Running your own show

Many successful brands in FM operate under the franchise structure but there still appear to be misconceptions about what this business format actually entails

by Dan Archer

12 January 2007

The FM industry has a number of well known names which operate under the franchise structure. Brands such as Minster Services Group, Urban Planters, Swisher, Countrywide Grounds Maintenance and Kendlebell are only a few examples of successful franchises operating in the UK today and serving the facilities management professional. Nevertheless, there are a number of misconceptions about franchising which still prevail. This is partly due to the use of the term “franchising” to describe many different forms of business relationships, including licensing, distributor and agency arrangements.

The more accurate use of the term has arisen from the development of what is called “business format franchising”. Business format franchising is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.

 
The fundamental elements of a business format franchise are: piloting to prove the idea works and can be replicated; initial training to franchisees in the operation of the business; the ownership of the business by the franchisee and the capital investment they will have to make. The provision of ongoing support is also a vital element.  While the franchisee is the owner of the business, it is important to bear in mind that it is the franchisor’s system and brand that the franchisee is operating under. 

 
There are clear advantages to franchising:

• you do not have to come up with an idea – someone else has had it, and has tested it too
  

• larger, well-established franchise operations will often have national advertising campaigns and a solid trading name
  

• good franchisors will offer comprehensive training programmes in all business skills, including sales
  

• good franchisors can also help to secure funding for your investment as well as, for example, discounted bulk-buy supplies for outlets when you are in operation
  

• you will be in business for yourself but not by yourself

The provision of ongoing support is also a vital element. While the franchisee is the owner of the business, it is important to bear in mind that it is the franchisor’s system and brand that the franchisee is operating under.

With any life changing decision and significant investment, there will of course be important factors to consider and anyone thinking of starting an FM franchise should carry out thorough due diligence in advance.

BFA membership

 
Of the 759 franchisors operating in the UK 338 are members of the British Franchise Association – the BFA – and 61 per cent of new franchisees make BFA membership a part of their criteria for assessing a franchise. While it is not a guarantee of a system, it does ensure that the franchisor has been independently measured against a code of ethical franchising.

Your finances

Understand right at the beginning what you can afford to invest and what borrowings you are prepared to take. Also pay attention to the returns that the business will generate for you. Do this before you fall in love with something that you cannot afford.

What about you?

What are you good at doing?  What do you want to do and what will your family life and personal circumstances prevent you from doing? If you cannot bear the public then consumer facing businesses may not suit.  Equally if you take the kids out every weekend a business that requires weekend work is not the best fit.

Research the market

Speak to trade associations for the operational business.  Use the internet to research the business that you will be involved in. Those entering franchising are sometimes blinded by owning their own business; they need to understand what that business actually does and the market in which it operates.

Visit an exhibition

 
The industries operating in the franchise sector are many and varied.  Going along to one of the five franchise exhibitions supported by the BFA is an ideal way of seeing the breadth of opportunity available to prospective franchisees. You will also be able to meet face-to-face and discuss your suitability with a number of franchisors.

Research the franchise

Speak to current franchisees, of your choice. This may be managed and not every franchisee wants to speak to you, but don’t just settle for the ones you are given. Look for franchisees with a background like yours or ones at differing stages of development in different areas. Also research the franchisor. What is his background? How has the business grown? Have they lost any franchisees? Evaluate the support, the value in the costs and the nature of the agreement. They will all the while be assessing you to decide whether they want you.

Attending a BFA workshop is an ideal way of learning about the ins and outs of franchising, as well as helping potential franchisees to structure their research. For more information visit www.theBFA.org 

Dan Archer is head of marketing at the British Franchise Association

Tips and checks

• check whether the franchisor is a BFA member
  

• work out your finances – how much can you invest and what are you prepared to borrow?
  

• assess yourself – what are you good at doing and what do you want to do?
  

• research the market
  

• visit a BFA supported exhibition
  

• practise due diligence – attend a BFA workshop and take professional advice from banks, solicitors and accountants
  

• take your time as it is a long-term commitment – if you are still unsure, then you haven’t researched enough