Franchising

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Franchising is a much more common business model than many people realise, encompassing a surprising number of the most recognisable high-street brands. The benefits of opting for a franchising format may seem clear-cut, but taking a step back to assess the pros and cons before making your mind up is a must …

What is franchising?

Franchising, particularly business format franchising, continues to be a powerful model for business expansion and entrepreneurship in 2024. According to the British Franchise Association (bfa), franchising involves a franchisor granting a license to a franchisee, allowing them to operate under the franchisor's trademark and business model. This includes comprehensive support such as training, marketing, and ongoing assistance, ensuring the franchisee can effectively run the business while maintaining brand consistency.

In simple terms, franchising is a way for businesses to expand by licensing their brand and proven business model to others. The franchisee, who operates the individual business outlet, pays an initial franchise fee and ongoing royalties to the franchisor. In return, they receive the rights to use the brand and are supported in aspects like marketing, operations, and training. While the franchisee owns and operates the business, the franchisor maintains control over key aspects such as brand standards and product quality.

Franchising in 2024: Key Trends and Developments

1. Hybrid Business Models: A significant shift in 2024 is the rise of hybrid franchising models that blend traditional brick-and-mortar operations with digital and online services. This omnichannel approach allows franchises to cater to evolving consumer preferences, ensuring that they remain competitive by offering both in-person and digital experiences.
   
2. Emergence of Micro-Franchising: Micro-franchising has gained popularity as a lower-cost alternative to traditional franchises. These models are streamlined, requiring less capital to start, and are often focused on niche markets, making them attractive to new entrepreneurs and allowing for rapid scaling in localised markets.
3. Technology Integration: Franchises are increasingly leveraging advanced technologies like AI, VR, and data analytics to enhance customer experiences and streamline operations. For example, virtual reality may be used for virtual product try-ons, while AI-driven tools can provide personalised customer recommendations, making the customer journey more interactive and tailored.
4. Workforce Dynamics: The franchising sector is also adapting to changes in workforce expectations, including the rise of remote work and the gig economy. Franchises are exploring more flexible work arrangements and investing in innovative training programs to attract and retain talent.
5. Sustainability Focus: Environmental sustainability is becoming a competitive advantage in franchising. Many franchises are adopting eco-friendly practices, such as using sustainable packaging and renewable energy, which not only meet consumer demand for socially responsible businesses but also help differentiate brands in a crowded market.
6. Economic Factors: Despite the challenges posed by inflation and interest rates, franchising is expected to continue growing in 2024. Key sectors like personal services and quick-service restaurants (QSRs) are forecasted to lead this growth, driven by ongoing consumer demand and economic adjustments.

Why follow the franchising route

A veteran leaving the British Armed Forces might find franchising an appealing career path due to the structured and supportive environment it offers, which closely mirrors the military's operational framework. The discipline, leadership, and problem-solving skills honed during military service are directly transferable to managing a franchise. The franchising model provides a proven business system with clear procedures and ongoing support, making it a less risky venture for someone who may not have prior business experience. This structure helps ease the transition from military to civilian life, providing the veteran with a sense of security and familiarity. 

Moreover, franchising allows veterans to be their own boss while still benefiting from the established brand recognition and customer base of a larger network. Many franchises also offer financial incentives, such as reduced fees or special financing, specifically for veterans, making it an even more accessible and attractive option. This combination of independence, support, and financial opportunity makes franchising a viable and rewarding path for veterans looking to apply their military skills to a new civilian career.

More about the bfa

The British Franchise Association (bfa) plays a crucial role in promoting ethical franchising practices across the UK. It serves as a regulatory body that helps potential franchisees identify trustworthy and ethical franchisors while guiding businesses involved in franchising to uphold high standards of operation. The bfa’s mission is to ensure that franchising remains a reputable and viable business model by setting strict codes of conduct and providing accreditation to franchisors who meet these standards.

One of the key initiatives of the bfa is the Qualified Franchise Professional (QFP) qualification. This program is designed to formally recognise an individual’s expertise and professional experience in the franchising sector. It is a prestigious qualification that demonstrates a deep understanding of franchising principles and best practices, enhancing the credibility of professionals within the industry.

The bfa offers a range of membership levels tailored to different stages of a franchisor’s development, from prospective to fully established franchisors. These memberships provide various benefits, including access to industry insights, networking opportunities, and further training resources. Full details about membership categories and benefits can be found on the bfa’s official website.

In addition to professional qualifications, the bfa provides free online training through its Prospect Franchisee and Prospect Franchisor Certificates. These certificates are designed to educate potential franchisees and franchisors about the basics of franchising, helping them make informed decisions and understand the responsibilities involved in entering a franchise agreement.

Transferable skills

A career in the British Armed Forces equips individuals with a wide range of transferable skills that are highly valuable in franchising. One of the most significant skills is leadership. Military personnel are trained to lead teams under pressure, make critical decisions in high-stakes environments, and motivate others to achieve common goals. These leadership abilities are directly applicable to managing a franchise, where leading a team, making strategic decisions, and ensuring operational success are crucial to running a successful business.

Another key transferable skill is discipline and adherence to procedures. The military emphasises the importance of following established protocols and maintaining high standards, which are essential in franchising. Franchises operate under a proven business model with strict guidelines to ensure consistency and quality across all locations. Veterans are well-suited to adhere to these guidelines and maintain the high standards expected by the franchisor. Additionally, their experience in problem-solving and adaptability ensures they can handle the various challenges that arise in business, from managing staff issues to responding to market changes. These skills make veterans exceptionally well-prepared to navigate the complexities of franchising and drive their franchise to success.

Decided on a franchise? What next?

Once you've decided on pursuing a franchise, the next steps are critical to ensuring you make an informed and successful investment. Start by thoroughly researching available franchise opportunities and creating a shortlist of potential franchisors. It's essential to meet with these franchisors and request to speak with some of their existing franchisees—preferably those who are also Service leavers, as they can provide insights relevant to your specific transition from military to civilian life. Reputable franchisors will support your due diligence because they want their franchisees to be confident in their decision to join the business. Additionally, inquire whether the franchisors run their own outlets. If they do not, and the business is profitable, ask them why; this can reveal important information about the franchisor's business strategy and confidence in their model.

It’s crucial not to rush into any commitments. Although franchisors are keen to sell to individuals ready to invest within a few weeks, it's important to wait until you are fully prepared. Unlike military service timelines, which can be more extended, commercial enterprises often seek early commitment from serious candidates. Therefore, ensure you have all necessary information and are ready to secure any required financial backing before moving forward.

What you should look for

As a prospective franchisee in 2024, it’s important to gather comprehensive information on several key aspects before making your decision:

•  Initial Training: Evaluate the quality and comprehensiveness of the training provided. This should cover technical skills, administrative processes, sales techniques, and marketing strategies. The training should prepare you thoroughly to operate the franchise successfully from day one.
• Financial Support: Investigate what assistance, if any, the franchisor provides in securing initial funding. Some franchises have established relationships with financial institutions that could make obtaining financing easier.
• Ongoing Training and Support: Continuous professional development is vital. Look into what ongoing training and support are available, especially in adapting to new technologies or market trends.
• Product or Service Viability: Consider the franchise’s core products or services, their availability, and their performance in other franchises or businesses. Look for a strong sales record and potential for growth in your intended market.
• Plans for New Products/Services: Understand the franchisor’s plans for innovation and expansion. A forward-thinking franchisor will have a roadmap for introducing new products or services that can help keep the franchise competitive.
• Franchise Territory: Clarify the size and exclusivity of the territory you’ll be operating in. A well-defined territory can be critical to ensuring you don’t face internal competition and can fully capitalise on your market.
• Marketing Support: Effective marketing is essential for success. Assess the level of marketing support provided by the franchisor, including national advertising campaigns, local marketing tools, and digital marketing strategies. This support can significantly impact your ability to attract and retain customers.

How much does it cost to open a franchise?

The cost to open a franchise in 2024 varies significantly depending on the sector and specific franchise. Start-up costs typically include the initial franchise fee, equipment, inventory, and sometimes property costs. These expenses are usually covered by the franchisee’s own investment, often supplemented by a loan. High-street banks in the UK, recognising the lower risk associated with established and ethical franchise businesses, may lend up to 70% of the start-up costs. This is a more favourable rate compared to the 50% usually offered for independent businesses, reflecting the lower perceived risk of franchising.

However, despite the reduced risk compared to starting an independent business, franchising still carries financial risks and requires a realistic assessment of what you can afford and how much effort you are willing to invest. Success in franchising demands hard work, dedication, and a willingness to adhere to the franchisor’s business model. Many individuals, including those transitioning from long careers in the Armed Services, are drawn to franchising as a way to start fresh, leveraging the support and structure of an established brand while becoming their own boss​ (International Franchise Association)​ (FranNet).

Still not sure?

Franchising is a viable option for those considering starting their own business, offering a wide range of opportunities across numerous sectors. Whether your interests lie in retail, food service, health and fitness, education, or technology, there is likely a franchise that aligns with your experience, lifestyle, and budget. The diversity of available franchises means that nearly everyone can find a suitable business opportunity, regardless of their background or financial situation.

As the business landscape continues to stabilise following the pandemic, the British Franchise Association (bfa) has resumed its full schedule of events, seminars, and training courses. These events provide valuable opportunities to learn more about franchising, network with industry professionals, and explore different franchise opportunities. In 2024, major national and international franchise exhibitions have also returned, offering a chance to meet franchisors and gain insights directly from those within the industry. While exhibitions are excellent resources, don't overlook other sources of advice, such as consultations with banks, solicitors, franchise consultants, and current franchisees, who can provide practical insights based on their experiences​ (Franchise Experts)​ (FranNet).

A final few words of caution …

Before committing to a franchise, it’s important to be cautious of several red flags that could indicate potential issues down the line:

• Offers That Sound Too Good to Be True: If a franchise opportunity promises guaranteed success with minimal effort, it’s a red flag. No business is without risk, and claims of unusually high returns with little work or low investment should be treated with skepticism. Always conduct thorough research and seek independent advice before committing​ (FranchiseWire).
• Large Upfront Fee but Low Royalties: Be wary of franchise models that require a substantial upfront fee but have unusually low ongoing royalties. This could indicate that the franchisor is more interested in collecting the initial payment than in supporting your long-term success. A well-structured franchise model typically balances initial fees with ongoing royalties to ensure that the franchisor remains invested in your success​ (FranNet).
• Franchisors That Will Not Let You Meet Other Franchisees: A reputable franchisor will encourage you to speak with current franchisees as part of your due diligence. If a franchisor is hesitant or refuses to facilitate these meetings, it could indicate they are hiding negative feedback or poor franchisee satisfaction. Speaking with existing franchisees is crucial for gaining insight into the day-to-day realities of the business​ (Franchise Experts)​ (Elite Franchise Magazine).
• Low-Quality Training, Marketing Materials, or Business Plans: The quality of the training, marketing support, and business planning provided by the franchisor is essential to your success. If the materials are outdated, generic, or lack depth, it could indicate that the franchisor does not provide adequate support. High-quality training and resources are key to replicating the franchisor’s successful business model​ (FranNet).
• Pressure to Sign Before You Are Ready: Be cautious of any franchisor that pressures you to sign contracts quickly. High-pressure sales tactics can be a sign that the franchisor is more interested in securing a sale than ensuring you are a good fit for the business. Take your time to review all documents thoroughly, consult with legal and financial advisors, and only proceed when you are fully prepared and confident in your decision​ (FranchiseWire).

By being vigilant and taking the time to thoroughly vet any franchise opportunity, you can avoid common pitfalls and make a more informed decision about your investment.