Franchise advice please

the_leveller

Not sure if this is in the right section so please feel free to move it.
I've recently been looking into going self employed by investing in a franchise.
Has anybody got any advice on the finance side of it please?
Which is the best place to get a loan for this sort of thing?
Are there any grants available for new businesses?
Has anybody on here got a franchise already and how are they getting on with it?

paddyrg

A franchise is an opportunity to buy into someone else's business model and systems. In return for a bunch of cash, you get to use their name, buy into their advertising, share their promotions but also have to buy your stock direct from the supplier etc. This means a franchise can be a good thing or total lemon.

Good franchises have great brand recognition (maccyD for instance) backed up with extremely consistent standards, uniform training programme and accounting systems. They will favour ex-employees who've worked up.

On the other hand, poor franchises tie you to a poor business model and expensive supplies with no brand recognition. Dirty oven - who are you going to call? Are you even going to call someone? Need a plumber? Call the bloke round the corner who did your nan's pipes. These franchises are worthless so cheap and plentiful. Dr Oven, Oven Doctors, Super Scrubbers, whatever - nobody cares. McD burger may be uninspiring in itself, but is going to be consistently disappointing compared with 'Alaska Fried Chicken 8 scrawny dog end with chips for a quid' burger which may be OK or dreadful. If you want that identikit experience anywhere worldwide you can get that same sense of mild regret to the same guaranteed clean, fast, polite, quick fuel.

Will anyone lend you money for a franchise? Not usually, in fact you have to price to a good franchisor that you have the capital to back their brand and all the shop during/branding etc. Sometimes a good franchisor will come in with the franchisee and provide investment and cashflow - but only when they believe in the franchisee, which means experience and face time.

So there is no single answer - what franchise are you considering?

WHA

A good yardstick is whether you knew of, and maybe used, the franchise before you started looking to buy one. You need to be looking at one that is already a household name or has the potential to be one in the near future.

There are a lot of dubious schemes out there which seem to promise the earth but end up with you paying the franchise fees, paying over the odds for training, materials, equipment, etc., and having to do your own marketing. Some are good, some are bad, most are probably in the middle, so you really need to do your homework and not be seduced by their claims.

paddyrg

A good franchise might be a long-established business which is wanting to expand the brand quickly. Many high Street shops are in fact franchises, Tony & Guy, Burger King, Pret, coffee shops, bookmakers, clothes shops, lots of chains have franchise partners. It means they can not sink so much capital into new stores but grow the brand recognition quickly. Brand recognition is an essential part of the fee though - Rentokill, yes; Evans Exterminations, no

the_leveller

Thanks for the replies.
The franchise type that I'm looking at is an oven cleaning one. The reason for this is that, when we had ours done, the local bloke was booked up months in advance and the other nearest one, from a different company, had to travel miles to get to us. They both stated how busy it was and said that they struggled to keep up with demand. I spoke to a couple of companies and they said that there were available territories around here. This was backed up when I bumped into the original bloke who I had tried to book. He told me which areas he chose to cover and, in my mind, he was limiting himself to a small area. Since he is already covering my local area, I would only need to travel a couple of miles in either direction to be in an uncovered area.

ukpete79

From personal experiance of the cleaning industry, id steer clear of an oven cleaning franchise....can you name an oven cleaning company?

Save your money, buy your equipment from the supplier, brand it yourself, then visit all the local letting agents and !!!!! yourself about as the most efficient, flexible end of tenancy oven cleaner they will ever find.

with the money saved from buying a franchise, blanket market all your local magazines, leaflet drop in high net worth areas, the local school magazines....any where where Mr or Mrs Houseperson will be reading.

InsideInsurance

the_leveller wrote: »

Thanks for the replies.
The franchise type that I'm looking at is an oven cleaning one. The reason for this is that, when we had ours done, the local bloke was booked up months in advance and the other nearest one, from a different company, had to travel miles to get to us. They both stated how busy it was and said that they struggled to keep up with demand. I spoke to a couple of companies and they said that there were available territories around here. This was backed up when I bumped into the original bloke who I had tried to book. He told me which areas he chose to cover and, in my mind, he was limiting himself to a small area. Since he is already covering my local area, I would only need to travel a couple of miles in either direction to be in an uncovered area.

Then as above, why on earth do you want a franchise that will take a cut of your money, limit your territory etc?

Ask a dozen friends to name 3 oven cleaning companies. If there is none that the majority mention then none are worth going for. I know I dont know any at all and would simply reach google or possibly yellow pages if m internet was down

If there is so much work out there then set up your own business, save the franchise monies and invest some of it into advertising and you're then fully your own boss.

SailorSam

You look into failure rates for new businesses and franchises tend to be much lower than someone setting up a similar business on his own, so they must have something going for them Having said that years ago now i got all the information about 'Hometune',the car people. And 'Dynorod' drain service. Both of them wanted a lot of money upfront and were going to take a high percentage of any profits. I did neither, thinking i might not have the backing if i went as a one-man-band but any takings would be mine.
Maybe the good ones are worth it. It may be a good idea to look around the Internet for people who have done it.

InsideInsurance

SailorSam wrote: »

You look into failure rates for new businesses and franchises tend to be much lower than someone setting up a similar business on his own, so they must have something going for them

Arguably a £50k up front bill.

Fail to plan is to plan to fail. The advantage of franchising is the fact there is a big bill up front means people actually think about things properly before starting.

Look on business forums and clearly a lot of people wake up one morning, decide they want to start selling their handcrafts and so by the afternoon they've set up their business, bought a website, stuck things on eBay, registered with HMRC etc.

2 weeks later you then get all the messages about how can they market their business with no money or pennies a week.

The barrier to entry for own business can be under £20 given how the internet has changed everything and so people take a punt without any planning and needless to say, no budget for advertising, no planning on how any of this will work etc means a high failure rate.

directdebiter

I would visit a franchise show to find out more and see if it is suitable. BUt some good advice on here IMO. The most important reason fro investing in a franchise is if they are going to pass on to you consistent sales leads and commit to this. OR if the training is anything unique. If not you may as well set up on your own as other posters have said.

paddyrg

SailorSam wrote: »

You look into failure rates for new businesses and franchises tend to be much lower than someone setting up a similar business on his own, so they must have something going for them .

That may be a correlation rather than causal. For instance smoking causes yellow teeth and lung cancer. Yellow teeth and lung cancer may appear to be related by correlation (more yellow teeth observed in the lung cancer population ergo yellow teeth cause lung cancer), when they're really both caused by a third element.

In this case, people who enter franchises do better than those who don't, but the third element might be that as a part of the franchise process they have been financially vetted for stability, have enough cash to pay upfront fees and premises refits, etc - those are the same people who will have enough cash to cashflow the business for 3 years before it turns a profit, compared with the guy who went it alone because he couldn't afford the franchise. See what I mean?

But do be aware there are a LOT of junk franchises out there at the cheaper end of the market, where the master business scrapes by, but sells franchises to bring in living money, offering little of value in return.