To franchise or not to franchise?

August 22, 2018

Considering a new career in the franchise world? Here are some questions you should answer to understand if the franchise business model is right for you.

Are you new to business?

If you don’t have any formal experience of running your own company, franchising may be one of the best business opportunities available to you. That’s because you’ll be working under a brand that already has significant market exposure and operates with a proven business model.

This minimises your risk and increases your prospects of achieving a profitable and sustainable business.

If you were to start an independent business from scratch, you’d have to go through all the trials and tribulations of turning the concept into a business model and achieving brand recognition.

This can be very costly and time-consuming, especially if you’re new to enterprise.

Do you want to be part of a robust business network?

Being a franchisee doesn’t just give you the opportunity to run and operate your own company under a franchise business model.

You’ll also have the chance to network with fellow franchisees, gain insights into how they’ve built their companies under the same brand, and be part of a large, supportive community.

In fact, franchisors often arrange networking events free of charge and encourage maximum participation. After all, it’s in their interests to get franchisees to exchange ideas and find new ways to drive the network forward, especially when more people are buying into a franchise with the same brand.

This means you’ll have plenty of opportunities to stay up-to-date with your industry and learn about the latest trends and ideas.

Plus, gaining new business contacts and sharing your ideas can help you stay motivated and focused, especially when your franchise is still in its early stages. On the other hand, a solo entrepreneur might not have the opportunity to attend these types of events and learn from other business leaders face to face.

Is there a specific industry you’d like to work in?

The chances are you’ll enjoy a much higher sense of job satisfaction if you run a franchise in an industry that you’re passionate about and/or have experience in.

For example, someone with experience of managing a restaurant or who has a passion for food is more likely to enjoy running a catering or restaurant franchise, whereas a former athlete or exercise enthusiast may find success running a gym franchise.

Is the franchise model you’re considering going to survive?

Make sure you research the franchise industry so you can determine whether the underlying business model is sustainable.

For instance, some franchise models can become obsolete when a competitor comes up with something much cheaper and more efficient. Consider the viability of a video rental franchise in the early 1990’s, before the invention of the DVD player in the early 2000’s. And things continue to change. Investing in a DVD franchise now would be a dangerous move, as sales have fallen drastically thanks to the boom in digital downloads.

Are you looking for ongoing training opportunities?

To remain competitive and offer the best business opportunities, franchisors must continually invest in research and development. This enables them to innovate their product offering and keep their customers happy.

As you can imagine, it’s in their interests to provide you with ongoing training and support so you can maintain a high level of operational efficiency and sustain your franchise model.

Are you happy to operate under someone else’s concept?

A franchisee has to be comfortable carrying forward a predetermined concept and representing a brand that was created by someone else.

Your franchisor will have clear guidelines for how you market the brand and communicate with your customers/clients, as this will ensure all franchisees are consistent.

For quality control, you’ll also need to work with a list of suppliers that have been approved by the franchisor, even if you wouldn’t necessarily choose these suppliers yourself.

Do you have enough money to finance your franchise business?

Before buying into a franchise, make sure you meet the franchisor’s financial requirements and have enough working capital to fund your franchise’s day-to-day operations.

While franchisors will tell you what the minimum requirements are for the investment, you’ll still need extra money for getting the business up and running, and to pay for legal fees and any moving costs.

Many franchisees finance the majority of their investment with their own money. However, large franchisors will often have good relationships with UK banks, which may be willing to offer more favourable lending terms to franchisees, so you don’t have to miss out on the best business opportunities.

Source: Start-Ups

4 Things You Should Never Do as the Boss

April 23, 2018

If you’ve never been the person in charge, getting to be the boss can be challenging. Maybe you opened a small business, or perhaps you just got promoted to a position where you manage others. Both scenarios are similar, and offer numerous pitfalls where you can undermine your own authority or make your workplace inefficient or even uncomfortable.

A boss or business owner needs to do more than tell people what to do. You need to lead by example. And to do that, you need to avoid violating the rules below.

Sometimes the boss has to have unpleasant conversations. Image source: Getty Images.

1. Don’t forget you’re in charge

It’s reasonable at a small business, or in a small group at a larger company, for personal relationships to form. As the boss, it’s OK to be professionally friendly with the people you supervise. It’s important to remember, however, that you have power over their lives.

You can like everyone and be liked, but you can’t get too chummy with people who work for you. You may someday have to make decisions that will feel like betrayals if you have close friendships with your employees.

You may have to fire people, discipline them, or turn down a request for a raise or for time off. You’re part of the team, but not everyone’s equal. That can be lonely, but keeping some distance helps you make effective decisions.

2. Don’t act like a big shot

Just because you are the boss does not mean you’re better than anyone else. Don’t ignore people. Say hello and goodbye. Make time for conversation and to show that you are approachable.

Being the boss may afford you certain perks (along with certain responsibilities). Don’t show off or flaunt what you get over others. You might, for example, be allowed to stay in more-expensive hotels or book pricier airfare because of your position. That’s great, but keep quiet about it and don’t make those below you feel bad.

3. Don’t avoid pitching in

Being the boss may take you away from some responsibilities that the rest of your company or team do on a daily basis. It’s one thing to skip certain tasks because you have other responsibilities. It’s another entirely to not pitch in when you can.

When things are busy, roll your sleeves up and help out. Answer a phone; talk to a customer; help package an order. Whatever it is, you’ll score points with the people who work for you by being willing to assist with the less pleasant parts of their job.

4. Don’t play favorites

Back when I ran two different retail operations, I inadvertently made this mistake. I supervised people who were also managers. That allowed us the freedom to do things, like have lunch together off-premises, which hourly employees could not do.

I wasn’t paying for lunch or offering any work advantages to these lower-level managers, but that’s not how it was perceived. The rank-and-file workers thought I was playing favorites, and that led to resentment of the employees I occasionally had lunch with.

As a boss or owner, it’s sometimes impossible to avoid the perception you have a favorite. You may have a sales manager or finance person you spend a lot of time with, and people will make their own inferences. Don’t, however, fuel the fire by actually favoring, or creating a perception that you favor, any specific person.

Be the boss

Remember that being in charge means you have to make hard decisions. Solicit input, and value good ideas that aren’t yours — but in the end, don’t be afraid to move forward assertively and take responsibility for your actions when necessary. That can be scary, but indecision can cripple a company. Be informed and recognize that you won’t always be right, but don’t let fear of being wrong stop you from acting at all.

Source: Yahoo Finance UK

Franchise Brands’ strong core the key to growth plans

April 6, 2018

Franchise Brands PLC (LON:FRAN) does what it says on the tin – it owns branded businesses and franchises them out.

Under its umbrella, the company currently has four businesses but is in the process of beefing up its infrastructure, especially IT, after which it will add more.

That strengthened infrastructure is key to what is, in effect, a classic buy and build strategy.

As more brands are added, more benefit (and profit) is extracted out of the management hub at the centre.

Stephen Hemsley, executive chairman and co-founder, is confident the plan will deliver substantial gains for shareholders.

And he has plenty of experience to draw on.

Twenty years of making dough

In a 20-year career at the Domino’s Pizza franchise in the UK, he steered the group from an early stage start-up to a market cap of £1.6bn currently.

Hemsley was finance director at first, then chief executive and finally chairman and he still retains links to Domino’s through a non-executive seat on the board.

His plans for Franchise Brands contain much of what he learnt during that time at the pizza delivery business.

Most franchise owners and managers are great at building a relationship with their franchisees, he says, but a lack of critical mass means they struggle with the support services requirements.

Finances are handled poorly, they recruit badly, have weak IT systems and lack marketing sophistication.

While a good relationship with the franchisees can compensate some way for this, Hemsley, and long-standing business partner Nigel Wray, believe a better option is to provide those skills to the franchises.

Sum of the parts

Brands with common characteristics can leverage a centralised support services function, so the sum of the parts becomes greater than each business individually – and that is what Franchise Brands aims to do.

It may sound like Domino’s UK pizza business, but there is one major difference.

Domino’s UK had an exclusive licence with the US owner, a master franchise, but this time Franchise Brands owns the brands itself, which crucially gives it complete control of marketing, branding and the other support services.

The four bands currently in the portfolio are Metro Rod (drainage and plumbing); ChipsAway (minor car paintwork repairs), Barking Mad (dog sitting) and Ovenclean (cleaning ovens).

All brands and IP are owned by the company, with direct franchises to operators in most cases, though ChipsAway does have some master licences overseas.

Metro Rod points the way

It is the most profitable currently, but Metro Rod is the largest and most recent incomer, having been acquired for £28.4mln in April 2017, and will become increasingly important.

Hemsley says the potential of the business has surprised the company since it took over, especially the fact it is in effect two businesses.

Metro Plumb, a specialist plumbing service, effectively was thrown in for nothing and ultimately might have even more potential than Metro Rod, which specialises in drains cleaning and maintenance.

Both companies are B2B business, not domestic, working for utilities, businesses supplying emergency repair services and there are huge opportunities for each, Hemsley believes.

At Metro Rod, the initial thought was it would be competing with the four heavyweights in the sector, but in fact, the market contains 1,500 smaller players and that diversity gives a lot of scope to build market share.

“Out of a business worth £750mln, we have a market share of £35mln”.

Brand building

Metro Rod has also been a little neglected. Formed 30 years ago, it has changed hands a few times since, but this is the first time a specialist franchising team has held the management reins for more than 20 years.

Brand building features heavily in the rejuvenation plans.

“It’s all in the sales and marketing – professionalising this to raise the profile of the brand and the understanding of what we do.”

Adding Metro Rod has also allowed Franchise Brands to strengthen its IT infrastructure – it never had the scale previously – and finance function with a chief financial officer now on board as well.

That has freed up the three managing directors, which now includes one to run Metro Rod, within the business, just to focus on building the franchise networks not the back-office or admin stuff.

These investments will dampen profits in the short term as the additional central costs will outrun the growth in the income received from franchisees, but as sales pick up or more brands are added, the rewards will come through increasing rapidly.

That was how it worked at Domino’s, Hemsley says.

Invest first, profits later

Initially, royalty income from franchise businesses struggle to keep up with central costs, but once the system is in place and annualised, any further expansion drops straight to the bottom line.

“At Domino’s we had five years of growing overheads as costs rose as fast as income.

“But once everything was in place, profits went from £5mln to £100mln.”

House broker Allenby Capital expects Franchise Brand’s profits in 2018 to rise to £2.81mln from £2.1mln, on revenues of £33mln (£24.3mln).

Cash generation is good as commercial risks and capital expenditure are borne by the franchisees.

Franchise also pays a dividend, 0.5p in 2017, while Hemsley and Wray still own stakes of 26.4% and 27.8% respectively.

Executing the strategy for Metro Rod will take 18 months but after that point, Hemsley says the incremental turnover starts to come through on annualised overhead costs.

“From 2019 onwards – it will start to get interesting”.

At 73.5p, Franchise Brands is valued at £55mln.

Source: Proactive Investors

Four Ways Franchising Helps You Reach Your Business Goals

April 3, 2018

If growth is your goal — and it should be if you’re a motivated entrepreneur — franchising offers some of the greatest benefits of any expansion strategy.

Maybe your motivation for growth is to create opportunities for others. Perhaps it’s to build a legacy that lasts beyond your lifetime. Some entrepreneurs do it purely out of opportunism or because they enjoy the challenge of building a business. In most cases, it’s a combination of these things. Whatever your reason, here are four advantages of franchising to consider before deciding if it’s the right move for your business.

1. You don’t need as much capital.

A lack of capital is one of the most common barriers to business expansion as entrepreneurs often find their available funds far outstripped by their growth goals.

Taking on debt — from banks, leasing companies, private investors, sometimes even friends and relatives — is a huge barrier for business owners looking to grow. High interest rates can cause payments to spiral out of control and bank loans are often difficult to come by — especially in amounts that are adequate to fuel aggressive growth.

Unlike the “go-go” days before the Great Recession, banks today often will not lend even in situations when they’re fully secured. Franchising offers an alternative that allows entrepreneurs to expand their business without the cost of equity. The franchisee provides the capital needed to open and operate a unit, allowing the franchisor to grow without incurring debt or giving up equity.

But, don’t think franchising will come at no cost. Outside of what you’ll need to spend on marketing the opportunity to qualified investors, as a franchisor you need to budget for costs in a number of areas including business planning, financial analysis, legal documentation and training — not to mention accounting for the additional staff you’ll need to support the influx of franchisees.

2. You’ll have extremely motivated management.

Entrepreneurs often stumble when recruiting and retaining high-quality unit managers. It’s not uncommon for a business owner to spend months finding and training supervisory employees, only to see them move on after less than a year. Furthermore, hired managers are still only employees. They may or may not be genuinely committed to their jobs, which means it’s important to closely supervise their work. This can be a challenge as a hands-off operator.

Franchising, however, can help eliminate this problem. No one is more motivated than a person who has invested their life savings into a business. Their livelihood depends upon the success of the business, even more than you depend on them.

Owner-operators embody several factors that impact unit-level performance:

• Long-term commitment: Franchisees are invested, financially and emotionally. Most franchise contracts, which the franchisees will sign, commit them to your business for decades.

• Quality: As long-term operators whose livelihood depends on the success of the business, franchisees are motivated to continuously learn about the business and the industry. And often, the caliber of experience from people interested in buying a business is significantly above that of the “typical” manager.

• Improved operations: Franchise operators take pride in ownership. They keep their locations cleaner and train their employees better because they are owners, not just managers. Franchisees also keep a sharper eye on expenses, continuously looking for ways they can reduce labor and other costs.

3. You can promote growth quickly.

Most entrepreneurs I’ve met have the same fear: that someone will beat them to market with their own concept. The business world moves so fast that those fears are not without merit. Unfortunately, it takes time to open a single unit. Depending on the nature of the business, you may need to hunt for appropriate sites, negotiate leases, assist with location build-out, research the local market, arrange vendor relations and more.

Even with adequate capital, unit growth is still limited based on an entrepreneur’s ability to support that growth. Franchising may be the only strategy for some entrepreneurs to secure leadership in the market. Franchising allows companies to compete with much larger businesses and saturate markets before their competitors can respond.

4. You can reduce risk.

Because your franchisees hold the responsibility for their franchise operation, franchising can significantly reduce the risk to you as a franchisor. Since the franchisee is responsible for the entire startup investment (including purchasing inventory, hiring talent, paying for build-outs and fronting any working capital) you can focus on growth without the unit level risk incurred by your franchisee.

In addition to all the start-up responsibilities, franchisees are also responsible for activities within the unit itself. As long as the franchisor is careful to clearly define where the franchisee’s responsibilities lie, franchising can also minimize the risk of potential litigation that might, at the unit level, include things like sexual harassment, discrimination or slip-and-fall lawsuits.

With limited risk though, comes limited control. A franchisor will not have the ability to hire, fire, supervise and discipline the franchisee’s employees. Instead, they can only mandate that the franchisee follow brand standards — and leave it to them to develop the team to meet those standards.

When franchisees start to join the system, it can often be a jarring experience for the franchisor that is no longer in complete control of every aspect of day-to-day operations. Comprehensive operations manuals, regular site visits and clear operational systems and processes are absolutely critical and must be developed and established ahead of launching a franchise program — often at significant cost.

So while franchising is a great growth vehicle for some, it is not always the right vehicle for everyone, despite its advantages. Consider these things closely when determining if franchising is right for you.

Source: Forbes

What to do when your business needs emergency funding

March 28, 2018

Running a business isn’t always plain sailing and there may be times when you need an injection of funds, fast. There could be a number of reasons for this, such as broken equipment that needs replacing, late payment of invoices, or coping with seasonal peaks and troughs.

There are many funding options available to businesses and some are designed specifically to cover scenarios like those described above.

The funding you could apply for will depend largely on what you need the emergency finance for, as there are many tailored products out there that are more suited to particular situations. Let’s have a look at some of the more common reasons that businesses might need emergency finance and the possible funding options on offer.

Finance for late payment

Waiting incredibly long periods of time for customers to settle their invoices is a common problem experienced by businesses. In some cases, they could even be waiting up to 90 days to get paid for work they have long since completed. This can make running a business almost impossible where cashflow is concerned, especially for those firms which rely on a handful of large customers.

If you’re waiting months to get paid, how do you pay your suppliers for the goods you need to fulfil the next order?

Invoice finance is a great way to release cash and improve cashflow by borrowing money against your unpaid invoices. It involves a lender looking at your sales ledger, so as soon as you send an invoice, the lender advances you the majority of the cash immediately. They will pay the rest, minus their service charge, once the invoice has been paid by your customer.

For businesses trading overseas, the pay cycle is even longer, which is when trade finance comes in handy. When cashflow is tight, trade finance allows you to pay your supplier for a confirmed order, so the goods can be shipped without leaving you out of pocket for a long time.

Hire purchase for broken equipment

If your business relies on an asset, for example if you’re a manufacturer and key piece of machinery breaks, you’ll want to get it replaced as soon as possible. There are various asset finance options that can help if you can’t afford to buy it outright.

Hire purchase, for example, enables you to spread the cost of an item over time without a large up-front cost. Repayments are normally fixed on a monthly basis for easy cashflow management and you will own the asset at the end of the term.

There are also options for leasing the equipment, without having to buy it at the end, if that would suit your business better. This can also be a good option for any equipment that you don’t need for the long term, or if your future is uncertain. Maintenance is usually taken on by the lessor, and when the contract is up you can give back the equipment, or start a new one.

Merchant cash advances for sales businesses

There’s another type of borrowing which is great for retail businesses, and particularly those which use card terminals to process payments from customers. Merchant cash advances are a type of lending based upon your future card revenue, and effectively involve selling your future sales to the lender at a discount.

Unlike a standard loan, which has interest constantly running, the total cost of finance is agreed upfront and the amount you repay is proportionate to how much money you make — you’ll always be working towards paying off the fixed amount agreed at the beginning.

This can be a good way of releasing cash for broken equipment or plugging a cashflow gap in a retail business.

Short term loans for seasonal peaks

Some businesses are very seasonal, especially at times like Christmas, Easter or school holidays. This can require a significant amount of upfront investment as you prepare for the peak by buying extra stock, employing additional staff and maybe even taking on additional office or warehouse space.

A short-term loan could be a good way of injecting extra cash into your business to tide you over until the seasonal sales start to materialise. There are many business loans available now, from a variety of lenders, including loans specifically for small businesses with terms as little as three months.

Revolving credit facilities for seasonal troughs

On the other hand, some businesses will see a huge drop at times like Christmas, when business may almost grind to a stop. Throw in staff holidays and late payment from other customers and a seasonal trough can quickly become a serious situation.

Revolving credit facilities can be a good way of making it through those tough times. Rather than having a fixed loan agreement, these products are on a rolling agreement. You’ll have a set credit limit, but as soon as you have repaid some of what you owe, you can borrow again – as long as it’s within the overall limit. It’s like an automatically renewing loan that you can dip into as and when you need it when times are tight.

Conclusion

There are many different forms of emergency finance available when you need funding fast. Of course, some may be more suitable than others and accessing them can depend on the criteria of the lender, but the bottom line is there’s likely to be something suitable. One thing you should bear in mind is that fast and flexible finance usually comes at a price, so interest rates tend to be higher. In this article we’ve outlined just a few of the main funding options, but there are many others, and Funding Options can help if you need more help narrowing down the search.

Source: World First