Which Franchise to Buy – Established Name or New Kid on the Block?

Pip Wilkins

Pip Wilkins
Chief Executive of the
British Franchise Association (bfa)

There are currently more than 900 brands using a franchise model in the UK, and if you ask the average person on the street to name some then they’ll most likely come out with the usual suspects – McDonald’s, Subway, Domino’s and so on.

However, those global giants make up only a fraction of the options available to prospective franchisees.

Anyone who has begun to delve into what’s on offer will soon find a multitude of brands large and small with tempting and very real business propositions.

Some of those propositions are other household names that are not typically known as franchises – perhaps Clarks, Thorntons, 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!

What does this mean for you, the prospective franchisee?

There are very clear advantages to both the familiar, established brand as well as the new kid on the block when assessing what the right opportunity is for you. Like so many considerations when you’re doing your research, the type of personality you are and the lifestyle you want to lead are critical in your decision-making.

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 in addition to head office resources, including from franchisees at every stage of development and size. Those franchisees will also be able to offer you, the prospect, an abundance of historical data as to the expectations of your own business and its potential 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.

And the operational structures will be quite rigidly controlled – while it’s true to say that the Big Mac was the invention of a franchisee, brands the size of McDonald’s are by now very successful at determining what works for them (and what doesn’t), and therefore you’re going to have to follow the franchise system very closely, with less day-to-day entrepreneurial freedom.

Still, when that system has been shown to work time and again, that’s exactly what you are paying for!

Those are some of the reasons why renowned brands come at a premium price. As a general rule, the most established brands will have higher start-up costs precisely because you’re buying into a more proven model, and because the turnover potential can be highly lucrative with less perceived risk involved.

Good Things Come in Small Packages

A brand newer to the market and/or to franchising comes with very different considerations. There is little or no historical precedence when a business begins franchising as to what may be achieved by a franchisee, so accurate forecasting and enormous due diligence is critical in assessing the opportunity.

With few or no trading franchisees to check on aspects such as turnover potential and the support offered by the franchisor, your research and your instincts are vital.

Usually, you’ll be paying a lower fee to join as the franchise tries to attract those 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 when the brand under which you operate suddenly becomes the next big thing in its marketplace.

And on a personal growth level, there are also 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.

An established brand already has significant infrastructure in place, whereas in a newer brand you might get involved in shaping the network, and will usually be dealing with the business owner(s) in the beginning at least, giving a personal touch that some find appealing.

It’s certainly a more risky proposition, but if you’re willing to take that risk then the rewards are potentially substantial too. Because they’re newer to the model and the market, in an emerging brand the early franchisees in the network are usually instrumental in shaping the business as it moves forwards and grows. That means more freedom for you to input your own ideas – but remember, they’ll still have to fit within the overall business model!

At the bfa we have a category called ‘Provisionally Listed’ to distinguish those brands that are newer to the sector. That means that the business has demonstrated a commitment to ethical franchising, taken the right advice and has a proven pilot system in place. Those are important signs you should be looking out for in a newer franchise brand to help you identify the good from the rest.

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 important to establish.

Also remember: though they may be inherently less risky, there are no guarantees even with the bigger brands – dedication, hard work, tenacity and a strong will are vital to your success in franchising, no matter the size of brand you’re operating under.

For more information on any aspect of franchising visit www.thebfa.org.

ABOUT PIP

Pip Wilkins is the Chief Executive of the British Franchise Association (bfa). With 18 years’ experience in the franchise sector, Pip has worked her way up within the Association, gaining insight from all areas of the business and the franchise industry. She is well-known and highly regarded in franchising for her dedication and depth of knowledge.

Pip regularly speaks at conferences and seminars both domestically and internationally, as well as writing on franchising matters for national, local and franchising trade press. Pip is also a judge for the annual bfa HSBC Franchisor and Franchisee of the Year Awards.

Pip represents the UK at both the European Franchise Federation (EFF) and World Franchise Council (WFC). The bfa has grown to be one of the largest franchise associations in Europe, and one of the most successful associations in the world.

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