If you’re looking to invest in your own business in the UK, you might not want to start completely from scratch. If this is the case, a franchise could be a brilliant investment opportunity. From household fast-food names to home care companies and mobile services, the franchising sector in the UK contributes £19.1bn to the economy each year, but what is a franchise business?
In this blog, we’ll cover everything you need to know about franchises, including how these models operate, the various types of franchises, and why investing in this industry can be a brilliant opportunity for future business owners.
What is a franchise business? Explaining the franchise model
A franchise is a commercial company that operates where the main party offers other groups or individuals the right to use their brand name and operate using their systems. A franchise business model includes two main entities: the franchisor and the franchisee.
The franchisor is the parent company that owns the brand, products, any trademarks, and operating systems.
A franchisee is a business or individual that invests in the franchise or purchases a licence to operate under the franchisor’s brands in a designated area or territory.
How a franchise works
A successful franchise relies on alignment with legal requirements, operational consistency and efficient use of finances.
The role of the franchisor
A franchisor is in charge of national advertising and marketing of the wider business and controls the brand name and image. A franchisor is also in charge of managing compliance with regulatory bodies like the CQC and ensuring franchisees all conform to these requirements.
Ongoing training and alignment with brand values and goals is also a franchisor’s responsibility, acting as a point of reference and guidance for all franchisees to follow.
The role of the franchisee
As a franchisee, you’re in charge of running operations in your chosen domain. This includes hiring and managing local staff, and ensuring you comply with UK employment regulations. Organising staffing schedules, managing operating systems and liaising with clients are all part of your responsibilities, with guidance from the franchisor when required.
You’re also responsible for delivering your franchise’s services in your area and generating revenue for your business.
What are the different types of franchises in the UK?
There are a wide variety of popular franchises across the UK that contribute a great deal to the British economy. These franchises operate across B2B and B2C sectors and fall under the following categories:
Fast food franchises
These include prominent high street names like Greggs, Costa Coffee, and the most famous franchise, McDonald’s. Operating as in-person or drive-thru stores, fast food franchises operate with high volumes and require a high initial investment.
Home care franchises
Home care franchises like us at Bridgewater Home Care offer a range of care services to clients in their homes. As part of these franchises, home care services operate across offices in different locations and hire care staff to make home visits. This industry is regulated across the UK and subject to registration with and period inspections by public bodies such as the CQC in England, Care Inspectorate in Scotland and Care Inspectorate Wales. This franchise has relatively high initial investment, but many banks and franchises offer loans that make the initial costs more affordable.
Mobile and trade services
These franchises include a wide range of services like home cleaning, gardening and decorating that operate on a mobile basis, carrying out work in homes or other businesses. These franchises typically have much lower franchise costs as all major tools and equipment can be stored in your vehicle and offices can remain small and streamlined.
Gyms and fitness studios
Big names like PureGym operate on a franchise system, with franchisees leasing commercial properties and specialist gym equipment in a dedicated area under the larger brand’s name. These franchises are another high-cost investment and involve hiring expert staff like personal trainers and adhering to equipment and building safety standards.
Whilst there are a number of other franchise examples, these are the most common and popular options to invest in in the UK.
How much does it cost to invest in a franchise?
The costs of buying a franchise vary greatly depending on the industry and the requirements. The total investment for a franchise can be anywhere from under £10,000 to over £500,00 depending on the size and scale of the business.
What costs are involved in joining a franchise?
- Initial investment fee – This is usually the largest lump sum payment that secures your rights to work under the franchisor, secure a territory, and access their systems and support services.
- Real estate and premises fees – The second largest fee, this involves renting a commercial property and fitting it out with all the equipment and decor you need. If you have a mobile business, this cost can be considerably less, but for fast food premises or gyms this cost can be £100,000 and above.
- Stock and vehicles – If you’re a mobile franchise service, you’ll need to purchase stock and vehicles and have them customised to display your franchise information. This cost may replace real estate for trade businesses.
- Working capital – You’ll need a reserve to cover staff salaries, utility costs and marketing material until your franchise is fully launched and generating revenue.
How does the franchise process work?
If you’ve decided to invest in a particular franchise, you’ll need to go through several different checks and processes before you become an official franchisee.
- Screening: The franchisor will assess your employment and business background and may also assign a territory based on your area of employment or local demands.
- Legal and financial screening: Your finances will be reviewed by the franchisor to determine if you can afford to invest in their franchise. If you’re applying for a loan, this is when you’ll present your franchise/ business plan to a lender. A solicitor should also review the Franchise Agreement at this stage to ensure everything meets BFA (British Franchise Association) standards.
- Training: Once you’ve been approved and are officially a franchisee, you’ll need to undergo detailed training on your franchise’s sector, operating systems and compliance requirements. You’ll also need to complete statutory training on things like National Living Wage and any health and safety compliance.
- Setup and soft launch: At this point you’ll need to set up your premises, fit any equipment and install any software and systems needed for operations. You’ll also begin the process of hiring staff and advertising your local offerings.
- Ongoing support: Once you’ve officially launched and are fully operational, you’ll start to receive income, ongoing training and support, and national marketing coverage from your franchisor.
Of course, every franchise has its own unique structure, and this process differs across various industries. At Bridgewater, our business opportunity involves dedicated support from the national office team and our founder, Phil Eckersley, at every stage of the journey so you can create a successful, compliant business even if you’re not a home care expert.
The advantages of investing in a franchise business
For many first-time business owners or entrepreneurs, investing in a franchise is a brilliant option and comes with a range of benefits and advantages.
Proven business models
One of the main advantages of a franchise is reduced risk for investors. You’re becoming part of a business that already has a proven track record of success, with established operational models, software and processes in place that allow sustainable and stable growth.
Dedicated and ongoing support
As one of the faces of an existing brand, a franchisor has a duty and responsibility to ensure you’re following rules and regulations as well as positively representing an established brand name. This means that as a franchisee you have access to structured and standardised support and training, and not just during onboarding but throughout your entire journey. Many independent business owners struggle with accessing the help they need in specialist industries, but for franchises, this issue is removed.
Established branding
One of the toughest parts of building an independent business is getting your brand out there. With a franchise, you have the benefit of an established brand, trusted services, and an existing client base. This makes it much easier during the initial startup phase and allows franchisees to start generating revenue faster than typical start-up businesses.
Lower rate of failure
Recent data shows that over 90% of franchises report profitability, a much larger number than independent businesses. This puts franchisees at a greater advantage compared to other businesses and reduces the risk involved in the initial investment.
The disadvantages of a franchise business
Whilst there are a large number of advantages to a franchise, as with every investment, there are some disadvantages to this decision.
Royalties and expenses
Alongside monthly management service fees, you may also need to pay ongoing royalties or expenses to the franchisorThis can eat into your gross profit, especially in the early months when you’re just starting your business.
Less operational freedom
Due to the already established procedures and processes, there’s less freedom to control pricing and branding. If you’d prefer to create your own rules, image, and services, you’re limited in what you can do with a franchise. If, however, you want less hassle and the stability of established processes, this may actually be a benefit.
Territory limitations
When you become part of a franchise, you’re limited to the area you’re assigned and cannot expand your operations unless you decide to buy another territory from the franchisor or an existing franchisee to set up multiple locations.
Brand dependence
If anything happens regarding the reputation of the brand, such as a scandal or negative reviews, this affects all franchisees. This can in turn lead to a loss of clientele and trust and puts the entire franchise network at risk.
How to decide on the right franchise for you
With so many different franchises spanning across different industries on various scales, it can be difficult to know where to start when it comes to investing.
Ultimately, the decision comes down to your finances and personal needs/ requirements from your business.
If you’re looking for low start-up and investment costs for a franchise, a mobile franchise like cleaning or gardening can be a great starting point. This not only requires lower initial fees but also saves money on utilities and rent for larger commercial spaces.
If you’re searching for a high-cost, high-reward model, a fast food franchise might be for you. Although this typically has the highest fees, fast food franchises typically have the highest profits, and working with well-known names can get your business off the ground quicker.
For entrepreneurs looking for sustainability and an industry that makes a social difference, we’d recommend a home care franchise. At Bridgewater Home Care, our franchise helps franchisees create a stable, profitable business that offers essential specialist care across the UK.
If this sounds like the right investment for you, our team is here to help. Get in touch with our team today, and we’ll walk you through the process of becoming a home care franchisee.
