Franchising has not only catapulted some of the world’s biggest brands to the forefront of their industries but has also been a game-changer for entrepreneurs. It offers a unique opportunity to scale businesses and establish a lucrative network of operations in diverse locations. As this proven method of mutual growth increases in popularity, it’s left many questioning: ‘How does a franchise work?’. In this article, we’ll cover precisely that and explain how you, too, can benefit from franchise opportunities in the UK like The Rub BBQ.
How Does A Franchise Work? The Complete Guide To Franchising
Whether you’re a business owner considering expansion or an investor looking for their next venture, a franchise could be the ideal solution. By definition, a franchise is the right to market and trade a company’s products using its name. It involves a franchisor and a franchisor who form a mutually beneficial business relationship. Keep reading for the complete lowdown on franchising and how it could benefit you.
- What Is A Franchise?
- Securing A Franchise
- What’s In It For The Franchisee?
- Franchise Vs Startup
- Franchising Examples
What Is A Franchise?
Franchising is a business model in which a brand, the franchisor, expands its footprint through a proven network of franchisees. Franchisees buy into a business through an initial investment; in return, they receive startup assistance, training, and the right to trade under the franchisor’s brand name. Once established, the franchisee will pay a percentage of revenue (typically 5-20%) to the franchisor and may be required to contribute to a business marketing fund.
With over 900 franchise systems in the UK and 48,000 franchise outlets, it’s clearly a popular method of growth for some of the nation’s largest businesses. However, for a franchise to be successful, the business model, product, and systems must be scalable and teachable to franchisees. Many franchisors offer extensive training programmes for franchisees to ensure the business’s standards are upheld and there’s no damage to their existing reputation.
Part of what makes franchise agreements so successful is the vested interests of both parties. The franchisor wants the new location to thrive just as much as the franchisee and will offer continued support throughout the business venture.
Securing A Franchise
The first step in any franchisee’s journey is to register an interest with the franchisor. They’ll usually provide you with a franchise prospectus outlining the business’s history and the responsibilities of a franchisee within the system. If you’re still interested, communications with the franchisor will become more personalised and tailored to your circumstances. They’ll answer any questions you might have and give you the chance to see some of their existing operations in action.
Once both parties have had a chance to better understand each other, they can decide whether to proceed with the franchise disclosure package. These documents are usually protected by a confidentiality agreement as they provide in-depth financial information and a detailed explanation of the business model.
Equipped with a detailed understanding of the franchise commitment, the franchisee must now either sign the franchise agreement and pay the initial fee or walk away. If they choose to continue, the franchisor will provide all the support necessary to get the new location on its feet following its proven processes and often financial assistance to give it the best chance at success. In many business models, franchisees are given exclusive access to territory they are already familiar with. The franchisor will look to build on the strengths of their new franchisee to help grow the business together.
What’s In It For The Franchisee?
Although investing in a franchise can be daunting, the benefits make it a potentially life-changing decision. As with any investment, extensive research and consideration are required before deciding. That’s why many franchisors have a lengthy education and communication process before both parties agree to the partnership. With that in mind, these are some of the ways franchisees can benefit from the deal:
Becoming Your Own Boss
As a franchisee, you’re self-employed, so the level of effort you put into your business will impact you directly rather than those higher up in the chain of command. It’s a fantastic option for those seeking a more rewarding and empowering career path.
Risk Avoidance
You’ll benefit from a proven business model with tried-and-tested systems. Your franchise’s likelihood of failing is reduced because you’re benefitting from the reputation and methods of an already successful business.
Ongoing Support
Your franchisor will assist with admin, insurance, legal documents, finance, and marketing to give your business the best chance at success. Most franchisors offer training and support programmes that teach you how to run the business best. For example, The Rub BBQ’s food franchise provides 1:1 training for all franchisees until they’re ready to operate the business by themselves.
Marketing Support
While getting your business up to speed, finding time to produce compelling marketing material will be difficult. Fortunately, most franchisors already have marketing strategies to promote the business nationally and locally, relieving you of that burden.
Consistent Costing
As part of the franchise agreement, the franchisee will pay a monthly fee to operate under the branding of the franchisor. This fee does not fluctuate, no matter how successful the franchisee’s business might get, allowing them to establish a consistent operational costings and making budgeting a lot easier.
Franchise Vs Startup
If you’re committed to becoming a business owner but don’t want to use someone else’s idea, a startup might be the answer. Starting your own business is far more risky than buying into a franchise because you’re starting from scratch with no proven framework. Data from the Office for National Statistics shows that 20% of new businesses fail within their first year, and around 60% will go bust within their first three years. Some of the best-known franchises have failure rates in the low single digits, so it’s clear the chances of success are much higher as a franchisee.
Despite this, a startup gives entrepreneurs the chance to take home all of their business’s profits without having to pay the licensing fees present in a franchise system. Owners of successful startups may begin franchising their business to ensure its long-term growth and benefit from the contributions of franchisees.
Entrepreneurs who value safety may find franchises offer a more secure path to success. On the other hand, individuals with strong business acumen and innovative ideas might prefer the potentially higher rewards of launching their own startup. Ultimately, the decision between the two models depends on your specific circumstances and is one only you can make.
Franchising Examples
With origins dating back to 1851, franchising has transformed industries and economies worldwide. Many of the largest global brands have cemented their positions as industry leaders through franchising, and some of the fastest-growing brands are finding success in the franchise model. Below are some businesses maximising their growth through franchising:
McDonald’s
Widely seen as the most successful franchise of all time, McDonald’s has an annual revenue of well over $25 billion and over 30,000 locations worldwide. Franchising allowed the fast-food giant to go from a single location to an international brand in just a few years. Over 80% of McDonald’s restaurants worldwide are owned and operated by franchisees.
Skechers
Skechers is one of the leading franchises in the fashion industry. Founded in 1992, the California-based footwear brand had over 2,200 accounts and 30 of its own stores by 1998. Today, there are over 5,200 third-party-owned Skechers stores worldwide. Before starting their own business, new franchisees must go through the Skechers Retail Franchising Program and various other training schemes.
The Rub BBQ
We’ve begun franchising atThe Rub BBQ just seven years after we were founded in 2017, having taken the street food industry by storm. As we look to build on the success we’ve already had as a business, we’ll provide franchisees with ongoing support and 1:1 training to help them hit the ground running in their new food truck. Franchisees will be given exclusive territory and can expect to see a return on their investment within 12 months.
Franchising: Mutually Beneficial Growth
Franchising is a big commitment for both parties, but the rewards can be huge when done right. Franchisors can expand their brand footprint and benefit financially from a business they don’t need to manage. Franchisees can use a successful brand’s proven methods to run a profitable business.
If you’re looking for franchise opportunities UK, The Rub BBQ is the perfect place to start your business venture. We’ve developed a market-leading reputation in the street food industry, and you can use this to become a profitable street food vendor. From marketing and social media plans to in-depth recipe training, we’ll provide all the support you need to become a successful franchise. Our franchisees can expect a return on their investment within a year, so what are you waiting for? Get in touch with our team today!