UKC

Morning Campers,

I'm planning on starting my own business in the none-too-distant future. However, I've just seen an advertisement for a franchisee in the self same line of work in my area... so:
Does anyone have any experience of being a franchisee/franchiser and is it worthwhile - it's certainly got a fairly hefty upfront cost?
What are the pros and cons?
Am I most likely to be better off going my own way?

All advice gratefully received.
Cheers,

Joyce

In reply to Joyce:

Why not follow up the advertisement and learn as much as you can about the franchise opportunity.

If you go your own way they will have given you a bunch of useful data to build your own business plan.

In reply to Joyce:

I'd say it depends on the industry, and what terms and conditions existed in the contract.

My father had a catering franchise in a golf club, whereby the club paid gas, electricity and fitted out the kitchen. There was no lease fee for the kitchen or dining room either. For his part, my father paid stock, staff and tax costs.

By comparison he has a former colleague who took out a subway franchise in London, and said it was ridiculously hard to turn a decent profit due to contractual obligation to order x amount of product from supplier y every month.

Whatever you do make sure you can live with whatever contractual obligations you will have to the parent company.

In reply to Joyce:

It's called buying a job.

In reply to Joyce:

I don't think there can be a hard and fast rule - I'm sure they vary quite a bit, from rock solid franchises that are a licence to print money, albeit at a small rate of return because of the lower risk - like MacDonalds - to near-criminal pyramid selling schemes.

As someone else said, check them out, obviously, but if you're confident that you know your business sector then my suspicion would be that you are usually better off by yourself. (Unless there is some compelling economy of scale, e.g. being able to offer nationwide coverage via other franchisees.)

In reply to Joyce:

Depends when you get in - got a mate who bought a Dominos franchise dirt cheap when they first started appearing in the UK. He made an absolute mint. He says he wouldn't bother now because of the premium setting one up now commands.

In reply to Joyce:

I used to sell franchises. The franchisers makes most of the profit at very little risk. The franchisee makes a small profit and takes most of the risk. The cost of buying a franchise is often greater than the cost of setting up your own business. You must, of course be confident in your own business plan and be prepared for periods of poor business, as almost all businesses are seasonal/periodic. Look carefully at all the costs of both the franchise and setting up your own business.
Also remember that an identical franchise could be sold to your neighbour, you need some protection to prevent this. This protection should be clearly written in any offer and contract for a franchise. (I sold several franchises to people who were close together, who then competed with each other. The only winner was the parent company who still got their original price, plus their annual servicing fee plus their sales of product to service the franchise.
Franchises are possible the most open to corruption sales system there is. Buy one with care.

In reply to Joyce:


In many respects your buying a business name. Whether it is worth it depends upon how good that name is particularly from the publics/potential client perception. thereafter how good the support is and the cost of all that. Its going to vary massively depending upon the business, someone I knew once tried to persuade me a franchise selling books was a good idea, I did the sums and I would have made the square root of zero so didn't pursue. Its going to depend a lot on the business for example if you wanted to sell pizza then having a well known name may help when compared to Joe Bloggs Pizza Shop. Would trading under your own name in your line of work have the same gravitas?

In reply to Joyce:

Ask yourself why they are franchising it, rather than doing it themselves and employing people. Either they think the risk is too great or they don't have the expertise.

Look at how much established franchises change hands for. Not much.

Your graft, and it will be, builds their brand not yours.

Really good retail brands, Macdonald's or cafe Nero are not franchises in the UK.

Non franchised operations can always undercut you, they don't have a service charge.

If it is a mobile type of franchise make sure your "area" is small, they can't stop you trading out of area and if you want to set up on your own you can do so not very far away.

Think what else you could do with that money, in terms of training and qualifications that can get you into protected professions, teaching, plumbing, engineer whatever with nice lifestyles.

Don't franchise.

In reply to ian caton:

Mac Donald's is a franchise in the U.K.

In reply to marsbar:

If it is, it has changed. I won't argue the point.

In reply to ian caton:

Some McD's are franchises, some are direct owned. That was my understanding anyway.

In reply to Stig:

Macdonald's being franchises or not isn't that important relative to the life changing decision of mortgaging yourself to a franchise.

If the lifestyle you want is tied worker, it's the way to go.

In reply to Stig:


Correct. Far more are direct owned.

Subway is 100% franchised, OTOH. That's how it grew so quickly.

In reply to Neil Williams:

Specsavers is an example of a pretty nasty franchise. The deal is that the franchisee pays a proportion of the turnover - not profit - to the franshisor, the sainted Dame Mary Perkins, who just so happens to live as a tax exile in Guernsey.

Ever wondered why Speccies do so much advertising? Because the more they turnover, the more money Mary makes. The fact that the franchisees are on a hamster wheel seeing ever more patients in less time is not her problem.

In reply to Neil Williams:

50:50 according to McDonald's website, lol. who cares? Me obviously, but why? no idea.