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Why franchise your business?

At the end of July, Patrick Burge – Director at Smorgasbord – was in the spotlight. 

Background: 

Smorgasbord provides the tools, skills and experience for those who are starting or growing a business, offering expertise within three distinct areas: 1) Helping to secure funding for ideas or new businesses; 2) Growing more established businesses; 3) Delivering programmes and services in partnership with Brandon: specialists in providing clinics, workshops and mentoring. 

On 31st July 2020, Patrick took us through the benefits and considerations of franchising your business.

Why franchise your business at all? Well, why not? 

The industry 

In 2018, franchising contributed £17.2 billion to the economy, up 14% in three years. Franchising has a significant impact on local economies and employs over 750,000 people in the UK. 

This growing trend has seen a 10% rise of 48,600 franchised units within the last three years. Even more positive news is that 93% of franchisees claim to be profitable, with over 900 active franchise systems in the UK.

The system 

A franchise is a strategic partnership and a means to scale through replication. Good franchisors support, teach, help to sell and provide structure in return for revenue. 

So why consider franchising?

  • Do the work and bear some cost upfront to scale up faster in the mid- to long-term.

  • Good franchisees add capabilities to your business cost-effectively. 

  • Good franchisees can be more engaged, committed and longer-term than employees.

  • Short-term capital pain, but mid-term and long-term capital/balance sheet gain.

  • Turning a business into a brand.

Documents you will require:

  • Franchise prospectus (marketing).

  • Franchise information memorandum.

  • Franchise website.

  • Legal agreement. 

  • Operations manual. 

 Recruiting franchisees

For those who are new to a franchising business, 30% never get to scale. 

To find your ideal franchisees, think about the marketing: what does a good franchisee look like? Where do they hang out and live? What social activities do they engage with?

You are likely to get plenty of enquiries but potentially low quality, so it’s important to have a stringent filter process in place. Choose wisely, no matter how tempting it may be to bring in the first one quickly. It’s essential, as in all lines of business, to have the right people in place. 

It’s also advised not to set too high expectations of growth – two or three in the first 12 months is ideal. 

How to start – questions to ask yourself:

  • Market scope – does the world need more of your products/services?

  • What is the best way to scale your business? 

  • Franchise market scope – who, where, how? Where is the gap and what will you lead in?

  • Protect your idea and your concept.

  • What type of business do you want? A ‘lifestyle business plus’ or a scalable franchise machine?

  • What is the exit route?

It’s not an easy path – but be patient. 

Franchising why.pptx

How long and how much?

Top financials factors to consider:

  • Allow £30,000 but plan for less.

  • Allow six months but plan for less.

  • Financing for the franchisee is their biggest barrier. 

If you would like more information on Smorgasbord or how to set up your franchise, contact Patrick on 07977 984001 or patrick@smorgasbord.tech.

11/08/2020

Patrick Burge (Smorgasbord)