Why Franchise
The figures are clear that franchising is a great way to go into business. The 2003 BFA franchise survey demonstrated that the franchise business sector was worth some £9.5 billion, 93% of franchisees were profitable and that the failure rate of franchise businesses was just 2.2%, which compares extremely favourably against the non-franchise accepted norm of 40% failure rate within their first 2 years.
The reason that franchising is so good, is because opening a franchise means that you are confident that your business strategy will work and that your marketing is right because they are already proven, and are ready and waiting for you to pick up and use. With franchising you are using a proven system, not just going it alone and hoping for the best.
The term 'franchising' has been used to describe many different forms of business relationships, including licensing, distributor and agency arrangements. The more popular use of the term has arisen from the development of what is called 'business format franchising.'
Business format franchising is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.
The principle is simple - some companies choose to grow, not by developing in the conventional way, but by granting a license to others to sell their product or service. There are clear advantages to this:
- You don't have to come up with a new idea - someone else has had it and tested it, too!
- Larger, well-established franchise operations will often have national advertising campaigns and a solid trading name
- Good franchisors will offer comprehensive training programmes in sales and indeed all business skills
- Good franchisors can also help secure funding for your investment as well as e.g. discounted bulk-buy supplies for outlets when you are in operation
- If aware that you are running a franchise, customers will also understand that you will be offering the best possible value for money and service - although you run your 'own show', you are part of a much larger organisation.