Weighing up your franchising options

Investing in a franchise can be a life changing business choice, so it is vital to make an informed decision, says Neil Black, development agent for the SUBWAY chain

According to the latest NatWest/ British Franchise Association Franchise Survey, the UK franchise sector further increased its turnover by £600 million in 2010, resulting in an annual turnover of £12.4 billion.

Findings from the survey also revealed that franchising now employs more than 520,000 people and that 87 per cent of franchisors are planning to expand in the next year. It is clear that franchising remains at the forefront of the UK’s recovery and the successful business model continues to grow.

One of these franchises continuing to demonstrate growth is the SUBWAY chain. As one of the UK’s most popular franchise opportunities, the chain now has over 1,500 stores in the UK and Ireland and is currently seeking to expand its business and recruit new franchisees nationwide.

Franchise resales
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As with many franchise opportunities, there are two ways of becoming part of the SUBWAY chain - either by developing a new store or purchasing an existing one. The latter of these options - often known in the industry as a resale - can be an excellent way of joining a popular franchise, but for sometimes significantly less initial investment than would be required for opening a new store.

For those who are looking to run their own business, possibly for the first time, the option of taking over an existing franchise may well be more appealing. Not only will they benefit from taking over a company that is already trading successfully, and therefore have reduced start-up costs, but they can also take advantage of the support available from the franchisor, which in the case of the SUBWAY chain includes the same high levels of training and support regardless of whether the franchisee is opening a new store or taking over an existing one.

It’s these existing stores that now present an opportunity for local entrepreneurs, or those who would like to be their own boss or have a passion for the franchise they wish to operate, to step up and take advantage of a great opportunity.

Of course, there are many pros and cons of taking over an existing franchise. The sort of questions you will have to think about are:

* Is it a well-known franchise brand?

* Is the business in a good location?

* What has the recent financial performance been like?

* What about competitors?

* What is the motivation for the current franchisee to sell and is there anything that might hinder the performance of the business in the future?

To help you decide whether a resale is right for you, it’s best to talk directly to both the current franchisee and the franchisor, as they will be able to provide you with information and advice about the franchise and why it may offer a well structured and profitable business opportunity, or if it may require some work to get to that level.

For an international brand such as the SUBWAY chain, there will be plenty of advice available, as well as the opportunity to talk to development agents and field consultants across the UK who are experts in their local area and have considerable knowledge of the opportunities available and how to make the most of them.

In general terms, the same advice and guidelines apply if you are considering purchasing a new or an existing franchise. Outlined below are my top tips for ensuring you carefully consider the options and end up with the right franchise for you:

Support systems
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The SUBWAY chain owes much of its success to the strong support systems it has for franchisees, allowing each individual to operate within a tried and tested system with excellent training and a solid support structure. This support has been very successful, and the fact that over 70 per cent of all new SUBWAY franchises sold worldwide are sold to existing owners speaks volumes. There will always be room to improve and adapt certain aspects, but if you see yourself as a pioneering entrepreneur then perhaps franchising isn’t for you. Successful franchisees are those that truly understand both the business potential of their franchise and any limitations.

Have you got what it takes?
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To run a successful franchise it’s important you know your business inside out and are prepared to’work the line, which for us means working behind the counter as a ‘sandwich artist’. This experience can prove invaluable, allowing you to master all aspects of your business - from serving customers to managing the everyday running of the store. A willingness to ‘get your hands dirty’ enables you to empathise with your staff and customers, and gives you the knowledge to direct the business effectively. Hands-on management is vital for a successful store.

To be a success in any franchise you also need to be passionate about what you do. Many potential franchisees already have excellent business flair, but you need more than this to run a successful franchise. It’s important
to know your franchise, market, community and competitors - a franchise is hard work and to make it a success you have to know and believe in what you are investing in.

Do your research
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The next step is always to thoroughly research the franchise. Most franchised companies have websites full of information for potential franchisees, including seminars, training guides and background information. Make sure you read the franchise press and attend any local franchise exhibitions armed with questions to pose to those attending.

It’s also important to look at the competition and research market trends and the franchise’s historical performance - are there any potential threats that may affect your success in the future and what plans are in place to address these? Look into any awards or accolades the franchise has received in the past - these are a good indicator that the franchise provides a successful business model.

Motivation matters
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An understanding of what motivates people is a real bonus in franchising. As a quick service restaurant franchise, the SUBWAY chain is faced with the ingrained perceptions of working in a ‘food to go’ outlet. Attracting reliable, customer focused staff and retaining them is a key issue and it’s essential you can offer potential employees motivating factors to keep them challenged within the organisation. The key is to be able to identify individuals who are looking for a long-term career and work with them to identify where you can assist in their goals.

The SUBWAY chain’s career opportunities are endless and employees are encouraged to progress within the organisation, becoming franchisees or moving to other areas of the structure. As well as encouraging progression among store staff, we also encourage successful franchisees to build on their achievements and move on to become multi-unit owners.

Make the mostof existing contacts
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Networking can be an effective way of working successfully within your community. Attending local events and getting to know surrounding businesses can boost your support network and may result in possible partnerships and cross-promotional opportunities.

Try and attend any conferences and meetings that the franchisor organises -these are a fantastic opportunity to share best practice, discuss relevant issues and learn from other franchisees. The SUBWAY chain organises meetings throughout the year where the worldwide SUBWAY community can come together to take part in seminars and brainstorming sessions laid on for their benefit. As well as being of vital importance as a networking and learning opportunity, they also provide a social environment where relationships can be built that can have a hugely positive influence on your business. It also helps you to stay up to date with where the company is
going, as well as any plans for product development, innovation and expansion.

Manage your money
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Once your business is up and running and becoming well established in the local area it may be tempting for franchisees to start to spend their profits. At the SUBWAY chain we caution our franchisees to temper this inclination, to look after the money that is coming in and think ahead to any possible drains on these resources. Good business people will be thinking three-six months ahead and have the ability to anticipate the ebbs and flows of cash flow, putting a strategy in place to address these potential pitfalls. Evaluate any risks, taking an informed and disciplined view.