Trying to decide whether to buy a franchise or start your own business? While the lower startup costs may be attractive, becoming a franchise owner is something you should research carefully.
Read our guide to understand how franchises work, some of the advantages and disadvantages, and any legal and tax implications of being a franchisee.
Franchising is when an existing business owner (franchisor) sells the rights for a third party (franchisee) to trade under its name.
As a franchisee, you’ll be self-employed and sell products or services using a proven business model, with support and training from the franchisor.
You’ll need to follow the brand and company guidelines and will be responsible for building up a customer base, ordering stock, keeping on top of business admin, and following health and safety guidelines.
After signing a franchise agreement and paying an initial start up cost, you’ll run the day-to-day operations of the business and take a share of the revenue.
There are three different types of franchise:
Franchises are big companies or home-run businesses, from coffee and food franchises to pet care, gyms, and shops. Some of the best franchises in the UK, and worldwide, include McDonalds, Subway and Costa Coffee.
Some of the advantages of being a franchisee include:
Disadvantages of being a franchisee include:
Still interested in buying a franchise in the UK? Follow this step-by-step guide to getting started.
The British Franchising Association has plenty of information, including a franchise directory with the latest opportunities as well as handy support guides. Similarly, Which Franchise has advice and a list of franchises out there.
Once you’ve settled on a company, it can be a good idea to speak to other franchisees to find out more about their experience and if it’s worth investing.
It’s important to get professional advice from an accountant and a solicitor before entering into a franchise agreement or applying for funding. A franchise agreement is a legal document that sets out the length and terms of the agreement, so you want to make sure you’re happy with it.
You don’t need experience running a business to buy into a franchise, but you’ll need to get to grips with basic bookkeeping, marketing and customer service. City & Guilds has a wide range of vocational courses and business qualifications if you’re interested in developing your skills.
As a sole trader you’re not legally required to have a business bank account, but you might find it helpful to separate your personal and business banking. Our guide to business bank accounts goes into more detail.
So if you’re looking into buying a franchise, beware of opportunities that seem too good to be true. Do your research, and remember that running a business of any kind is challenging – but it can be highly rewarding too.
Are you considering buying into a franchise? Let us know how you get on in the comments.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
22 June 2020 • 9-minute read
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