Tuesday, September 15th, 2009
There is little doubt that buying a business franchise involves a making a big commitment both financially and in terms of the amount of work that it involves. For this reason it is important that people thinking about investing in a franchise take their time in considering the options. If you are investigating a franchise opportunity these are some of the questions you should ask.
What type of franchise is being sold?
Since there are several different types of franchise systems in the UK the first question to ask is what type of franchise is being offered. Probably the most widely known kind of franchise is the business format franchise. Business format franchises involve a broad relationship between the franchise and franchiser. In this type of franchise the franchisee receives assistance with some or all aspects of running the business. Other types of franchise include manufacturing franchises and basic product franchises.
How many franchisees does the company have?
Before investing in a particular franchise it is useful to know how many franchisees the company currently has. A large number of franchisees indicate that the company is successful and well established. However this may not always be a positive factor. A high number of franchisees may mean that the market has become saturated and that there is a reduced opportunity for profit. Similarly prime market locations may already be occupied. Newer franchises that have not yet had time to become established may offer a better long term investment.
How high is the franchise fee?
Most if not all business franchises will require franchisees to contribute an initial investment fee. The size of this franchise fee will vary between companies. If you have a limited budget then the choice of available franchise opportunities will clearly be narrowed down to those you can afford. Many franchisees will take out a loan to help them with their investment.
How much support and training is provided?
Many franchisers will offer training and support to their franchisees to assist them with running their business. The actual amount and quality of support offered will vary between franchisers and so it is important that you investigate just what you will be getting for your money. If you have had little previous experience of managing a business then it is beneficial to choose a franchise that provides a lot of help to its franchisees.
Tags: Business, Company, Directories, franchise, franchising, Investment, Opportunities, UK
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Monday, October 27th, 2008
In the UK there are many franchising opportunities being offered for sale. For people who would like to manage their own business franchising can be an attractive option. People buying a franchise will obviously want to be sure that they are investing in a profitable business. Although buyers can never know exact figures, with work they can make accurate estimates on the likely profitability of the business. Evaluating a franchise to see if it will be profitable enough to make a viable business can be done through a number of stages.
Purchase Price
Every franchise will require its franchisees to pay an initial fee. This fee is the starting point for the franchise agreement. The size of the fee will vary substantially from franchise to franchise. All potential buyers of a franchise first need to calculate how much they are able to invest and rule out franchises that are too expensive.
It is not just the size of the investment that should be considered here. Also to be taken into account are other expenses needed to begin the business. These costs will include the purchase of any relevant stock, equipment, property, transport and IT systems. Totalled together these costs will give the purchase price of the franchise. It is important that franchisees also look at exactly what is included in the investment i.e. is training and support provided or will this be an additional cost.
Estimating Income
Franchisees should ask to see profit and loss accounts of existing branches of the franchise. Ideally to be of maximum use these accounts will be from a branch of a similar size and location to the branch that they are proposing to open. If taking over an existing branch of the franchise estimates will clearly to easier to make although they should be adjusted to account for the new owner’s level of expertise and experience. Franchisors will usually provide financial forecasts which again can be useful when estimating likely income.
Borrowing & Interest Payments
It is likely that anybody investing in a franchise agreement will commit to a certain amount of borrowing. When calculating profitability the repayments on this lending will need to be taken into account. People interested in entering into a franchise agreement may find that lenders are prepared to provide up to 60-70 percent of the initial investment amount. Generally the less the franchisee has to borrow the better. Franchisees should look to see how much they have to invest and then calculate how much they will need to borrow.
Franchise Profitability
By deducting the size of the initial investment, running costs and loan repayments from estimated income potential franchisees can calculate how profitable the business is likely to be. With this calculation franchisees can then decide if the franchise will make a good investment.
Tags: Business, Due diligence, franchise, franchising, Investment, Opportunities, UK, United Kingdom
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Monday, September 22nd, 2008
Newswise – stretching from the Arctic to the Mediterranean and the Atlantic to the Aegean Sea, the European Union represents a single market of over 450 million consumers in 25 nations. New research by the William Rosenberg International Center of Franchising at the University of New Hampshire indicates franchisors from around the world, and particularly those in the United States, are poised to take advantage of this dynamic market.
A new research report, “International Franchising: The European Union (EU)”, was presented recently at the International Franchise Association 46th Annual Convention Schlentrich Udo, a professor of the franchise management of hospitality, and director of the Center for Rosenberg at United Nations Headquarters of the Whittemore School of Business and Economics.
“Although the U.S. based franchisors have been operating in the EU countries for many years, the entry and expansion in the new enlarged EU market is not without risk. The experience of United States-based franchise companies that have operated in the EU system offers valuable lessons for potential entrants and also for businesses interested in expanding into the newly enlarged European market franchise, “said Schlentrich.
According to the International Franchise Association, franchising in 2001 the companies accounted for 56.3 percent of quick-service restaurants, 18.2 per cent of the accommodation establishments, 14.2 percent of retail companies food, and 13.l percent of table / full service restaurants. Franchises employed almost 10 million people, with direct output close to U.S. $ 625 million and a payroll of $ 230 million.
The United Nations Headquarters researchers surveyed 109 US-based franchise companies, representing more than 115000 units worldwide. Of those surveyed, most firms franchise units were located in the United States (69.8 percent), and four out of five franchised units in the United States was owned by franchisees (80 percent). More than half of the United States-based franchise companies (52 percent) surveyed operate units outside the U.S., representing nearly a 20 percent increase in the international expansion of U.S. based systems Franchising since 1996, and a 53 percent increase since 1989.
“The assessment of the franchise in the EU is timely, particularly in light of the potential opportunities presented by EU enlargement with 10 new member countries. Two new countries, Romania and Bulgaria, are about to be given the right to join the European Union, while Turkey and Ukraine are working actively in its implementation. The EU has an active franchise, with hundreds of thousands of franchisors and franchisees operating throughout Europe, generating billions in sales annually, “the report said.
Almost one third (3l.3 percent) of respondents believed that franchisors its future potential in the EU was outstanding, nearly half (48.4 percent) believes it is moderate, and 20.3 percent considered it Limited.
The respondents seem ready for expansion. Nearly four out of five franchise companies (79 percent) plan to open new units outside the United States in the next three years, which represents approximately a 25 percent increase since 1996, and nearly 70 percent increase since 1989. The most important countries / regions identified for the expansion franchise over the next three years were the U.S. (28 percent), closely followed by Canada (26 percent), Europe (15 percent), the Pacific Rim ( 9 per cent) and China (7 percent).
More than half of United States based on the survey franchisors already operating in EU countries, and the majority (51 percent) of those operating in Europe for the United Kingdom, the United Kingdom, where they are most units. Although less than half (45.1 percent) of the United States-based franchisors surveyed do not currently operate units in EU countries, 66 per cent plan to enter the market.
That bodes well for the United Kingdom. More than half (60 percent) of the United States based on franchisors that do not currently operating in the EU find the UK to be the most attractive EU country for entry. However, 22 percent of the U.S. based franchisors that do not operate in the EU said France was the least attractive EU country for entry.
The UK also did well with the U.S. based franchisors already operating in the EU, with 48 percent saying that the UK is the most attractive EU country for expansion. Germany was also considered a good place for the expansion franchise, as well as France. Those surveyed said Cyprus, Malta, Estonia and Slovenia were the least attractive EU countries for the expansion, all newcomers to the EU and each represents a very small market.
Tags: Enlargement of the European Union, EU, European Union, U.S, UK, United Kingdom, United Nations Headquarters, United States
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