Franchising in the UK has seen consistent growth over the past few years, with thousands of franchise units operating across various sectors.
The British Franchise Association (BFA) estimates that the franchise industry contributes to over £17 billion to the UK economy, with nearly half a million people employed in franchise businesses.
This growth can be attributed to the flexibility, support and reduced risk that franchising offers entrepreneurs.
Franchising can be a fantastic way to start your own business while benefiting from the support, brand recognition and proven business model of an established company.
However, it is important to recognise that franchising may not be appropriate for every business.
If you are considering investing in a franchise, today’s blog will cover the basics of franchising and its advantages and disadvantages to help you make an informed decision.
What is a franchise?
A franchise is a business model where a company (the franchisor) allows an individual or group (the franchisee) to operate their own business using the franchisor’s established brand, products and services in exchange for an initial fee and ongoing royalties.
This model allows the franchisee to benefit from the support in training, marketing and experience from the franchisor while the franchisor expands its brand presence.
Advantages of franchising
Franchises offer a multitude of advantages that can make them an attractive business model for both entrepreneurs and investors.
- Brand recognition – As a franchisee, you will be able to leverage the franchisor’s established brand, which can help you attract customers and build client trust more easily.
- Proven business model – Franchises often have a higher success rate than independent start-ups because they are based on an established business model that allows for repeatable success.
- Support and training: Franchisors typically provide training, ongoing support and resources to help franchisees operate their business efficiently and effectively.
- Easier access to financing: Banks and other lenders may be more willing to finance a franchise due to the lower risk associated with established brands and businesses.
Franchises also often have stronger purchasing power due to their collective bargaining capabilities, enabling franchisees to benefit from cost savings on inventory, equipment and supplies.
Disadvantages of franchising
Franchising is not suitable for every business and there are drawbacks of turning your business into a franchise.
- Not a remedy for struggling businesses – Franchising should not be viewed as a means to obtain capital injections from others when a business is facing financial difficulties. Pursue the franchising path only if you have an established and successful business.
- Time commitment – Setting up the franchise model demands a significant amount of time investment, as does ensuring the selection of suitable franchisees and overseeing their activities.
- Training and support responsibilities – You will need to create and provide comprehensive training and support for your franchisees to effectively represent your brand, requiring a considerable amount of effort and time. To facilitate a successful business, it is essential to have systems and procedures in place that can be easily replicated by most individuals.
- Expenses – Transforming your business into a franchise entails substantial financial investment upfront to establish a thriving franchise model for future business growth, including expenditures on legal documents, operations manuals and marketing materials.
It is important to consider consulting a solicitor if you are planning on investing in a franchise, as they can help protect your interests and ensure a smooth transition into the world of franchising.
By engaging a solicitor, prospective franchisees can make well-informed decisions and mitigate potential legal and financial pitfalls, ultimately contributing to a successful and sustainable franchise venture.
Franchising can be a rewarding and profitable way to start your own business. By understanding the basics of franchising and the advantages and disadvantages, you can increase your chances of finding the right franchise opportunity and achieving long-term success.
Are you considering investing in a franchise? Get in touch today for legal advice.