Do you have what it takes to start your own franchise? From McDonalds to Spar, you could own a piece of a world famous brand - and make your fortune

Do you have an entrepreneurial spirit or experience running a company but want an established brand behind you before you venture out on your own?

Franchising is a way for individuals to benefit from the infrastructure and expertise of an existing business, but with the autonomy of running an outlet themselves.

Franchises range from household names like Costa Coffee and McDonald's to under the radar brands operating in anything from beauty therapy to animal care.

But you will have to spend some money to get started. Franchises require those looking to run one to buy in - the average cost of that is £50,000 - and although you are paying for a potentially big name and proven concept, they can seem expensive  

Franchisees can follow in the footsteps of Clarks which is almost 200 years old
Costa Coffees can be found in service stations, hospitals and workplaces all over the UK

From Costa to Clarks: There are plenty of famous franchises operating in the UK

Pip Wilkins is chief executive of the British Franchise Association, which has been the industry's trade body since 1977.

He says: 'Choosing franchising can be a great option for those who are looking to start their own business. Taking a business model that has been tried and tested by the franchiser and putting those with the right attitude, work ethic, determination and passion to succeed is a proven recipe for success.'

So what are the pros and cons of taking on a franchise versus starting an independent business, and how do you get started?

What exactly is a franchise?

A franchise is a partnership between the business owner (franchiser) and an individual (franchisee). The franchiser is looking to expand their business and the franchisee is looking to set up an outlet that is part of an established brand with infrastructure already in place.

Examples of famous franchises include fast food restaurants like McDonalds, Burger King, KFC and Subway, and shops like Clarks and Thorntons.

Who owns what?

The franchisee (the person or team who takes on the franchise) owns and operates their own business unit. But the franchiser (the brand) retains control of how the product or service is marketed and monitors the quality and standards of the business.

All of these terms will be set out in a contract signed by both parties. Although you're not obliged to, it is a good idea to meet with a lawyer who specialises in franchising, who can walk you through how the relationship works and the penalties in place if either side doesn't fulfill their obligations, and - crucially - what happens if you want to leave the franchise at any point. 

How much will this cost? 

The cost of becoming a franchisee depends on the individual business model but there will be an initial set-up cost or 'buy-in fee' of around 10 per cent, as well as an ongoing fee.

For this reason, budgeting from the outset is crucial. The average cost of setting up a franchise is about £50,000 but this varies greatly according to the individual business model - it could be anything from £10,000 to £500,000. 

Most banks who deal in franchising will offer a loan of between 50 and 70 per cent of your start up costs. This means that as a rough rule of thumb, you could look to run a franchise with initial costs of around three times your available savings - so if you have £15,000 you could afford a £45,000 franchise. More than that and you risk running into financial difficulty if anything goes wrong further down the line.

Hannah MacKechnie, director of franchising at Radfield Home Care, says: 'It is important to make sure you have sufficient working capital to enable you to cash flow your business in case it grows more slowly than you expected. You should discuss financing options with your potential franchiser as they may have relationships with certain banks or other lending institutions that could assist you.'

In cases where your franchiser doesn't offer a finance package, most of the major banks offer accounts for franchisees along with resources such as checklists, guides and mentoring.

Major banks also offer franchise loans and asset financing, which allows you to spread the cost of a big one-off purchase like a van, equipment or uniforms.

If you're taking on a franchise, you will also usually be eligible for a start-up or SME bank account, which can offer perks like free banking or an interest-free overdraft. You can read This is Money's guide to the best small business bank accounts here.  


Ex-police constable on her two Mcfranchises: 'It's not for the faint hearted - you have to be passionate'

Jane was in the police for 10 years
It took almost two years between Jane filling in the application forms and opening her first restaurant

Career change: Jane Blackwell made use of her people skills after leaving the police

Jane Blackwell, 42, is originally from South Wales but now lives in Warwickshire. She was in the police for more than a decade, but now has two McDonald’s restaurants in Banbury, Oxfordshire. 

It took almost two years from her initial application in 2011 to the opening of her first restaurant - and £85,000 of start-up capital. 

Jane says: 'It was a tough process that I embarked on, but it’s right that we’re thorough because you need to be right for each other.

'I was in the police force for 10 years but I was always very interested in running my own business. It came to the point where I had the necessary skills to put my passion into practice, try my hand at business and really give it a go.'

Jane decided to take on a franchise rather than start her own business so that she could use the leadership and people skills that she developed in the police.

Community spirit: Jane sponsors Banbury United

Community spirit: Jane sponsors Banbury United

'Franchising is based on strong systems that have been tried and tested over time, and McDonald’s is an established business. It’s reassuring starting out with a network like that behind you, but at the same time having the freedom to inject my own personality into it.'

The fast food giant is over 70 per cent franchised in the UK with 900 restaurants operated by 160 franchisees, which between them employ more than 70,000 people.

The entrepreneur says her biggest challenge when embarking on the business was understanding the local economy in Oxfordshire. But her first restaurant broke its sales records within six months, and even sponsors local football club Banbury United.

'I really love helping people develop their skills and progress their careers, from kitchen to counter to front of house management. I have also enjoyed making an impact in the local community and beyond.'

The mother-of-three warns that franchising is not an easy option but can prove fulfilling for entrepreneurs looking for a challenge.

'I would say do your due diligence and look at all the franchising options. It is certainly not for the faint-hearted, it’s hard work and is not a nine to five job. You have to be willing to make that commitment and be passionate about it. You also need to love people.'

What are the advantages of becoming a franchisee? 

Becoming part of a franchise means you get all the benefits of scaling up a business, and a clearly defined business model with a proven track record.

A big chain business will usually have the money to spend on marketing and ad campaigns, while relevant customers will probably already be aware of your brand - meaning you won't have to work so hard at the beginning to establish your presence in the market. 

Good franchises will also offer ongoing training and support to their franchisees and help make sure their outlet is successful. Plus, as with any other business, there is the opportunity to sell it on in the future.

What are the disadvantages?

Obviously, there is less freedom and creativity involved in running your own franchise then there is when starting a business of your own. You will have to splash out on a setting up cost and also have to pay an ongoing fee to the franchiser on top of that. 

What's more, taking on a franchise means a strict set of parameters to follow which depending on your personality could be helpful, or could be frustrating if you wish to put your own stamp on the business - or trade under your own name. 

While you are hopefully becoming part of a good business with a strong track record, being tied to a wider franchise works both ways - if the business suffers reputational damage due to the behaviour of another outlet, this could negatively affect your outlet too. 

How do I get started? 

If you've decided you want to go down the franchising route, there are quite a few things to think about.  

Decide if you want a home or property- based franchise 

The first big decision to make is whether to take on a franchise that you run from home, or one that is run from a business premises. The latter tends to be more expensive because you will need to cover the cost of renting the property (which may or may not be covered by the franchiser), and hiring other staff.

Work out which sector you want to operate in 

It makes sense to run a business that is relevant to your skills and experience. This could be through taking on a franchise in an industry you have direct experience of - for example you may have spent some time working as a restaurant manager and want to take on a fast food franchise. 

However, you may be buying a franchise as part of a career change, or because you feel that part of the market could be more profitable than the one you work in currently. In that case, doing your research is particularly vital. Even if you don't have specific experience in that sector, some business experience will be helpful, especially with transferable skills such as managing staff and writing a business plan and projections.

It's also important to consider the location of your business - what kind of footfall will you get, and what is the clientele like in your area? Are there three other shops that already sell exactly the same thing?

Hannah MacKechnie says: 'When beginning to think about what franchise would be right for you, it is important to spend time reflecting on your own skill set. Think about the things that give you the most satisfaction, both in your work and home life, and what you would like to spend your time doing.

'You need to be very honest with yourself and then try to match your values, experience and expectations with a franchiser who you feel can best help you to achieve what you are looking for.'

Narrow it down to a couple of potential brands

Once you have picked a sector, the next stage is to narrow it down to the company you want to align yourself with.

Think about what is important to you in a franchise partner. That they have a long track record, a well-known brand or lots of branches? 

There are lots of other things to consider. Are they doing well at the moment? Have any of their existing franchises been unsuccessful, and if so - why? Speak to one of their current franchisees if possible and see what their experience of the partnership has been like. 

Another thing to check is whether the company is a member of industry body the British Franchising Association. To join the BFA, franchisers have to prove they fulfill certain criteria including an ethical code of conduct, so if your chosen firm isn't a member it is worth finding out why not.

Come up with your pitch/ business plan 

Setting out your business plan is essential for you, the franchiser, and your bank.

MacKechnie adds: 'A business plan should look at the opportunity in the area and how you are planning to operate. It should set out your plans on how you will grow your business and attract clients, how you will operate your business and include financial projections for your business.

'It is an important document that you will use to track your progress with your business and should be reviewed regularly with your franchise support team.'

A good plan will set out your key objectives, financial projections and an approximate time frame in which to achieve them - have a look at some of our business plan tips here. 

Consider launching a pilot first

If you want to test the waters first, it could be worth doing a dry run of your product or service to see what does and doesn't work, and how people respond to what you're selling. Find out more about launching a pilot here. 

However, this won't always be necessary as it is your franchiser's responsibility to make sure that they offer a tried and tested business model and that there is a viable market for you to enter into.

Potential franchisees can get expert advice on all aspects of the franchise industry at The British Franchise Exhibition on 16th and 17th June 2017 at EventCity in Manchester, which is supported by the British Franchise Association.


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