The good, the bad and the ugly of franchising
By Maplebrook Wills
28th Dec '18
Whether you’re considering buying a will-writing franchise or any other franchise business, there are many pros and cons to consider.
Here are some of the good, bad and downright ugly aspects of running a business as a franchisee.
A distinct operational area
Every business has competitors and that applies to franchises too. And while there’s nothing stopping someone opening a similar operation next door to you, some franchises (like Maplebrook Wills) are sold with an exclusive operational area. It means there won’t be another franchise holder trading under the same name in the same area. The size of the area varies with the business, though, so it’s well worth finding out the details of this before you sign on the dotted line.
Training and support
When you start a business, you really are on your own. It’s likely that most of your learning will be done on the job. But buy a franchise and you’ll have immediate access to a business operation that’s already been successful. The franchise holder will want to give you every chance to succeed in order to boost their own business. Many successful franchises provide training at the outset, as well as additional courses you can take if you need them. They’ll also help you get set up with systems and processes that have worked for them over the years. In other words, you won’t be thrown in at the deep end.
Trusted brand name
When you’re starting from scratch, nobody will have heard of your business. So to get brand recognition, you’ll either have to spend big on marketing or rely on referrals. But companies that are household names or that are well known within a specialist sector already have a head start. A franchise enables you to take advantage of existing brand recognition right off the bat. Plus, they operate in markets where there’s known demand and have tried-and-tested processes for trading and generating new business.
You’ll face start-up costs – every business does – but being part of a franchise should make that a little easier. Whereas banks may be reluctant to lend to small businesses, they’re more likely to see the benefit of a proven business model, with the backing of a trusted brand name. They’ll want their money back eventually, and a track record gives them more confidence that you’ll be able to repay the loan. If your franchise is part of a really big, global operation then you may be able to apply for additional funding from the company should you need it to grow later on.
When you buy a franchise, you’re at the mercy of the terms and conditions you sign up to. To a greater or lesser extent, these will restrict the way you can run your business. Buy a McDonald’s franchise, for example, and you won’t suddenly be able to introduce kebabs onto the menu. Customers buy into a brand because they know what to expect, which is why your scope for innovation will be limited. There may even be penalties if you don’t comply with franchise requirements.
To start a franchise, you’ll need to find money to pay the up-front cost – that could be in the low thousands of pounds but might be much more. You’ll probably also have to find money for materials such as stationery, phone lines and an office if you can’t work from home. Then there are ongoing fees to consider – these are calculated as a percentage of your turnover. Other fees include the renewal cost, which you’ll have to find when your initial contract – typically five or 10 years – runs out.
No easy ride
It’s hard work running a franchise business. Yes, there’s a system in place and a proven business model, but implementing it is going to require lots of time and effort. It’s not uncommon for new franchisees to work longer hours than they did in their previous, full-time jobs, at least to begin with. Remember that the terms and conditions may stipulate additional requirements you may not have bothered with if you started your own business from scratch.
Beyond your control
When run your own business, your success or failure comes down to you alone. But with a franchise, you depend to a certain degree on the success of the parent company. If the business model, product or service is struggling, it’s likely you will too. Then there are your fellow franchisees. If one of them does something to bring down the brand’s reputation, you’ll suffer too. All of these factors will be outside your control.