Client Case Studies

Baguette Express

This small food business in Scotland had only 7 units - now there are over 70. Here's how we helped them achieve this.

Read More

Why use franchising in your business?

There are many reasons why an increasing number of businesses are turning to franchising, here are just a few:

Network Growth

When you franchise a business, you bring in the financial backing, dedication and manpower of a local franchisee to drive your business forward in their territory. This allows your network to grow much more quickly and a lot more cheaply than ‘organic’ growth. You, the franchisor, have few costs because the franchisee pays for all the equipment and set-up costs as part of their franchise fee. There is an increasing number of retailers that see franchising as a vital part of international growth. It provides them with cheaper access to new markets and allows them to sell more stock. Let’s say a T-shirt costs £1 to make. A UK company can make it and supply it to a franchisee for £5 who in turn retails it at £10. Everyone makes money in this relationship and everyone is happy.

Brand Consistency

Franchising does not necessarily mean a loss of control. If the system is set up properly, each franchisee will be bound by a strong Franchise Agreement and Operations Manual. These documents set out exactly how the franchised unit should operate. Indeed some of our retail clients go to the extent of producing ‘Look books’ (Documents that detail exactly how the store should look – right down to the length of a sleeve on a mannequin). As a franchisee is bound by the agreement to run the business in accordance with these documents, any variations could lead to repercussions for the franchisee. The greatest testament to a franchised business is when a customer does not know that franchising is being used. The look, the feel and the experience should be the same wherever they go.

Recession Proof

No Industry is recession proof. However, businesses that use franchising have been proven less likely to fail in a recession than others. According to the latest survey published by the bfa and NatWest: “4 in 5 franchisees reckon that being part of a franchise has given them a competitive advantage in the last year [2010] when compared with similar businesses that are not franchised” “The recession appears to have had a limited negative impact on profitability, turnover and employment and business failure” One reason for this level of security is that franchisors tend not to be exposed to the high levels of debt and overheads that are involved in non-franchised businesses. However, the main reason for me is that each business in the network is run by a dedicated franchisee who will work tirelessly to protect his or her business.

Less Hassle

In a franchise the day-to-day administrative burden is shouldered by franchisees. This allows the franchisor to focus on developing and expanding their franchise community. For example, one particular area of administration is staffing. With franchising, staff are employed by the franchisee therefore any problems are the franchisee’s to sort! Naturally, the franchisor has to be on hand to provide support to franchisees when required, however this is a lot less hassle than trying to do everything yourself.

Comparison with Company owned

Whether Franchising is right for your business depends on what you want to get out of it. Here is a quick comparison table that outlines the perceived advantages and disadvantages versus organic growth:


Attribute

Company Owned

Franchised

Sales Profit

Slower

Faster

Profit Margin

Higher

Lower

Capital Outlay

Higher

Lower

Staff Motivation Levels

Lower

Higher

Control over Staff

Higher

Lower

Initial costs/time

Lower

Higher

Ongoing costs/time

Higher

Lower

Competition Risk

Lower

Higher

Cost of failure

Higher

Lower

Operating Overheads

Higher

Lower

Management Culture

Controlled

Relaxed