Ask Johnny - questions on franchising

The cost of a franchise

Question: I've never worked for myself before and am about to be made redundant and it scares me, investing my redundancy money in a business.

Answer: Going into business for yourself is a big decision with many risks, however in many ways franchising is a safer route in owning your own business. This is because when you buy an ethical franchise you're tapping into a successful business formula and you will not be going through this alone. As a franchisee you will have access to advice, help and direction from people who are running the same business as you. For this reason franchising is a successful method of starting your own business and why even during hard economic times, franchisees are making profit. But beware when considering franchise opportunities; make sure it is an ethical franchise with the accreditation of the British Franchise Association (bfa).

Question: In uncertain times where big businesses are going bust what chance will I have in a franchise?

Answer: There is no doubt that these are difficult economic times; however there are some very successful franchises. Franchising statistically is proven to be a safer bet, because of the established Brand Name, tried and tested formula, back up and support from franchisor and fellow franchisees and higher success rates. Plus the fact that your franchise will be operated by you as an owner is a huge advantage as owner-operators are best equipped to respond and deliver what their customers want. Make sure that you research the franchise you're looking into thoroughly, checking especially how they and their product sit in the current markets.

Question: If I wanted to buy a franchise how do I know which is the right one for me?

Answer: To find which franchise is best for you, you must assess you own skills and experiences. It's a question of matching the skills and type of experience required to run a franchise with what you like doing and are good at. In many cases it's worth remembering that franchising can allow you to work in an industry where you've had no previous experience. So broadly it's the type of work that suits you best and you would enjoy working at everyday!

Question: Why buy a franchise?

Answer: Buying a franchise is an easier way to owning your own business, than starting from scratch. For a start you can see your potential business in operation before you invest a penny.

You will be starting your business using someone else's know-how and expertise gained over years of running a mirror image business and on top of it you don't have to worry about developing the system or indeed coming up with the original business concept/idea.

Question: Are Banks still funding franchising?

Answer: Banks really like franchising & have learned that it can be safer to lend to franchisees of well-structured ethical franchise systems. The track record of the franchisor is most important. For an established franchise, most of the major banks will lend up to 70% of the start up costs. Banks will normally expect the franchisee to contribute at least 30% of the highlighted ingoing cost of the franchise. Bottom line, you can borrow up to 70% against a good ethical franchise system yet Banks will only lend up to 50% on a new stand alone business!