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Franchising Workshop
Franchising Workshop
Barry - Ortus
Franchising Workshop
Franchising Workshop Part I
Franchising
A growing opportunity for Northern Ireland
Barry A Kelly
Franchise Services Manager
@
What is Franchising?
A business method that involves the licensing of Trademarks and Ways of
doing business
TERMSFranchisor = ownerFranchisee = purchaser
The origins of franchising
1850 … Singer Sewing Machines Isaac Singer Sold Licenses to Distribute/Service/Train
1955 … Ray Kroc Milk Shake Machine Salesman Joined 2 Brothers Cafes Business… Now the Biggest Franchised Food Business in the world…
Who are they now????
Franchise Industry Stats
UK• Annual Turnover: £13.4 Billion• Franchisors: 929• Outlets: 40,100• Employed: 594,000
ROI• Annual Turnover: 2.4 Billion• Franchisors: 300+• Outlets: 4,086• Employed: 42,927
91%of franchise outlets are profitable
49average age of
franchisees
Global:Brand
Developer/Franchisor
Country:Master Franchisee
Local Franchisee
Local Franchisee
Local Franchisee
Structure of Franchise Network
Structure of the franchise Network
MASTER FRANCHISES •Duplicates all the original functions of a Franchisor
•Buys/Develops the Franchise right for a wide territory/country/region and manages the franchise system for the franchisor
•Appoints, trains and receives a fee from the franchisee for specific territories within their country
Business growth through Franchising
Trading locally
Growing nationally(Or internationally)
A realisation of full potential
Franchising SectorsProperty Services
Personal Services
Business & Commercial Services
Hotel & Catering
Store Retailing
Transport & Vehicle Services
How do I develop my franchise model?
Franchise Feasibility Study Development of Financial Tools Development of Operations Manual Development of Franchise License Agreement Franchisee Recruitment Specification Development of the Franchise prospectus Intellectual Property Protection
Self employment through Franchising
In Business for yourself
BUTNot by yourself
What does a Franchise Cost?
Start at as little as £3,000 and go up to hundreds of thousands
Average franchise fee costs £10,000 - £22,000
Average total investment is £44,000
Average cost of a Personal Services Franchise is £24,000
Average cost of Hotel & Catering Franchise £140,000
Recognise any of these?
£280,000
£100,000
£125,000 - £325,000
£3,000 - £5,000
£8,000
£9,999
Advantages of Franchising• Your business is based on a proven idea.
You can check how successful other franchises are before committing yourself.
• You can use a recognised brand name and trade marks. You benefit from any advertising or promotion by the owner of the franchise - the "franchisor".
• The franchisor gives you support - usually including training, help setting up the business, a manual telling you how to run the business and ongoing advice.
• Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.
• Risk is reduced and is shared by the franchisor.
• If you have an existing customer base you will not have to invest time looking to set one up.
• Relationships with suppliers have already been established.
• No need for experience in the sector you choose! Training is provided
Disadvantages of Franchising
• Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing royalties and you may have to agree to buy products from the franchisor
• Contract / Agreement may be set for a period – may not allow for trial periods .
• The franchise agreement usually includes restrictions on how you run the business. You might not be able to make changes to suit your local market
• The franchisor might go out of business, or change the way they do things.
• Other franchisees could give the brand a bad reputation.
• You may find it more difficult to sell your franchise - you can only sell it to someone approved by the franchisor
• You may not like to continually pay Management Service Fees/Royalty Fees and Advertising & Promotional levy’s
Northern Ireland Franchise Show
The FranchisingNI Brand has initiated and facilitated Northern Irelands only franchise exhibition in both 2011 & 2012 with
the support of
FranchisingNI delivering franchise programmes
In summary…….Chances of Survival
60% Independe
nt Businesse
s Fail within 3 Years 80% of
franchises Survive
more than 3 Years
Less than 4% of
franchises fail each year for
commercial Reasons
When franchising is viewed historically, it reveals itself to be a valuable competitive strategy for enterprises both large and small, and a potential incubator for entrepreneurial initiative.
It facilitates achieving scale economies, risk and resource sharing, symbiosis, and rapid geo-expansion.
In its public form, it creates utility while simultaneously eliminating learning-curves, and community expense and risk.
In its private form, it provides shelter and support for the nascent entrepreneur.
In summary.............
Any Questions?
Mark JohnstonUlsterbank
Franchising Workshop
Overview of Financing – what are banks looking for
Mark Johnston Mark Johnston Business Development ManagerBusiness Development Manager
Ulster Bank and Franchising Ulster Bank and Franchising 44thth March 2013 March 2013
Mark Johnston Mark Johnston Business Development ManagerBusiness Development Manager
Ulster Bank and Franchising Ulster Bank and Franchising 44thth March 2013 March 2013
AIMS
Explain franchising within RBS Group
Provide a list of steps to consider before approaching a lender
Provide an overview of how a bank looks at a franchisee proposal
Ulster Bank and Franchising
Part of the RBS Group
• Specialised Franchise Section established in 1981• Market leaders in the UK• Strong relationships with franchisors and franchisees• Local presence in the Northern Ireland market via Ulster Bank
• All Ireland/ UK uniform approach to Franchising working within the RBS Group
• Competitive terms• A real person and direct telephone line • An understanding of franchising and the specific franchise you want to talk
about
What do we mean by Franchising?What do we mean by Franchising?
Franchising
The owner of an existing business (the franchisor) gives investors (franchisees), the right to operate a business under their brand in return for a portion of revenues generated.
The Franchisor provides a ready-made, established and proven business format including trade name, know-how, training and support.
The Franchisee buys rights to clone the whole business package from the franchisor (normally) in a specific territory for a specified period
Why do banks like franchises?
Why do banks like franchising?
Proven, tried and tested business system mean Reduced risk but Not risk-free
• Good way of starting a business for yourself but not by yourself
Proven business format and track record Training and on-going support
• Better track record of success
Franchisee Considerations before approaching a lender
Steps before meeting the bank...
Personal Assessment
Choosing the right type of business
Choosing the right franchise
Advisers
Bank View of Franchising
What a bank looks at…..
Business Plan
• Personal Assessment
• Market/Competitive Assessment
Market Place Sector Location Marketing Place
• Financial Projections
Set up costs Borrowing Requirements Assets and liabilities Cashflow forecast, profit & loss, balance sheet
Franchisor & Track Record
Lending Criteria
For proven, established franchise systems the bank will lend up to 70% of the total start up costs including working capital.
Security will generally be required
Funding for Lending Scheme
May be eligible for assistance under the Enterprise Finance Guarantee Scheme
Term of any loan will not be longer than that of the franchise agreement
Borrowing Facilities Available
Term Loans – truly flexible
• Capital Holidays• Low Start Repayments• Staged Drawdowns
Committed Overdrafts
Business Charge Cards
Other services• Credit/Debit card processing (Streamline)• Leasing/Hire Purchase (Lombard)• Factoring/ Invoice Discounting (Commercial Services)
Key things to consider
Take care not to over/ under borrow
Undertake thorough market and financial research before signing any agreements
Talk to other franchisees
Assess the business experience and financial position of the franchisor
Take Independent Legal Advice from a franchise lawyer
RBS Group does not warrant, RBS Group does not warrant, recommend or recommend or
endorse specific franchise systemsendorse specific franchise systems
Helpful Websites Starting your own business? When starting your own business the more information you have the better. We have listed some
helpful websites with information to help you on your way to making your business idea a reality. www.ulsterbank.co.uk
www.smallbusinesscan.com www.intertradeireland.com www.investni.com/index/start www.enterpriseni.com www.fsb.org.uk/ni www.nibusinessinfo.co.uk
Joining a franchise? By joining a franchise you have the opportunity to enjoy being your own boss while benefiting from
the security and support that comes with being part of a franchise family. We have listed some informative websites to guide you through the process of becoming part of a franchise.
www.franchise.co.uk www.thebfa.org www.irishfranchiseassociation.com www.franchiseoptions.ie www.whichfranchise.com
Any further queries please call Mark Johnston 07766133466
Thank You
Franchising Workshop