010 FAQ 30/10/07 11:29 Page 2
Health, Fitness & Beauty; Home Care; Leisure &
“A franchisee is
from a bank will depend upon the strength of the
Travel; Print & Design; Property Care; Real franchise system and your business plan.
Estate; Retail & Fashion; and Sales &
not an
Generally most well-established franchise
Distribution, plus Specialised to encompass the systems offer a tried and tested business model
myriad of concepts that don’t fit into these
employee - he
with initial training, ongoing support, brand
categories. The types of franchises can be recognition and the collective buying power
divided into categories: Job Franchises, where the
or she is an
benefits that a network of businesses can bring.
franchisee operates the business hands-on; Sales There is evidence that franchised businesses tend
& Distribution Franchises, where the franchisee
independent
to grow quicker and survive longer than new start
is on the road, selling and/or distributing products up independents.
in his territory; Executive Franchises, where the
business owner
It is for these reasons that banks generally
franchisee runs a one-man, white-collar business; consider franchising as a less risky way of
Retail Franchises, where the franchisee invests in
- and woe
operating a business. You will need to raise as
commercial property, staff and inventory to help much as between 30 and 50 per cent of any setup
operate a shop-unit; Investment Franchises,
where the franchisee puts up the capital and
betide the
costs from your own resources. While most banks
will consider lending up to 70 per cent of the total
appoints a manager to run the business; and
Management Franchises, where the franchisee
franchisor who
costs including any working capital requirement
for selected well established franchise systems,
manages a team of operatives.
tries to issue
this is not an automatic option. For newer, less
established franchise opportunities it is likely that
HOW CAN I DETERMINE IF A FRANCHISE IS ETHICALLY
PUT TOGETHER?
orders!”
you may need to invest at least 40 to 50 per cent
from your own funds. The importance of a good
Cash Generator Managing Director Brian Lewis:
Cathryn Hayes, HSBC Head
business plan can not be overstated. When
First of all, check whether the considering the financial aspects of the business
company is registered with
of Franchising
plan it is best to build in a contingency of at least
the British Franchise six months’ - and preferably 12 months’ -
Association (bfa), and expenditure in case the business takes longer than
ideally has attained full anticipated to get off the ground.
membership. To gain full
membership accreditation WHAT IS THE POTENTIAL TO GROW WITHIN A
from the bfa takes an amount of time and effort. FRANCHISE SYSTEM?
This does not mean that companies at the Nigel Toplis, Recognition Express Managing Director
provisional or associate level are not ethical I think it is fair to say that the
franchises, but they will not have had the rigorous growth potential of a
testing by the bfa that has to be undertaken in business format franchise
order to be awarded full membership. is limited only by the
Secondly, do all the necessary due diligence, desire and ambition of the
in particular observing the accounts of the franchise owner. It is in
company, obtaining bank and trade references and everybody’s interest but
making general observations of the people and particularly that of the franchisor to encourage
company in question. You may need to have continual growth of the franchise unit not simply
some accountancy or legal advice, but you are to enable a particular franchise owner to succeed
looking to see if there is anything in those but also to encourage new franchise owners into
accounts that casts doubt onto the viability and or the system. Successful franchising is dependent
integrity of the company. on repeatability and successful repeatability
Thirdly, it is always good practice to do a ensures development and growth of a business. It
county court judgement check through a credit is incumbent on the franchisor to continually
reference agency to make sure the company is not monitor and add to the tools, programmes,
acquiring bad debts by non-payment of bills. training and collateral provided to the franchise
Finally, it is critical that you speak to a number of owner such that the implementation of same will
existing franchisees and ask them if they know of bring about new growth.
any incidents that might put that integrity
into question.
HOW MUCH OF THE INVESTMENT WILL I BE REQUIRED
TO PRODUCE?
Richard Holden, Lloyds TSB Head of Franchising
The amount of your investment
will depend upon your
FURTHER INFORMATION:
chosen franchise
opportunity. You maybe Read more franchising advice from a range of franchise industry experts on The
able to finance the Franchise Magazine online at:
www.thefranchisemagazine.net
investment from your own
To talk to a Franchise Consultant, call FDS: 01603 620 301
resources however if you need
to borrow funds banks are the most common
email:
enquiries@fdsltd.com
source of finance. The level of finance available
visit:
www.fdsfranchise.com
©2007 The Franchise Magazine 11
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