Franchises for sale: franchising suits tough times


Franchises for sale: franchising suits tough times

Sixty percent of aspirant franchisees believe it’s a good time to buy a franchise against only 11% who think it’s a bad time, according to a survey.

With the economic climate still turbulent and uncertain, this represents an emphatic vote of confidence in the franchising model, which is seen generally as the safest way to taking an entrepreneurial risk.

Lifestyles

The survey of more than 200,000 franchise seekers and franchisors by FranchiseSales.co.uk also suggests that many franchise buyers are taking on heavy workloads: 40% of franchise seekers want to run a franchise to supplement an existing income, whether a part-time job or an existing business. Of those polled, 35% of franchise seekers were employed, 48% were self-employed or already owned businesses, 2% were contractors and 15% were unemployed.

Undoubtedly, it’s much easier to combine running a franchise with another role because they’re invariably easier to operate a franchise than set up a business from scratch; franchisees enjoy a proven business model, comprehensive training and ongoing support.

It’s notable that of those who valued having constant training and support on hand above all the other advantages of buying a franchise, 43% planned to continue in their previous job, a figure which fell to 38% among those who valued other benefits.

However, without the internet and advances in remote-working technologies, it’s unlikely that so many franchise buyers would have been able to sustain two roles. Web-based businesses, of which there are 28 on FranchiseSales.co.uk, have been at the forefront of this revolution in portfolio careers.

Online businesses have lower overheads, can be run from home and can operate autonomously to a large extent, so are more conducive to being run part-time and at low cost. It’s certainly noteworthy that 48% of franchise seekers declaring an interest in technology or internet-based franchises intend to continue in their previous role, 8% more than among franchise seekers interested in other sectors.

Younger buyers

The growing share of the franchising market accounted for by internet franchises could help to explain why the average age of franchisees is falling, from 43 in 2005 to around 40 in 2010; younger people tend to have a greater affinity with computers and the web.
The majority of franchise seekers are aged between 31 and 50, accounting for 57% of respondents. The average age of the global franchise seeker is also appreciably lower than the average age of the business buyer, 41.5 against 44.2.

The growing share of the franchising market accounted for by internet franchises could help to explain why the average age of franchisees is falling

Jeremy Mandell, head of marketing at Dynamis, which runs the website behind the survey, FranchiseSales.co.uk, believes “there are two overarching reasons why franchise seekers are, on average, younger.

“Firstly, money: with less cash and fewer assets, younger people struggle to afford the higher costs associated with buying a regular business. On average, a franchise seeker’s budget of £79,500 is about a third of that of a business buyer’s, standing at £208,000.

“Secondly, the experience factor: whereas nearly 60% of buyers of non-franchised businesses said experience in the sector was the primary reason for choosing an industry, many – though not all – franchises do not require franchisees to have any experience in their sector. In many cases, it’s positively desirable for them to have no experience.”

Motivation

Franchise buyers are more preoccupied by security and potential income than experience in, or passion for, a particular sector. Starting a business where the brand is already established is the most common reason for buying a franchise as opposed to a regular business, cited by 46% of respondents.

The next most important factor, with 29% of responses, is the lower risk associated with buying a franchise, followed by the training and ongoing support franchisees receive from an experienced support team, attracting 13% of replies. Only 38% of franchise seekers are looking at a specific sector.

Meanwhile, the most important motivation for going into business generally was a desire to be their own boss, followed by wanting to invest in something, then a change in lifestyle and wanting to change their field of work.

 

Popular sectors

Of those that did know which sector they wanted to go into, food was overwhelmingly the popular choice, with nearly half of all franchise seekers (45%) choosing food-related franchises. The sector offers a number of advantages, not least that they tend to require little or no previous experience.

The next most popular sectors were web franchises, automotive, retail, health and beauty, coffee and fast food. It’s perhaps no surprise that the least popular sectors, including care, pet, dating service and pest control, are either more expensive, require specific industry experience or a demand a passion for the field.

Shop-based businesses were the most popular workplace type, cited by 46% of respondents, followed by home-based with 37% and office-based with 33%. Twenty-seven percent professed not to mind where their place of work is, suggesting income and being their own boss enjoyed primacy in their motivations. Van or car-based environments polled 15% and 6% respectively.

Finance

Not only do banks see franchises as low risk and so offer favourable terms in these credit-straitened times, but the amounts borrowed are also comparatively modest. Sixty-three percent of aspiring franchisees have finance in place before they approach franchisors. Of these, 23% are already working with a local bank and 19% are already working with the franchisor. Only 20% said they hadn’t yet thought about finance.

However, even though raising finance is generally easier for franchise seekers than for other entrepreneurs, 76% of respondents still wished for more attractive franchise promotions and offers when asked what they most wanted franchisors to offer over the next 12 months. Better financing scored highly too, with 31%, followed by the expansion of franchising into new sectors with 19% and an increase in territories with 18%.

Flight to safety

Aided by modern technology, franchising clearly helps entrepreneurs fulfil their modern demands to work flexibly or combine two incomes. Franchising has undoubtedly become more attractive given recent figures showing that the numbers of part-time workers have swelled to record levels.

Meanwhile, amid the most troubled economic landscape for decades the three most popular sectors are worth analysing. Food is widely considered, as a non-discretionary good, to be relatively recession-proof.

Web-related businesses are low cost and therefore low risk, while it’s also notable that spending online represented a growing slice of shrinking retail expenditure throughout the downturn. Meanwhile, automotive franchises are invariably maintenance businesses, and the sector arguably benefited from the recession as people increasingly repaired vehicles rather than buy new cars.

The availability of so many recession-resilient sectors, along with the comparative ease of securing finance and the reliability of the franchising model, means that franchising represents a flight to safety in tough times. That 90% of franchises make it past three years compared to just one in three conventional start-ups certainly backs this up. There are few other business models who can boast such a track record.

About The Author

Adam Bannister Writer
Adam Bannister writes for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other industry publications.