Why buying a franchise is a good choice in times of economic uncertainty.

17/05/2018 08:00 | Start a business

Franchising in economic uncertainty

The last 12 months have seen some significant political changes taking place in the UK. This can create uncertainty and apprehension for all business owners, including franchisees. With Britains imminent exit from the EU, is now a good time to consider buying a franchise?

Recent history tells us that franchising is pretty recession proof and has weathered the most turbulent of economic storms. The British Franchise Association and NatWest 2015 Franchise Survey confirmed that of the 44,000 franchise outlets in the UK, 97% are profitable. And with only 1% of franchised businesses closing their doors due to commercial failure, its easy to see why the franchise industry is an excellent choice during times of economic uncertainty.

But as with any area of business, there are good and bad franchise investment opportunities regardless of the economic climate. However, in tough times its even more important that you look out for the key factors that contribute towards making the most profitable franchises.

What to look for when buying a franchise

There are many benefits of buying a franchise rather than starting an independent business from scratch. Here are just some of the key advantages that you should look for before committing to a franchise investment:

  • Profitability

    There are lots of reasons why budding entrepreneurs choose to become franchisees, but making a profit is probably one of them. If youre looking to invest in a well-established franchise, there should be plenty of financial information for you to review.

    To understand how sales, margin and profits are performing across the franchise network, ask the franchisor if you can speak to active franchisees. Being able to discuss financial expectations versus reality with existing franchisees will give you a real insight into if this one of the most profitable franchises to invest in, or not.

    If youre interested in a newer franchise that has less financial information for you to evaluate, ask to see the results of the pilot franchise. To prove their business concept, many franchisors run a pilot franchise for one to two years. Being able to assess how the pilot performed should give you confidence that you can also make a success as a franchisee.
  • Quality training programme

    A franchise should provide you with training that adequately prepares you to operate your new business. The type of training you receive should be relevant to the job youll be undertaking but will also include the skills you need to run your franchise effectively and efficiently successfully.
  • Marketing

    As well as a recognisable brand, a good franchise should provide you with excellent marketing advantages that would be difficult to replicate in an independent business. It's likely that you'll have to contribute towards marketing through the payment of a regular fee, but this should give you marketing power above and beyond what you could achieve alone.

    Of course, youll still need to complement the franchisors nationwide marketing with local promotional activity. However, the franchise should provide you with the tools, systems and training you need so that you can acquire customers cost-effectively. You then have the job of retaining your customer base through consistency and quality of the products and services you offer.
  • Ongoing support

    The most profitable franchises dont stop providing you with training and support once your business is up and running. Having access to ongoing and in-depth support can make a real difference to how successful you are as a franchisee. Whether support is offered through webinars, conferences, training courses or on-site visits, the important thing is that there is continued focus on helping you make your business more profitable.
  • Lower overheads

    If you do have concerns about starting a franchise with so much uncertainty surrounding Brexit, you could choose to limit your risks by considering home-based franchises. Because expensive business premises and equipment dont need to be funded, home-based franchises can achieve profitability much more quickly than their bricks and mortar counterparts. Generally, home-based franchises also have lower franchise fees so are perfect for entrepreneurs who don't want to make a considerable investment to get their own business up and running.

Are you ready to become a franchisee?

When youre happy that youve found a stable and robust franchise to invest in, the next step is to consider if you have what it takes to be a franchisee during tough times. To be a successful franchisee during times of economic uncertainty, youll need to:

  • Be committed

    Running a franchise takes hard work, dedication and commitment. Its a massive misconception of franchising that because many elements of the business have been established, being a franchisee is easy and a guaranteed route to success. However, this isn't the case, and you should be prepared to commit to making your business a profitable one.
  • Understand whats expected of you

    Franchising is an attractive alternative to setting up an independent business for many, but there are lots of rules that need to be adhered to as a franchisee. You must understand what your obligations are as a franchisee and be 100% certain that you can achieve these before you commit.
  • Be willing to follow the system.

    The rules that come with buying a franchise are there for a reason. The franchisor will have developed a successful business system, and the restrictions placed on you are there to protect the brand. If you have a strong entrepreneurial spirit and like to do things your way, then franchising may not be right for you.
  • Motivate your staff

    When times get tough, your staff will look to you for guidance and inspiration. You need to be more than a manager. You need to lead your staff so that they're engaged in your business. The last thing you want to be worrying about when the economy is fragile is losing experienced employees because they no longer feel motivated or supported.

Despite the political and economic landscape, it appears that franchising is going from strength to strength. To increase your chances of being a successful franchisee, just make sure that you do your homework to find the right franchise for you and reflect on whether you have the skills needed to ride out the turbulent times.

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