For franchisors, taking the franchise step is best suited to businesses who have been trading for approximately four years.
It is best to ensure that your business is making a profit and is well-established. Then there are a few questions you should be asking yourself: is the business successful and profitable? Is there a market for your product and services for at least 12 months, or is it just seasonal? Is your business scalable and replicable?”
It's always a good idea to pilot the operation first. Set up in a new location and trade for between 12-18 months, so you can monitor the set-up costs, performance and footfall. Once this has been tried and tested, you can use these figures as a guideline to share with potential franchisees. It’s also good to involve consultants and lawyers within this period, because they will help you put all the documentation together.
Read how Water Babies enjoyed significant growth through franchising.
If you’re an aspiring franchisee, research and due diligence are very important. Decide which franchise industry you’re looking to enter and look at the different franchise systems that are available in that sector. Find and speak to the franchisors for guidance, and reach out to the other franchisees to find out what support has been available to them. Make sure you look at your competition; find out if there have been any failures, and why they failed.
How HSBC can support
We recently launched a £15 billion lending fund to support SMEs across the UK, and we’ve ring fenced £500 million for the franchise sector. This is all about supporting regional economies, building employment opportunities and driving growth. We know that franchising is a great route into business – it can be a really accessible way to open a business for the first time using a tried and tested concept.
Our dedicated franchise team is also able to offer personalised support to business owners considering a franchise opportunity. Alongside possible funding of between 50%-70%, we can provide guidance and networking opportunities to help you nail a successful expansion.
Lending is subject to status, eligibility criteria apply.