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Introduction to franchising presentation 2018.pptxv1
The document provides an overview of franchising in the UK, highlighting its growth potential, types of franchise models, and the advantages and disadvantages for both franchisors and franchisees. It discusses key elements for successful franchising including financial models, training support, and the importance of agreement terms. The British Franchise Association (BFA) is mentioned as a key industry body that promotes ethical standards in franchising.
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Introduction to franchising presentation 2018.pptxv1
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- 2. FRANCHISING IN THEUK 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 franchiselegislation exists in the UK
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- 5. KEY FEATURES OFA 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 OFFRANCHISE 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 FRANCHISINGSO 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 FRANCHISINGTO 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 FRANCHISINGTO THE FRANCHISOR Franchisor Loss of total control Need to share profits Franchisee disputes Internal competition Potential brand risk
- 11. 36ADVANTAGES OF FRANCHISINGTO FRANCHISEES Franchisee Proven Model Reduced Risk No previous experience Capital growthEasier to finance Training & Support Use of brand
- 12. DISADVANTAGES OF FRANCHISINGTO THE FRANCHISEE Franchisee Lack total control Need to share profits Need to follow the system Internal conflict Ongoing Fees
- 13. KEY ISSUES TOFRANCHISE SUCCESS FINANCIAL MODEL The market opportunity Training and support Internal resources Franchisee Recruitment Operational model
- 14. TO BE SUITABLEFOR 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 – INITIALFEES •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 •Ongoingincome 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 OFTHE 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 COMPANYOWNED EXPANSION •A smaller slice of a larger cake •Less investment required •Reduced risk •Reduced ongoing management function
- 19. STAGES OF FRANCHISEDEVELOPMENT 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-winrelationship • 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 MashudChoudhury mc@franchisecompany.co.uk Mobile: 07778 743517 www.franchisecompany.co.uk