outlet will open during evenings and weekends, and though of course the franchisee won’t need to be on-site as staff will be looking after things, they may at the least need to be contactable in emergencies.
    
Similarly, a B2B franchise will frequently be home-based, at least to start off with, or operate from a small office. They’ll need less stock and therefore typically have lower start-up costs and working capital requirements than a premises-based business. In mitigation though, a coffee shop or retail franchise will usually come with a big, national brand and substantial customer loyalty behind it.
    
There’s no right or wrong here. What’s important for the franchisee is to consider what they’re comfortable doing and what they are passionate about.

Money Talks
So, how much is needed to get started? Typically, a management franchise is going to cost anywhere from around £25,000 to get off the ground. That figure will rise to comfortably over £100,000 for a premises-based business, including fitting, stock and initial rent; the majority are probably somewhere in between.
    
The initial fee pays for training in the business, installing the systems to get started and will sometimes also include launching marketing materials/strategies. Each franchise is different, so it’s important to check what’s included carefully when weighing up the options.
    
It can be a sizeable investment, but it’s worth repeating that once the franchisee owns the business, if they can successfully build up a saleable asset, then not only do they reap the rewards of their own hard work, they are also creating a nest egg for the future. Most franchise contracts are for five years, with options to renew, while many premises-based franchises offer 10- or even 20-year agreements.
    
Usually the franchisee will need to have around one-third to one-half of the total start-up cost in liquid capital. Banks look very favourably on the franchise model, because it offers them historical, verifiable data on what a new business owner can achieve by looking at existing franchisees’ accounts. For established brands, they’ll lend up to around 70 per cent of the start-up cost; for newer brands, it will be around 50 per cent.
    
One last consideration here: as franchising matures in the UK, more re-sale businesses are coming onto the market (the majority of franchises are now re-sales in fact).
    
Management franchises offer excellent re‑sale potential because of their structure – the staff performing day-to-day operations do not change when the ownership changes, so they can continue to make profit from day one if the business is already successfully trading. The franchisee’s job will be to grow rather than establish the company in their local area.

Growing Gains
Franchising has shown how well it works in recent years: approximately 90 per cent of franchisees have recorded profitability in the last 20-plus years consecutively, including throughout the recent downturn; and from 2008 to mid-2013, the sector’s revenue and number of jobs both increased by 20 per cent – while the nation’s economy contracted by 2.5 per cent. It’s now a £13.7 billion industry, responsible for more than 560,000 jobs and almost 40,000 individual businesses (per the NatWest/British Franchise Association Franchise Survey 2013).
    
The chances to join that success are abundant and the sector has been buoyant throughout 2014 too. But it can still be helpful to approach things calmly, do an abundance of due diligence on potential franchisors and speak with existing franchisees to find out what life is like within the network.

The British Franchise Association
The British Franchise Association is the non‑profit trade association for franchising in this country and it accredits franchises against a strict set of criteria before they can join as a member. Those businesses offer franchisees the best chance of success because they have been judged to operate ethically and provide the right support. The BFA’s website lists all current members and also contains numerous tips and advice on joining a franchise, including 50 questions to consider asking a franchisor before signing up.
    
If the franchisee get it right, they could be managing their own healthy business before too long.

Further information
www.thebfa.org

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