A franchise lets a business owner expand by licensing their brand to others who open and run their own locations. The franchisor creates the model, while the franchisee invests to operate a branch using the established name and products. This structure can be a fast and cost-effective way to grow, but it requires the business to be ready for replication. Franchises can be run from a physical premises or as home-based operations.
Is Your Business Ready?
Before starting, a business must be franchiseable. The British Franchise Association’s chief executive, Pip Wilkins, says owners should ask four key questions: can the business be easily replicated in different locations, can it be taught to a new person in a reasonable time, and is it profitable enough to cover a monthly service fee? A franchise consultant can run a feasibility test to answer these questions.
Wilkins notes that knowing which parts of the business can be taught is often the hardest part. The consultant will also check if the profit margins are strong enough to support a management fee, which is typically a percentage of turnover. The relationship with the consultant matters as much as the test; Wilkins suggests the franchisor should look for someone they can work with closely, almost like a partner. Anything from around about 10 per cent is the average management fee charged.
Franchisors must protect their intellectual property by registering a trademark. This costs £205 for one class and £60 for each additional class, and can be done through the government website. They also need a solid business plan, which should cover the expansion strategy, the franchise fee, and the package provided to franchisees. This plan should be updated at least once a year.
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Franchisees generally receive more support than employees, which is one of the main benefits of the model. Samantha Wingfield-Jones, a franchisee of Razzamataz in Leighton Buzzard, said the head office helped her from the start by answering questions and introducing her to the company. The training lasts about a month, combining intensive courses with meetings. This support, along with pre-made templates and a unified website, makes it easier for franchisees to focus on running the business rather than building it from scratch.
Franchising offers a lower-risk path for entrepreneurs compared to starting an independent business. However, the franchisor’s role changes significantly. They must manage, recruit, and support groups of people, a task that demands time and effort.
Recruiting and Retaining Franchisees
Recruitment remains a significant challenge for franchisors. The screening process typically involves an information day, an application form, interviews, and the submission of financial information. Assessing personality is as critical as evaluating skills. The right personality traits are often just as important as technical knowledge for long-term success.
Franchisees usually sign contracts lasting between five and 20 years. To maintain a positive relationship, it is vital to ensure they understand the specific terms and conditions before they sign. Wingfield-Jones noted that contracts often include clauses restricting the franchisee from opening a competing business in the same area after leaving the franchise.
Marketing and Costs
Franchisees require clear information on costs to make informed decisions. It is important to specify exactly what the franchise fee covers and to highlight any additional expenses, such as uniforms. Wingfield-Jones advises others to verify the total investment required before committing funds.
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A successful marketing plan must be part of the operations manual. This plan should include a brand overview, a mission statement, and quality control measures. To assist with marketing efforts, franchisors can provide branded templates, stock assets, and software for email and social media marketing. A digital marketing agency may also help with local SEO and pay-per-click advertising.
Franchise consultants charge fees ranging from £10,000 to £50,000. A standard franchise agreement costs between £3,000 and £6,000. Initial preparation costs, including legal advice and systemisation, can amount to around £25,000. The process can be completed in a few months or take a year, depending on the resources invested. A huge 93 per cent of franchise businesses are profitable, with 60 per cent of those having a turnover of more than £250,000.
Case Study: Barking Mad
Take dog sitting and dog boarding service, Barking Mad, as an example. It started to franchise back in 2001. The first 18-24 months were spent running the pilot business to ascertain that it was viable, profitable, scalable and marketable. In 2016, Franchise Brands Plc, the multi-brand franchisor, bought Barking Mad. It’s now consistently in the Elite Franchise Top 50 franchise business in the UK.
The British Franchise Association has a free online course on franchising a business as well as monthly education seminars. The 2024 British Franchise Journal says that 89 per cent of franchise units report profitability, with an average turnover of £400,000, and a success rate of 99.5 per cent.
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