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Franchising can help to give you the confidence you need
to start a business on your own.
The most famous franchise is probably MacDonald's but there are
numerous kinds of franchises out there. In relation to any other small business,
franchising has proved to be successful, with 94% of units still operating
profitable businesses 5 years down the line whilst it is estimated that more
than 40% of small firms cease trading within 3 years.
We are basically talking about a Business Format Franchise. It
is where a business has established a successful way of working and in order to
grow it licences the rights to their methods, know-how, name, goodwill and
product or service to others for a certain period of time. They are the
FRANCHISOR and the local operator is the FRANCHISEE.
Some Advantages of using a Franchise...
- You donít have to go through the learning curve of working
out what works;
- Their is a proven market for the product;
- You get to use the goodwill and established name of the
- You normally have an exclusive area in which to operate;
- All necessary training is provided by the franchisor;
- Marketing assistance is provided by the franchisor;
- Bulk buying powers of the franchisor can be used;
- Banks are often more willing to lend to franchisees where the
business plan is more likely to be as predicted.
The franchise costs are normally the main downside of choosing to operate as a
franchise and consist of the following...
- A initial start-up fee
- An on-going management fee or royalty for the franchise which
is usually a percentage of annual turnover or mark-ups on supplies.
Who'se business is it?
Each franchise is a separate business in its own right and is the business of
the franchisee over which they have control. However, the franchisor is likely
to retain control over the method of operation and marketing. It is important
that franchisor and franchisee get along and work together as a team.
Choosing a Franchise
The British Franchise Association (BFA) is a good place to start when
choosing a franchise and they are the only independent accreditation body for
franchising within the UK.
It is also useful to attend franchise exhibitions to compare
They have a free video 'Your Introduction to Franchising' which
provides a wealth of information - more than 33% of franchisees buy this unique,
independent guide before making their decision.
BFA members are recommended as they have volunteered to be
'vetted' by the BFA and adhere to its codes and standards, based on the European
Code of Franchising Ethics. They are also re-accredited on a regular basis.
Before deciding on the franchise you are going to choose you
- Can you commit to the time and money needed to get going
which are both likely to be significant?
- How viable is the product or service or will it be easy to
sell in your area?
- Can you speak to other franchisees to verify how they have
- How well has the franchise been tested?
- Does the franchisor have the resources to provide the support
- How well do the franchisor's systems work in practice?
- What are the tends in the market likely to be?
The Franchise Contract
A franchise is a long term arrangement and you need to take legal advice on any
franchise contract, ideally from a solicitor who has a lot of experience with
The franchisor will have a lot of control over how the business
is run and you need to ensure you are happy with this and what is in the
How We Can Help You
About the Author
Jonathan Amponsah BSc FCCA is a UK Tax Expert and the founding partner of
A M P Associates Ė
A specialist firm of chartered certified accountants and tax advisers based in
London and Surrey. Jonathan advises on a wide range of business and tax issues
and he is recognized for his proactive and innovative approach to taxation.
Jonathan can be contacted on 0845 009 8845 or email:email@example.com
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Article Published/Sorted/Amended on Scopulus 2008-04-10 09:41:21 in Business Articles