Today on the blog we meet Sally Anne Butters who has worked in the world of franchising for over a decade and with her business partner, Lucy Maisey, now runs Rev PR, an agency specialising in PR for franchise brands.
We asked Sally to explain to us about buying a franchise and why could be a great choice for women considering becoming a business owner.
Sally, can you explain what a franchise is?
In its most simple terms, a franchise is a company which expands by allowing people to buy the rights to run a copy of the core business in a new location. Most people buy a franchise linked to a specific territory, giving them exclusive rights to run the business in that location.
The franchisee, the person who has invested in the rights to operate the business in their chosen location, is given comprehensive initial training in the correct way to run the business and then ongoing support for the life of their franchise agreement – normally 5-10 years.
The franchisor is the person who owns the overall brand and should provide all the documentation, operations manual and support so that all the franchisee needs to do is follow the system with the same vigour they would give to any start-up business.
What are some of the pros and cons of starting a franchise opposed to a new startup?
These pros and cons vary depending on which franchise you choose to invest in. I use the word ‘invest’ rather than ‘buy’ because it really is an investment of your time and energy as well as money. And that is my first double-edged warning. Just like any business, with a franchise you get out what you put in – you can’t just buy the rights to a franchise and then watch the money roll in.
You can make a choice between an established franchise brand or an emerging franchise brand. Those with a stronger entrepreneurial spirit may choose an emerging brand as they can help to shape the development of the franchise and its support function by working with the franchisor in the early years, whereas those who are slightly more risk averse may prefer the reassurance of lots of franchisees and their trading histories.
In order to receive all the support you get with a franchise, there is a price to pay. Most franchisors will charge you a monthly fee which can either be a flat fee, a tiered fee or a percentage of turnover – that’s how they make their money. They may also charge a marketing levy to pay for national marketing campaigns and other associated costs are often made clear during the due diligence phase.
If you have any concerns about how you’ll make any money from your business or if the franchisor is as supportive as they profess, ask for a complete list of franchisees and choose several at random to get the lowdown. During the conversation, you should ask each franchisee how long they have been operating, what turnover and profit margins did they achieve in each year with how many employees and what were those figures in their original business plan, how many hours they work in the business and how satisfied they are with their franchisor – this will give you an overview on actual performance versus expectations and will normally bring out a true sense of satisfaction level.
How would you find a franchise to buy?
Just like buying an existing business, there are plenty of specialist franchise listing websites including franchisedirect.co.uk and franchisesales.co.uk but I’d also recommend doing some general research on thebfa.org which is the largest industry support organisation for franchising in the UK.
If you prefer to get networking straight away, choose a franchise show to get your research going. The International Franchise Show at London’s ExCel is in February thefranchiseshow.co.uk or visit franchiseinfo.co.uk for several other franchise expos throughout the year. You’ll find a number of franchise brands represented plus related suppliers you’ll need before you sign up for a franchise and once you are operating – these shows are a great one-stop-shop.
You can also choose the hand-holding route where you hire a broker to match you to a few franchise opportunities based on your personality and skills. They will then coach you through the research phase and due diligence process. There will be a fee for this which is usually paid for by the franchisor by way of a commission but this shouldn’t put you off – you don’t have to take any of the choices put forward by the broker if they don’t feel right. Try tworldba.co.uk or thefranchisingcentre.com to see if they have the right match for you.
How straightforward is it to be up and running with a franchise – timeframes?
Again, this varies depending on the franchise. For example, opportunities like McDonald’s expect you to complete a lengthy process before awarding you their franchise whereas some could be as little as six weeks. Some franchises need a physical retail or office site whereas some can be operated from home. From our experience, from initial search to business launch day, the average time it takes to shortlist opportunities, complete due diligence and initial training is three to six months.
One of the major factors where this timeframe may increase is funding. I’d recommend speaking to a franchise banking specialist from the outset to discuss levels of funding you could secure depending on your financial position and the ratio they are prepared to lend to for different franchise brands. All the major high-street banks (Lloyds, NatWest, HSBC, Metro Bank) have franchise teams who do not reside in your high-street branches and the rep you may talk to about your mortgage often knows little or nothing about the franchise team – find their contact details online and go direct.
Is there anything you must do when buying and investing into a franchise?
To make sure buying a franchise goes as smoothly as possible, you MUST use a franchise specialist lawyer. thebfa.org has a long list you can choose from and they will save you time and money in the short term and a lot of stress in the long-term should you choose to move on from your franchise business. And that leads me on to my final point… you can also buy a resale franchise (look at businessesforsale.co.uk or franchiseresales.co.uk) – an existing franchise business where you can take over from an outgoing franchisee. The franchise fee will be higher than buying a greenfield territory but you’ll benefit from starting day one with a customer base from which to expand.
Some franchises suit those looking for a flexible work-life balance, some have the potential to grow into multi-million-pound businesses and some have a model where you can achieve both a great income whilst spending only a few hours a week in work. If you don’t like playing by the rules then a franchise is probably not for you but, if you’re happy to tow the line and be in business for yourself but not by yourself, then you may wish to take a closer look at franchising.