According to statistics, in the USA half of small business start-ups fail in the first year of operation while in the UK, the statistics are even more depressing with 80% of small businesses going under in the first 18 months of operation. Franchise businesses have a much higher rate of success, but the question is whether it’s the right choice for you.
What are the advantages of a franchise?
A franchise gives you the best of both worlds – the independence of being your own boss but with the support of a large network behind you. Factors such as access to national advertising and the selling power of a recognizable brand/image (based on market research) boost your chances of success. Even if you have no experience in running a business, the franchisor will give you all the training you need and provide ongoing support. They will often negotiate on your behalf so that your supplies are much cheaper than if you had been ordering alone. Provided with a tried-and-tested business model, you’re much more likely to receive financial support from lenders.
What are the disadvantages of a franchise?
If you have a fiercely independent character, a franchise might not be the right business opportunity for you. There will be restrictions on where you’re allowed to operate, which products you can sell and which suppliers you must use which all leave you with little creative control. Apart from these limitations, your contract with the franchisor sets out how profits must be shared. Depending on the agreement, you might have to pay a monthly sum or give a share of the profits (typically 2-10%). Once you have worked hard at getting the business running, there’s no guarantee that your contract will be renewed. Being part of a regional/nationwide network has its downside too. If another franchisee has a bad reputation, this will have an impact on your own business.
How can you find the right franchise?
Trade fairs are regularly organised in major cities which give you the chance to meet face-to-face with franchisors and find the best one for your background, work experience and/or interests.
Alternatively, there are many franchise websites which give you the opportunity to see what is on offer – both new franchises and ones for resale. As well as finding out basic information about the franchise company to help you decide (such as their financial stability and growth), you can use a quick search function or filter to narrow down your search even further. The franchise website might enable you to choose the right business opportunity according to location, industry sector, size of initial investment, or franchises that are part-time, home-based and/or targeted for women.
One of the main reasons that small businesses often fail is because of cash flow problems to meet their daily running costs. As the best lender in the UK, Cashfloat are more than willing to offer a loan to keep your business going when customers let you down.