Franchise - what to consider before taking the plunge

Franchise - what to consider before taking the plunge  
Mark Scott, Director, Franchise Development, NatWest

Starting up your own business is a big decision.  NatWest’s Director for Franchise Development, Mark Scott, looks at how taking the plunge with a franchise could help ease some of the burden.

You want to be your own boss, but you’re well aware that alongside the benefits come risk and responsibility. What if you could take that step into self employment with the benefit of a proven business model, the use of a well known brand and the support of an established marketing and management team?

Welcome to the world of franchising. 

It’s a route in to business which is becoming more popular. Across the UK we are seeing an increasing number of franchises opening, from fast food takeaways to business services.

From computers to catering and cleaning to caring, franchises offer a unique opportunity for those passionate in a particular field to experience running their own business – with the added security that comes with the franchise model.

So how does it work?

When you buy a franchise, the franchisor will pass on their know-how, allow you to trade using their  name and trade mark, and you sell their products or services. In return for using the franchisor’s name and systems you pay an initial fee that goes towards the business set-up costs, and on-going payments throughout the franchise agreement for continuing support. These payments are normally a percentage of your turnover or a mark up of the goods or materials you purchase from the franchisor.

With the franchisor’s income tied to that of your business, they can only succeed if you do, so they will do all they can to make sure your business is a success, from ensuring a successful launch to continued marketing and promotion support.

Like any business, the start-up costs will vary. A franchise you run from home will naturally have lower start-up costs than a franchise requiring retail premises and extensive stock. It is therefore key to assess what type of franchise you can afford. You should also choose the type of franchise business that suits you best, taking into account factors such as:

•           Is there an established market or does one need to be developed?

•           Is the market expanding or declining?

•           Is the franchise competitive?

•           Perhaps most importantly, do the initial and on-going fees represent good value for money?

Of course, like any business, starting a franchise still requires a huge amount of commitment and dedication - so make sure you do your research and have the support structures in place to succeed.

Check out the franchisor, asking questions including about their track record and stability as a franchisor. How many outlets does the franchisor own and how are they performing? What support does the franchisor offer with regards to site location, market research, preparing your business plan - and so on.

NatWest has a long-established reputation for helping people to start up their own business and we were the first to recognise the potential of franchising , becoming the first bank in Britain to establish a dedicated Franchise section more than 30 years ago. We have more than 165 franchise finance specialists across the UK helping customers whatever their industry sector, and whatever their ambitions.