How to franchise your business. An introduction to The Franchise Company and how we can help you franchise your buisness

1. An Introduction Franchising

2. FRANCHISING IN THE UK TODAY – NAT WEST/BFA
No of UK franchise systems 901
Annual Sales £15.1 billion
Jobs 2011 – 521,000
2015 - 621,000
(321,000 FTEs)
Franchised Units 44,200
Average number of employees 14
Reported profitability 97%
Forced change 2.5%
2016 BFA/Nat West Survey

3. LEGISLATION
No specific franchise legislation exists
in the UK

4. SPOT THE FRANCHISES!

5. KEY FEATURES OF A FRANCHISE RELATIONSHIP
• Proven business model
• Use of the brand/trading name
• Use of Intellectual Property
• Franchise agreement
• Payment of fees (up front and ongoing)
• Induction training
• Ongoing training and business support
• Effective marketing tools and support
• Agreement to operate the business in line with the model
developed by the franchisor

6. COMMERCIAL FRANCHISING - AN ILLUSTRATION

7. DIFFERENT TYPES OF FRANCHISE MODELS
Job Format Ovenu
Service Master
Retail Body Shop
Benetton
Sales/Distribution Snap on Tools
Managerial /B2B Avis Car Hire
Investment Holiday Inns
Harry Ramsdens
Joint Venture Specsavers

8. WHY IS FRANCHISING SO ATTRACTIVE?
•Reduced capital requirement
•Reduced central management resource
•Day to day local management provided by
franchisee
•“Locked in” network
•Raise brand awareness and profile
•Increased capital value

9. ADVANTAGES OF FRANCHISING TO THE FRANCHISOR
Franchisor
Quality
management-
standardization Lower Overhead
costs
Improved
customer service
Potential for
faster growth
Revenue Stream
Increased
geographical
coverage
Brand
development

10. DISADVANTAGES OF FRANCHISING TO THE FRANCHISOR
Franchisor
Loss of total
control
Need to share
profits
Franchisee
disputes
Internal
competition
Potential brand
risk

11. 36ADVANTAGES OF FRANCHISING TO FRANCHISEES
Franchisee
Proven Model
Reduced Risk
No previous
experience
Capital growthEasier to finance
Training &
Support
Use of brand

12. DISADVANTAGES OF FRANCHISING TO THE FRANCHISEE
Franchisee
Lack total
control
Need to share
profits
Need to follow
the system
Internal conflict
Ongoing Fees

13. KEY ISSUES TO FRANCHISE SUCCESS
FINANCIAL
MODEL
The market
opportunity
Training and
support
Internal
resources
Franchisee
Recruitment
Operational
model

14. TO BE SUITABLE FOR FRANCHISING A BUSINESS SHOULD..
•Be tried & tested
•Generating good operating profits
•Developed business format
•Be able to be replicated
•Similar demand in other areas
•Reasonable training requirements
•No main barriers to entry

15. FINANCIALS – INITIAL FEES
•Most franchisors charge an
initial fee – Franchise Package
Fee
•Initial package fees vary
between £5000 and £25,000
(depending upon the individual
business)
•Some franchisors also charge a
license fee re intellectual
property.

16. AND ONGOING INCOME
•Ongoing income generated in a
number of ways –
•Management fees – % of gross sales
net of VAT is the norm
•OR Selling product or services to
franchisees
•OR Fixed monthly fees
•Dependent on each individual business

17. KEY POINTS OF THE FRANCHISE AGREEMENT
•Fixed term agreement
•Franchisee right to renew
•Franchisor rights re termination
•No notice period for franchisee
•Same ongoing terms for all network
•Subject to commercial laws
•Some impact re European legislation
•Terms must comply with BFA
requirements for membership

18. COMPARISON WITH COMPANY OWNED EXPANSION
•A smaller slice of a larger cake
•Less investment required
•Reduced risk
•Reduced ongoing
management function

19. STAGES OF FRANCHISE DEVELOPMENT
Design the
franchise model
(feasibility
analysis)
Define Strategic
objectives
Confirm
feasibility
Create
expansion
strategy
Develop systems
and documentation
required for
franchising
Operations Manual
Franchise
Agreement
Franchise
marketing strategy
and materials
Franchise
recruitment, training
and support
systems
Pilot replication in
a number of
varied locations
On-going
monitoring and
evaluation
Feedback loop to
improve systems
Rapid roll out of
replications
On-going support
Continued learning
and innovation
Develop the
business model
and prove overall
viability
Prove Design Systemize Pilot Scale

20. FRANCHISE SUCCESS
• Win-win relationship
• Interdependency
• Mutual respect
• Whole is greater than the
component parts
• Added value in system
• Value for money re fees
• Desire to renew the agreement
• Take professional advice – BFA
affiliates

21. BRITISH FRANCHISE ASSOCIATION (Bfa)
• Industry body
• Established by a small group of
franchisors in 1979
• Now has over 300 members
• Represents franchising in the UK and
Europe
• Mainly franchisor funded and managed
• Franchisee members
• Membership code of ethics
• Affiliates are approved and need to
follow European code of ethics

22. THE FRANCHISE COMPANY
Mashud Choudhury
mc@franchisecompany.co.uk
Mobile: 07778 743517
www.franchisecompany.co.uk