Franchised Business
In 2007 the British Franchise Association (the bfa) launched their "Proud to Franchise" program to help people that run franchised businesses highlight the benefits to customers of dealing with franchised brands in the UK.
A survey carried out in 2006 by the bfa asked people about their preferences for buying goods or services from a franchised business against buying from independent businesses. A high percentage (45%) said that they would first try out an franchised business before going to a business that was not a franchise.
What is a franchise?
The term 'franchise' has been used in the past to describe many different forms of business types, including licensing, distributor and agency arrangements. Nowdays, the term is increasingly used to decribe what is called 'business format franchising.'
Business format franchising is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis. Examples include businesses such as Prontaprint; Chips-away; Belvoir Residential Lettings; courier businesses and even Wheelie bin cleaning
The franchise principle is simple - some companies choose to grow, not by developing in the conventional way (taking on more staff; opening new offices or shops; expanding into a new territory), but by granting a license to others to sell their product or service. There are clear advantages to this:
- You don't have to come up with a new idea - someone else has tried and tested the idea and it works
- Larger, well-established franchise operations will often have national advertising campaigns and a solid trading name that you as a new startup can use to help establish yourself
- Good franchisors will offer comprehensive training programmes in sales and indeed all business skills such as book-keeping and staff recruitment and management.
- Good franchisors may also be able to help secure funding for your investment as well as by, for example, discounting bulk-buy supplies for outlets when you are in operation
- If aware that you are running a franchise, customers will also understand that you will be offering the best possible value for money and service - although you run your 'own show', you are part of a much larger organisation with all the benefits for the customer that entails.
Who runs the franchised business?
Each business outlet is owned and operated by the franchisee. However, the franchisor retains control over several elements of the business. These may include: -
- The way in which products and services are marketed and sold
- Shop front design
- The quality and standards of the business
- Advertising of the business
- The area that the business operates in - you probably would sign up for a single geographical area
What are the cost of buying into a franchise business?
There are several different types of costs involved in buying into a franchise, the amount of these vary between fanchisor to franchisor but basically...
The franchisor receives an initial fee from the franchisee that is payable when you sign the franchise agreement.
There is then an on-going management service fee. This is usually based on either a percentage of annual turnover or may be as a mark-up on supplies (you may have to buy all supplies from the franchisor).
In return, the franchisor has an obligation to support the franchise network, usually with training in the business model, product development, national advertising (yellow pages for example or the daily papers), promotional activities and with a specialist range of management services.
Ohter costs that you may incur are stock, wages, professional fees from solicitors/accountants etc and even the cost of renting a van / office or shop. You may also feel that you want to use a bookkeeper that is familiar with the needs of a franchise business. If you are based in the Peterborough area AK Bookkeeping provide bookkeeping for franchise businesses in Peterborough and Stamford.