Franchises

minxy-x

Hi

I am trying to find some more info re franchises, specifically at the moment regarding ...
finances I have seen info which states there are some extra/different responsibilities around this, and advise to speak to an accountant, obviously I will be speaking with an accountant but would like to gather some info now to enable me to research basics prior to visit.

Business set up- to find if the options are the same i.e. self employed, partnership, ltd company etc, Again I am unable to find this info.

I have been on the bfa, HMRC and .gov websites, and am unable to see this info, if someone tells me its there I will have a look tomorrow as think my headache is not helping the situation!

Does anyone have any good websites etc for researching this option.

Many thanks in advance.

CKhalvashi

You've generally got the option of business type, however a word of warning, is that a friend of mine lost more than £300k to buy his (coffee) shop back, after being promised a 'cheap' franchise, and paying £80k for the privilege. Franchiser finished at least £400k up, he finished about £350k down.

More often than not, only the franchise wins.

Businesses For Sale has the best reputation for dealings in this area.

CK

minxy-x

CKhalvashi wrote: »

You've generally got the option of business type, however a word of warning, is that a friend of mine lost more than £300k to buy his (coffee) shop back, after being promised a 'cheap' franchise, and paying £80k for the privilege. Franchiser finished at least £400k up, he finished about £350k down.

More often than not, only the franchise wins.

Businesses For Sale has the best reputation for dealings in this area.

CK

Thanks for the help and advise.

Brassedoff

minxy-x wrote: »

Hi

I am trying to find some more info re franchises, specifically at the moment regarding ...
finances I have seen info which states there are some extra/different responsibilities around this, and advise to speak to an accountant, obviously I will be speaking with an accountant but would like to gather some info now to enable me to research basics prior to visit.

Business set up- to find if the options are the same i.e. self employed, partnership, ltd company etc, Again I am unable to find this info.

I have been on the bfa, HMRC and .gov websites, and am unable to see this info, if someone tells me its there I will have a look tomorrow as think my headache is not helping the situation!

Does anyone have any good websites etc for researching this option.

Many thanks in advance.

Firstly, pull your arms and feet in. Hold on until you have had the chance to visit the Franchise exhibition at the NEC.

Do you know what type of franchise you want? Your budget? Time frame?

I have a client who is a multimillionaire, she started off as a trainee manager at the largest fast food franchise.

I usually start by saying look at the franchise. Look at the failure rate before anything else. The reason for that is the one mentioned above only has one UK failure in 35 years if UK trading. Against others that regularly turnover, but only get franchises on the basis of how good their buy back is.

Drilling down to it, the difference between your franchise and regular business is what? (in your case).

I have not come across a decent franchise that is for sale at a reduced rate unless there were issues with it.

Can you come back with some answers?

paulwf

minxy-x wrote: »

Hi


Business set up- to find if the options are the same i.e. self employed, partnership, ltd company etc, Again I am unable to find this info.

A franchise could be for cleaning ovens in your local area or you could be looking to get on board with Costa at £250K a store with a minimum commitment of 5 stores (or something like that) so it's hard to give an answer to such a broad question. Basically you have to ask each franchisor how they are structured.

However...find out how the franchisor (them) takes fees from the franchisee (you). If there is just a set fee a month then it probably doesn't matter too much how you structure your business. It's more common though for the franchisor to take a percentage of your turnover. That means there needs to be a lot more transparency in your accounts so they can do basic checks to see that you are giving them the real turnover figure. You having a limited company with proper yearly accounts and a structure that is totally separate from the owner - unlike being a sole trader - is what any large franchisor will be looking for.

Naturally there will be other checks to make sure you are putting everything through the books (as you should anyway) and that you aren't cutting any corners that could damage the reputation of the brand. For example with a food franchise they will check your gross profit margin to check that it isn't too low but also that it isn't too high. Same with staffing levels and the amount of discounting. In practice it's all straightforward stuff, just do everything properly and put everything through the books.

minxy-x

Brassedoff wrote: »

Firstly, pull your arms and feet in. Hold on until you have had the chance to visit the Franchise exhibition at the NEC. Thanks will look into this also

Do you know what type of franchise you want? Car wash
Your budget? £90,000 now personal cash in bank Time frame? Unsure if you mean to open which would be ASAP, or how long lease, would look at options

I have a client who is a multimillionaire, she started off as a trainee manager at the largest fast food franchise.


I usually start by saying look at the franchise.
Look at the failure rate before anything else. What info would you be looking for re this? Sorry Im unsure
The reason for that is the one mentioned above only has one UK failure in 35 years if UK trading. Against others that regularly turnover, but only get franchises on the basis of how good their buy back is.

Drilling down to it, the difference between your franchise and regular business is what? (in your case).
Im unsure exactly what you mean by this, Im going to answer what I think you mean, if I have gone off on a different tangent sorry. Do you mean why franchise and not open on own? If yes, because too hard to secure sites

I have not come across a decent franchise that is for sale at a reduced rate unless there were issues with it.


Can you come back with some answers?

Thanks

Hi, If all has worked OK, I have answered next to your questions, cheers

minxy-x

paulwf wrote: »

A franchise could be for cleaning ovens in your local area or you could be looking to get on board with Costa at £250K a store with a minimum commitment of 5 stores (or something like that) so it's hard to give an answer to such a broad question. Basically you have to ask each franchisor how they are structured.
OK thanks, that was a stupid question! Its a car wash one site initially to expand

However...find out how the franchisor (them) takes fees from the franchisee (you). If there is just a set fee a month then it probably doesn't matter too much how you structure your business. It's more common though for the franchisor to take a percentage of your turnover. That means there needs to be a lot more transparency in your accounts so they can do basic checks to see that you are giving them the real turnover figure. You having a limited company with proper yearly accounts and a structure that is totally separate from the owner - unlike being a sole trader - is what any large franchisor will be looking for.
set ups so far in car washes seem to be a set monthly fee

Naturally there will be other checks to make sure you are putting everything through the books (as you should anyway) and that you aren't cutting any corners that could damage the reputation of the brand. For example with a food franchise they will check your gross profit margin to check that it isn't too low but also that it isn't too high. Same with staffing levels and the amount of discounting. In practice it's all straightforward stuff, just do everything properly and put everything through the books.

Thanks for the replys!

paddyrg

Car wash with one site? What part of the franchise is worth paying for?

You can reproduce the model yourself (bucket and sponge/whatever)
A solitary car wash doesn't have any brand leverage
A solitary car wash doesn't have buying power.

minxy-x

paddyrg wrote: »

Car wash with one site? What part of the franchise is worth paying for?

You can reproduce the model yourself (bucket and sponge/whatever)
A solitary car wash doesn't have any brand leverage
A solitary car wash doesn't have buying power.

I am looking into one site, to start. Aim is to expand.

The franchiser has a contract with national supermarket for all of there car wash sites, the car washes are branded under the supermarket name.
They also have sites and contracts with other brands.

Buying power is through them due to their network of sites.

paddyrg

minxy-x wrote: »

I am looking into one site, to start. Aim is to expand.

The franchiser has a contract with national supermarket for all of there car wash sites, the car washes are branded under the supermarket name.
They also have sites and contracts with other brands.

Buying power is through them due to their network of sites.

Ah! From a previous comment I thought you meant the franchisor had one car wash and was looking to expand! Big difference!

I guess it'll come down to how many vehicles you can do, how much people well pay in your area, and whether some guys setting up at the end of the road illegally on wasteland is real competition or an annoyance!

If you're under the supermarket brand, are there extra constraints upon you? The supermarkets are not known for their benevolence (ask any farmer/supplier), so it can be quite easy to lose money on each job but be contacted into it. They can be dreadful bullies. On the plus side, the franchisor would shield you from that somewhat, but be conscious of it when you're investigating the small print, maybe.

paulwf

The business model you describe would be of concern to me as the franchisor is not in control of the brand, and the main reason you buy into a franchise is because of the brand name (not the only reason but it is very important).

I would want to see a cast iron contract in place between the supermarket and franchisor lasting at least 10 years. I can see the supermarket contracting to another franchisor and you being left in the lurch, what happens then? All very complicated and you'd need a very good commercial solicitor to look into all the possible scenarios.

Buying power can work both ways...you might get a group deal but you will probably be tied into buying specific products from a specific supplier so you can't shop around. I don't know the industry but I can't see consumables being a big part of your overall costs anyway (unlike in the food industry where getting a good price on ingredients is vital).

You will be at the mercy of the supermarket and petrol station for your footfall, what happens if trade drops off because the petrol price is too high or another supermarket opens? Naturally any business on a high street depends on the shops around it to generate footfall but you'll have all your eggs in one basket.

Lots to think about basically.