Franchise a business

[dafcjim]

Good afternoon,

I have built a business up over the past four years and we are now treading profit after the pandemic. I have a great entertainment venue and retail opportunity that is working well in my small town.

I am thinking the best way to grow would be to either get
1) Investors on board
2) Crowdfund
3) Franchise.

Does anybody have any experience with these options, anything to note or avoid?

thank you, much appreciated!

Jay

 

[Mark T Jones]

Since your header mentioned franchise, let's start there

Is the concept itself franchiseable?

Usually the basis is 2 outlets returning profits (though I have seen franchises opened with just one)

Is the brand solid & recognisable?
Do you have solid systems & processes?

Here is the real kicker - you need a concept that is easily replicated, but sufficiently unique that the franchisee can't just go off and do it themselves.

Crowd funding / investors - very different - what is your investor proposition?

 

[Greg PW Shearman]

I also will start with franchise as that's what I understand best.

Firstly a business with one outlet has not proved that it can be duplicated yet so before franchising open a second as identical as you can outlet with an operating system that is used in both sites.

Can this operating system be picked up by an investor/franchise and will some training operate the second third or fourth unit ?

Next - what is unique about your current business why does it stand out ? Why can't I just copy it ? Is the concept brand trademarked ?

With regards to an investor choose carefully as they may just look at your business and get all the information they need to do it on their own.

With regards to crowdfunding - unless you have a massive following in a busy city I do not think you would raise what you need, however I have very little experience in this field.

Finally why don't you try simply forms of funding as in loans or if your first unit is successful why don't you pay for unit 2 from that ?

 

[Clinton]

What's your budget?

If you want to franchise, you going to have to fling £100K or so at it with no guarantee of success.

£20K just to get a lawyer to draw up the franchising agreements etc and then a ton of advertising and marketing. It's not easy selling a £20K or £50K product (which is essentially what you'll be doing)! Getting the first couple of franchisees is going to be very, very difficult. And you'll have to be prepared to lose money on the first few! So, back to the budget...

How much can you afford to lose?

 

[MBE2017]

Some friends of mine started a franchise after five years of good figures and growth, I think from memory it cost the £80k to get it started. After a decade they are on a small number of franchises, 2-3 max. Their franchises cost £37k years ago.

So I think Clinton’s figures are probably reasonably accurate.

 

[Greg PW Shearman]

Depending on your concept you can have a BFA contract drawn up for about £8000 add in another £7000 for a professionally drawn up manual that you would provide all the content.

So even though £80k could be spent I think that is top heavy.

But as has been said before depends on what your offer is.

 

[KM-Tiger]

If you can find the right franchisee you could run the first one as a pilot. Keep costs down and find out whether it will really work in practice. So a fairly simple agreement drawn up with the assistance of a franchise consultant, and the manual accepted by both parties as a work in progress

A good few years back I was a pilot franchisee with a friend/business acquaintance. It actually worked very well but in the end the franchisor decided not ot pursue it as other ways of business expansion were more attractive to him.

 

[Greg PW Shearman]

Speak to Richard Pakey at Lime Licensing group for a chat about all things franchising

 

[Mark T Jones]

Meanwhile, let's come back to other growth strategies:

INVESTORS: Are currently a bit reluctant to invest in the hospitality sector, BUT there will always be money out there for interesting and proven models.

Your pitch needs to demonstrate to them that you are the right person (and/or team,) do deliver a return for them. (don't bang on about your idea / concept, tell them about the business).

CROWDFUNDING: Tends to a bit over-hyped - ultimately you need a very loyal crowd before you start, and a reasonably compelling offer (though, there are examples of campaigns where the return is pitiful, such is the commitment of the crowd)

ORGANIC GROWTH: Keep is small, keep it all.

Use a mixture of debt, own funds and potentially supplier goodwill/incentives to grow without the need for investors.

I've put a few funding guides in the archives here, starting with this one https://www.ukbusinessforums.co.uk/articles/funding-for-start-ups-and-small-business.1051/