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Knowledge.

Getting knowledge is easy. Easier now than it’s ever been. But to become an expert you have to do a lot more than acquire knowledge. Your first step to becomming an expert is to get yourself into that particular environment, practically or digitally so that you can start learning. That might be degree, a job, an online course or just do some volunteering! Just get into that environment. However you acheive it you’re nothing wthout learning the ropes so crack on with that and starrt soaking everything up you can on your chosen topic. Live it and breathe it and you’ll get the knowledge quicker. Choose a franchise and you’ll get there quicker still!

Experience.

The other week I was chatting to the anaesthetist who volunteered his time at our local vaccination centre. I was amazed that he’s been injecting and making people unconscious in surgery for over 30 years. I felt in safe hands as he squirted a shot of Bill Gates’ nano bots into my arm. Some would say it was covid vaccine, it depends on who you believe. Anyway, he tells me it’s pretty easy to learn to be an anaesthetist and I believed him because with his Yorkshire accent he didn’t seem to be part of microsoft’s secret team. “90% of the time it all goes to plan and an idiot could do it” he said. “It’s when it doesn’t go to plan that all those years make all the difference. It’s in those 10% moments that you rely on all the years you’ve been doing it”. How true is that I thought. His needle skills are one thing, but it’s the many things he has experienced that set him apart from the rest.

In my case after 29 years as a franchise consultant I’ve often experienced a similar thing. A client shares with me their plans for world franchise domination, or at least a UK plan to start with, but …. there’s something stopping me raising from my chair and punching the air. When you’ve done the time with relevant experience you see things differently and that’s when can start to trust your instincts.

Instinct.

The third stsge of becomming an expert is gained when your instincts kick in. Sometimes I can’t put my finger on things. It just doesn’t “feel” the right strategy. So I suggest something else to my overly confident client. “I share your enthusiasm Mr Valued Customer but I’m going to recommend that we do something else instead.” Client looks perplexed. But he doesnt have my crystal ball. Everyone who has gained knowledge and practical experience inherits a sixth sense. I call it my crystal ball because you get an idea of what outcomes are likely in any set of circumstances. It’s more accurate than the fairground fortune teller version though! But you can see into the future a lot clearer with many years behind you. When you choose a franchise your franchisor has that crystal ball already.

Knowing when to pause, even if you’re not sure why you need to pause is an amazing moment. Something is telling you something, so you wait, or you just sleep on it. This is instinct in action. Gained from years, maybe even decades of experience, which leads to good judgement and that “gut feel” that you just can’t buy.

Judgement.

When your instincts keep proving you right you can trust your judgements. And that’s it – you’re clearly now an expert. The only question is how long does it take you to reach that point? For some it’s decades, for others it’s less, but it’s never a short period of time.

You would rather the vet you’ve known for years operated on little fluffy rather than the 20 year old newly qualified vet who you’ve just met. The senior vet has the experience, her or his instinct guide every situation and as a result there is better judgement. Little fluffy’s unexpected emergency probably has a better chance of making it with the veteran vet. If I go into surgery I’d be happier knowing that my anaesthetist has done this for 30 years.

A colleague and I were recently negotiating a purchase for Lime Licensing Group costing around £7k. The representative dealing with our purchase looked 17. I got the classic sales pitch followed by the classic alternative clause “perhaps this one, or would you prefer that one?” I looked at my colleague, he looked at me…. we both rolled our eyes. Puleeeeese! His judgement that he’d be able to close the sale with us this way was way wide of the mark. We’ve been round the block too long. He should have taken a more consultative approach. We chose neither and told him what we would like, what we suggest he charges us for it and therefore how it would be. He simply agreed, and so we bought. His judgement and instincts were non existent, but in 10 years time he’ll likely be awesome. He just needs more time to “read” people better.

So in your own career these are the steps to climb to the top of your expert staircase. Knowledge – experience – instinct – judgement. Just be sure that you keep your eye on the next step and focus on what you need to get there. It’s not easy, but then if it were we’d all be experts wouldn’t we?

Of course a shortcut to all of this is to choose a franchise system!

The post The four stages to becoming an expert if you don’t choose a franchise appeared first on Lime Licensing Group.

The company you work for is a shambles. You could run it better with your eyes closed. You’ve had a crappy year and your boss is an idiot. Maybe you should just tell him to shove it. Or tell her to shove it. Or whatever non binary equivilants there are to shove it. All these things are running through your mind whilst you lay on your sunbed. Your partner is relaxed next to you and half way through the latest Cosmopolitan. Your kids are playing in the pool, you give them a nonshallant wave. No one seems to have a care in the world, but your mind is on your career isn’t it?

Thinking time for a franchise purchase.

Each year when August comes along a quarter of the population are on holiday at any one time. This is when you get your thinking time. The treadmill of your career doesn’t give you that luxury. The pressure of your role plus your family doesn’t give you that mental time.

Maybe it’s time to go it alone. But alone isn’t where you want to be because you don’t really know what business to do or how to do it. Even if you did know what business to do in the first place. What about your mortgage? Your posh job title? The company car and pension. What will the neighbours think if it doesn’t work? You might lose your money! You’ve got prestige, comfort, capital, a certain respect …. what’s the matter with you? You’re not happy – that’s what, and deep down you know it. Maybe starting your own business isn’t such a batshit crazy idea after all.

Dissatisfaction is bad for your health I’m convinced of it. So what’s holding YOU back? I’ll tell you what it is – it’s the fear of failure that’s what. The fear of failure is the single biggest stumbling block I have come across and I’ve met well over 10,000 potential entrepreneurs. Actually that’s a contradiction in terms – there’s probably no such thing as a potential entrepreneur, it’s as black and white as it gets. You either do it or you dont. Potential isn’t a starting point or even a stage in the process. However let’s stick with the term for the purposes of this article.

A franchise purchase makes sense.

The good news is there is a half step for all potential entrepreneurs and it’s called franchising.

In my world the fear of failure is mitigated to its lowest consideration when you look at a franchise. You see with a franchise purchase all you’ve got to do is match your personal skill set to the franchise opportunity and then copy it. Also do everything the franchisor suggests. That’s the lowest risk way there is and all of the available statistics back that up.

Franchising lowers the risk of your business startup – and by quite a margin too. 90% of franchises are at least marginally profitable. Half of “none franchised” businesses go under within 2 years. Franchising equals less risk.

Acknowledging the risk

Sure you’re still going to get some risk and pressure but provided you can manage it the franchise industry supports you, coaches you, and shows you the light. The lower risk you take can be transformational and the reduced sense of risk can become the impetus you need to perform and replicate that franchisors blueprint. That’s also what a franchise is – it’s a blueprint. You just concentrate on doing the doing. Your franchisor will guide you.

Finally don’t worry if you bottle it, or you deem that the timings not right (spoiler alert – it never is) there’s always January and a New Year resolution waiting for you. And if you miss that inspiring time, you can just wait till next August and mull your self employment plans over all again ….. and off you go again, dithering about ad infinitum.

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“I’m a fan of licensing, especially if it’s franchising!”

I am frequently asked by clients ‘should we franchise or license our business’? It is a surprisingly difficult, and sometimes nuanced, question to answer. I’m a fan of licensing, especially if it’s franchising. I also love licensing in its own right. But most of all I love it when a client takes the right growth option for them.

I think most people in business would know that McDonalds and Subway are franchised businesses, and that if I buy a Disney item in a store it is most likely that it was manufactured sold under license, not manufactured by Disney. Simple huh?

So a franchise business model obviously works for a retail format where everything in the environment is under one brand name right? And licensing is for a product that has a brand or logo on it. End of.

Here’s some pointers about licensing v franchising.

Well sort of, but not really. So here’s the difference between the two.

In a franchising model, the franchisee uses another company or brand’s business model and brand name to operate as a replica or carbon copy of that business. You are effectively acting like the franchisor’s business and no one else’s business, in your territory; whether that is a physical geographic territory, or the territory is based on another non geographic criteria.

Under a licensing model, a company, the licensor, sells licenses to other companies, called licensees, to manufacture or use the brand, or business programmes, often on a non-exclusive basis; so licenses can be sold or awarded to multiple competing companies serving the same market. The licensee also nearly always has the right to have other competing or non-competing license arrangements with other licensors. You often find that a franchise has the franchisor’s proverbial name over their door, whereas a licensor does not.

One fundamental difference therefore is that whereby a licensing company may exercise control over how its brand is used it does not control the business operations or the behaviour of the licensee in any way; but a franchisor does.

It might be useful to look at the limitations of each business model, what types of business might be more appropriate for the brand owner to license or franchise, control, support and legal constraints.

A license can often be put in place quicker than a franchise, but the brand owner does not exert as much control over the licensee and how he represents the brand as a franchisor does.

A license is typically a single revenue stream, as in there is a simple payment per product sold or service delivered. A franchisor typically has more than one revenue stream from a franchisee, but it probably takes more time and effort to set the franchise operation up than a licensing operation.

A franchisor maintains a considerable degree of control over the operations and processes used by the franchisee, but is also obligated to help with things like branding and marketing support that aid the franchise. The franchiser also typically has control and policing responsibilities to ensure that franchise branches do not cannibalize each other’s revenues.

Franchisor has the benefit of an immediate revenue stream from the franchisee in the form of a franchise fee, but a license is typically a drip feed of percentages on sales.

There are many other areas that one could compare but as a company that is more often involved with franchising than licensing, we see one of the fundamental benefits of franchising as one of control and value.

As one of my colleagues says, “with licensing the licensee is growing his business, with franchising the franchisee is growing his business, your business, your balance sheet and your exit value”.

We are working with a wide range of businesses in franchising at the moment; from retail, food service, hospitality and B2B service businesses that are traditionally franchised, to pure tech businesses and others that you would not automatically think of as potential franchised business models. We always consider licensing v franchising with every new brand.

We talk about business growth all the time and it is very hard to be definitive about what growth model is best for you. Licensing, franchising, organic, acquisition, distributor; there are so many options and it is worth investigating what suits you best with someone who knows.

I would say that if business strategy is to expand, do not discount franchising as a business model just because it is not the obvious option. If a brand owner can find, buy in, or develop the necessary resources to set up and support a franchise network as it develops, I would say look there first. It may not be simpler, and it may not ultimately be for you, but it might also mean a more capitalised growth, a more valuable business as exit and a more controlled brand.

About the Author: Patrick Burge is a specialist in business growth having helped build online and offline businesses in many sectors including tech startups, apparel, sport, fitness, health, printing, retail, coaching and consulting. Apart from specialising in the brand licensing and franchising, he has also advised numerous businesses on getting their strategy and funding in place as an advisor and Delivery Partner CEO on The Government Startup Loan Scheme. He can be contacted at patrick@limelicensinggroup.co.uk

Additional sources:

https://www.nerdwallet.com/article/small-business/franchising-vs-licensing

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It was all so simple 25 years ago when the only trade association in the UK was the British Franchise Association. Back then your only decision was do I join or not? Some franchisors did some didn’t. But you did get a discount to do the franchise exhibitions as a result so we joined! In my early days as a franchise specialist in the early 90’s there was a great circuit of franchise exhibitions which were always good fun. They were organised by the Venture Marketing Group on behalf of the British Franchise Association. Myself and my colleagues would do every franchise show when we were building our first network for a brand we owned called Appletree Cottage. we stopped doing them after we recruited over 100 franchise partners and went on to sign up a further 67!

We didn’t sign all our franchisees up at shows though, broadsheet and tabloid newspapers and magazines also worked back then. They still do to an extent but most budget is now expended online. After we sold Appletree, which was then part of a four company group of franchised brands we had established I formed a consultancy that worked with potential franchise owners called Franchise Pro and that company was an affiliate member of the BFA for several years.

There was Wembley or Olympia in London. The NEC in Birmingham, The GMEX centre in Manchester and the SECC in Glasgow. We did a few Irish versions in Dublin (they got messy on a night out) and even a few in Belfast. Every so often I’d hop over to the International Franchise Expo in Washington DC for the International Franchise Show. I always enjoyed that trip and my first class flights there and back as a legitimate business expense. It’s now in New York though.

As far as the UK is concerned there are three trade associations for franchisors to choose from. There’s the British Franchise Association, the Quality Franchise Association and the Approved Franchise Association.

Franchise associations are not regulators.

Trade associations are not regulatory bodies. We don’t think that phrase should ever be used really. The public assume a regulatory body is a government appointed body. So we’re not really fans of any watered down version this either such as “self regulatory body”. What is your interpretation of regulation I wonder? Regulation is defined as the enforcement of standards and behaviour. There is no regulatory body for the franchise industry. We don’t think that any trade association should purport to be “that” body for the industry or say anything that might confuse a franchise buyer. I’m sure they might argue otherwise but hey – we’re never going to agree on everything are we? One of the biggest issues in franchising is misrepresentation and that’s where we’re coming from with this point.

Cost and profit

Lime Licensing Group’s MD Andy Cheetham has just signed Lime up the BFA and so we are now  Development Consultants for the British Franchise Association. That costs around £1500 per year and the BFA like many other professional bodies likes to sell professional qualifications. In the BFA’s case that costs about £3,000. Similarly the QFA charges members around £350 to join and their competency course costs £150 or so. The AFA charge about £600 for franchisors and just under £1,000 for service providers. Running an association is a profitable undertaking but the QFA are the only ones who state they are running a not for profit enterprise. Although this isn’t independently verified it certainly strikes a chord with some. Lime joined the QFA when it first launched a few years ago and are still members today.

Qualified in franchising

Once you’re a member you can apply for a franchise qualification if you fancy. Once you’ve completed the course successfully you can then have some post nominal letters after you name. In the BFA’s case that is “QFP” Qualified Franchise Professional. The International Franchise Association use “CFE” standing for certified franchise executive. The QFA version is VFP (verified franchise professional) and the AFA don’t have an accreditation as far as were aware, which we’re pleased about because this paragraph is already confusing enough!

Always remember that post nominal letters regardless of where you see them should be taken with a pinch of salt. You could probably have some letters of your own choosing after your name anyway! In Lime’s case each of our consultants passes our own elite franchise advisor training before they are let loose so that could be EFA for example, or EFE maybe, or EFC ….  There’s no one to stop us doing that and our training is the most comprehensive we are aware of in the industry. I’m also a sailing instructor when I’m not franchising, that’s an “SI” in nautical terms. So as previously mentioned, qualifications show a certain attainment but I mainly learnt to drive after passing my test and even though I’m also a yachtmaster there’s no way I can sail as well as someone who has five times more sea miles.

Nepotism in UK franchise associations

A potential issue arises when those who run an association create a problem of impartiality. It has often been thrown at trade associations run by members that some members are favoured over others. An example of that might be that when a random enquiry comes along someone in the association might recommend one member or supplier over another rather than just point them in the direction of the members list or the nearest one geographically speaking. Or maybe there’s a favourite group who always end up being promoted above the others. Mainly some brands are just better adverts for an association than others. It is a fact that in all groups and clubs some people just get along better than others and human nature takes over when friendships are formed.

Conflict of Interests

Could a government minister who is also on the board of a private company truly act impartially when something in their ministerial life affects their private role? We all know the answer as has been widely documented numerous times. Someway down the pecking order it’s also a sad fact of a significant number of trade associations and not just those in franchising. It’s because a lot of associations are run by people from within the industry. It can lead to the association being used as an extension of their own marketing for commercial gain.

If a Director of a trade association was a shareholder of a new or existing franchisor for example will they access franchise leads that might not have otherwise found their way to that brand? Or would that brand be promoted better in the association than a direct competitor? You can judge that one for yourself too. In an ideal world every franchise association would be run by impartial people and independently audited. But it’s not an ideal world we know that. However this article is commenting on UK trade associations which by definition need to be started by unpaid volunteers or they would never have got off the ground in the first place. It’s for those that run associations to show that they can avoid conflicts of interest or otherwise declare their preferences.

Franchise Awards

My wife Debbie used to show Dalmatians, we had a dog that was the most beautiful of them all (she was honest). She actually won her class at Crufts twice. One night myself and Debbie were invited to the annual “Dalmatian of the year” dinner dance. Amusingly we watched one judge in particular accept a bottle of Dom Perignon from a competitor. He quickly shoved it under the table. Here at Lime we’ve won awards we’ve never even entered. We gratefully accept them all of course. But when a trade association gives an award don’t accept that as a substitute for your own due diligence whatever you do. Just take it all with a pinch of salt.

Who’s the biggest and the best?

The BFA are the biggest with around 200 members, the QFA have around 115 and the AFA around 60. (But someone feel free to correct me if I’m wrong). The franchise industry has something like 1,000 franchisors in it. So none of the associations have cornered the market really. The QFA and the AFA are privately owned businesses, and those who run them are also active elsewhere in the franchise industry. The difference that we have found in the BFA since we were last members 15 years ago is quite significant. The BFA is run by Pip Wilkins who is taking the association forward and as usual it is run by its members with financial transparency. From what we can see Pip and her executive team are doing a great job.

Why do UK franchise associations have a role

Competition isn’t a bad thing so for all the years the BFA had the market to itself they didn’t really have any concerns. It might be a concern to them now though that 175 other brands are members of other organisations but I don’t think they need worry too much. What matters from our view point is that they have clearly set their stall out as the number one destination for excellence in franchising. The BFA’s core message is that it’s members are the most professionally accredited in the industry. It’s true that applicants are examined and go through a thorough accreditation process – we’ve been through it.

Should you only buy franchise that’s a member?

No, no and no! If you’re reading this as potential franchisee by all means take some comfort from a brands membership but no trade association can guarantee to anyone the quality of any franchise opportunity. It’s also true that genuine regulators do a better job. The BFA can’t fine anyone whereas the Financial Conduct Authority can bring proceedings that send someone to prison. Some of our clients have been members of the FCA and that’s true regulation right there! So always do your due diligence and don’t assume any franchise is a good purchase just because they are members of a trade association. It’s a factor but you’ve got many more important checks to do before you get influenced by that!

Do your due diligence of a member just the same as you would a non member.

The post Franchise Associations in the UK appeared first on Lime Licensing Group.

I wrote a blog in 2019 about the five barriers to business growth, obviously having no idea how the Covid-19 pandemic would start to dominate our business lives. When I recently joined Lime Licensing Group, I reflected on that blog, my expertise helping people with strategy and funding, and as an advisor on The Government backed Startup Loan Scheme. My thinking led me to the issue of franchise funding. Both for new franchisors and for people investigating becoming a franchisee.

I have worked in strategy, marketing, advisory and commercial roles with businesses pursuing business growth models ranging from using agents, distributors, franchising and licensing, as well as businesses that follow a direct to customer business expansion model. Regardless of the business model, for most SME’s access to finance remains the number one barrier to growth, followed by nurturing the right type of customers, harnessing accurate information and good technology tools, and getting good expert advice.

Whilst many parts of the small business community are sadly currently in limbo, or worse, the performance of franchising businesses during previous recessions indicates a positive outlook for the sector. One reason for this is that, for a franchisor, growth to a large degree can be achieved with less need for finance and more control than with other growth models. For the franchisee growth can be achieved based on the franchisor’s tried and tested business blueprint; taking away some of those barriers to growth.

Franchise Funding & Finance

One barrier that remains for the franchisee however is access to finance.

Financing a franchise can be expensive and most franchisees need to secure capital to get their business up and running. Despite options including some franchisors tailoring financing solutions exclusively designed for their franchisees, high street and challenger bank loans, overdrafts, The Enterprise Finance Guarantee Scheme, crowd funding, peer to peer options, friends and family lending, securing the finance is often not easy. All those attractive headlines and attractive headline interest rates do not get your franchise financed.

I am a fan of the of the Government backed Startup Loan Scheme; not just because I have helped over a hundred businesses get funding, but because for the right people, franchises being very much included, it is a great option to investigate.

Having our own in-house expertise, working closely with our franchisor clients and with two of the Government’s largest Delivery Partners on the scheme is an added benefit that can help get the finance over the line.

Startup loans

The Startup Loan is a way for people with a business idea, who are buying a business, or who have a business that has been trading for under two years, to borrow between £500 and £25,000 up to a limit of £100,000 between four people within the business.

Data from many sources say that on a like for like basis franchises are probably more likely to survive than other types of business; based on the statistics the added profitability, survival and viability of a typical franchise business model means a Startup Loan could be seen as a good lending risk for the Startup Loan; and it is lending risk along with affordability of the repayments by the borrower and viability of the business that inform a lending decision.

The Startup Loan scheme is a government supported scheme run the The British Business Bank initiative that provides loans to businesses of all types across the UK Normally the loan is over five years and it is an unsecured personal loan at 6% interest rate that you can inject into a business. The loan can be paid back early without incurring additional charges or paying the interest due on the time left on the loan. The process is relatively quick and simple.

Different from most bank derived lending, a Startup Loan offers up to 100% of the investment amount of buying a franchise, and applicants can apply for capital repayment holidays. It is a great way to fund a viable business but as with other forms of lending there are hurdles to clear and hoops to jump through. For example you will need a good credit rating, and to submit a business plan, a cash flow, and financials; but if you are a franchise buyer you are using the franchisor’s tried and tested business model and have the support of the franchisor. As an expert on the scheme we have built templates to help with those hurdles and also offer on going advice, working with the franchisor and their potential franchisees.

That’s a good start as far as this scheme is concerned.

Ultimately franchise funding, for both franchisor and franchisees, is about getting good advice from advisors with the combination of experience and knowledge to help. And ultimately the biggest barrier to business growth is getting good, experienced advice. My view is that as we at last seem to be seeing some dim light at the end of the Covid-19 tunnel, the Startup Loan Scheme can be a great benefit for the franchisor and the franchisee. For both, finance is one of the biggest barriers to growth, and the Startup Loan Scheme is potentially a very good fit.

There is a book that everyone seems to be reading at the moment ‘The Boy, The Mole, The Fox and The Horse’. In it The Horse says ‘the truth is, everyone is winging it’. True, but there has to be something said for winging it backed by access to good finance, support and advice, helping you overcome those five barriers to growth.

Maybe, just maybe, looking at a Startup Loan might help.

Patrick Burge is a specialist in business growth. He has helped build online and offline businesses in many sectors including tech startups, apparel, sport, fitness, health, printing, retail, coaching and consulting. Apart from specialising in brand licensing and franchising, he has also advised numerous businesses on getting their strategy and funding in place. He is an advisor and Delivery Partner CEO on The Government Startup Loan Scheme.

He can be contacted at patrick@smorgasbord.tech or patrick@limelicensinggroup.co.uk

Further reading:

Why startup franchises are not really startups

The post How to get franchise funding appeared first on Lime Licensing Group.

By Richard Pakey, Regional Director, Lime Licensing Group.

Tired of the uncertainly of 2020 and keen to do something by yourself and start your very own business? Maybe you have even heard of franchising as one way to do this, but know very little about it? There are many areas that you need to be aware of, here is just one of them for you to think about that might help you make your decisions.

Franchising can certainly be one way to get going much quicker than you probably would be able to alone, however, it is also fair to say that franchising is not for everyone! (Now, that might seem a strange statement coming from a franchising consultant don’t you think?)

Franchising Is A Great System, But NOT For Everyone!

When all the elements are right in franchising, there should be a high value relationship between the franchisee (you) and the franchisor (the person or company that sold you your franchise) because over time the two of you will definitely become interdependent, but, when this fails it goes horribly wrong for both parties and everyone loses, I want to be really clear with you, that nobody wins when things go wrong, and they sometimes do! However it is a great place to be when the successes can be shared and a great position to be in which will help to drive the business forwards.

There Are Franchisor and Franchisee Roles That All Must Undertake

You will be buying into a proven concept with a system to operate as a franchisee, direct from the franchisor who has a right to sell what you are paying your hard earned cash for, be sure that what is being described to you is worthy of the investment, I’ve often asked myself what it would cost me to replicate what is being offered as the franchise offering and too many times see the initial investment as minimal compared to going alone, again, a clear advantage of buying a franchise verses going alone, the franchisor does not win on a single sale but then hopes to sell that same principle multiple times across the UK, and often beyond…

You Will Not ‘Own’ The Brand As A Franchisee

Get used to some restrictions as a franchisee, for example, there will be marketing restrictions (as the franchisor will ensure that the brand is protected at all times) you might also have territory restrictions as this is what helps the franchisor be in a position to sell additional territories across the UK, however, it is fair to say that you will accept and purchase an area, or territory that the franchisor confirms is equal to, or better than their own areas or pilots, and you should feel confident that there should be enough business for you to replicate their earlier successes.

You Will Have Some Control As A Franchisee!

A franchise will still be your business, so you can expect to be in control of cashflow for example, maybe operating minimum levels of marketing and advertising, often with no maximum levels, but be guided by the franchisor here who will be able to demonstrate what decent levels of spend activity levels look like for revenue, often referred to as R.O.I.
Do not just run off with your own ideas either, there will be strict guidelines on what you can do with any marketing and advertising, see it as a good thing as there will be a consistent message as the brand grows, and when done correctly, you will even benefit from the entire franchisor set-up and everyone playing their own part in awareness campaigns. A franchisor should however be receptive to your ideas or new methodology, but I would advise that you first get the basics under your belt to ensure you have at least followed the system that you have purchased by the letter and are showing growth as a result of doing so

You Must Work Together!

All franchisors and franchisees are not only duty, but also contractually bound to work together, whether is contract law written or simply ‘best practice’ It is only when these parts break-down that it can all go wrong, as a franchisee, you are not simply at risk of losing any capital you may have invested, the implications of failure (at least from your part) can sometimes be more far-reaching than that (but maybe too extensive for this short article) and are mostly part of any franchise agreement that you will sign on exchange of contacts, but also for the franchisor there are damaging effects as they will not want to be part of a failed network, it will impact on their growth plans moving forwards and then at the end of the day, work together, and do you know what…everyone just goes on to make a little bit of money and everyone just sleeps that little bit better at night…now, that is the sort of business I am more than happy to play my part in!

Happy New Year to you all, I look forward to writing more monthly articles and assisting you in what will be a very busy year in franchising, we will see many more franchisors and franchisees than at any other point in UK history this year, it is a great place to be in when done right!

__________

Richard Pakey is a franchising expert and Regional Director for the award-winning Lime Licensing Group and can be contacted in the following ways:

Mobile/text/whatsapp: 07904 697591
LinkedIn

The post The Franchisor And Franchisee Relationships In 2021 appeared first on Lime Licensing Group.

How To Unite Franchising and the economy in 2021

Some of you readers might recall 1992. The Queen’s speech referred to that year being “annus horribilis”. I would think most of us reading this article right now would agree that 2020 would seemingly be on par with the Queen’s thoughts. Nobody would ever think that what has happened this year was even possible, let alone the effects that came to life.

As this article is being written, breaking stories of two of the high streets more prominent players in really serious trouble. Thus impacting on tens of thousands of jobs. Furthermore, and at the worst possible time, this will have a short and medium term impact. As a result there will also be the longer term implication of empty high street sites.

An Empty High Street Is Good For Nobody!

And yet, despite the doom and gloom, there does appear to be some optimism! The Pandemic does, at least for the moment, show some signs of slowing. There is plenty of talk about a good enough vaccine, and a roll-out could begin within a few short months.

Let’s take the positives then! 2020 has been very strong for the franchise sector, with more enquiries all round than historic records show. It may be people looking to buy a franchise or businesses looking to create a version of their own business as a franchise opportunity. Overseas brands are also looking to enter what they believe is the safe haven that is in the UK. Yet, is there still a further opportunity?

Could Franchising Be The Darling Of The New Economy?

Things will undoubtedly change moving forwards. Online has thrived during these uncertain times (it was on an upwards curve anyway!) Delivery has almost become widely accepted as standard now. The way we shop and become accepted of change has happened at a rapid pace, however, has our need for an experience just being heightened?

The high street was attacked for being more of ‘Clone Towns’ a few years back. This thinking will change with some dying businesses falling by the wayside now, so, could things be about to change?

Get Ready For Pent Up Demand!

Visiting our friends and family, going to the cinema, just sitting in a coffee shop and relaxing with a hot drink. We aren’t browsing the shops or buying clothes like we used to. These are largely experience led, the demand will not go away for ever. It never will in fact. Further, it is a well-known fact that the human in us craves this to survive. Arguably one of the reasons we work … to then enjoy the experience. I bet you cannot wait to have this option again can you?

Here’s How Franchising Can Play A Huge Part

Historically each franchise system operates individually. There is little evidence to suggest that this will change. However, can the franchise sector be more concerted in their efforts to unite? Here are a few suggestions for further consideration:

• Competing and non-competing food brands (for example) can complement each other. Either by driving more traffic or creating further choice to generate footfall into specific areas like high streets
• Larger high street units can be split to either zones or split unit spaces to ensure high fixed costs are kept low. This may ensure long term economically viable. It may also create more choice which drives footfall.
• Franchising can be a great alternative to employment (granted, not for everyone) but with so much support, such as the well backed Government Start-Ups Scheme, options are there to help people transition if they are made aware
• Some home-based franchises can fuel the appetite for the new work-life balance that has recently been thrust on us all, but only if people are educated on the prospect, strangely enough, some business concepts that maybe were not suitable to be operational from home historically, are now having to!
• And last, but no means least, the franchising community has at long last its best chance to have a real voice that can truly be heard, the ins and outs of franchising in the UK is still little known, ask the majority of the public and the thought is that franchising is still reserved for the big corporates, unbelievably, there are still only around 1000 different franchised concepts in the UK, this is massively dwarfed by most other developed countries, yet, this is the time and place where lots of individuals are on the look-out, yet they simply do not realise that franchising is a real possibility for them

As we draw to a close for the end of the year, I would personally like to wish you all a very Happy Christmas and New Year, thank you for taking the time to read my articles, I do hope they spark a debate at least, keep well, keep safe and let’s smash it together in 2021!

See the best franchises of 2021 here.

Richard Pakey is a franchising expert and Regional Director for the award-winning Lime Licensing Group and can be contacted in the following ways:

Email: richard@limelicensinggroup.co.uk

Mobile/text/whatsapp: 07904 697591

LinkedIn

https://www.limelicensinggroup.co.uk/franchise-consultants-in-cambridgeshire/

The post Franchising and the economy in 2021 appeared first on Lime Licensing Group.

Let’s just start with the obvious typical franchise fees. There’s an initial franchise fee that most often gets the franchisee trained and the rights granted to them. Usually some inventory and other bits and bobs to go with it. When we ask people what their idea of typical franchise fees are this is the most popular answer. Most investors also appreciate that there is a royalty to be paid to the franchisor and that’s likely to be the biggest fee over time. Finally maybe there are some nominal costs which cover technology licenses and an advertising commitment payable through Head Office.

For many franchisees that’s about it.  However, there are potentially dozens of other fees within a franchise agreement. Particularly with North American brands. Here’s a breakdown of costs to highlight some typical franchise fees, and some not so typical!

Don’t be paranoid if you’re looking at a franchise purchase with any of Lime’s clients – you wont find anything like the number or type of fees on this page! All our clients cover the basic engagement and have fair, typical franchise fees. But just for fun, let’s cover the common franchise fees and highlight the franchise fees that get ridiculous! We’ve seen it all over the years. Furthermore, this may not be an exhaustive list!

What is an Initial Franchise Fee?

This is the “get you going” investment which covers the launching of the franchise from the franchisors perspective. It doesn’t cover costs that you might also need to account for. Those might include asset acquisition, vehicles, premises and such like. Once you’ve added all those up bear in mind you’ll likely need access to further capital. That capital has to support you and cover overheads until the business is on it’s feet. The initial franchise fee needs to be at a level that the franchisors costs are met.

What is a Royalty Fee?

Fixed or percentage. Fixed ones can rise annually either in line with inflation or RPI or the greater of both. Percentage ones are cheap when you aren’t doing very well, and expensive when you are. As a result percentage based systems hurt the franchisor if the franchisees are struggling and vice versa. Furthermore there is a strong argument that this is a sort of “wrong way around” arrangement. A franchisee who is earning the least royalty requires the most support and sucks up the most Head Office resources. Maybe that franchisee is given extra rights such as working off territory or even helping the franchisor deliver some business. Clearly though that franchisee pays the least for it.  A top performing franchisee pays the most royalty, but probably needs the least assistance. A fixed fee royalty has an inherent fairness to it but it isn’t always the best fit for a franchisor or franchisee for various reasons.But that’s a huge topic and you’ll need a franchise consultant for that!

What is an Advertising Levy?

Two costs to look out for here. It is common that all franchisees contribute a sum into a central pot. The franchisor or a selected team of franchisees administer and spend that pot. Be aware that some franchise agreements permit the franchisor to make deductions from the levy to cover the costs of administering the levy. That’s not a typical franchisee fee and it may seem harsh but a franchise is a contract and if it’s in the contract then hey – that’s the deal!

What are Local Advertising Fees?

Many franchisors require that franchisees spend a minimum amount on local advertising. This isn’t orchestrated by the franchisor or paid via the franchisor. A % of turnover or a fixed amount or a minimum amount is common. These are often seen as typical franchise fees, but they’re not really. They are a typical business expense irrespective of what business you are in.

What is a Franchise Technology Services Fee?

There was at time that you bought software and owned it. These days it’s all about recurring licenses and so typically the franchisor will decide what form that takes. Fees for technology are very typical franchise fees these days.  Franchisees will pay for those licenses and Head Office will often stipulate the specification. Technology costs can be applied to many things other than software so it’s best to fully understand these expenses to avoid any nasty surprises down the line.

What is a Franchise Deposit Fee?

A deposit for a new franchise may be retained by a franchisor in the event that a franchisee doesn’t complete the purchase. Or as is more common a portion of the deposit will be retained and a balance refunded. Franchisors honour the principal of deposits by turning away other franchisees who might want the same location or territory or commencing some work for the franchisees eventual benefit. If costs are incurred it is unlikely you’ll get the whole deposit, or even a portion of it back should you later change your mind.

For the most part the above fees are pretty much what should concern most franchisees. However, if there’s one thing that decades of experience provides it’s an in depth knowledge of what many franchisors do well and don’t do well. Read on to discover what we think are probably the less typical franchise fees we have come across.

What is a Local Cooperative Fee?

This can be quite expensive between 1% -3% of gross sales. Note the word gross there! It’s usually where franchisees group together to place local advertising. More common across the pond in North America. So maybe a newspaper overlaps 10 franchise units and one advert would do for all of them. Here at Lime we think this is a great example of excessive fees. If you have a local cooperative fee in your agreement you’ll pay this in addition to a national fund, and your own local advertising!

What is a Remodelling Fee?

Common with premises based businesses. You might expect a price per square metre or a capped amount to update the outlet from time to time or upon renewal of the franchise agreement.

What is a Decor Update Package?

We’ve seen remodelling fees apply to new branding and decor update packages apply to items that are still on brand but need updating after a period of time or even after a certain amount of turnover! No one wants a tired looking franchise do they? So when things start to look a little shabby expect a cost to update the decor.

What is a Minimum Age Fee?

A minimum age fee is an interesting one because this can be abused somewhat. Just like the decor updates to a degree but it sets a time limit on assets within the business. Typical franchise fees in this category might be applied to a vehicle for example. The franchisor may stipulate that your liveried van has to be no older than 4 years old.  You can see the logic for this but it’s also true that being forced into a new lease even though your current van is tickety boo does grate somewhat. Minimum age fees can be applied to lots of assets.

What are Franchise Renewal or Transfer Fees?

Time flies by and soon enough your franchise agreement will be up for renewal. The cost of dealing with this may well be nominal. However, expect a few grand as a minimum for the right to the new agreement. You may also need to pay for legals and the renewal may trigger a decor update fee and a minimum age fee. Watch out for franchisors who require that a sum equal to the initial franchisee fee is paid again in full. You decide if it’s worth it…

What are Franchise Resale Fees?

When a franchisee sells a franchise the franchisor is put to considerable expense. Not just the expense of dealing with every enquiry but also then training and supporting the newbie. Typical franchise fees for the granting of the resale can include a straight percentage fee of the total consideration or a fixed amount. Sometimes a franchisor may charge a fee to the incoming franchisee too for their initial training and support. In addition, an outgoing franchisee may have to pay an additional fee if the franchisor introduced the buyer. Many franchisors introduce the buyer anyway and so act as a business broker in effect. Business brokers charge a fee and so too therefore do franchisors.

What is a Franchise Audit Fee?

Naturally there is some resistance to audits. Because the real issue isn’t just decor and service standards, it’s royalty compliance! But franchise owners need not worry. It is only fair that a franchisor can check compliance with the agreement. In doing so the franchisor incurs a cost which is usually the cost of the franchisor. However, if there is a material discrepancy found between what has been reported and what the audit finds then the franchisor usually has the right to charge for the audit.

What is a Franchise Mystery Shopper Fee?

A franchisee may have to cover the cost of a mystery shopper to ensure that standards required are being implemented. If you’re a multi location franchise owner this is per location! Sometimes it’s just a franchisors routine exercise, sometimes it’s prior to an audit. Sometimes its just a money making exercise!

What are Collection & Interest charges?

Not just the late payment of commercial debts (Interest) Act 1998. Be sure to understand what happens within your franchise agreement if you are a late payer!

What are mandatory and additional training fee?

Mandatory training costs are charged for various reasons including, changing legislation, material shifts in the business model, new software etc. It’s a necessity in many business environments. You simply just have to be trained on it! Additional training will more likely be to address underperformance issues within each franchise or perhaps when a new member of staff joins and they need Head Office induction or training. Sometimes if a new franchisee doesn’t attain the standard required after their own initial training then a franchisor may arrange additional training at additional cost.

What are Additional Persons Fees?

Initial training is usually limited to a certain number of people, thereafter it costs extra. Most franchisors don’t want the family coming along or a bunch of other shareholders or advisors. But, if you especially want that, and the franchisor agrees then you may trigger an additional persons fee.

What is a Unapproved Franchise Advertising fee?

Does just what it says on the tin. If a franchisee places any advertising that isn’t brand complaint or approved then some franchisors will charge a fine. We’ve seen tiered examples not unlike the following:

1st infraction £250

2nd infraction £500

3rd infraction £1,000

What is a New Franchise Product evaluation fee?

If a franchisee wants to introduce a new product into the system then the franchisor will need to put some time into evaluating this and that time incurs a fee.

What is a New Franchise supplier fee?

If a franchisee wants to introduce a new supplier to work for them or the franchise network then the suppliers evaluation and maybe onboarding incurs a fee.

What is a Franchise Hold Harmless Fee?

This typically is an acknowledgement by the franchisee that they must meet their own expenses when defending anything relating to their own franchise company. Hold Harmless means the franchisor is not required to pay for anything resulting from a case a franchisee may have to get involved with relating to their franchise and another party. So that could be lawyers fees, damages, civil action or any claim against the franchisee.

What is a Franchise Opening Extension Fee?

Let’s say you’ve signed the agreement and you’ve now got 12 months to get the shop doors open. But you’re late for whatever reason doing so. Some franchisors have clauses in their agreement that allow for a fine. We’ve seen $1,000 / month in North America which only stops when a location opens or the franchisor terminates the agreement! Thankfully we’re not used to seeing typical franchise fees like this one in the UK!

What are Franchise Arbitration fees?

Most franchise agreements have a mandatory arbitration clause within them. The fee for this are usually met by each party so as a franchise owner it’s going to cost you if you go down this route. This is actually one of the more typical franchise fees we see in nearly all agreements. However, it isn’t common that it is charged because most disputes don’t go this far.

What are Franchise Enforcement costs?

There could be fees for trademark protection, intellectual property rights and enforcing restrictive covenants if a franchisee breaks the terms of the agreement. The costs of enforcing those rights is often covered within the terms of the agreement.

What are Franchise Fines?

Fines for unapproved advertising are one thing, but what about fines for insufficient liquidity, or not turning up for a conference? We’ve seen them all!

What are Insufficient funds fees?

To be fair to many franchisors who are in a regulated industry it is a requirement that there is a minimum liquidity in each franchise. So the franchisor wants to enforce this within the agreement by way of a fine if a franchisee doesn’t comply. Similarly if a franchisee has insufficient liquidity to fund the franchise in any way a fee may be charged. In the old days when a cheque might bounce this would have triggered a fee if this clause was included. These days this style of fee, if adopted by a franchisor, is chargeable for any occurrence of this nature. As a result stopping a direct debit might also trigger it.

What are Non attendance fees?

No shows at meetings with your franchisor can incur a franchise fine. As a result this may be a fixed fee. we have even seen agreements where non attendance at a franchise conference results in a 1% increase in royalty for the remainder of the year!

What are Franchise Management Appointment Fees?

If for any reason a franchisee is unable to fulfil the contract then the franchisor may include rights to appoint a manager. Maybe through illness or even death of the owner, franchisors may appoint a manager and charge an excess over the managers costs for keeping the franchise running.  We’ve seen costs + 100% in some agreements!

What are Franchise Termination Fees?

If it all goes wrong for you, or your circumstances change and the franchisor consents to an orderly termination then you’d better hope you’ve got a compassionate franchisor. This is contract law people and if a franchisee or a franchisor for that matter wants to step away then that’s a breach of contract. The value of any breaches of contract can be the subject of litigation against franchisees or franchisors. However in the context of this article a fee payable by. the franchisee is usually agreed and that represents a termination fee.

What Are Typical Franchise Fees

Remember that for the most part the inherent deal is an initial franchise fee, a royalty and an advertising contribution. Maybe also a technical services fee which is probably software related. Don’t see the advertising contribution or technical services expenses as fees though. They’re collected as fee’s but deliver value to a franchisee as if they’ve paid it to a supplier directly. Any small business owner would expend money like this whether they’re a franchise or not.

Take comfort that Lime’s clients don’t charge ridiculous franchise fees. If you’re a potential franchisor then contact us to structure a franchise arrangement that wins for all parties. In franchising the winner isn’t the franchisor one who charges the most, it’s the franchisor who find the balance that works best for the franchisee and the franchisor.

Andy Cheetham has been designing franchise systems for almost 30 years. A 5x franchisor himself, he and his elite team of franchise specialists provide clear guidance and recruitment services to franchisors and franchisees.

Call Andy today on 07782 115993.

Become a franchisor

The post Typical Franchise Fees and the point at which it just gets ridiculous! appeared first on Lime Licensing Group.