Category: Franchising

Earlier this year I spent over an hour on the phone on behalf of one of my clients with a reprensentative from the independent research consultancy BDRC. I was answering questions as part of the 26rd annual survey commissioned by the British Franchise Association (BFA). Sponsored by NatWest, the compiled results published earlier this week indicate that:

• UK franchise businesses continue to grow and remain robust despite economic conditions, with the industry contributing £11.8 billion to the country's GDP last year, an increase of £4 million, according to the latest findings from the annual NatWest bfa franchise survey.
• The average turnover figures rose by just under 3% on last year's figure at £335,000 in 2009, with levels in some sectors strengthening as the year progressed.
• Compared to the '90s recession fewer franchise businesses today are trading at a loss, in 1990 only 70% of all franchise businesses were profitable compared to 89% in 2009.
• 2009 was a year where more businesses took up franchising as a business model, with the total number of franchise systems operating in the UK reaching 842, signalling a modest growth from the figure of 835 quoted last year.
• Franchisors' confidence for the future of their business also grew with 94% being optimistic about business conditions, in comparison to only 82% last year.
• Franchisors and franchisees are hopeful about the potential for growth with franchisors on average planning for an additional 8.8 franchisee outlets.
• Franchised businesses dealt with the recession by focusing on growing existing customer bases and increasing spend on marketing and advertising. One indication of how franchised businesses dealt with the difficulties posed by the recession during 2009 is a reduction of full time employees from 239 to 219, but a rise in part time employees.
• There was a slight decrease in the number of individuals employed in franchising in the last 12 months from 467,000 to 465,000 (full time and part time) across a total of 34,800 franchised units in the UK.
• More women are now starting to get involved in franchising, with 39% of recent franchisees women compared with only 21% in 2003.
• Estimated start up costs have declined slightly, and new entrants can expect to pay £46,700 in franchise fees and other associated costs to their franchisor (down from £50,000 last year).
• Whilst almost half of franchises said that NatWest has the most helpful franchise department, for some lack of financial capital has been the biggest barrier for growth.

Franchise Direct one of the leading franchise and business portals recently published a list of the top 100 global franchises. The list was compiled from "thousands of franchises that have invested in international expansion strategies and have been ranked using an objective and measurable criteria.

This criterion includes:

• System size based on numbers of units
• Sales revenue for the system
• Stability and growth
• Number of years in operation
• Market expansion

The ranking is also based on the implementation of:

• Best practice in the areas of franchisee support and training


• Environmental policy


• Social responsibility"

Interestly, only one UK franchisor -- InterContinental Hotels Group - made the list which is dominated by North American brands. Not surprising is the number of fast food and hotel franchisors!

If you missed last month's franchise exhibition at Olympia and live near Newcastle, would encourage you to attend the Great Northern Franchise Show on Saturday 8th May 2010 at Newcastle Racecourse's Gosforth Park Conference Suite.

Open between 10.00am and 4.00pm, the exhibition will showcase 35+ innovative, inspiring and proven franchised business formulas -- all of which have licenses available for the North East, Cumbria & Scottish Border regions and beyond.

For more information, check out the Great Northern Franchise Show Internet Site.

According to the 2009 NatWest/British Franchise Association Survey:

the historic male-domination of the industry remains: men make up 73% of franchisees, but this is gradually decreasing, showing an increasing number of females are entering the industry. Indeed, just over a third of new recruits entering franchising are women. There remain significant differences by sector: women make up nearly two thirds of franchisees in the Personal Services sector, whereas other sectors remain male dominated; especially Transport and Vehicle Services which only has 6% of females.

To further encourage more women to join the franchising industry, a new organisation named: Encouraging Women into Franchising was recently launched. The mandate for the group is "to inspire, educate, encourage and support women looking to become franchisees, women business owners looking to franchise their business or businesses, and existing franchisors that are under represented by women franchisees."

The group which has the support of the British Franchise Association is made up of: franchisors, franchisees, franchise service providers, banks, women's support groups and national support agencies.

To find out more about this new organisation, be sure to check out their Internet site: Encouraging Women into Franchising.

Every franchisee starting out should read: Guerrilla Marketing for Franchisees: 125 Proven Strategies, Tactics and Techniques to Increase Your Profits written by Jay Conrad Levinson and Todd Woods. At the start they outline the formula for franchise success which includes:

1. Developing the proper success mindset


2. Becoming a lifelong student of marketing and business development


3. Owning your success


4. Accepting Accountability


5. Executing and TAKE ACTION

To help achieve this success, they offer franchisees insight on:

• How to write a powerful, 7-step marketing plan and prepare a successful marketing attack
• How to successfully launch & maintain an ongoing marketing attack using up to 100 marketing weapons; 62 of which are low cost or cost next to nothing
• How to understand their role as a franchisee when it comes to their own local store marketing
• How to reach and even exceed their sales and profit goals and much more.

Overall, it's a quick read with lots of relevant examples and low cost tips that any new franchisee can use to incorporate into their business with a view to increasing profits.

The article below written by Joe Lindenmayer offers great advice for those considering franchise ownership.

How Will Your Franchise Ownership End? Before your grand opening, think about how you want to make your exit.

Entrepreneur.com | By Joe Lindenmayer | August 17, 2009

It seems funny to think about selling your business before you even start, doesn't it? But having a vision of how you would like to conclude your business ownership before getting started is no different than knowing your destination before you start a trip.

When I talk to prospective franchisees early in their discovery process, I always ask the same question: "When you look back at your first year in business, what would you like to have accomplished?" More than 75 percent of the time, I am met with a blank stare. When they finally do respond with an answer, I usually follow up with, "So, when the day comes to eventually leave the business, how do you foresee that happening?" That's the guaranteed deer-in-the-headlights question.

Do you think if I had asked Donald Trump or Michael Phelps when they started out what they hoped to accomplish that they'd have that same look? Nope, not even close. These competitors know how they want to finish what they start--and how to build the plan to achieve it.

You can read the full article at Entrepreneur.com.

Misconceptions about franchise ownership often causes a franchisee candidate to walk away from an opportunity that can not only be financially rewarding, but also personally satisfying. Thus in my role as a Franchise Consultant, I am constantly working to dispel these myths. Now Terry O. Powell in a column for Entrepreneur.com, does a great job of outlining the top 8. They are as follows:

Myth 1: I'll only be successful if I find the right business Many of us define "right" as what we're already good at. But don't limit yourself. Define your transferable skills from the corporate world: delegation, management, marketing, etc. If you had them in one type of business, you can easily use them in another.

Myth 2: I can only be successful doing something I love Believe it or not, businesses based on an owner's background have the highest failure rate. Your franchise business is a vehicle to the lifestyle you're seeking. If you limit your choices to what you're familiar with or good at, you're placing yourself at a major disadvantage by ignoring a huge number of possibilities that are outside your realm of past business experience.

Myth 3: I'll instantly know the right opportunity when I see it Many people want to fall in love with their business at first sight. That's an emotional decision, not a career choice. You have to take the time to learn about the details and nuances of an opportunity to understand its potential. You simply can't do that when you make a determination based only on what you feel today.

Myth 4: I can't be in a business I know nothing about Of course you can. It's natural to want to stay in your comfort zone and stick to areas you have experience in. But as a franchise owner, your job is running and growing your business, no matter what it is. Remember, you have transferable skills. That's your strength. You can hire people who know the details. Your road to success is buying into and learning the franchise system--which is already a positive working model--and then using your talents to make it grow.

Myth 5: there's no freedom in a franchise--corporate dictates everything This is one of the most pervasive myths about franchise ownership. In actuality, there's tons of room for individuality. The franchisor "dictates" only one thing: the basic system--the framework, if you --that's already proven successful. Beyond that, you're in charge. You're managing your business. You decide who to hire and fire, how to market your location and how to promote it regionally. Keep in mind that the franchisor wants you to succeed, because if you don't, they don't. It's a win-win situation.

Myth 6: Franchises stifle creativity Again, this is patently untrue. The only limitations you have are those that have already been proven to generate income. This might include signage, uniforms, formulas, protocol, and so on--the basics that allow you to represent the brand and your own location as professionally as possible. But it's completely up to you to think up new ideas and make suggestions to corporate. In fact, most franchise parent companies encourage suggestions, because it's where they get many of their best ideas. McDonald's corporate, for example, didn't come up with the inspiration to start selling breakfast. The concept of the Egg McMuffin was developed by a franchisee.

Myth 7: I can't afford a franchise Sure you can, if you look at it for what it is: an investment in your future. Most franchises can be established for well under $100,000, and some can be started for as little as $12,000. Your only payments to the parent company are a one-time franchise fee and weekly or monthly royalties, which are usually determined on a case-by-case basis. Beyond that, your out-of-pocket expenses are the same as they'd be for any business--salaries, local advertising, etc. The difference is you have the support and training of the franchisor, which will help you ramp up to full speed far more quickly that you could on your own.

Myth 8: I'll have to quit my job to become a franchisee Many franchise concepts are specifically designed for people who are working other jobs. In fact, a large percentage of franchise owners are passive rather than full-time investors.

Can franchises still fail? Sure they can. But the vast majority of the time this is due to the owner deviating from the system and cutting corners by using inferior materials or altering formulas. The key to making it as a franchisee is consistency. If you don't adhere to the groundwork--which, once again, is in place because it works--your chances of success will drop dramatically. You want to leave the habits from the corporate world where they are and bring along your marketable and transferable skills.

Each year the British Franchisor Association recognises three franchisors for their outstanding performance. The 2009 winners selected from 9 finalists include:

Gold: Countrywide Ground Maintenance
Silver: TaxAssist Accountants
Bronze: Wiltshire Farm Foods

Also recognised at the recent awards dinner was:

Green Thumb who the won Express Newspapers Brand Builder of the Year award and Home Instead Senior who won the HSBC Award for Enterprise.

Congratulations to all the franchise brands!

Despite the challenges in the economy, "2008 was a year of expansion for many franchises, with the total number of franchise systems now reaching 838 - an increase of 3.6% on the 809 systems recorded last year. " Furthermore, according to the 2009 BFA/NatWest Survey, "franchisors' expansion ambitions remain bullish, with an average of nine new franchise units planned over the next 12 months. The newer systems are looking to expand at a greater rate with an average of 14 new franchise units."

A few more finding from the survey include:

While the majority (60%) of franchisors and franchisees (66%) think that general economic conditions will become more difficult in the next 12 months, 82% of franchisors anticipate that that their business will improve or stay the same over this period, compared to 95% last year, while the remaining 18% expected business to become more difficult.

Franchisors and franchisees were taking positive action to protect their businesses against tough trading, with nearly a third increasing their advertising, a fifth improving productivity, 15% lowering prices and nearly a quarter increasing their existing client base.

Although the number of individuals employed in franchising has not risen over the last 12 months, the franchising sector still represents employment for 467,000 or 1.3% of the UK workforce.

Estimated start up costs have declined, and new entrants can expect to pay £50,400 in franchise fees and other associated costs to their franchisor, down from £64,900 last year.

It should be noted that this is the 25th annual research study among franchisors and franchisees by the British Franchise Association. The report concludes that overall, the Franchise industry in the UK continues to grow and is a key employer. Although recessionary pressures are being felt, the industry shows strong signs of resilience thus far. Brian Smart concluded, "It's clear from this survey that the franchise sector is proving resilient to the economic downturn by investing heavily in activities to drive business forward and ensure future success. It is a mark of the enthusiasm and commitment of franchisors and franchisees that they continue to drive new business and retain it with such vigour."

A master franchise opportunity requires a significant investment of time and money and choosing the right concept is extremely critical. You must choose not only a franchise you personally believe in but one that you feel is here to stay has a strong foundation and excellent management.

Here are some tips to consider when exploring master franchise opportunities as outlined at allbusiness.com.

1. Do Extensive Research
As a master franchise buyer, it's important for you to understand two entities: the franchise company and the master organization. Make sure, for instance, that the franchise system is based on a solid business model. Without a viable business model, it's unlikely that a master franchise could succeed. You will also need to research the market and territory demographics. Make sure that the territory has a population that can support your projected sales.

2. Know Your Role and Responsibilities
A master franchisee is generally responsible for recruiting individual franchisees. As a master franchise owner, you're also responsible for providing support and training on an as-needed basis.

3. Go See the Franchise and Franchisees
Your intelligence gathering should include actual visits to as many franchise locations as possible. If you detect any problems, cross this franchise off your list. Don't be tempted to rationalize red flags. If you sense trouble, regroup and consider another franchise system.

4. Choose A Franchise That Fits You
Even if the business model is solid, you'll want to make certain that the franchise suits your investment limitations and your goals. If you don't have the capital, then it's not a good match. If you're not interested in the business, then it's not a good match. Be prepared to walk away if the opportunity doesn't feel right.

5. Talk with Other Successful Master Franchisees
If possible, try to talk to other people in the master franchise field. Find out, for instance, what kinds of challenges they face, what kind of support is available, and if they had to do again, what they would do differently. If speaking with other master franchise company owners isn't possible, search the Internet, go to the library, and do whatever you can to immerse yourself in the language of a master franchise. The more you know the better off you'll be.