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Welcome to the webchat with Karina Fox-Andrews from Travel Counsellors and Nick Tubb from Total Franchise.
They'll both be here on Tuesday (14th October), from midday to 1pm, to answer your questions on starting a home business through a franchise.
If you can't make it for that hour, please post a question in this thread and Karina and Nick will respond on Tuesday.
Look forward to seeing you!
Emma
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Hi Emma What a great idea for a Web chat. I am at a conference all day tomorrow, or I would love to have joined in with this. I think it would be really good if both of the contributors could give a bit of a warts and all summary of starting a franchise with a home-based business. The reason that I say this is that before starting the marketinggym, I worked with a small-business owner to franchise his business and bring on board new franchisees who were all home-based businesses. I spent three years training and recruiting franchisees so it was a real eye-opener. So my opening questions would be What are the key questions that someone interested in buying a franchise should be asking the franchisor before signing up? What are the downsides of being a franchisee? What are the benefits of being a franchisee? Have a fabulous Web chat and I will look forward to reading all the comments! Kind regards Dee Dee Blick MCIM Chartered Marketer The Marketing Gym T: 07845 439332 www.themarketinggym.org
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Great Web-chat idea. Here's my question: If I'm setting up a home based business with an eye to franchising it further down the line, what key things do I need to be doing now. Have a great chat Thanks Heather 
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Hello! As this is my first post, lets see if I manage to do it right first time! Ill try and offer some guidance on these questions, and hope the advice is helpful. In response to Dee's question: What are the key questions that someone interested in buying a franchise should be asking the franchisor before signing up?id say the following.... Researching franchising is a process that takes time, and needs to be done carefully. Starting a business is of course a massive decision to take, and investing in a franchise ensures that you are making a commitment that will usually last at least several years, so it needs to be made carefully. As every franchise has differences in its operational structure, so every franchise, and the franchisors, will have different thoughts on a franchisee recruitment process, so advice will differ from person to person. This often leaves prospective franchisees searching for a definitive list of information, that they should follow in researching starting a business. Broadly, this is available from many sources, such as our links below or from information provided by the British Franchise Association or from the franchise units of Banks such as Natwest and Lloyds. However, many prospective franchisees find themselves uncertain as to whether they have all the information they need, whether there is anything they have missed or simply suffering from information overload, where they have varying advice to certain questions. My thoughts, therefore, are that when it comes to exploring any franchise opportunity, you should seek only to get prior information and guidance on the general topics you should be covering, rather than to seek a definitive list of ready made questions. After all. this is your research process and your decision, so you should be doing the thinking and decision making, even when you dont have definitive answers one way or the other. If this is something that you find difficult to do, then consider that this is what you will be doing day in, day out when running a business. Of course, one of the major key benefits of a franchise therefore, is that you have lots of fellow franchisees and the franchisor that you can utilise for their experience too, of course. For franchisees who have been self-employed in a stand alone business before, it is this 'teamwork' and sharing that they often cite as perhaps the biggest benefit, due to the time saving benefits of having fellow franchisees who have been facing the same challenged that you may be facing at that time. To answer more specifically, the link below is for a resource on our website that, I think, would be exactly what you would be looking for when preparing to meet with a franchisor: http://www.totalfranchise.co.uk/img/data/pdf/interview.pdfIn fact, there are several documents on the following page that will help! http://www.totalfranchise.co.uk/resources
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Hi Heather If I'm setting up a home based business with an eye to franchising it further down the line, what key things do I need to be doing now.Interesting Question! Think of franchising as a business in a box. Take every aspect of what you are doing in your business, such as equipment and software that you use, the whole operations of what you do in your business, sales processes etc etc and document everything. When it comes to training and supporting franchisees, in theory, they will be running replicas of what you do in your everyday running of your business. However, lets step back a moment and consider the following: 1. You cant franchise an idea, only an existing business. In your case then, it would appear you are setting up a business currently, with a thought of franchising in future. I believe your business would need to have at least two years of track record, before you can look at franchising it. Remember that a franchise is a proven business system, so you will need to develop a successful business model, and prove that success, in order to attract franchise partners to invest in your business by becoming franchisees. 2. If you are running a home-based business, when it comes to franchising that business out, what will your role be then? Recruiting, training and supporting franchisees probably, rather than running the business that you have developed. This is one of the biggest challenges to business owners who become franchisors as your role changes so dramatically. There are experts in franchising, that can handle franchise marketing and recruitment services for example, ideal for new franchisors who dont have the time, expertise or focus to handle directly the franchise recruitment, training and support 3. Connected with the above, it is likely that the business will have to take premises to support the staff base needed to support a growing franchise network, plus to give your business a base for the purposes of franchise recruitment. While there are lots of franchise opportunities where the franchisee is home based, the franchisor head office operation is unlikely to be. There are many franchise consultants who can advise properly on how to franchise your business, such as Michael Way, of Franchise Your Business, who I know has helped lots of businessed to franchise successfully over many years. http://www.franchiseyourbusiness.co.uk/directors-consultants.phpDo bear in mind the first point though, but its worth talking to an expert in franchising your business for clear guidance and specifics on your question, as it will save you time further down the line.
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Hi Nick
I've only looked into franchising briefly, but like Heather, am thinking about the idea for the future. I have seen franchises available whereby you pay a low initial licence fee but you then pay an ongoing percentage of profits. Then others seem to have an extremely high licence fee only, and you as franchiser provide an agreed amount of support/training, etc.
I would be looking at a service-based franchise.
I can see how a product-based franchise could withdraw access to their product if they needed to - say a licence had expired but the franchisee tried to continue without buying a new licence.
How would this work for a service-based franchise? Once the franchisee had set up their business, built a client based, etc, they wouldn't need to come back to you to renew their licence. Is that a case for a high initial charge for the franchise, knowing that often people will not renew, rather reinvent themselves?
Does that make sense!
Thanks, Jackie
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Hi Nick
I have been looking at franchises recently. I personally have not found a suitable one yet.
Given the present economic climate, my question would be;
If the franchisor goes out of business, what happens to the franchisee?
Thanks
Catesy
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Hi Jackie
Yes, I think so!
A franchise opportunity is different from a license opportunity. A franchise will usually contain:
1. A franchise start-up fee - covering the cost of recruiting and training you, operational costs, franchisor overheads, equipment and products etc, plus a value fee for Intellectual Property
2. An ongoing fee - to cover ongoing support, Franchisor R&D, business growth, national marketing etc
3. A fixed term - The Franchise Agreement will be for a fixed term, commonly between 5 and 10 years
The cost of franchises varies enormously. A well developed franchise that is very experience, with more resources and a better proven history and stronger brand, you would expect to pay more for, but then you would also expect a lower risk of lack of success. A new franchise will have less in support, less experience, resources etc by comparison, and so present more of a risk but likely to cost less also.
A franchise is a partnership which needs commitment and an agreement of both parties as to obligations that each will perform. If you developed a great business that you franchised out, you owould want to ensure that your franchisees had everything they needed to be as successful as possible, as their success would mean that the ongoing fees they pay to you as a percentage of monthly turnover (as is often the case in service franchises) would be greater. The more successful the franchisees are, the more successful the franchisor is.
This works both ways. If the franchisor provides valuable ongoing training, support, develops a strong brand that benefits the franchisee, then it is in both parties interests that the franchisee renew their franchise agreement at the end of the term. There is not usually a renewal fee such as a need to pay the franchise fee again, but there may sometimes be some kind of new training that the franchisor might encourage the franchisee to take.
If the franchisor is providing the resources and has the brand strength, then it would not be in the franchisees interest to drop out of the franchise and trade alone. They would not be able to operate under that brand, the IP would be recalled, the Franchise Agreement would contain restrictions on the franchisee being able to run a business in competition (albeit very hard to legally impose, they would lose the franchise 'network' and potential sharing of business and clients they may have enjoyed, and they franchisor would be able to take back the clients who are being served by the brand.
As you can see, it can be quite complex, but a good franchise thats has a strong brand and true USP's, should not have a major issues in this regard.
A license opportunity however, does not have the same ties, the licensee does not trade under the main brand, and there are far less obligations on both parties. The licensor makes there money up front, and the licensee has much less commitment ongoing, and less protection too.
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dee wrote:Hi Emma What a great idea for a Web chat. I am at a conference all day tomorrow, or I would love to have joined in with this. I think it would be really good if both of the contributors could give a bit of a warts and all summary of starting a franchise with a home-based business. The reason that I say this is that before starting the marketinggym, I worked with a small-business owner to franchise his business and bring on board new franchisees who were all home-based businesses. I spent three years training and recruiting franchisees so it was a real eye-opener. So my opening questions would be What are the key questions that someone interested in buying a franchise should be asking the franchisor before signing up? What are the downsides of being a franchisee? What are the benefits of being a franchisee? Have a fabulous Web chat and I will look forward to reading all the comments! Kind regards Dee Dee Blick MCIM Chartered Marketer The Marketing Gym T: 07845 439332 www.themarketinggym.org Hi Dee, The main question we get asked is 'How quickly can I earn an income and recoup my investment?' - As a Travel Counsellor Associate you can start to sell holidays after your initial 2 week training, so the franchisee can start to earn an income straight away. We also get asked about backup and support. Starting a franchise in a new industry is daunting for anyone so having a good support network is really important. Here at Travel Counsellors we have over 200 support staff, so someone is on hand to answer questions and support the franchisee in all areas of the business, from admin to marketing. This is also a great benefit of being a franchisee rather than starting out completely on your own. Thanks Karina
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Thank you Nick. Jackie
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Hi Catesy A timely question. This will vary franchise by franchise. Check the Franchise Agreement. Challenge the franchisor on this and also ask franchisees of the franchise (once you have started to narrow down to one or two) for their views on this. Ensure you get the Franchise Agreement checked. This costs around £400, but use a specialist Franchise Legal Expert, like Nina Moran-Watson and see what the Agreement says. http://www.whitecollarfranchise.co.uk/Profile/MoranWatson[url]It really depends on the nature of the franchise as to whether a franchisee can continue to trade under the own name like with product based franchises but in most cases the franchisee will be able to continue, with the main issues being replacing the parts of the business that the franchisor provided before. In the 1990's, franchise advertisements often focussed on how 'recession proof' a franchise was. This term has seen to fade away over the course of this decade, but expect to see every franchise advert focussing on how their opportunity is strong in adverse economy very soon! The question you need to really ask yourself though, is whether you would feel as confident that the business in question is not at risk in a declining economy as the adverts say?!
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Karina FA wrote:
Hi Dee,
We also get asked about backup and support. Starting a franchise in a new industry is daunting for anyone so having a good support network is really important. Here at Travel Counsellors we have over 200 support staff, so someone is on hand to answer questions and support the franchisee in all areas of the business, from admin to marketing. This is also a great benefit of being a franchisee rather than starting out completely on your own.
Thanks
Karina
Hi Karina How big was your support staff team in the beginning? (I don't know how long you have been a franchisor). I assume it has grown to 200 over time. Is it possible to start a franchise with just a couple of people and grow as it grows? Or am I being completely naive!? Jackie
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[quote=catesy]
If the franchisor goes out of business, what happens to the franchisee?
Hi Catsey,
When choosing a franchise I would certainly recommend going with a well established company with a proven track record. In the event of a franchisor going out of business the answer is fairly complicated and depends on the individual circumstances. Generally (and in very simple terms), when a company goes bust an administrator will try to sell the assets of the company to a third party purchasor, in the case of a franchise the trade name & franchisees would probably be regarded as assets.
I can only speak on behalf of the travel industry, but as I am sure you have read on many reports & surveys, travel is one of the last things people forgoe. We have found that our booking patterns have changed - people are booking later, but still travelling.
Regards
Karina
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For anyone considering starting a franchise, or thinking about franchising their own business, I personally would recommend you attend a free evening seminar, run by the the Franchise Information Team, sponsored by NatWest Bank. They seminars are to help people understand franchising, the upsides and downsides, learn about researching franchising, see some case studies, and learn about funding for franchising. We, (Totalfranchise.co.uk) host the seminars, as we want our users to make the most informed decision possible when starting a business. These are educational events, not a sales pitch! http://www.totalfranchise.co.uk/FranchiseSeminarsHave a look at the forthcoming dates and venues. I am sure that if you attend, you will find it extremely worthwhile.
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It's 1pm and time to bring this chat to a close!
Thanks for your great questions and to Nick and Karina for their great answers.
Until tomorrow's webchat, happy homeworking!
Emma
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jackiehatton wrote:Karina FA wrote:
Hi Dee,
We also get asked about backup and support. Starting a franchise in a new industry is daunting for anyone so having a good support network is really important. Here at Travel Counsellors we have over 200 support staff, so someone is on hand to answer questions and support the franchisee in all areas of the business, from admin to marketing. This is also a great benefit of being a franchisee rather than starting out completely on your own.
Thanks
Karina
Hi Karina How big was your support staff team in the beginning? (I don't know how long you have been a franchisor). I assume it has grown to 200 over time. Is it possible to start a franchise with just a couple of people and grow as it grows? Or am I being completely naive!? Jackie Hi Jackie, Yes you are correct, our support team has grown over time. The company as a whole was founded in 1994. Our team of 200 head office staff are there to support the franchisees. As the number of franchisees grow, so do the number of support staff accordingly. In answer to your question about starting with just a couple of people - that would depend on the nature of the business. Working in travel means that there will be many different elements in growing your business, including the technology to sell travel and the way in which you can market your business. Our franchise is quite unique in that we provide support in these areas, including admin, marketing, IT, general helpdesk, commercial deals...so you can focus on selling travel, servicing your customers and growing your business. Of course all franchises are different and some could survive with just a few support staff.
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Thanks Karina. 200 support staff - you've given me something to aim for!
Kind regards, Jackie
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Thanks for your time everyone. If anyone is interested in finding out more about Travel Counsellors please register for our webcast which is being broadcast tonight at 8pm. To register please email recruitment@travelcounsellors.com . Alternatively please feel free to contact me with any questions you have on karina.foxandrews@travelcounsellors.com. You will also be able to view our webcast on the Enterprise Nation site shortly. Many Thanks Karina
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Hi Jackie Every business has to start somewhere, a franchise is no different. When you look at the hundreds of franchises in the UK, the majority are quite small businesses, even when they have a large franchise network. Two of my former employers are Auditel and Expense Reduction Analysts, cost management consultancy franchises that are currently enjoying fantastic business thanks to the present economy as the franchisees help businesses to find better value from suppliers and save money. The franchisees share the savings with the client, and no fees are due if no savings are found - simple. See these and other executive style franchises at www.whitecollarfranchise.co.ukToday, both of these franchises have around a dozen support staff and have UK franchisee networks of around 120 - 140. Both started in the mid 1990's with two people - the MD and their assistants, and have grown steadily since Every franchise is different of course, and needs less or more support staff depending on business model. Do consider though, that the franchisors costs need to be covered, and so these fees are normally absorbed in franchise start-up and ongoing support fees. So expect a very large franchisor with lots of resources in place to cost accordingly in most cases. You'll see that on the franchise Profile Pages of the various franchises on the Totalfranchise websites, there is a box that gives a snapshot summary of how estanlished a franchise is, such as the links below: http://www.whitecollarfranchise.co.uk/Profile/UKWebsaverhttp://www.femalefranchise.co.uk/Profile/ActivWebDesign
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Hi all Can I also recommend that you make use of the advice and services offered by the British Franchise Association. They offer seminars to prospective franchisees and franchisors. Here's a link to their site http://www.thebfa.org/Lee Riverford Home Delivery - Shrewsbury & Telford www.riverfordstockley.co.uk
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