Franchising in the UK
Investigate Before You Invest
Thousands of Britons, from across all backgrounds and walks of life, decide to become entrepreneurs every year. Many of these people are attracted to the franchise system as a means of doing business within a successful system. They perceive greater chances of success via the franchise route, rather than the independent start-up route.
However, many of these budding entrepreneurs view the franchise model as some kind of magic success guarantee. And whilst franchising tends to be a safer form of investment and business start up, than by going it alone and independently, it is only when the franchise is within a solid system.
Studies have shown that 86% of franchises opened in the last five years remained within the same ownership, and an incredible 97% were still doing business. However, many independent businesses that opened during the same five years, are no longer trading. As a general rule, it's believed that 40% of non-franchised start-ups fail to remain trading beyond year one, and over 80% go out of business within five years. Of the remaining 20% of surviving businesses, the following five years see 90% of them fail.
The importance of due diligence
When you consider investing in a franchise, good due diligence is essential. The successful franchise is based on good mutual dependence, which means that the correct search for the right franchise will involve mutual research and investigation. Evaluate both the franchise, and the franchisor. A reputable franchisor will spend time and effort selecting the right franchisee. If you don't experience in-depth investigation when proposing to invest in a franchise, then exercise caution. If a franchisee is awarded a franchise that they can't successfully operate, both franchisor and franchisee will suffer. This is because the franchisor will lose its revenue stream for that location, and be obliged to give a great amount of effort and time to re-sell or salvage that particular franchise.
Of course, a franchisor will not be resting their entire business reputation on your success, however you're likely to be betting a large amount of your business future on the quality of the franchisor, so ask as many questions as you can. Legitimate franchisors offering genuine opportunities will have nothing to hide, and will not hesitate to provide the information you require, if they see you as a qualified and genuine prospect. A good franchisor will respect the lengths you go to, in investigating them - in the way that they'll investigate you and your viability as an investor.