AGENDA Agenda Introduction What is it? Examples Top Rated Franchise Sucess Rate Industry overview Suitability Revenue Streams ROI Types COMMON FACTORS Is it a Good Time? Summary Questions & Answers THANK YOU!
INTRODUCTION FRANCHISE SYSTEM = FRANCHISE + FRANCHISOR + FRANCHISEE
INTRODUCTION o A franchise is a license granted by a business to another business to make and sell goods/services. o A franchisor is the owner of the business who grants the license. o A franchisee is the person who purchases the business name.
WHAT IS IT Normally referred to as Business Format Franchising A contractual long-term relationship Grant of a licence to franchisee Franchisee gets: Tried and tested product/service Profitable proven business model to follow Experience and know-how of the franchisor Entitlement to use the trade name / mark Entire package
EXAMPLES
EXAMPLES
TOP Rated Franchise ( 2009 )
Industry Overview At the end of 2007 in the UK: Industry worth 12.4bn 806 franchise systems Property services 202 Personal services 159 Business and commercial services 156 Hotels and catering 115 Store retailing 101 Transport and vehicle services 73
Industry Overview Regional Distribution of Franchised Units (%), 2005 2007 South East 20 South West 13 London 12 North West 10 East Midlands 8 Scotland 8 Yorkshire 8 West Midlands 7 North/North East 5 Wales 5 East Anglia 3 Northern Ireland 1
SUITABLE? 1. Is it a financially viable business? - Would it still be viable with an additional 15% costs? 1. Is there long-term and widespread demand for your product / service? 2. Can you prove that it can work in other parts of the country and without your skills and ability? 3. Are the business processes easily replicable? 4. Can an unskilled person easily be trained to run the business / sell the product or service?
NOT SUITABLE YET! A business that is failing Low gross margins (e.g. newspaper delivery) Where product range has short life-cycle (e.g. toy) Geographically defined market - no potential to repeat in other places (e.g. Tower of London gift shop) High technical skill levels required (e.g. brain surgery) Not proven (e.g. only been trading for 3 months old)
TYPES Investment Franchise Investment franchises are operated by the fast-food and restaurant chains, as well as by some well-known hotels. The franchisee has overall control of the business Employs his or her own senior management and staff. Executive Franchise Involves the provision of professional services, Financial advice, legal services or recruitment assistance.
TYPES Retail Franchise The franchisee runs the outlet, employs staff and displays goods approved by the franchisor. Distribution Franchise A distribution franchise permits the franchisee to operate from a depot or central office that is usually owned by the franchisor. Depot Franchise The franchisee is the operator and sole occupant of the depot. This type of franchise is generally available to courier companies and parts suppliers, for whom a depot is an essential part of the business.
TYPES Job Franchise Usually a one-person business, operated by the franchisee from home. Home-delivery operations, such as lawn care, car repairs or furniture refurbishing, are examples of job franchises. Management Franchise A management franchise is where the franchisee will be responsible for both running the franchise and employing and managing a team of operatives.
REVENUE STREAMS Initial Franchise Fee Average cost is 52,500 On-going Fees Management Services Fee (Royalty) Average 7.5% of Gross turnover (never profit) National Marketing Levy Average 1.9% of Gross turnover Mark-up on Goods Service Fees Training Fee Others: e.g. re-sales (transfer fees) The franchisor should not be looking to make a profit from the initial fee. Source: (Nat West Survey 2008)
R.O.I
COMMON FACTORS Successful Franchises View franchising as a long term partnership Provide comprehensive training Undertake ongoing research & development Franchisors income linked to the success of the franchisees
COMMON FACTORS Failed Franchises View franchising as an income stream to prop up a failing business The business is not proven The business has limited longevity After initial training, they leave the franchisee on their own Have little or no financial incentive in the success of their franchisees Do not undertake ongoing research & development
IS NOW A GOOD TIME? People being made redundant, have a pay off and its difficult to find new jobs Businesses have less money to expand using company owned expansion The success rates are higher for both franchisors and franchisees than for non franchise businesses For Franchising to succeed still need to apply proper / sound business practices
IS NOW A GOOD TIME? Your Local Business with National Backing 45% of People would prefer to buy from a franchise business Source: bfa Franchise Awareness Survey 2006
SUMMARY A well established industry Create a national or international brand Cost Effectively Quickly A number of elements to developing a successful franchise Sources of Help and Advice
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