Tuesday, 2 October 2007

A Few Thoughts on Franchising...

One of the most emotive responses that I receive from my Entrepreneurial Profiling Test is from people highly indignant at my suggestion that they should perhaps consider franchising as their first venture into business, as an alternative to starting a completely new business from scratch.

It seems that for some franchising is still a dirty word in business - and that it is somehow a 'fake' alternative to going into business proper.

The other side of the coin is of course the emails I receive from people, typically 12 to 18 months in to their business journey, who have tried to start a business completely from scratch and who are beginning to realise just how difficult (and expensive) that is.

Creating a brand identity alone, along with all the brand collateral needed for certain businesses (signage, brochures, websites etc) for just one business location/outlet can cost tens of thousands of pounds. More often than not it's an area where many businesses skimp - and end up looking unprofessional and amateurish.

That's before you even begin to consider all the costs of setting up operational systems, bespoke software, supply chains and processes/know how - as well as the cost of the kind of 'trial and error' mistakes you inevitably make when you decide to go it alone.

Franchising gives you a ready made solution usually for an all in one fee - which allows you to focus on revenue generation practically from Day One - as well as fantastic training and ongoing support.

The results of my Profile Test show that over 80% of people thinking of going into business really should consider looking at the franchise sector as their first venture into business. The failure rate is less than 5% (compared to something like 67% in the start up sector); it's much easier to finance your start up costs, and with most franchises you can actually sell them on for more than they cost you once you have momentum going. Alternatively put a manager in to run them and use the money generated for your completely new business a couple of years down the line - once you have experience in business.

This week is the National Franchise Exhibition at the NEC - and I would normally be there speaking if I weren't currently 9 months' pregnant! If you are thinking of going into business I would suggest it's well worth a visit - and particularly if you Profile under my free Test as a Safepreneur/Execpreneur/Dadpreneur or Mumpreneur.

Alternatively visit the UK Franchise Directory Site which gives you a complete listing on every franchise currently available in the UK.

As with any business opportunity, you still need to be very careful which franchise you go for - and indeed some of the more established ones have very strict criteria on who they will allow to run one of their franchises - but it's an avenue well worth exploring.

Good luck!



Ian said...

I currently have control over franchisee's with the business that I am contracting for.
Can I add a point that Rachel has not made loudly enough.
Yes we help, but you still need to dedicate yourself to it....and then some.

sweeting said...

Hi Rachel - Was this a truly non-biased opinion or should we presume by the referral link on the URL you posted that you have a commercial interest in promoting the website.

If you're independent then thats ok. If you've profiting from alliances and comments then that's fine - just declare it from the start.

Rachel Elnaugh said...

Thanks for your comments.

Ian - yes, I totally agree, all business requires absolute committment effort and committment, there are no easy rides. Too many people launch into business without realising just how difficult it is - hence the high failure rate amongst start ups.

Sweeting - there are some people who I would absolutely consider are wrong for franchising; others who I would say are absolutely right to consider it.
In my opinion franchising has a place in Business Start Up which should be considered with equal validity alongside all the other options for those types of people.
I am providing the link to enable those who wish to find out more the opportunity from what I believe is the most comprehensive source of franchising information in the UK.
My site is primarily advisory and I take care not to make it overtly commercial; I believe by providing this link I am giving a service both to would be entrepreneurs and to the company which I have selected from the many who you will find on the web offering franchising information.
If that transaction offers value to both parties then why should I not benefit?
See earlier blog - I do not and have never professed to be a Charity; I am an entrepreneur and this is a Business Blog.
Are you seriously saying that any entity that makes any kind of return on advice/content contained within its site cannot also do so with integrity?


Mike B said...


Franchising is not nearly as good as it is cracked up to be.

In my view that is an assumption that is repeated so often it has gained the status of fact without proof.

All would be franchisees should consider these points carefully.

First. The BFA is not an independent body, it is a marketing agency for franchisors: so do not rely on it for even handed treatment or balanced comment - neither is it an honest broker.

Second: Nobody measures the failure rate of franchises as a whole - not even the BFA It is high time the ASA took a pop at the franchise industry for misleading the public.

Third: have you ever asked why there is no negative comment to be found on franchises on the web? - the answer is that any forum, or franchisee who speaks out is the subject of vicious legal and other intimidation. You would not believe how bad this is - unless you are an ex franchisee

I am not saying all franchises are bad - I am saying that they are shades of grey to pitch black all dressed up as white.

Many hide behind a veil of secrecy and gagging of present and ex franchisees.

There are thousands and thousands of people who have lost their live savings ( and more) on this myth and it is time it was exploded.

Happy to have a dialogue on this if you like.

Rachel Elnaugh said...

Hi Mike

Actually I do agree with you - I have also heard the horror stories, and been on the end of many a desperate email from franchisees caught up unsuspectingly in a 'scam' - usually where they have been sold on a franchise concept which hasn't yet been proven.

The bottom line in these transactions - as in ALL business transactions - is that you have to be very very careful indeed.

The point I was trying to make is that it is incredibly difficult to launch a new business from scratch with all the brand identity and operational issues that go with it, and people ALWAYS underestimate this.

Franchising can be a good alternative - but that doesn't mean you don't have to do your own due diligence.

A very good starting place is random one to one conversations with existing franchisees - those chosen by you, not the ones the franchisor suggests.