Is a franchise a safer option than starting your own business?

[slipperandpjsmum]

Does anyone here run a franchise? Do you find you make a good living? What are the pros and cons?

Is a franchise a safer option than starting your own business in the current economic climate?

I agree with the points that GiddyPickle made.

IME most franchises out there are being sold quite agressively by the franchisor rather than being bought by the franchisees.

Having looked closely at several retail franchises and negotiated with the national franchisor to buy a regional franchise of a well known retail franchise my strong impression is that many of the franchisees with 1 - 2 shops were not really making much more than minimum wage and if they had made money it was only because thay had bought the shop(s) they operated from and had made money on the property market.

Most of the national franchisors I spoke to were very clearly out there simply looking for people who were in effect going to be given very little autonomy and treated more or less like a quasi employee rather than someone who is a valued business partner.

Not all franchises are like this but many are and all I would say is be very very careful. Despite the headlines, many franchise businesses do fail and many franchisors just want to sell as many franchises to as many people as possible as quickly as possible.

It depends what it is and whether you feel you have the skills and inclination to set it up without buying into a franchise package.

I bought a franchise because my DC were young at the time and I wanted to pick up a proven business model and make it work rather than reinventing the wheel.

The benefits are that I have a nationally recognised brand, HO support and a network of other franchisees who share ideas and support. Franchised businesses are statistically less like to fail than other new ventures according to the British Franchise Association (well they would say that!)
The downside is frustrations with HO rules and regs and having to pay an on-going % to the franchisor. That feels particularly galling when you've been running for several years and no longer need the support you did in the early days.

I'd be wary of buying a franchise where there are lots of competitors around btw.

Thanks for the info. I am led to believe this company has exclusive UK rights on this product. To those of you who are in the know does this sound correct? Should I pursue trying to buy the product direct? I have contaacted the distributor (in America) and am awaiting a reply.

I thought I would have a high degree of autonomy on the day to day running of the business as one of the reasons I am leaving my current employer (local authority) is I am tired of the level of control. I would like to be free to make my own choices. What sorts of controls will they have over me???

My DP has one. he gets support in theory, but I think he was expecting a higher degree of autonomy in terms of day-to-day decision making. He's not making a profit yet, but is apparently on-target. IMHO, it's just like being employed, but taking all the risks as well!

During your due diligence process you will need to confirm with the US firm that the person you are talking to really does have the exclusive rights they are claiming.

If not, you would be far far better to go direct and negotiate an exclusive regional (or even national) franchise agreement.

You will need an experienced franchise lawyer.

The controls that they have over you will be the controls that are stated in your franchise agreement with them. Your local Business Link should be able to give you advice. Mine actually gave me a free session with a lawyer to look over the agreement although it wasn't long enough and I found someone else to advise me. I also had a session with a small business specialist which was useful. And they run courses too.

What proof do you have about the exclusive rights this company has to the product? Are there any other franchisees running currently with whom you can talk? (You may have to sign a confidentiality agreement to do this). They should be able to give you audited accounts of established franchisees (if there are any) so you can understand exactly what costs are involved?

You also need to check out exactly what you are buying in terms of equipment, support, franchise area etc. Is the franchisor a member of the BFA?

Have you started a business plan. You will need to answer these questions to do so:
Have you researched your market? What is your target market? Who are your competitors? What will the set up costs be? And on-going running costs? How much turnover do you expect to make? How will you promote the business?

If your franchisor is any good they will help you with some of these questions.

These are just some of the issues which spring to mind. Good luck and definitely try Business Link.

x post with others

Would your own business be competing with the franchisor ?

Depends on the precise details of each; unfortunately it's impossible to generalise.

The co is currently in the south. There are no other franchisers in the north west, so they say and I can't find any.

I don't have any experience in business so the support appealed to me but I want support not control.

As far as them having sole rights - they told me!! But I have been in touch with America as I said and am awaiting a response.

The set up costs are £9,000. What sort of ongoing percentage do you have to pay?

Do you think I could make more of a profit going it alone? I just worry because I have very limited business experience.

All your replies are so helpful - thanks

New business are succeeding at a better rate than usual at the moment because people aren't taking on the debt that usually causes massive problems in year 2.

biryani - I suspect many of the franchisees I went to see would say the same as you:

"IMHO, it's just like being employed, but taking all the risks as well!"

One very good piece of advice I got about buying a franchise was not to end up just buying yourself a job and do focus on ensuring you buy yourself a business.

BeenBeta how do I do that?? Do you run a franchise?

I have had an e mail from the UK company saying the American co has forwarded my e mail to them. So that would suggest they UK co are the outlet in the UK????

slipper - the ongoing percentages do vary a lot.

One regional retail franchise I looked at required an upfront fee, a 5% ongoing marketing fee on turnover and a further 5% ongoing franchise fee on turnover. They also required me to exclusivley buy all the supplies through the master franchisee in the USA. They also wanted me to open 15 shops.

I thought that was far too greedy.

Another retail franchise I know has no upfront fee and only requires franchisees to buy at a national wholesale price and exclusively stock their product with no other fees.

Thanks. Do you run a retail franchise?

In terms of day to day management I would have control though wouldn't I?? Eg staffing, hours/days I work??? I thought this was the answer to getting out (partly will still do some freelance) of my current career but I am being put off fast!

I am very actively looking, making inquiries and in negotiation with franchisors.

So its not all negative?? Some must be successful??

slipper - BeenBeta is right, so everything he said! All franchises are not created equally and you cannot generalise. You have to be very careful and 90% of the time you get very little support and a lot of control - effectively, as BB said, you end up buying a job and not a business.

Is there a similar product you could buy and start up for yourself?

ffs this is aibu!!

Lots are very successful.

Mostly for the master franchise.

I bought a franchise last year and I have no regrets. I needed it to fit around my family and it mostly does. I rarely hear from H.O but they are supportive when needed. I have a large territory that I can work within and it will take a long time for me to cover it all.

I pay a set fee each month rather than a percentage which I think is fairer.

Shiney/Warthog - unknot you knickers!!

Am I being unreasonable to think a franchise is safer than going it alone

Job done.