How to Start a Franchise in the UK

Originally Posted 07/07/2017; Updated on 11/03/19

Starting a business by working under a successful brand identity and an established business model has obvious advantages, but the process is not as simple as it might seem. So, here are five pieces of key advice to aid those starting out on their franchising journey.

5 Top Tips to Start Your Franchise

1. Do your research. Firstly, you should make sure that the franchise model is compatible with your outlook and working style; for example, if you are a strong-willed person, you may find it difficult to work underneath a franchisor who ultimately controls your business. If you’ve decided you would like to become a franchisee, you should carry out sufficient research to ensure that your chosen franchise is right for you, as you’ll eventually have to sign a legally binding franchise agreement. Make sure that your budget and values match the requirements of the franchise. You can talk to potential business partners at events such as the British Franchise Exhibition, the National Franchise Exhibition and Franchise Opportunities Live to get a better sense of what is out there. You could also seek out more information on the British Franchise Association’s website.

2. Make discovery days count. Most franchises will run discovery days for prospective business partners to get a better feel for the company and meet the people who run it. You should arrive having thoroughly researched the opportunity and prepared questions to ask. Many discovery days will allocate time to discuss in detail the franchise agreement, so you should find out exactly what the franchise requires of you and offers you in return. You could even ask about the particulars of the set-up process, such as territory, funding, training or recruitment. Don’t pass up the opportunity to meet the company’s leadership team in person, as first impressions are extremely valuable.

3. Choose your location. Depending on the type of business they operate, some franchisors will be able to allocate exclusive territories to individual franchisees. This is applicable for businesses in the transportation or delivery sectors, or for other businesses that visit clients or customers in their home or workplace, such as home care businesses. However, franchisees might be left to find their own location, or, in particularly successful franchises, the franchisor may be unable to offer an exclusive territory, which means that the franchisee must work alongside a nearby franchised unit. For static businesses like restaurants or shops, location is key, and – if franchisors don’t offer support with site selection – franchisees should seek out a site which benefits from a high customer footfall, like a high street or shopping centre. This will, of course, need approval from the franchisor.

4. Secure funding. Many lenders are willing to offer up to 70 percent of the total investment cost, but this relies on having a robust business plan that shows you as a reliable franchisee. You will also need a clear financial history. Many established franchises have developed a list of approved partners for the benefit of new franchisees, but you could also approach other lenders. Many lenders are accustomed to supporting franchisees and can provide valuable advice if further funding is needed in the future.

5. Ensure that your franchise agreement is up to scratch. When you’ve met your franchisor, found out everything you need to know about the business and are finally asked to sign on the dotted line, it is time to take a moment to scrutinise the agreement. This is a legal document and once you’ve put your name to it, you can’t go back. This is the time to meet with a franchise solicitor who is familiar with the intricacies of the franchise process. They will be able to alert you to any suspicious elements of the agreement and make sure it meets the British Franchise Association Code of Ethics.

Advantages of Franchising

• Franchisees benefit from a business model that has been proven to succeed. As a result, franchisees can rely on an established customer base and save time developing products, site designs and a brand identity.
• A proven business model means that franchisees don’t need experience in business management or their chosen industry.
• In turn, the security afforded by the proven business model may make it easier to secure funding.
• Many franchises (particularly low-cost ones) offer franchisees flexibility when it comes to location and working hours. This means that franchisees can tailor their new business to their own lifestyle, working around the school run or other commitments, or even work part-time. It is no longer necessary to work nine till five, five days a week.
• Franchisees usually receive extensive training before the launch of their business, and ongoing support to keep them in the loop once it’s up and running.

Disadvantages of Franchising

• There are initial set-up costs and ongoing fees to pay that aren’t incurred when setting up an independent business. These enable franchisees to use the brand name and increase in accordance with the size of the franchise.
• Because the franchisor oversees the franchise, the amount of creative control the franchisee has is limited. Often, franchisees cannot choose the products they sell, let alone have a hand in creating them.
• Buying a franchise isn’t a promise of success. Good business judgement, hard work and an entrepreneurial spirit are vital attributes when it comes to making any business succeed, including a franchise.

However, the benefits of franchising are clear to see; 97 percent of franchises run in profitability and just 4.6 percent undergo changes in ownership in their lifetime. In fact, the franchise industry has become so vast that it now contributes £15 billion to the UK economy – a figure that has increased by 46 percent over the last ten years. The franchising model represents an attractive alternative to those apprehensive about building an independent business from the ground up. A franchise should save investors time in the development process, and, what’s more, with hard work and determination, it is very likely to be profitable.