Buying a Franchise
Many people dream of running their own business, organising their work/life balance to suit their needs while taking control of their own financial destiny. But embarking on a new business venture doesn't mean having to build a company from the ground up - buying into a successful franchise allows you to join an already established brand and increases your chances of success.
What is a franchise?
Essentially a self-employment business opportunity, a franchise is a type of licence that allows a franchisee to operate a company under an established brand's name. Once a franchisor establishes a brand and gains customer loyalty, franchising enables them to show someone else how to replicate that success by providing them with access to their business knowledge, processes and trademarks. The franchisor also provides training and ongoing support across all areas of the business.
In exchange, franchisees typically pay the franchisor an initial start-up fee, as well as an ongoing management fee or a share of the profits. In some cases the cost of buying a franchise can be as little as £500, but prices vary depending on the size of the brand.
In the UK, food outlets such as Subway and Domino's are prime examples of successful franchises. When you visit one of their branches, it is being run by a franchisee not the brand itself. The franchisee is responsible for the outlet, products and employees but the franchisor establishes the rules and restrictions for the franchisee to follow and dictates how the products or services are marketed and sold.
Why buy a franchise?
Like any new business opportunity, franchising has its advantages and disadvantages. Before you make a decision, consider the following:
Advantages of buying a franchise
Buying a franchise is less risky than starting your own business. Research reveals that, in 2018, the UK's franchise industry was worth approximately £17 billion, with circa 97% of franchised companies running in profitability. In comparison, only 40% of new businesses in the UK survive more than three years.
The franchisor has already gone through the trial-and-error period, so franchisees can follow a proven business model and benefit from pre-existing brand awareness and customer loyalty, increasing their chances of success.
Trading under an established brand name also allows franchisees to benefit from any advertising or marketing carried out by the franchisor.
In-depth training is provided by the franchisor, allowing franchisees to get their business up and running quickly.
Franchisees receive ongoing support on all aspects of the business from the franchisor, as well as regular networking opportunities with other franchisees.
It may be easier to secure business finance, with most banks offering dedicated franchise-lending teams.
What to consider before buying a franchise
Franchising isn't for everyone so be sure to ask these questions before making an investment:
Can you afford it? In addition to the initial start-up fee, do you have sufficient finances to withstand a loss?
Have you carried out due diligence on your chosen franchise? Be thorough in your research and don't be afraid to ask questions. How long have other franchisees been in business? How much profit do they make? Are they satisfied with the level of support provided by the franchisor?
Do you have the right skill set?
Can you follow orders? Franchises are full of dos and don'ts so you need to be comfortable implementing the franchisor's procedures.
Have you done your market research? Find out if the industry you're interested in is growing, especially in the region in which you'll be operating. Who are your main competitors?
Do you need help? Hiring a solicitor will ensure all contracts are fit-for-purpose before you sign them. Employing an accountant to go through your finances is also worth considering.
How do you buy a franchise?
Once a potential franchisee has identified a franchise they may wish to buy, they request a prospectus from the franchisor in order to understand its terms and conditions. Once an interview between the two parties has been carried out to ensure suitability and both parties are satisfied with the deal, a legally-binding contract between the franchisor and franchisee is drawn up and signed.
Franchise evaluation checklist
If you've decided that becoming a franchisee is right for you, it's important to choose the right franchise. When evaluating your options, remember to ask the following:
Is the franchise profitable? Can you see sales reports?
Are the franchise and franchisor reputable?
Who will be responsible for advertising?
Do you require any technical skills or expertise to operate a particular franchise?
Does the product or service have an advantage over its competitors?
What is the market trend and potential growth?
How competitive is the pricing structure?
What kind of support does the franchisor provide?
At Cafe2U, we boast a network of almost 100 franchise partners. With excellent income potential, green initiatives, generous franchise packages - including a Mercedes-Benz Vito premium van and Commercial 2 Group espresso coffee machine - and new franchise partners being trained every month, there's never been a better time to become a Cafe2U franchisee.
If you're interested in joining the UK's coffee market leader, find out more here.