Choosing a franchise: Should you join a known brand or a new brand?

Alongside big name franchises like McDonald’s and Subway are a host of up and coming businesses. But what’s the right option? Read on to find out

More than 900 businesses operate a franchise model in the UK, and most people know the most familiar ones well – McDonald’s, Subway, Domino’s and so on.

But global giants make up only a fraction of the options available to prospective franchisees. Some are other household names that are not typically known as franchises – such as Clarks, Thorntons or O2 – and some are much smaller businesses, perhaps just starting out in franchising or beginning to expand from their local marketplace. And, of course, everything in between!

There are different considerations in joining a familiar brand or a newer business as one of the first franchisees, and the type of personality you are and the lifestyle you want to lead are critical in your decision-making. Here’s why.

Choosing a big business

Franchisees of renowned national and international brands benefit from significant consumer knowledge of their products and services; often with brand loyalty and expectations already engrained within a core base of customers that keep them coming back time and again.

Most franchises at this stage have national marketing campaigns in place and your brand will be seen on a regular basis. A larger network of franchisees also means there should be vast quantities of expertise to call on, including from franchisees at every stage of development, and support from peers as well as from the franchisor is at hand.

Existing franchisees will also be able to offer you an abundance of historical data as to the expectations of your own business and its potential turnover and profitability.

Head office back-up should be plentiful, with dedicated business development staff and systems, and the proven infrastructure to support franchised outlets up and down the UK. The operational structures will be quite rigorously controlled – brands this size have a comprehensive understanding of what works for their franchisees (and what doesn’t).

While that might mean less day-to-day entrepreneurial freedom, there should also be formal channels in place for ideas to flow from the network to the franchisor, such as forums or advisory groups.

As a general rule, more established brands will have larger start-up costs because you’re buying into consumer recognition, a long-proven model and infrastructure, and because the turnover potential can be highly lucrative with less perceived risk involved.

Good things come in small packages

A brand newer to franchising is a different proposition. With few (or no) trading franchisees to check on aspects such as turnover projections, your research into the people behind the business, and your instincts, are vital.

Usually, you’ll be paying a lower fee to join as the franchise tries to attract early-adopters that can propel it forwards. If you find the right opportunity, that can mean significant reward for taking that risk later down the line if the brand becomes the next big thing in its marketplace. The re-sale value of your business will also be substantial compared to your initial outlay should that happen.

On a growth level, there are plenty of opportunities to branch out – whether through buying a vacant neighbouring territory to expand your own business, or by becoming an experienced mentor to the next wave of franchisees.

You’ll also usually be dealing directly with the business owner(s), giving a personal touch that some find appealing and the ability to discuss new ideas directly with the founder or director. In an emerging brand, the early franchisees can be instrumental in shaping the business as it grows – but remember, you’re still operating within the franchisor’s systems, which have been honed over time prior to franchising.

Having lower consumer brand awareness may not appeal to everyone, but if you’re willing to get in early then the rewards can be considerable. Social media nowadays can also quickly raise local profile in ways not previously possible. And remember, international brands all started with a single franchisee too.

At the British Franchise Association there is a membership category called ‘Provisionally Listed’ to distinguish brands that are newer to the sector and have satisfied an accreditation process. To do so, the business has demonstrated a commitment to ethical franchising, has taken the right advice in setting up their franchise model and has piloted it properly. That’s why membership is an important sign you should be looking for in a newer franchisor to help identify the best from the rest.

Risk versus reward

At its heart, the choice of known versus new franchisor comes down to a risk versus reward equation; how comfortable you are with each on a personal level is very important to establish.

Either way, don’t forget: dedication, hard work and tenacity are vital to your success in franchising, no matter the size of brand you’re operating under.

Paul Stafford is public relations manager at the British Franchise Association (bfa).

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