The most famous franchise is probably MacDonald’s but there are numerous kinds of franchises out there. In relation to any other small business, franchising has proved to be successful, with 94% of units still operating profitable businesses 5 years down the line whilst it is estimated that more than 40% of small firms cease trading within 3 years.
We are basically talking about a Business Format Franchise. It is where a business has established a successful way of working and in order to grow it licences the rights to their methods, know-how, name, goodwill and product or service to others for a certain period of time. They are the Franchiser and the local operator is the Franchisee.
Some Advantages of using a Franchise…
The franchise costs are normally the main downside of choosing to operate as a franchise and consist of the following…
The British Franchise Association (BFA) is a good place to start when choosing a franchise and they are the only independent accreditation body for franchising within the UK.
It is also useful to attend franchise exhibitions to compare different franchisees.
They have a free video ‘Your Introduction to Franchising’ which provides a wealth of information – more than 33% of franchisees buy this unique, independent guide before making their decision.
BFA members are recommended as they have volunteered to be ‘vetted’ by the BFA and adhere to its codes and standards, based on the European Code of Franchising Ethics. They are also re-accredited on a regular basis.
A franchise is a long term arrangement and you need to take legal advice on any franchise contract, ideally from a solicitor who has a lot of experience with franchise contracts.
The franchiser will have a lot of control over how the business is run and you need to ensure you are happy with this and what is in the contract.