Franchising your business idea offers an effective way to roll out the concept across the country with the potential to create a steady stream of income. Rob Gray explains the potential risks and rewards.
You’ve built a good business and it’s ripe for expansion. But taking it to the next level isn’t easy. For instance, efforts to grow organically by extending your presence into new geographies could be hampered by constraints on your time, a lack of the right people or a shortage of cash. In this case, franchising could offer a logical way forward.
Franchising continues to show growth, even in the face of economic uncertainty. The 2018 BFA (British Franchise Association) NatWest Franchise Survey revealed a £2.1 billion increase from 2015, bringing the total turnover generated by the franchise industry to £17.2 billion. This represents around 1 per cent of UK GDP.
The UK now has 935 franchise systems, double what was available 22 years ago. Finding the right franchise partner is key. It’s important to choose franchisees who have a passion for your brand, share the same ethos and vision and who have compatible experience and character traits. Recruiting the wrong franchisee may end up costing you money in the long-term.
“Work hard with your initial franchisees – they will be your case studies for further growth,” advises Mark Llewellyn, who founded minor car repairs business Revive! He started franchising in 2004 and now has 60 franchisees. Moreover, Mr Llewellyn is firmly of the view that Revive! is on course to become a £100 million business.
As a franchisor, you need to have been in business for at least 12 months to prove that what you do actually works. You will need to show potential franchisees how they will be able to run it, too. After all, they want to invest in an established model. Your business needs to be transferable (which means it can be run in multiple locations, using the same system, brand and quality) and teachable (something you can train others to do).
It’s vital to note that franchising is not a last resort for a business that isn’t working. It’s purely for successful businesses that can prove sustainability.
The franchising process requires two crucial documents: an operations manual, to show how everything must be done; and a franchise agreement, which sets out how the relationship between franchisor and franchisee will work. It should also be designed to protect the network and your brand. Other issues you must pay attention to include finance – all the planning, building and commitments will cost you money – and defining the geographical areas people will be restricted to if they join your franchise.
Although many entrepreneurs enjoy becoming franchisors, it’s undeniably demanding and at times stressful. Denise Hutton-Gosney, MD and founder of Razzamataz, opened her first theatre school in 2000, began franchising in 2006 and now has 45 franchise schools.
She says: “Often challenges can be overcome through simple communication, which is why as a business we offer lots of support to our franchisees through meetings, conferences, Skype calls and webinars. I never shy away from a challenge because I believe you have to face it head-on – it won’t simply go away of its own accord. Trying to bury it will only cause further problems down the line.”
For more insight into the highs and lows of franchising, we talk to four more entrepreneurs who’ve gone down this route.
Balancing act: Tatty Bumpkin
Sam Petter started children’s yoga business Tatty Bumpkin with a social enterprise award from UnLtd, with a view to helping mothers back into work. After proving the model worked with a teacher training programme, she realised that franchising was a way to preserve brand values while building a financially robust business model.
Tatty Bumpkin began franchising in 2008 and currently has 37 franchisees up and running (but has recruited more than 50). It has trained hundreds of teachers, who work with the franchisees. “Franchising, using teachers, means franchisees can structure their business around holidays and other variables while still earning, making it the ideal model for parents,” says Ms Petter.
Although her initial brand ambition hasn’t changed, Ms Petter concedes she had to “make sacrifices to my grand vision, in order to fulfil obligations to my franchisees”. Set against this, royalties from the franchisees provide a consistent revenue stream which, she asserts, must always be at the forefront of any decision.
Key pieces of advice include: trademark your concept and be prepared to defend your brand where necessary; learn to say ‘no’; franchising is about replication and scale; your initial model should be tested to the best of your ability; and an ops manual and processes are critical. “You can’t franchise, as the creator, until you are prepared to delegate, honour and celebrate your franchisees and all their differences,” she adds.
Cautionary tale: Diamond Logistics
Courier company Diamond Logistics launched its first four franchises in 2013 and now has 12, alongside company-owned sites.
CEO Kate Lester candidly describes franchising as a mixed experience. “A third have done really well, a third have been OK and a third poor. So budget for this! Every franchisor I know faces the same challenge. In fact, some say having a third of good performers is rare.”
Over time, Ms Lester’s role has changed “from salesperson to evaluator and policewoman”. After several setbacks, Diamond is now moving away from traditional franchising towards “network partnerships”.
She cautions entrepreneurs embarking on franchising to be selective and stringent on maintaining standards. “We found that giving leeway in the initial phases led to endemic liberty-taking so we’ve had to toughen up a lot,” she says. “My advice on this is be kind but firm right from the start. It’s very possible for the franchisor to entirely overdeliver, and the franchise not hold up their part of the bargain.”
She recommends building robust processes to avoid over-resourcing when managing a network of franchisees. And while revenue shoots up quickly, Ms Lester warns that the initial costs of launching and nurturing a franchise outweigh the fee, so “profit doesn’t arrive for a long time”.
Invite-only: Radfield Home Care
Radfield provides care for the elderly in their own homes. It began franchising in 2017 and now has 11 franchise partners, with more in the pipeline. “My role has transitioned from managing our care services to supporting our franchise partners to manage their care services,” says Radfield franchise recruitment manager Ed Gill.
Radfield has “invested heavily from the outset” in building a full national office support team to help franchise partners get their businesses off to a flying start and achieve long-term growth.
Mr Gill is passionate about Radfield’s core values and delivering high-quality care services. As a result, the franchise recruitment process focuses on “inviting individuals into the network who share our values and will generate high-quality, client-centred businesses that represent our brand”.
With that in mind, Radfield has rejected some prospects for the good of its
own reputation and to protect the brand for existing franchise partners.
Mr Gill recommends franchising as a route to growth because of its clear structure and the opportunity to bring high-calibre people who will harness brand potential into a network.
But he cautions not to underestimate the costs. Doing it well requires “heavy upfront investment in building a strong team, as this is the key to the success of the franchise network. And like any new business venture, it takes a lot of effort and graft in the early years to make it a success.”
Consistency is key: The Massage Company
The Massage Company has brought the membership-based massage business concept, popular in the US, to the UK market. It has three franchisees at different stages: one opened last year, another in April 2019, with the third due to launch later this year.
Business partners Elliot Walker and Charlie Thompson opened a Massage Company centre in 2016. After that, Mr Walker started creating the Build Manual and the Operational Manual, which took about three months.
Mr Walker seeks out good franchisees, helps them find properties and works with them to build their centre before handing over to Mr Thompson’s team, which focuses on operational optimisation.
“We have built a training academy and programme led by the UK’s leading massage expert and our Director of Training John Holman so that we can take good therapists and deliver a consistent quality of massage across our whole business, to each and every customer,” says Mr Walker.
Valuable tips for other budding franchisors include: listen to the experienced hands; your first franchise has to be a success; take your time with recruitment and only bring in franchisees you honestly believe will be successful.