Small Business Startup Guide
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Things to consider before Starting your Franchised Business
What is a franchise? In simple terms a franchise is when a franchisor offers its business model/intellectual property to a franchisee in return for consideration (money). Most good franchisors will support their franchisees throughout both the business setup and growing stages.
Is it better to buy a franchise or set up on my own? This is a difficult one to answer but certainly statistics indicate that franchisees are far more likelier to still be in business after 5 years than their non-franchisee counterparts. However, if you already have considerable business experience and do not feel that the added value of having an "established" brand name is sufficient then buying a franchise may not be for you.
 Get independent advice. Never pay over money for any franchise without speaking to established franchisees who have been in business for a number of years. It is also highly recommended that you try and purchase a franchise which has been "vetted" by the British Franchise Association. Further, do not rush into anything and in particular make sure that you have subscribed to a few months worth of specialist publications such as Business Franchise Magazine.
Is it difficult to raise finance? Well established franchises often have close connections with banks and other financial institutions so raising money is often easier with a franchise than for an independent business idea. The reason is simply that there is empirical evidence for lending institutions so they are aware of the potential risks which would be more difficult to quantify for an independent enterprise no matter how good an idea.
Should I take out a franchise in my name or form a company? Generally it is better to register a limited liability company as this effectively separates you and your personal assets from those of the company. In addition, in most cases it is also better since UK corporate tax levels - especially for start up's - are amongst some of the lowest in Europe and significantly lower than for individuals. |
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