What is franchising and what does it mean?

A franchise is a type of license that grants a franchisee access to a franchisor’s proprietary business knowledge, processes and trademarks allowing the franchisee to sell a product or service under the franchisor’s business name. In exchange, the franchisee pays the franchisor an initial start-up fee and/or ongoing licensing fees and the franchisor provides the franchisee with ongoing support.

The US Federal Trade Commission describes a franchise as a business relationship that has three defining elements*:

Use of a common name or trademark
The presence of “significant operating control” or “significant operating assistance” (the support referred to above)
A required payment of more than $500 in the first six months of operation by the franchisee (including initial fees, ongoing fees, advertising fees, training fees or fees for equipment)

The arrangement between the franchisor and franchisee is entered into for a set period of time, usually five years. The franchisee operates their business within a certain territory, usually with exclusive rights to that territory.

What types of franchise are there?

Various different models of franchising exist in this fast-growing industry. For example:

A job franchise tends to require low investment and is often-home based. The franchisee pays a small fee and minimal start-up costs. These franchises are typically in the services industry, for example lawn care, food vans, cleaning companies and event planning.
A business format franchise is where the franchisee operates the business under the brand of the original company and within its proven system. These are larger-scale businesses with significant capital investment.
An investment franchise is also sometimes referred to as a management franchise, the franchisee is not directly involved in the day-to-day running of the business. Instead, they often purchase a franchise from the current franchisee and hire a manager to run the business for them.
Conversion franchises are rarer and are an emerging type of franchising. They are the opposite of a business format franchise as they occur when a company absorbs smaller businesses.
Product driven franchises are also known as distribution franchises. The franchisor licenses out a trademark to a distributor who then markets the products supplied by the franchisor.

Franchising proves to be a phenomenally popular way of doing business in many industries, including, but not limited to:

What makes franchising different from setting up alone?

When you set up your own business from scratch, you take on all of the risks that come with a new product or service and an untested business model and strategy. With a franchise, you buy into a proven operating model with a successful system, a working strategy and a ready-made business, which you can simply license as a franchisee, take training and begin to operate yourself. It is usually far quicker and easier to buy into a successful franchise and to build it into a profitable business than it is to start from scratch.

Who regulates franchising?

The UK franchising industry is regulated by the UK Competitions Act, in the same way as any other business in the UK and it is supported by specialist organisations and representative bodies such as the British Franchise Association (www.thebfa.org). Because franchises are established business systems with a track record of success and a network of existing franchisees, it is easy to carry out a prospective franchise search and to gather detailed information about the nature of the franchise, its track record and its suitability for your needs.

Who owns a franchise?

The franchisor owns the franchise brand and system, and individual franchisees own the rights to their territory and their own businesses via the licensing system. The details of each franchise’s specific legal arrangement are provided during the franchisee recruitment process.

What do you get when you buy a franchise?

Every franchise will offer something different, but effectively, you buy into an existing business system, a brand and the training and other benefits that come from an established operational system. This might include a ready-made supply network for products, printed marketing materials and digital assets. You will also be entitled to some level of ongoing support from your franchisor. Full details of what you get for your fees are included in the franchise pack that you apply for in the information gathering process.

What support is there for franchisees?

In addition to the consistent support from their franchisor, franchisees will meet and interact with other franchisees within their network. There is also support available from relevant industry bodies such as the bfa. It’s important to investigate what support you are entitled to from your franchisor for your franchise fees before investing in a franchise.

10 interesting facts you need to know about franchising:

The sector contributes £17.2bn to the country’s economy each year and has grown at a rate of nearly 50% over the last decade.
The industry currently employs over 700,000 people.
On average, franchises employ ten or more staff members and have one of the lowest failure rates (4.6%) compared to other start-up models.
There are more than 50,000 franchised units with over half of franchises declaring an annual turnover of over £250,000.
Over 90% of franchisees are happy with their franchisor and almost a third have multiple units of the same franchise.

The future of franchising appears bright thanks to an increase in younger franchisees entering the sector.
Over 60% of people employed by franchises are female and over 30% of franchises are female owned.
Of all new franchisees in the last two years under the age of 30, more than half were female.
Nearly 30% of UK-based franchisees plan to expand their businesses to overseas markets in the future.
Almost half of UK franchises can be operated from home thanks to improved internet connectivity, the rise of Web 3.0 and an expanding app universe.

*taken from ‘Franchise Your Business, The Guide to Employing the Greatest Growth Strategy Ever’ written by Mark Siebert

If you’d like further information about becoming part of the PGH Beegone family, please get in touch with us:

Tel: 01483 387414
Email: opportunity@pghbeegone.co.uk
www.pghbeegonefranchise.co.uk

Experts in pest control and prevention serving homes and commercial properties. Our mission is to identify, control and exclude pests and customer service is at the heart of everything we do. We employ a holistic approach, dealing with and resolving problems by providing preventative work for a long-term solution. We tackle a wide range of pests including rodents, insects, large animals and birds and are passionate about conserving the environment.

Pioneers in the live bee removal field with an established client base across the UK from private clients to blue chip companies and even international and local pest control firms who sub-contract out to us. The safe process moves honeybees and combs from chimneys, walls, roofs and trees without using insecticides. We extract bees alive and relocate them before bee proofing the structure to prevent more returning. We carry out all aspects of the work in-house and provide unrivalled benefits to clients.

What is franchising and what does it mean?

What types of franchise are there?

What makes franchising different from setting up alone?

Who regulates franchising?

Who owns a franchise?

What do you get when you buy a franchise?

What support is there for franchisees?

10 interesting facts you need to know about franchising:

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