Should you buy a franchise?

In brief

• What is a franchise?
• How do I find the franchise to suit me?
• Top franchise sectors
• Where can I buy a franchise?
• What to do next

Fancy emulating the success of McDonald’s or Dyno-Rod? It's not as impossible as it sounds. Both these companies, and many more high-street names, run as franchises, which means that you can buy a licence to operate your own business using their name and business model. Franchises offer you many of the advantages of self-employment; with less risk than setting up on your own, franchises have a much lower failure rate than new businesses. There are a few questions to ask yourself before deciding to become a franchisee.

The most common type of franchise is a Business Format Franchise. In return for a fee, you will be granted a licence to trade under a company’s name, follow their business model, access their customer base, and benefit from their experience, training and support.

Franchises are available across a wide variety of business sectors, from personal training to plumbing, cleaning to customer services. Think about whether you want to take on a "job franchise", where you do the work and deal with customers, or a "management franchise", where you employ others to do the work for you. Most successful business people, including franchisees, have a passion for the product or service they’re providing, so keep that in mind when you’re making your decision.

According to experts at NatWest, some of the top franchise sectors include lettings, consultancy, personal services, retail catering, contract cleaning and domiciliary care. Once you have decided which field you want to work in it’s time to weigh up the pros and cons of whether it's right for you.

PROS

• It’s a tried and tested business idea
• Customers may already be familiar with your business name
• You’ll receive support including help setting up the business, a detailed operations manual, training and ongoing advice
• Exclusive rights in your territory
• It may be easier to attract backing for your start-up
• Supplier relationships will already be established
• You can network with, and get support from, other franchisees.

CONS

• It can be expensive. As well as an initial franchise fee, you will have to pay a share of profits and possibly a management fee, plus you may have to purchase products from your franchisor. You will also need to pay the usual business costs for premises, staff, supplies and so on
• You will have to run the business according to the franchise agreement, giving you less scope to introduce your own ideas
• You will only be allowed to sell the business to a buyer approved by your franchisor
• You’re at risk if your franchisor goes out of business or is sold to a new owner who changes the operation
• Other franchisees may lower the reputation of the brand.

If you’re thinking seriously about buying a franchise, you’ll need to know just as much about the industry and the market as if you were starting your own business. Researching any franchise opportunity thoroughly is essential – checking if the business is a member of the British Franchise Association (BFA) is a good place to start.

Here are further places to find information on franchises:

Websites
Which Franchise;
Franchise Advice;
Franchise Info
Publications
The Franchise Magazine;
The UK Franchise Directory ;
Franchise World;
Business Franchise
Press adverts You can find advertisements for franchise opportunities in the business pages of newspapers, but remember that many of these are untested and should be approached with caution
Exhibitions Major franchise exhibitions are held each year in London and Birmingham. Contact the BFA for details of regional and specialist exhibitions or look at the Franchise Info website.