Franchising |
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General Information |
The following information has been compiled in association with the British Franchise Association (BFA). The BFA are the official franchising governing body and have been established since 1977.
More and more people wishing to start their own businesses are turning to franchising. So what is franchising?
There are various different forms of franchising including licensing, distributor and agency agreements, but the most popular use of the term relates to 'business format franchising'.
This involves the granting of a licence by the franchisor (the company) to the franchisee (purchaser), thus enabling him/her to trade under the franchisor's name and make use of an entire established and proven business package which comprises all the elements necessary in order to establish an individual in the business and then to continue to give ongoing back up and support. This removes many of the pitfalls of starting a new business.
This means that the franchisor can grow their company by granting licences or territories to individuals to sell their product or service.
Advantages to franchising:
The business concept has already been tested and proven.
Many well established franchisors operate National advertising campaigns. and also offer in-depth residential training courses.
The franchisor can usually offer additional financing when the time comes to expand your business, thus eliminating these worries.
You will have confidence from your customers if they are aware that you are part of a large, established organisation.
Who controls the business?:
Each franchised outlet or territory is owned and controlled by the individual, although the way in which the products or services are sold will be dictated by the franchisor, who controls the quality and sets the standards and ethics for the business.
How much does a franchise cost?:
Costs can vary enormously depending on which franchise you buy. For example, you could invest in a modest franchise that could be easily controlled by one person and yield a small income from it, or perhaps invest at a higher level and work as a partnership or employ staff. There are so many franchises out there, the choice really is down to each individual.
Generally speaking, the franchisor will charge the franchisee an initial fee (financing can normally also be arranged). They will then charge ongoing management fees which may either be a set amount, a percentage of your earnings or on the profit they make when you re-order your supplies from them.
So what are the pitfalls?:
When choosing a franchise always do some research. After you have received the initial information, make a list of questions to ask the franchisor when you go to meet them. Ask to speak to a handful of other franchisees who have been running their businesses for varying lengths of time - MOST IMPORTANT!!
One thing to remember is this: There are over 650 companies currently offering franchises. So, once you have decided what level of investment is right for you, which one do you choose?
Companies who wish to be BFA approved submit themselves to this organisation for scrutiny in terms of effectiveness as a franchisor, terms of contract etc, and we would recommend that you look at those companies who have been accredited by the BFA before making your final decision. The BFA also offer seminars at various venues around the country to help prospective franchisees evaluate all the elements involved in the purchase of a franchise before committing to such a venture.
For more information on the BFA and the evaluation seminars available please click HERE.
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