Franchising for start ups

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6 Franchising for Start-Ups

 

The franchise approach

 

A business idea for a startup doesn't have to be original. Many new businesses are formed with the intention of offering an existing business idea. The use of franchises is a great example of that.

 

The basic idea for a franchise is this.

 

A franchisor grants a licence (the "franchise") to another business (the "franchisee") to allow it to trade using the brand or business format.

 

That might sound a bit complicated! The trick is to remember that the franchisor is in

charge - the franchisor is the original owner of the business idea.

 

Franchises are a significant part of business life in the UK:

• Franchises generated annual sales of £12.4 billion in the UK in 2007

• There are over 800 different franchised business formats in the UK and that number is rising by around 5% each year

• The average sales turnover per franchise outlet is £360,000

• 90% of franchises are reported to be profitable

• A franchise has average borrowings of £70,000, suggesting that banks are happier to make loans to franchise businesses than other startups

• The typical franchisee is aged 47. 66% are men and 86% of franchisees are married!

• Franchises are particularly popular in the service sector

 

Examples of well-known businesses that use franchising to expand their operations include:

Comments

davidsalter

A good introduction to the arguments for and against setting up as a franchisee. There is a test yourself facility or students can adapt the notes for their own uses.

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