When the average person thinks of a franchise, chances are big fast-food chains and retail outlets immediately come to mind. What many don’t know is the vast number of franchises which don’t sit within the stereotypical realm, covering a vast array of industries.
But how do you get into franchises and are the chances of success increased due to have the backing of a big established business behind you, as opposed to going it alone as an independent start-up?
We spoke to franchise specialist, Keith Dolby, on his experience within business and the franchise sector, the increase in people looking to get into franchises, and the future of the industry…
Firstly, tell us a bit about yourself & your history in business?
From 1982 until 2007 I was in the software industry. I originally started as a software developer and worked my way up through the ranks until I became Managing Director and a shareholder of Real Asset Management Plc (RAM) in 2002. Over the next 5 years I grew the company by more than it had grown in the previous 20 years. This made my shareholding worth a significant sum, so I sold my shares and left the company in 2007.
It was pointed out to me by my marketing director that I had taken a well-established business model in RAM and refined and improved it significantly. He suggested I should get into franchising. So, in 2008 I became the first Matchpoint franchisee in the UK.
What type of work is carried out being a franchise broker and what is your average day like?
Franchise Brokers including Matchpoint work in a similar way to an executive search firm. Franchisors tell me what type of people they are looking for, because not all people are suited to franchising and not all franchisors are looking for the same skill sets in their franchisees.
I then advertise my services to the general public who come to me for advice about which types of business model they would be suited to. After a lengthy assessment which lasts approximately half a day, I suggest some brands that are looking for people with their skills and background who fit within their investment criteria. These brands can offer a role that they would enjoy and can provide the work/life balance, as well as income, they are looking to achieve.
If they choose to investigate any of those brands further, I then guide them through their due diligence with examples of questions they should be asking the franchisor about their business model; examples of questions they should ask existing franchisees when they speak to them and a checklist of all the things they must make sure they have researched and full understood before they make a final decision.
Should they go on to invest in one of the franchises I suggested to them, the franchisor pays me for having found them that individual in the first place.
At any time I’m usually working with 20-50 clients who are all at different stages of their investigations, so each day will usually contain an element of all of the items listed below.
A typical day consists of:
- Making initial contact with any new enquiries I have received and explaining the process I would take them through to ascertain which business models they would be suited to.
- Reviewing the online questionnaire that I ask them to complete for me, in order to decide which of their answers I need to explore in more detail and to understand their answers.
- Scheduling and performing a consultation with them.
- Researching suitable options by speaking to franchisors that I think they are suited to, to see if the franchisor has territory available in the right location and is interested in speaking with this individual based on their background, skill sets and business aspirations.
- Introducing my clients to the franchisors they wish to speak with.
- Guiding them through their due diligence.
Has there been a particular franchise that you’ve been a part of through consultancy which is a particular highlight of your career?
My Matchpoint business is a franchise and I’ve been doing it for 14 years now. It’s given me both the income and the work/life balance that I wanted after leaving employment. A number of people I’ve worked with have recommended me to friends and colleagues who are also interested in franchising, and I think that’s the big highlight.
Someone who used my service was impressed enough by their experience with the franchise I found for them, to recommend me to others they know.
Over the past 2 years, with the pandemic and the looming cost of living crisis, has there been an increase in franchises, or has it remained stagnant?
Many people do not like the jobs they have and yearn to run their own business. But during times of uncertainty, it’s ‘better the devil you know’, so no matter how much someone dislikes the role they are in, they stick with it rather than take the risk of jumping ship and trying to start their own business. The franchising world has seen significantly fewer enquiries since 2021 due to the pandemic and more lately, the cost-of-living crisis.
When the pandemic first started in 2020 many senior executives were laid off as employers looked to cut costs. Laying off a director or senior manager can save as much money as laying off several other staff. Many of those laid off were in their 50s and believed the market was contracting and getting smaller, therefore they were unlikely to find a new role in the immediate future.
These were typically people who had always wanted to do something for themselves but had been unable to wrench themselves away from a well-paid and secure role. These people, effectively, had their hands forced during 2020, so during that year the franchising industry did well, with lots of suitable people coming to the franchise market.
Where do you see the franchise industry within the next 5 years? Will it be in a good, solid position or will consumer behaviour veer towards local, independent retailers which is regularly promoted?
Franchising is not all about big retail brands. There are around 900 different franchise models available in the UK currently and the vast majority (approximately 90%) are not in the retail sector. Franchisees within these brands are local business people, providing a service in the local area.
So, whilst they may be part of a larger brand, they are operating a business model in the same way that a local independent would, but with the backup and support of having a much larger brand behind them. This is best explained by the example of lawncare business:
- A local franchisee will probably cover an area of 10-20 miles radius of their base.
- A local independent would probably cover a similar sized area.
- In both cases it would always be the same person that the customer saw and the same relationships between customer and service provider would be built.
- However, the franchisee will benefit from lower operating costs because –
- The franchisor would be buying lawncare products in bulk for all of its franchisees, whereas the local independent would just be buying enough for themselves, so wouldn’t get the same discounts.
- The franchisor probably has a nationwide agreement for franchisees to get their vans serviced and replacement tyres, etc at a fixed price with a discount based on the number of vehicles this covers. The independent will be paying the going rate for this, without benefitting from a discount.
- Franchisees have economies of scale that aren’t available to independents. This means they can often provide the same standard of service to a customer at a lower cost.
- Franchisees collaborate, so if a franchisee goes on holiday or is ill, another nearby franchisee will probably service their customers until they are back at work.
- With an independent, customers either have to wait for them to return to work or find someone else to provide the service they are looking for. If they find someone else, there’s a reasonable chance they will stick with their new supplier, so the independent has lost a customer. With a franchise, one franchisee cannot poach the customers of another franchisee, so the original franchisee always gets the customers back once they return to work.
A good way to think of a franchise like this is to view it as a collective of independents all working to a set of rules or standards, that mean they look after each other without treading on each other’s toes.
We hope this has outlined to you how franchises work, whilst providing an insight into the future of the franchise sector. If you require any further information on franchising, then please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.