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