What is a Franchise?
An article by Darren Taylor, MD of Taylor Made Franchising
With the latest NatWest BFA survey in 2018, [1] (don’t worry, there’s another one due in 2022) revealing that four years ago the UK franchise industry was worth £17 billion, and had created 71,000 jobs, it’s not surprising that you might be researching franchising as a route to being a successful, self-employed business owner.
Taylor Made Franchising
My company, Taylor Made Franchising, owns or part-owns nine different franchise organisations across a huge variety of sectors. Tree Stump grinding, commercial vehicle washing, chimney sweeping, domestic and commercial cleaning, window cleaning, tachograph analysis, wholesale wine sales, women’s business networking and dog boarding, truly something for everyone.
We have over 100 franchisees, all running successful businesses, backed up by our expert support and advice. 99% of our franchisees had no experience in the franchise they bought when they started. That’s the beauty of franchising, you don’t need to know about the business, but your interest should be piqued and you should choose one that feels right for you.
What is a franchise?
A franchise is a business model that has been developed by the franchisor, usually from their own business, that you buy a license to use. There are two people involved in the franchise, the franchisor, the owner, and you, the franchisee. There is only one franchisor but there will be multiple franchisees. The key to a franchise is repeating the model. It has taken years of experience and hours of hard work to pull together the training and operations manuals you’ll be given and the lessons you’ll be taught. Within their pages lie the secret to your success, simply read and repeat and you won’t go far wrong (oh and a lot of hard work!)
How does a franchise work?
You, the franchisee, buys a territory for a contracted number of years, usually five, which will allow you to run a replica of the franchisor’s business in your own exclusive area. No other franchisees will be allowed to trade in your area. You will be given full training to learn how to perform the job (eg sweeping chimneys or washing commercial vehicles etc) and how to run the business e.g. marketing, sales, employing and managing staff, business planning and business growth.
What is a management franchise?
Some people buy a franchise to build it into a large business. Fairly soon after starting their franchise, they’ll train and employ other people to carry out the service for them, leaving them to manage the business. This is called a management franchise. Most franchises can be run either by a sole operator (eg just you) with a smaller net profit or, as a management franchise, which is where the big money is to be made. Make sure you ask what basis ‘anticipated earnings’ figures in marketing material are based on, just you working on your own, or a team?
What is a franchisor or franchisee?
What is a franchisor?
The franchisor is usually, but not always, the person who started the business. Let’s take for instance our brand Wilkins Chimney Sweep. The business was founded in 1895 and franchised in 2011. Wilkins Chimney Sweep now has 18 franchisees operating their own, successful businesses across the United Kingdom. We are the franchisor and we sell/award territories to our franchisees. Read here about our latest Wilkins Chimney Sweep annual conference.
What is a franchisee?
The franchisee is a person like you, who buys a franchise territory and is given access to all the information, knowledge and branding to run the business. Although you own a franchise, the success of your business is 100% down to you. We are there to support, guide and teach, but we aren’t there to do the hard work for you.
Why buy a franchise? Why not start up a business on your own?
A very good question and one that is simple to answer. Some people are born entrepreneurs and willing to risk everything on their idea; others still want to own and run their own business, but with less risk and more support. They may well have had another long-term career that they're moving out of and want to carry on earning money to support their family, rather than risking it all on a start-up business. A wise decision.
This doesn’t mean people who own a franchise are taking the safe or boring route, far from it, our most successful franchisees recognise the value in simply repeating someone else’s model. Everything is set up for you, the website, the position on Google, the branding, the method, the marketing collateral, you just have to build up your client base and repeat.
Nothing boring about that – just good business sense.
The failure rate of start-up businesses compared to franchise businesses
The other thing to consider is the rate that new businesses fail in their first year, compared to franchise businesses.
According to the 2018 BFA survey: 'around half of all non-franchised start-ups fail within five years.' Compare this to the very small failure rates in franchising and you'll see why banks are happy to loan people money to buy a franchise, rather than to start up on their own.
Small business statistics[2]
· On average, almost 20% of new businesses fail in their first year
· The government’s business population estimates in 2021 show that the total business population decreased by 390,000 (6.5%) between 2020 and 2021. That’s 23% higher than the number of business failures in the previous year.
Don’t get us wrong, we applaud anyone who wants to start their own business, more power to you, if people didn’t, we wouldn’t have any franchises to run, but we also know that our 100+ franchisees are very happy running their own successful businesses, with all the help and support they need. It feeds their families and keeps a roof over their heads and, in the case of PVC Vendo, it is usually passed down from father to son as it is so successful.
Expert franchise knowledge
A business generally franchises after years, in some cases decades of commercial trading. As you can imagine, during that time the owner (the franchisor) has learned a lot about running the business and, for you coming in as a franchisee, they share ALL of that knowledge with you, all neatly packaged up in a franchise-shaped bundle. This is something start-up business owners can only dream of, as they navigate the snakes and ladders board of going into business alone.
Learn from our mistakes – I promise, we’ve made them all
As franchisors, we’ve made all the mistakes before and we’re here to help our franchisees avoid them. Some franchisors, like us, give you sophisticated software to make running your business even easier. With a franchise you are buying a tried and tested model; we know it works, our existing franchisees know it works and we know it can work for you too.
Ignore your franchisor at your peril
Although you may be tempted to completely ignore us, your business will almost certainly fail if you do. If you’re clever, you’ll listen to the franchisor, you’ve paid a lot of money for the advice, why waste it? It’s a sad fact that 9 times out of 10 the franchises that fail are those that ignored our advice.
Franchise network support
Our franchisees often tell us the support and camaraderie they get from the rest of the franchise network (eg all the other franchisees) is something they didn’t expect but find invaluable, as there is always someone to ask the most basic questions from. Of course, your first port of call should always be the franchisor but sometimes you just want to chat it through with a colleague and that’s where the franchise network becomes invaluable.
Imagine, an entire network of people doing EXACTLY the same job as you, some of whom have been doing it for 10yrs plus, they're not in competition with you and they are willing to share their knowledge and best practice tips with you. A start-up business owner/s dream. The combined knowledge of all those experienced minds is commercial gold.
What’s in it for the franchisor?
Imagine you own your own bakery. You’ve been doing it for 10 years and you’d like to grow the business. You could simply open up another shop in the next town, employ more staff and be done with it, but that means twice the number of staff to look after, twice the number of buildings to upkeep etc etc. Now imagine you could get someone else to run a branch of your business for you, who has money invested in the business and who is as keen to see it succeed as you are, welcome to franchising, a great way to expand a business.
Does franchising suit everyone?
In a word, no. Did you know we turn away at least 50% of applicants? It is very important to us that we only award franchises to people who we believe will grow successful businesses and enhance the brand. The last thing we want is a franchisee to fail; it is bad for you, bad for us and bad for the brand. If you think you know better than the franchisor, then owning a franchise probably isn’t for you.
What costs are involved in buying a franchise?
You can buy a franchise from under £10,000 to over £1 million[3]; to say the range is large is an understatement. Our franchises range from £7995+VAT to £33,500 +VAT and we sometimes have special offers. Request our newsletter to find out about the latest offers as they happen.
Firstly, you pay a franchise fee (we have agreements with high street banks to help with finance if required.) You will also need liquid capital to pay your living expenses in the first year while you are establishing your business. Then you pay your franchisor a management service fee each month. This is often a percentage of your profits or in some cases, a fixed fee.
Find out more about our franchises
We have only scratched the surface of franchising in this article but, if we have piqued your interest and you’d like to know more, please visit our brands to see which one might suit you and sign up for our newsletter to give you a really good, behind the scenes look at each franchise. You can also contact our franchise manager alan@taylormadefranchising.co.uk to ask any specific questions you have. We look forward to talking to you soon.
Stop Press!
Register for our Virtual Open Day
In September 2022 we will be holding an online ‘Open Day’ where you are welcome to log on, meet the key players in our team and find out a little more about the franchises and ask any questions you may have. Click on the box below to register your interest and we'll let you know the date soon.
Sources: [1] https://www.thebfa.org/about-us/industry-research/ [2]https://startups.co.uk/analysis/small-business-statistics/ [3] https://www.what-franchise.com/franchise-opportunities/fast-food-franchises/kfc