Owning a franchise is appealing. You don’t need to establish a brand, you don’t need as much money, and technically, the store is yours. By definition, being part of a franchise gives an individual the right to market a product or service using the brand name or trademark. In the UK, there are approximately 48,000 franchise units. That’s an increase of nearly 25% since 2011. That increase is attributed to the growing number of businesses franchising their brand – McDonald’s, Dominos, Starbucks, and Pizza hut are amongst the most common franchises.
But it’s not all plain sailing – despite having the backing of the brand, there are some truths to running a franchise to explore. Keep on reading to find out more.
B2B Franchising
B2B franchises aren’t as common, but there are opportunities to make tons of money. The potential to earn big money comes from the big market. Statista states that the global B2B industry was worth a staggering $14.9 trillion in 2020 – that’s over five times the B2C market value. The B2B industry focuses heavily on customer relationships and buyer enablement, rather than the B2C industry, which very much focuses on the end sale.
That’s the difference between B2B and B2C franchising. B2B buyers operate differently. They want low-risk, high reward purchases from brands that make the buying cycle seamless. That is achieved by providing buyers with the information they need, improving the omnichannel experience, using a customer incentive platform for rewards-based purchases, and offering premium services.
B2C Franchising
B2C franchising is more common than B2B, although there is an increasing number of B2B franchises as the industry booms. One of the home truths about B2C franchising is that it’s not cheap. The average cost of signing up to be part of a franchise is between £500 and £300,000, depending on the brand. And franchising is all about the brand. The actual average startup cost is £42,000, but that includes securing the franchise, working capital and equipment and stock fees.
There’s also the matter of continuous payments to the brand, known as ongoing fees. That is typically paid as a flat-out fee or a monthly payment to the brand. That fee is often a percentage of sales that benefits the franchise and the franchisee – the more money the franchisee makes the brand, the more opportunities that’ll follow.
The Keys To Franchising Success
Buying into and running a franchise is similar to owning and running a startup business – except that a startup business already has an established brand that yields high profits. There are, however, still points to consider for franchising success. The International Franchise Association recommends researching the following before diving into the franchise world:
- What experience is needed to run a franchise
- The track record of the brand you’re buying into
- How other franchisees within the brand network are performing
- The fees for continuing to own the franchise
- The terms and conditions of the franchise agreement
- The financial stability of the franchisor
Running a franchise is no different to running a business. Standard business management tips apply, but areas like marketing – a substantial outgoing for most brands – and spreading brand awareness won’t be necessary. Business management skills, however, are.
Would you consider joining a franchise? A successful franchise can yield profits of anywhere between £2,000 and £50,000 per year, with the most successful franchises making upwards of £75,000. Many investors even buy into multiple franchises as part of an investment plan.
