Experience and skills learned over a career mean age is a bonus when it comes to becoming a franchisee. Here’s what you need to know to get started
Age is a perk
Being more mature is a definite plus when it comes to running a franchise:
“The transferable skills and experience learned over a career are highly valued by many franchisors when they come to select their franchisees and today, around 4,500 of the 40,000 franchised businesses in the UK are run by women age 50-plus,” says Paul Stafford from the British Franchise Association.
Women run successful franchises
Women are also successful in running franchises with the sector enjoying a much higher proportion of female-led business ownership (30%) than the UK as a whole (17%).
4,500 UK franchises are run by women age 50-plus
Why a franchise
From fast food to house cleaning, there’s a variety of franchises out there to choose from. The advantage of buying into a franchise is that you set up in business without starting from scratch plus you get the support of a team. Franchising has also been proven to be one of the safest ways of starting a new business. Some of the best-known brands including McDonald’s, Subway, Domino’s, Clarks Shoes, O2 and Thorntons are franchises. For more on franchise opportunities, visit the British Franchise Association’s website.
Funding a franchise
The range of investment levels in franchising is enormous – from a few thousand pounds for many home-based and/or part-time franchises, up to hundreds of thousands for some of the world’s best-known brands.
Many franchises are available for £5,000-£20,000, with the average total start-up cost around £30,000. Adding the most expensive sector, hotel and catering, that figure rises to around £50,000. The average franchise turnover is £265,000 or that figure rises to £356,000 including hotel and catering. For more than 20 years consecutively, 90% of all franchisees have reported profitability.
Where to get funding
There are three main areas of funding which account for nearly all franchise start-ups: personal investment, family or friends, or bank funding.
Bank financing is still the most common by some way and Paul Stafford says banks like franchises:
“They can look at historical data of how other franchisees have performed and make clear assessments on likely success, giving them a level of knowledge not possible from independent businesses.
“Generally speaking, for an established brand of good standing banks will lend up to 70% of the total start-up cost; for a newer brand to franchising, it will be nearer 50%. The Enterprise Finance Guarantee Scheme can be used in some cases for security on a bank loan,” he adds.
Almost all the major high street banks have franchise departments including RBS, NatWest, HSBC, Lloyds and Metro Bank.
5 tips for gaining finance
- Research, research and more research: the business, the forecasts, the competition and the marketplace
- Approach the bank’s franchise department and not your local branch in the first instance – these departments can offer guidance and support with researching franchises and understand the model intimately
- Create a solid business plan and accurate forecasts: expect to be challenged and understand it comprehensively
- Be prepared for the meeting with the bank manager (practice your pitch)
- Speak to the franchisor – many have strong, long-term relationships with one or more banks and can help with funding, as well as with completing business plans. Franchising is all about being supported in starting your own business, and that includes the funding stage.
First published in yours.co.uk
Author: Sarah Jagger