Exploring Franchise Opportunities

Payroll and HR | 08.04.2024

by Azets

A Guide for Entrepreneurs Taking their First Steps

Franchising benefits both franchisors and franchisees, enabling market expansion with lower risk and leveraging the established brand. For franchisees, it offers training, marketing support, and an existing customer base. However, careful consideration is necessary to determine if franchising suits your business. In this article, we will be focusing on finding the right franchisees and recognizing potential red flags. 

What does franchising mean? 

Franchising is an agreement where the franchisor grants the franchisee the right to use its business processes, trademarks, and trade names to market goods and services. The franchisee pays a one-off fee and ongoing royalties based on sales. 

  • A business format franchise is the most popular type, with the franchisor heavily involved in providing support and training. Examples include McDonald's and Starbucks. 
  • In a product distribution franchise, the franchisor supplies the product, and the distributor sells it, like Coca Cola. 
  • The third type is a management franchise, where an entrepreneur with management skills runs franchises. 

More entrepreneurs are seeking out franchises 

“Franchises offer a beneficial solution for those wanting to become their own boss. Setting up a business from scratch can be daunting, but with a franchise, you enter an established business with a support network and fellow franchisees. This support helps overcome initial challenges and fears of failure in a tried and tested business environment.” 

  • Claire Purbhoo, Central Head of Outsourcing at Azets 

Things to keep in mind before taking the first steps 

The starting point is the financial funding angle and the required initial capital investment. Have a business plan to determine profitability timelines, ensuring you're prepared for potential cash injections. Consider your growth pattern and exit strategy. Focus on profitability and remuneration strategy to get paid for your hard work. 

“It's vital to work with franchisees who align with your ethos and deliver as expected. The contract should be carefully drafted to include enforceable clauses, especially regarding financial information provision. Identifying red flags and offering timely advice is crucial.” 

  • Claire Purbhoo, Central Head of Outsourcing at Azets 

Do I need entrepreneurial experience? 

“We are willing to work with anybody who's willing to follow the franchise model, engage with the brand, and understand the brand inside out and back to front. We educate them and coach them on our business model. It's having the willingness to do that, and that can come from anybody with the right behaviors.” 

  • Daniel Penn, Head of Network Development at Anytime Fitness  

How much creative control do I have as a franchisee? 

“Don't fear losing control; you have a voice in collaboration. Believe in the brand; it shouldn't raise concerns.” 

  • Connor Thorne, Multi-site Franchisee at Anytime Fitness. 

How does Anytime Fitness work as a Franchise? 

Anytime Fitness operates 183 UK sites and franchising in 41 countries, making them the largest global fitness franchise, the third largest gym operator in the UK, and the largest UK franchise. They fall into the management franchise category, allowing entrepreneurs some freedom and autonomy to engage with the local community. 

“Having access to contracts and guidance on risk assessments among the plethora of available options has been amazing. It allowed us to grow, support our team, and build a strong foundation.” 

  • Connor Thorne, Multi-site Franchisee at Anytime Fitness.

Various marketing methods and collaborations and exhibitions go into the process of finding new franchisees. Around 50% of leads come from their website. Their marketing approach involves working with specialists, optimizing their website, and participating in franchise exhibitions to attract potential franchisees. 

A successful franchisee could be absolutely anybody with any background if they've got the right behaviors and the right willingness to follow the model and engage with the brand.” 

  • Daniel Penn, Head of Network Development at Anytime Fitness  

Tips for SME owners thinking about starting a franchise  

  • Have a clear vision: Know your end goal: short-term or long-term commitment. Choose a brand aligned with your values to effectively promote and sell.  If you have another business, be cautious of potential impacts. 
  • Understand the funding and cash flow needs: Stay aware of financial risks. Research and do due diligence. Use a solid business plan. Monitor performance regularly. Prepare for additional costs. 
  • Prepare your strategy: Plan short, medium, and long-term strategies. Know your franchise goals and how to achieve them. Guide your actions and decisions accordingly. 
  • Conduct thorough due diligence: Perform thorough due diligence. Research and assess the franchise opportunity carefully. Ensure it aligns with your aspirations and capabilities for a successful partnership. 
  • Embrace the brand: Invest in a proven business model. Embrace the brand and its practices. Follow guidelines for market success. 

“Any business with a proven, scalable model that can expand into different regions and locations is suitable for franchising. This applies to various sectors like retail, coffee shops, and fast food chains. The key is having a tried and tested model with established processes and systems that can be shared with new franchisees entering the marketplace.” 

  • Claire Purbhoo, Central Head of Outsourcing at Azets 

What questions should you ask your accountant? 

  • Ask about practical steps: Have documented processes, understand the system and market route. Scale product for wider marketplace in initial stages. 
  • Ask about financial aspects: Decide on fees, revenue, and business value. Create strong support, advice, and training system for franchisee success. 
  • Ask about market considerations: Determine target market (local, national, international). Consider tax implications for smooth financial operations. 
  • Ask about access to financial information: Access accurate, up-to-date financial info. Use a templated chart of accounts and reporting for informed decisions. 

Franchising may not suit everyone, but if your business is easily replicable, profitable, and teachable, it can be a great option to grow your brand. Choose a brand that aligns with your values and that you are passionate about. Make the most of the network by sharing best practices and avoiding rapid expansion while you learn the ropes. Franchising involves partnerships, and when done right, it can expand your business beyond your imagination. 

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