Business Ideas

Franchising

Greetings. I’m Jeremy Powers and I assume that, like me, you didn’t really understand the concept of franchising until you started your own company and somebody offered you a chance to enter into a franchising partnership. I hope that this post would help you understand what it is and how you can be a part of the franchising community.

If you don’t really understand what franchising is, you’re not alone. In general terms, franchising is the commercial practice of the right to use a brand and business model for a certain period of time. People enter into franchising arrangements for a variety of reasons – business growth and expansion, entering into new markets, and so on. Essentially, the franchisor is a supplier who allows an operator, or a franchisee, to use the supplier’s trademark and distribute the franchisee’s goods. In return, the operator pays the supplier a fee. A franchise arrangement usually lasts for a fixed time period, and serves a specific geographical area and/or a specific market. A single franchisee may manage several such locations. Agreements typically last from 5 to 25 years – early terminations could be very risky for you, so bear that in mind. A franchise is merely a temporary business arrangement involving renting or leasing an opportunity, not a purchase of a company for the purpose of ownership. Franchising arrangements can be entered into by businesses of any sizes – from a tiny start-up to a large international corporation.

Business Expansion

 Franchising is generally a great way to grow and expand your company in a relatively short period of time, in comparison to the time it takes to expand the “old-fashioned way” by getting all your revenue from your current customers and not exploring the “potentially risky” streams and market segments. Franchising is a way to secure venture capital and increase your cash flow without having to write complex business plans that have only a slight chance of being picked up by venture capitalists.

SMEs have started to explore franchising quite recently in the UK, mostly because franchising was thought to be a “big man’s game” merely a decade ago. However, if you’re a proud owner of an SME, don’t let yourself be intimidated by that notion. Even if you’re running a business from your flat alone, without having any office premises, you can still get involved in franchising via home-based franchising. Home-based franchises are in fact quite popular in the US and are said to be gaining momentum in the UK as well within the next few years because they can provide a smooth entry into larger-scale entrepreneurship.

Franchising Opportunities

If franchising sounds like your cup of tea, you’re probably asking yourself – where can I find franchising opportunities? Where to I meet potential franchisors? The answer is – you network. Many current SME franchisees have met their partners at networking events (or even online – more on that later). The franchising community is known to host quite a few events every year across the UK – I’d say that London is your best bet, but I’m sure they’re hosted in other large UK cities also. I’ve written about networking quite a bit, so you can easily find the information on the best ways to meet people. In general, I’ll say that you should treat any networking event as a business meeting – and in essence, it is. There is a high chance that each attendee can help you find potential franchising opportunities or even become your franchisor. Can you really afford to not be professional and make sure that your business comes across as an excellent potential franchisee at each meeting? I don’t think so.

There are also many sources of information available online for you to read (or watch). If you’re genuinely interested in pursuing franchising opportunities, you should definitely read up on franchising as much as you can. This post is a good starting point, but don’t stop here. The good thing about social media is that you can get new information on a certain subject instantly. There are many Facebook and Twitter accounts you can follow that post information on franchising a few times a week at least. In fact, these accounts would definitely post information about your local networking events, including the date and the guests that you might want to speak to.

I should also say that, despite being quite an attractive option, franchising agreements are complex legal documents that should be drafted carefully in order to protect you. For that reason, I highly recommend that you either outsource legal services or employ a well-qualified in-house legal advisor in order to draft the agreement and carry out any negotiations involved. In the English law, unlike the US law, there are no statutes about franchising as such, although franchising agreements are recognised by the civil courts as binding. There is also self-regulation through the British Franchise Association (BFA). Therefore, before you decide to enter into a franchising agreement, you should ensure that your potential partner is a member of the BFA in order to minimise the risks.

Overall, I’d definitely recommend that you at least consider franchising as a way to expand your business, because it is quite an attractive option, irrespective of the size of your company. It might turn out that it’s not quite the solution for you at the stage of business expansion you’re currently at, but it doesn’t mean that it would be the same forever. Perhaps, once you’ve gained some experience of running a business, you might have an easier time accepting that franchising would work great for you and your company.

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