Franchising FAQ’s

1. How successful is franchising in the UK?

Last year 1,025 franchised businesses opened their doors, according to the NatWest/bfa 2009 UK franchise Survey – that’s almost three a day! In fact, the number of franchisees has grown year-on-year for over a decade. The survey reveals that the industry is now 45 per cent larger than it was in 1995 in terms of number of franchised units (there are now over a quarter of a million franchised businesses operating in the UK). These franchises have been awarded by 718 brands offering business format franchises (compared with 474 in 1995), and in total franchises turned over £9.1 billion in 2004. Brian Lewis, Former Chairman of the bfa, confirms that franchising is set to ‘explode’ as awareness of the concept grows in the UK, which is perfectly feasible when you consider that in the US over half of all retail sales are generated through franchised outlets.

2.Do I need relevant experience of the sector?

‘No prior experience required. The reason for this is the commitment within the franchise industry to franchisee training, in fact all business format franchisors provide it. Comprehensive training opens up the availability of a franchise opportunity to a much wider population of potential franchisees, enabling the franchisor to select the best candidates in terms of commitment, drive and enthusiasm for the business rather than searching for relevant experience.

3. Is my investment safe with a franchise?

The odds of survival for more than three years – never mind achieving a profit – for a new business start-up in the UK today are less than seven out of ten, according to VAT registration and de-registration statistics released in 2009 by the Department of Trade and Industry. That means one third of the UK’s entrepreneurs that plough their business loans and nest eggs into new businesses will lose out to poor marketing, bad organisation, wrongly identified markets, inaccurate financial forecasts, management mistakes, shifting economic conditions – or any number of other pitfalls littering the road to building a successful business. Meanwhile, according to the UK Franchise Survey just 1.4 per cent of franchises changed hands due to commercial failure last year, with an additional 0.3 per cent due to disputes. The reason for this is that by investing in Activ you receive a business concept that is offering a service with proven demand and profitability. The systems and procedures are professionally constructed, supported by experienced management staff and the franchisee will benefit from a tried and tested business model with proven results.

4. What types of businesses offer franchises?

The United Kingdom Franchise Directory identifies three major sectors of franchising: Food & Beverages, Retail and Services. The types of franchises can be divided into categories: Job Franchises, where the franchisee operates the business hands-on; Sales & Distribution Franchises, where the franchisee is on the road, selling and/or distributing products in his territory; Executive Franchises, where the franchisee runs a one-man, white-collar business; Retail Franchises, where the franchisee invests in commercial property, staff and inventory to help operate a shop-unit; Investment Franchises, where the franchisee puts up the capital and appoints a manager to run the business; and Management Franchises, where the franchisee manages a team of operatives.

You should think about which type of franchise would suit your skill set the best!

5. What is the growth potential of a franchise?

Franchising offers the franchisor a route to national expansion that is usually much speedier than company-owned growth, because a franchisor will not need to build up huge staff and premises costs – rather the franchisor’s capital can be committed to developing a small central organisation with a few highly skilled staff. By speeding up expansion through franchising, a network of franchisees achieves higher economies of scale earlier, stronger brand awareness, is much sooner able to challenge for national contracts and, in the case of a fledgling market, is in a much better position to capture early market leadership and establish a dominant position over its non-franchising competitors. A reported 74 percent of franchisees report turnovers over £50,000 per year, 35 percent registering at the top end of over a quarter of a million (according to the UK Franchise Survey). Translating this into profitability, 79 percent are reporting profits within their first two years and overall 88 percent in total are earning an income from their business.

6. What exclusivity do I have for my franchise?

With Activ, you will be supplied with a designated area which you will have sole exclusivity in. The territory will be agreed before any money changes hands.

7. Is my franchise legally protected?

All franchisees sign a franchise agreement with the franchisor in order to secure their franchise, the main function of which is to clearly set out the extent of the rights to be granted, the territory in which those rights apply, the exclusivity of the rights in the territory and the term in which the rights exist. A typical agreement will outline the franchisee’s exclusive rights to market, build a business under, profit from and possibly sell sub-franchises under the brand within the territory for a reasonable term. There are a number of specialist franchise lawyers operating in the UK, and many are affiliated to the British Franchise Association. Because they are familiar with the nature of the franchising relationship, these practices will be able to judge a franchise contract that not only protects your business, but also keeps in mind commercial considerations.

8. Why choose Activ?

Activ have worked with countless number of franchisees and we are one of the biggest online franchise companies in the UK.

The Activ franchise opportunity starts from £4,995 + VAT and we have people in our network generating a fantastic income

Get in touch to find out how an Activ Web Design franchise could work for you!