Franchising ? Is it still viable?

[Scotsman]

Hi guys

Longtime lurker first time poster so please be gentle. To cut a long story short ive been out of work for three years and have just been signed back as fit to work.

Even with a good degree and experience I'm going to struggle to get back into employment so Im thinking of going down the franchising route.

The particular franchise that caught my eye was a business cost reduction one. Just wondering whether in anyone's experience they saw franchising as a viable model for someone with no experience but someone who wanted to start on their own

 

[JandJC]

Franchising is good for some and not others...despite it being your own business there are stringent rules to adhere to.

 

[WJP]

Depends massively on who is franchising and what they are offering. You need to sit down, work out exactly what it will cost, exactly what they offer, exactly how you will benefit and whether that exact business opportunity is right for you. Some are worthwhile, others are not. Some will work for some people and not for others. It's difficult for us to judge.

 

[Scotsman]

My thinking is that in the present climate businesses will be trying to make every penny count so cost reduction service is one worth investing time researching?

Is that logical thinking? Thanks for the useful responses

 

[GraemeL]

Morning.

Cost reduction experts became the fashion quite a few years ago. It seems like a win win situation.

The CRE needs to have a sound understanding of what the alternative sources of supply of goods or services are over many facets of a business. I would imagine it is this information that the franchise offered.

I have worked with CRE's before. Some will do deals with suppliers so that they are the preferred supplier and the CRE gets a cut of ongoing business - unknown to the client of course.

The biggest hurdle to be overcome is that the use of a CRE infers that those in the business are not doing as well as they should be. So don't expect a warm welcome. Oddly, reasons are found in a business that explain why there are circumstances peculiar to the business that the CRE does not understand!

To get work, you will need to be able to sell yourself to the most senior directors, of medium sized businesses.

Do you have any contacts in a business that you could use as a sounding board before you commit to anything?

G

 

[Moneyman]

I cant quite see the benefit of a franchise unless it is cheap.
you could lern a lot of the information from research and what exactly would you be getting back for a percentage of your income?
setting up a company is easy.

 

[businessfunding]

Is franchisning viable? Yes, as long as get the right franchise, on the right terms and at the right price.

Doesn't move you forward, I'm afraid but that's because the each franchise is different.

Te biggest question is what do you think you are buying? - and the correct answer is never 'business success' - you have to create that yourself.

I have no details on success rates of CRE, but when I was researching networking I noticed a lot of them at events, which might suggest there are too many people chasing too little work (nearly as prolific as those bleeding purple pig people)

 

[captaincloser]

Is the OP a salesman ?

First and foremost with this type of Franchise is that you need to be a red hot salesperson as you will be selling yourself and the service to all sorts of businesses.It's one of the bigger issues with franchising..people go flying into this type of franchise without realising the implication.

My personal, and never humble opinion on this is that it's quite simply 'buying a job' with the cost reduction franchises.

A lot of franchises are simply 'buying a job' as opposed to buying into a business.

 

[businessfunding]

Is the OP a salesman ?

First and foremost with this type of Franchise is that you need to be a red hot salesperson as you will be selling yourself and the service to all sorts of businesses.It's one of the bigger issues with franchising..people go flying into this type of franchise without realising the implication.

My personal, and never humble opinion on this is that it's quite simply 'buying a job' with the cost reduction franchises.

A lot of franchises are simply 'buying a job' as opposed to buying into a business.

Too often true, and a flaw that must a be attributed to the buying process as much as to franchisors.

Buyers tend to latch onto the concept of 'marketing' as meaning that they will be handed red-hot leads - I cannot think of one operation where this actually happens. In fact in one organisation, operators told me that he would turn up to pre-arranged appointments which wuld start with the question 'why do you want to see me?'.

Still boils down to understanding what you are buying.

 

[mhall]

A franchise is only any good if the money you pay up front is worth the return. You could argue that Subway is a good one as the name alone is recognised and will attract people to your door.

However, if "Mug Burgers" want £20k off you for a franchise you would need to ask yourself exactly what you would get for that £20k. If you could do everything that they are offering to do yourself for less money, then why would you want to pay them.

The good thing about franchising is that, in theory, you haven't got to learn everything about running a business as some of it wil be written down for you and you can just follow instructions, but then you lose control of "your" business.

McDonalds make an awful lot of money selling franchises and they will make sure you make a healthy living from it but something about:
a) Fitting out to their standards and using their recommended people
b) Buying Stock in at their price
c) Selling it at a price they determine
d) Complying with their area Managers tick lists
e) In fact, the only real control you have is on your staffing costs, which makes you realise why so many fast food places either have too many or not enough staff on and their love of "zero hour" contracts.

Makes me wonder if it is actually a good franchise at all - I certainly wouldn't be an ideal candidate at all as I wouldn't accept that level of control over me but I bow to their ability to make money for themselves and a bit for the franchisee owners by bloody good marketing/brainwashing.

 

[garyk]

yep agree with the comments here. I personally think most franchises are a con with the exception of the 'big' names; snap-on, macdonalds, subway etc.

As mentioned above unless the name alone is going to help you really have to question what you are getting. The problem is franchises are built (typically) on un-proven business models that have not been 'systemised' to allow inexperienced people to run them and its a self regulating industry (truly a bad thing).

Gary

 

[Psl]

I wonder how many of the people replying in this thread have been involved in franchising? but then most of the replies are just opinions!

 

[businessfunding]

I have been involved with a number of franchisors and franchisees as clients - both good and bad.

As far as I can make out the OP was specifically seeking opinions, but I woyuld certainly be interested in fact-based analysis.

 

[Psl]

I have been involved with a number of franchisors and franchisees as clients - both good and bad.

As far as I can make out the OP was specifically seeking opinions, but I woyuld certainly be interested in fact-based analysis.

And the OP has some great replies re the business

Out of interest what services did you provide to franchisors and franchisee's?

I do agree that self regulation of any business sector is a bad thing.

 

[businessfunding]

Finance facilities - mainly equipment finance.

 

[captaincloser]

I wonder how many of the people replying in this thread have been involved in franchising? but then most of the replies are just opinions!

I have...a big and bad franchise as it happens...though I was not the franchisee or fanchisor...saw enough to allow myself a very considered opinion.

Having said that a few are great but Subway and Macdonalds are a zillion miles away from DollyDuster, WillyWheelybinWhizz, LarrytheLawn mower andOwentheOven etc. They are completely different and should not be classed as the same business model. A large % of franchises could be done more successfully and more profitably on your own. And yes, that is an opinion

 

[mhall]

I wonder how many of the people replying in this thread have been involved in franchising? but then most of the replies are just opinions!

Yes I have: Subway, a cleaning franchise and a vehicle repair franchise, but I am more interested in why you would ask the question ?

 

[captaincloser]

^^^ 'Cos he has a vested interest in the franchise model of business ?

 

[garyk]

^^^ 'Cos he has a vested interest in the franchise model of business ?

Agreed, obviously doesn't like the 'opinions' that are being given.

 

[Psl]

Agreed, obviously doesn't like the 'opinions' that are being given.

The opinions given are just that opinions, and they don't affect me.

 

[Psl]

Yes I have: Subway, a cleaning franchise and a vehicle repair franchise, but I am more interested in why you would ask the question ?

I asked the question to simply find out how many of the people replying had direct experience of franchising that's all.

From your reply are you stating that you have bought three separate franchise's or you have been involved in three separate franchise's in some way?

 

[Psl]

^^^ 'Cos he has a vested interest in the franchise model of business ?

Not anymore but I do believe in the franchise model.

 

[Tony221268]

Statistically franchises have a high survival rate...http://www.franchise360.co.uk/franchising/advantages-and-disadvantages-of-taking-on-a-franchise/.

That doesn't mean you can relax and sit back. Good franchisors are generally selling a proven business format; they are not selling a business or a guarantee that you will succeed. Incidentally, IMHO the best franchisors care just as much about interviewing you as you will about them so you being scrutinized carefully is a good sign. Being simply asked for a cheque is not!

And before I am asked, as part of what we do, I speak to franchisors every day...

 

The particular franchise that caught my eye was a business cost reduction one. Just wondering whether in anyone's experience they saw franchising as a viable model for someone with no experience but someone who wanted to start on their own

Well the first thing I would cut is the cost of a cost reduction expert.:|

If you don't know how to cut your costs.

Maybe you should not be running a business.

As for a franchise in this area.

Do me a favour.

Earl

 

[businessfunding]

Statistically franchises have a high survival rate...http://www.franchise360.co.uk/franchising/advantages-and-disadvantages-of-taking-on-a-franchise/.

.

I would love to see that verified in any qualified stats.

One of my customers used to sell turnkey franchises to coffe carts. The sales director was constantly amazed at how keen prospective franchisees were to hand over £40k - for nothing except the key to a fitted out retail unit. In some cases they would sell the same untit 3 times in as many years.

Mis-sold - possibly. Mis-bought? Definitely.

 

[captaincloser]

Statistically franchises have a high survival rate...http://www.franchise360.co.uk/franchising/advantages-and-disadvantages-of-taking-on-a-franchise/.

This link takes you to a series of quotes from a 'franchise development manager' and it's hocum and a sales pitch ...

Properly run franchises and proficient franchisees can make for a happy family but it really is not true to say that it is a world of sweetness and light.

Franchising is a dangerous world and many franchises are pure carp from get-go to Gravesend. It's really no different to the grown up world of running your own business and all the same precautions need to be taken. Nobody is 'giving' you anything...you are the customer of the franchisor though they make it look like you are some privileged being to be granted one of their outlets...

Wise up before buying a franchise.Make sure you understand which way the deal is weighted.

 

[Tony221268]

Wise up before buying a franchise.Make sure you understand which way the deal is weighted.

I think that people are dismissing my point a little unfairly. I am not a franchise consultant BUT I do recognise that the bulk of statistics I have come across indicate that franchises have a relatively high survival rate.

This seems a likely and believable stat, given that the MOST franchisors have already proven the format whereas general start-ups have not.

I also make the point that good franchisors are not selling success. They are selling a format for others to achieve success. There is a huge difference

I do not think that the article I linked to is a sales pitch; it is the genuine opinion of a random franchisor with whom I have no personal business relationship except referencing this article!

 

[captaincloser]

I think that people are dismissing my point a little unfairly. I am not a franchise consultant BUT I do recognise that the bulk of statistics I have come across indicate that franchises have a relatively high survival rate.

This seems a likely and believable stat, given that the MOST franchisors have already proven the format whereas general start-ups have not.


I do not think that the article I linked to is a sales pitch; it is the genuine opinion of a random franchisor with whom I have no personal business relationship except referencing this article!

No wish to be unfair, and what's said above is true also. I believe that where there is a proven format and good evidential background then yes, becoming a franchisee makes a lot of sense where worthy companies and worthy franchisees are concerned.

 

[bgpt40]

I think the franchise is something to be reckoned from the interests of the people around us.

 

[Tony221268]

No wish to be unfair, and what's said above is true also. I believe that where there is a proven format and good evidential background then yes, becoming a franchisee makes a lot of sense where worthy companies and worthy franchisees are concerned.

Agreed!

It's just like anything in business; only fools rush in.

 

[Perfect Windows]

Mis-sold - possibly. Mis-bought? Definitely.

As someone working hard on systemising my business in order to franchise it, I have a great deal of interest in this thread. I think the comment above is at the core of it, though.

Since I've spoken to people in passing about franchising (I stress I've not advertised it as I'm not ready), I've had a number of enquiries. Without exception, the people were extremely enthusiastic and remarkably keen to raise money to go ahead based on numbers that I made clear were untested, provisional (they would have been franchisee no 1) and, as I made clear, created on the back of an envelope at the time we discussed the subject. One person even asked me to create a business plan for them to take to their bank so they could borrow a bundle of cash. Less scrupulous people that I would have been tempted to take the money and run. Incidentally, not one of the people would have been suitable.

I'm planning to price my initial franchise fee exactly at cost of equipment; the ongoing fees are my motivation. As far as I can see, as well as reflecting my long-term view of business, that's a route to enforce honesty; there is no incentive to sell to the wrong person. Contrast that with some of the truly eye-watering initial fees I saw at the franchise show up at the NEC last year and the companies offering them MUST be tempted to take on people for the cash.

I do believe there's goodness in franchising done properly. I've made literally hundreds of improvements to my business, all of those improvements from a model I thought I'd got right from the start. All of that experience was expensive either in real costs or lost profits. Passing on all that expertise in the form of a working business system should mean prompt success for franchisees.

Going back to the quote above, I've already decided that anyone who doesn't interview me is not going to be getting a franchise.

Vin

 

[recluze]

right franchise and it will be very good...

 

[Talay]

The often forgotten and glossed over commission figures of around 10% can in fact be 50% of the net profit.

Starting out it is so easy to dismiss small percentages of gross turnover but they have a critical impact on the bottom line.

 

[Psl]

As someone working hard on systemising my business in order to franchise it, I have a great deal of interest in this thread. I think the comment above is at the core of it, though.

Since I've spoken to people in passing about franchising (I stress I've not advertised it as I'm not ready), I've had a number of enquiries. Without exception, the people were extremely enthusiastic and remarkably keen to raise money to go ahead based on numbers that I made clear were untested, provisional (they would have been franchisee no 1) and, as I made clear, created on the back of an envelope at the time we discussed the subject. One person even asked me to create a business plan for them to take to their bank so they could borrow a bundle of cash. Less scrupulous people that I would have been tempted to take the money and run. Incidentally, not one of the people would have been suitable.

I'm planning to price my initial franchise fee exactly at cost of equipment; the ongoing fees are my motivation. As far as I can see, as well as reflecting my long-term view of business, that's a route to enforce honesty; there is no incentive to sell to the wrong person. Contrast that with some of the truly eye-watering initial fees I saw at the franchise show up at the NEC last year and the companies offering them MUST be tempted to take on people for the cash.

I do believe there's goodness in franchising done properly. I've made literally hundreds of improvements to my business, all of those improvements from a model I thought I'd got right from the start. All of that experience was expensive either in real costs or lost profits. Passing on all that expertise in the form of a working business system should mean prompt success for franchisees.

Going back to the quote above, I've already decided that anyone who doesn't interview me is not going to be getting a franchise.

Vin

It's good news that your proposed franchise idea has received positive feedback even before the launch.

Are you currently running a pilot of the franchise? If you aren't you should run one.

I wouldn't set your initial franchise fee equal to the cost of equipment, at least add a margin, you are after all in business.

What are your ongoing fees payable for?

Good luck recruiting franchisee's though That's a job in its self!

 

[Perfect Windows]

It's good news that your proposed franchise idea has received positive feedback even before the launch.

Are you currently running a pilot of the franchise? If you aren't you should run one.

I wouldn't set your initial franchise fee equal to the cost of equipment, at least add a margin, you are after all in business.

What are your ongoing fees payable for?

Good luck recruiting franchisee's though That's a job in its self!

Piloting with an ex-employee who is working the first one while we iron out the wrinkles.

There may come a time when we make a profit from the franchise fee but the ongoing fees are the core of the model.

The ongoing fee are for unlimited support and also, unusually for a franchise, we guarantee as much business as the franchisee can handle - we market and sell on their behalf out of the fees until they have the amount of business they require. They never need to recruit a customer. If they lose a customer, we replace them (there are limits on this in the agreement, of course, as quality could drop if this was unlimited)

Yes, the hard part may be finding the people. However, the pitch is an inviting one, based around working three days a week. Plenty of people in their 40s are receptive to that!

Vin

 

[Siralex]

Is franchisning viable? Yes, as long as...

as long as you are rather good manager and not an entrepreneur