Is a franchise the right business for you?

Starting your own business is a daunting prospect. You'll need to research your market, develop a business model and find ways to attract customers.

One way to make that journey a little easier is by buying a franchise. In theory, franchising allows you to build on groundwork that has already been laid. You benefit from an established brand, proven systems, existing knowledge and, in some cases, a ready-made customer base. This could mean launching a brand-new franchise unit or taking over one that is already up and running.

In return, the franchisee pays an initial fee, as well as ongoing royalties. 

Franchising is a popular route into business ownership. According to the British Franchise Association (BFA), with more than a thousand franchise systems operating in the UK and about 50,400 franchise units in total.

And there's good reason for this: nearly nine in ten UK franchises are profitable, with an average turnover of £400,000. More than eight in ten franchise operators say they are satisfied with their franchisor, and six in ten say the experience has met their expectations.

However, it's not necessarily an easy ride. You'll still be taking on a certain amount of risk, and of course investing what may be a significant amount of money.

Your first step, of course, is to decide what sort of business you're interested in. There are franchise opportunities for virtually every business sector, from restaurants and retail to dog-walking and tutoring.

Some of the fastest-growing franchise sectors, says the BFA, are home care and health services, fast food outlets, property and estate agencies, fitness and wellbeing and children's education and tutoring. You may already have expertise in a particular sector.

You'll also need to consider all the usual factors when starting a new business. Is the sector expanding or shrinking? Are you prepared, for example, to work the evenings and weekends that a catering business involves? Would you rather be a one-man-band, or take on employees?

Once you've decided on the type of franchise you're interested in, you'll need to look for specific opportunities. There are several directories of potential franchises that you can browse, some general and some specialising in one particular type of business, with hundreds of options at a variety of different prices.

Finances are a crucial consideration. Initial investment can range from a few thousand pounds for small, home-based franchises to several hundred thousand pounds for well-known brands. You’ll also need to budget for legal fees, insurance and, in some cases, premises. As very few franchises are profitable in their first year, it’s sensible to have sufficient savings to cover your living costs and provide a financial safety net.

But this is where the real research begins. First, you should research the franchisor thoroughly, checking out how long it's been going, its track record and whether existing franchisees have done well. Don't rely on the franchisor's projections of future success. Most reputable franchisors run discovery days or assessment sessions, in which you can ask any questions you may have.

And be especially careful if you're taking over an existing franchise, which may have unresolved disputes, a poor reputation, underperforming staff, or legal liabilities.

For each opportunity, you'll receive a franchise agreement setting out the rights and responsibilities of both parties, and defining the terms under which you’re allowed to operate.

It should contain details of the required fees, the territory you'll be allowed to operate in, renewal terms and exit conditions. You should get this checked over by a solicitor with experience in franchising.

And if you're buying an existing franchise, you'll need to agree what’s included in the sale, price, warranties and handover period. You'll need to legally transfer important contracts such as leases or supplier deals, along with existing staff contracts.

All this should help you create a business plan, which you'll need if you're applying for finance. This should include forecasts, marketing strategies, customer profiles and the operational costs involved.

Once you've made your decision, you should make sure you're taking advantage of all the support being offered by the franchisor, which is likely to include training, marketing infrastructure and technology, perhaps including customer relationship management (CRM) systems and delivery platforms.

You may also get access to conferences, mentoring opportunities and access to a network of experienced franchisees, as well as promotional materials, videos and online resources.

But don't expect it all to be an easy ride.

"Owning a franchise is not a guaranteed success. Be prepared for long hours, dedication, and continuous learning to grow your business," advises the Quality Franchise Association. "Buying a franchise in the UK can be a lucrative opportunity, but thorough research and careful planning are essential."

If you’re considering buying a franchise, our team can help you navigate your risks and secure the right insurance cover, so you can focus on making your business a success. Speak to our team using the button below.