Red Flag Alert: The franchise opportunity

The recently-launched business intelligence chain discusses its franchise ambitions and what it looks for in potential franchisees...

Franchise: Red Flag Alert
Description: Business intelligence and data integrity practice
Started in: 2014
Founders: Dan Archer and Mark Halstead
Coverage: Availability nationwide
Average cost per franchise: £29,950-£39,450
Website: www.redflagfranchise.co.uk

In 2003 Begbies Traynor Group Plc undertook an evaluation of the data that was available on the performance of businesses. Begbies Traynor developed Red Flag Alert to provide a market leading level of insight. The Red Flag Alert system was so successful in predicting changes in a business’ trading performance that it helped Begbies Traynor to become the UK’s leading independent business rescue and recovery specialist.

The unique software, data relationships and algorithms used by Red Flag Alert have been developed through expertise gathered over 25 years of Begbies Traynor Group history. Red Flag Alert has been proven in over 10 years of development to be a vital business intelligence tool for thousands of users. The franchise was launched in 2014 to continue the successful expansion of the business…

Moving into franchising

So how did Red Flag Alert move into franchising?

We moved into franchising after running the business for a number of years and realising that the service to a local small and medium enterprise was best provided by another local business person. We piloted the franchise extensively before launching the opportunity in June 2014.

The franchise opportunity

What makes the franchise different / unique?

There are no other franchise opportunities in the data/business intelligence software sector so the business offers a new alternative for those seeking a white-collar consultancy type business. The franchise is flexible enough to be started from home and because clients subscribe to the service it offers a recurring monthly income.

What services do you offer?

Franchisees run a business intelligence and data integrity practice with the vision of helping clients “do better business”. The service enables small and medium enterprise clients to reduce the risk of bad debt, evaluate the background of clients and potential clients and access a large volume of high quality marketing data.

How big is the market opportunity?

The market opportunity is vast and growing. The UK market for business intelligence is estimated at £936m and research by Pringle & Co attributes a growth rate (CAGR) of 15% to the global business intelligence and software services market (2011-2016).

How is the brand marketed?

Part of the service offered to clients is the supply of a marketing database so the franchisee’s own “product” is an essential part of the marketing process. In addition quarterly marketing campaigns and centralised telemarketing support are part of the package.

How do you divide the regions?

As a business intelligence provider we hold information on all available six and a half million UK businesses so the territories are designed using this data to give each franchisee a protected territory with an equal number of businesses in it.

The perfect franchisee

What do you look for in potential franchisees?

The franchise is ideally suited to people from a professional background in sales, IT, accountancy, legal services, finance or telecommunications. We look for people with the ability to provide a consultative service to hundreds of small businesses. Our franchise is a technology and information company but people and building rapport are really important to us and will be to a franchisee’s clients.

So do franchisees work from an office, or are they home-based? Is it part-time or full-time?

The business is designed to start from a home office and move into office space once staff have been recruited. The business is full time but there are lifestyle and management franchise options to suit different aspirations.

How are franchisees vetted?

We have a two stage selection process with meetings at our head office in Manchester and at the franchisee’s home. We help a franchisee to produce a bank ready business plan even if they are not seeking funding and we also use this to assess suitability along with psychometric testing. The most important element though is whether we get on with each other.

What do you offer franchisees that sign-up?

We don’t expect franchisees to have industry experience so we offer a three week training course and a structured three month launch programme. The ongoing “total” support package includes business plan reviews, regional meetings, an annual conference and mentoring.

How much do franchisees pay and what are the ongoing franchise fees?

The cost of the business varies depending on whether the franchisee chooses the lifestyle or management route. The total cost is £29,950-£39,450 plus VAT which is reclaimable, and indicative working capital of £3,000 to £5,000. The franchisee would therefore need a minimum of £9,000 to £12,000 in unencumbered funds with the banks supporting the funding of the balance.

Success and growth

How is the brand looking to grow?

We are looking for four to eight franchisees in the next 12 months and we want to make sure we are able to support the network that we build so we will review our support function at that point.

What is the potential of the business?

The business offers net profits of up to £150,000 per annum by year three. Because the revenue is a subscription the business also offers a resale potential which could also realise a sizeable capital return on investment. Our franchisees will be running a market leading business intelligence and data integrity practice and democratising the provision of Big Data for the small and medium enterprise market.

What will the challenges be in achieving that?

Our biggest challenge will be finding enough good quality people to maximise the potential of this growing market. As we approach 2017 changes to data protection legislation from Europe will open up new markets and present even more opportunities for our franchisees.

To what extent are the founders involved today?

The founders are actively involved in the business on a daily basis. Mark Halstead has been with Red Flag Alert since its creation and Dan Archer is responsible for franchising the business. Their experience in business intelligence and franchising is a powerful combination but the franchisees are the “x factor” which make the team a winning combination.

Finally, is the company a British Franchise Association (BFA) member?

Red Flag Alert was awarded membership of the bfa in 2014 and Dan Archer is a former board member of the association serving from 2008 until he resigned to start the Red Flag Alert franchise.

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