Business Structure

Are you considering a franchise?

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A franchise can be a great way of getting into business. For an initial fee, plus an ongoing payment, the owner (franchisor) will give you access to their already established business. As franchisee, you will have access to a logo, a market, trademarks and (if appropriate) branded stock.

No need to make all the decisions and do all the preparatory work, you will be buying into an established brand. However, you need to think carefully before you buy in – don’t sleepwalk into a bad deal.

Benefits of buying into a franchise

It’s effectively a ready-made business, up and running, with a known brand.

You can get on with running the business without worrying about start-up issues.

Support such as help and guidance in managing the business and setting up premises is available.

Benefits such as lower costs of goods (bulk discounts) result from working with a larger organisation.

Downsides of buying a franchise

You are not truly independent – the franchisor will exert control over the way you run the business.

Franchises can be expensive – the better the business, the higher the cost. As well as initial fees, there will be ongoing fees for support.

Quality of support will vary – some franchisees go all out to help, but others may not be so diligent.

You may be under obligation to buy goods and equipment from the franchisor. You will have no control over cost or quality, and could get better deals elsewhere.

Not all franchises are successful – your business can still fail, leaving you with debts.

How can you avoid the pitfalls?

First of all, contact the self-regulatory body for franchisors in the UK, the BFA (British Franchise Association). This voluntary body oversees standards and accreditation in the industry, and their main purpose is to give potential franchisees the chance to avoid bad investments. Check out any franchise with this body before making any commitments. They should be able to let you know if your target investment is with a reputable business, or if there are any causes for concern.

The BFA also hold regular exhibitions and meetings where you can get to meet potential franchise partners. You can also network with other franchisees and compare successes and war stories – you are not alone.

If you apply to invest in a franchise, the franchisor (or representative) may ask you to attend one or more interviews. This is good practice, and is an opportunity for both sides to see if they are a good fit. A franchise is a two-way deal, and it is important that both sides are happy before proceeding.

Before you commit to anything and sign a deal, it is a good idea to seek some professional help and advice from a specialist in the field.

A good place to look for further franchise information is the British Franchise Association website.

Another resource for general business information is the GOV.UK website, under the category business and self-employed.

For more information on franchises, email us at editor@startuphelp.org.uk or complete the form below, and we’ll do our best to answer your questions.

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