Be wise before you franchise

Franchising is very much in the news, following the summer announcement that Boots Opticians has started its own franchise programme and hairdressing giant Toni & Guy's entry into the optical market this month. But becoming a franchisee is much more than gaining an easily recognised brand over your practice. It requires serious consideration and financial planning, and then a great deal of hard work.
There are numerous benefits to those who take on a franchise. Practitioners can become self-employed, but as they are part of a large and successful company, there is more security. Franchisees are part of a brand, which means their business is more likely to succeed, and they receive support and guidance from the owner-company. Arguably the biggest benefit is that they can be financially better off, from securing a bank loan to enjoying big business buying power.
However, everything has its price. Practitioners still have to run the franchise themselves, as a profitable business. They are responsible for everything from the initial purchase fee, to shop fitting, equipment, stock, staff, bank repayments, rental space, bills, and the monthly loyalty fee to the franchisor. This fee will depend on the business, and will be different from franchise to franchise. The British Franchise Association (BFA) says the average figure is 8-9 per cent, sometimes with an additional 2 per cent marketing levy.
The BFA deputy director Simon Wise says research is vital for anyone looking at taking a franchise. He says: 'You have to sign a franchise agreement, so it is important you understand it, you will be legally bound to follow it. Also, make sure that the franchise is going to give you the return on income to support your standard of living. Consider all the costs involved.'

A company's view
Specsavers Opticians has been running a joint venture partnership programme since it started in business 20 years ago. It is intrinsic to the group, as the majority of practices are run in this way. There has been increasing interest in the programme over the last few years, says head of professional recruitment Chris Howarth, and more independent practitioners are converting their businesses to Specsavers practices.
'It is because of better development of the partnership and franchise business models in general that we have seen a significant increase, with the number of applicants doubling in the last three years,' he says.
Specsavers has a 'rigorous' selection process, to choose the best candidates and because there are more applicants than practices. 'We run a risk management programme Ð we are very protective to ensure applicants are ready.'
Those who are not successful are recommended to an intense development programme to increase their chances in the future. 'We don't disregard anyone, but we don't recommend joint venture partnerships to people who have been qualified for less than two years. They need to be fairly switched on to business issues from staff management to EU regulations. The average age of someone working with us is late 20s, as they have had clinical and management experience, and preferably some financial experience as well.'
This financial experience is important from the application stage. 'You have to have some money yourself,' says Howarth. 'It will vary, and buying into an existing business is more expensive, but for a new Specsavers operation you will need £20-30,000. We will match that input, so our joint venture is lower risk than a franchise.'
Howarth says the most important consideration for potential applicants is commitment. 'You have to be aware that it takes a significant investment from you. You will have to manage the staff and spend time on the business. It becomes a central part of your life.'

A franchisee's view
Jay Ghadiali, who qualified in 1999, has been a franchisee for two years. He became a Vision Express partner because he wanted the security and support of being part of a big company. He says that while he runs the business, he does not have a free rein. 'You have your own input but you can't just do whatever you want. There are targets, budgets and plans you have to meet and you have to be prepared to answer to others.'
But it is not all negative, Ghadiali says he has a bigger presence and more powerful marketing through the VE brand than he would as an independent, which is important because of the competition in his local area. More important is the support he receives, for everything from promotional advice to administrative assistance to staff management issues. 'They are always only a phone call away.'
Ghadiali believes the most important consideration is the commitment required. 'Think realistically about your personal goals and have a long-term plan, because it's a huge commitment. You're talking about going to a bank and borrowing a lot of money, and if the business goes under, it's your responsibility.'
Franchisees have to accept they may not see a profit in the first year, or maybe for a few years. 'It is hard work, I work six days per week. I'm not as rich as people think I am. I was better off financially as a locum, but I'm building an asset. There are some franchisees making a fortune, but don't assume it will be you on £100,000 a year, driving a Porsche.'