In the UK the franchising industry is on the up, in the year 2017 franchises UK contributed over £15 billion pounds to the UK economy, so it is evident that there is money to be made in the industry. However, the common question for anyone considering buying a franchise is how to identify a profitable franchise, especially in a time when the competition in the franchising world is increasing.
Although there is no set formula of finding out a profitable franchise, nonetheless there are certain parameters that can be used to access the profitability of a franchise. Factors such as location, market trends and the franchisee’s work ethos can play an integral role in the financial success of a given franchise.
We have asked the leading Franchise UK specialists for their expert tip, which aspiring franchisee can use to find a lucrative franchise that could lead them to financial freedom:
Location Matters
Like all other types of businesses, location plays an integral role in determining the success of a franchise. Ideally, a profitable franchise has to cater to the needs of an untapped niche in the right location. Experts rate the strategic location of a franchise to be as important as the product or service it is offering. Even the most popular franchise will fail if the market is already saturated in your area.
Therefore, to find a profitable franchise first consider your location and survey it to find out the competition you will have and the similarities between your offering and your competitor’s. Also, find out how costly it would be to establish your franchise there, how much traffic does the location get and is it easily accessible by your target market.
Franchise Success Rate
Try to find out the success rate of the new franchises opened of the brands and businesses you are considering. One way to get this information is to search loan failure rates, press releases that announce the milestones of franchises in a different location. Look for information online since it is the efficient and most convenient source of information.
Another thing you can look for while you search for information is the number of franchises opened in a specific location in a given period. This will help you confirm how popular the franchise is.
Support for Franchisees
A conscientious franchisor will make efforts to ensure that their franchisees succeed because the success of both parties is correlated. Before you select a franchise, seriously consider the amount or level of support provided by the franchisor to help you succeed. A supportive and reliable franchisor will back his/her franchisor in both good and bad times. Find out the franchisor obligations that would be the part of your franchise agreement. The support may be in the form of training, hiring, advertising, marketing, and other systems.
Reviews from Existing Franchisees
Learn from the people who have chosen the same path as you are planning to adopt. Try to visit existing franchises and talk to the franchisees to learn more about the franchise, the product or service and most importantly the franchisor. However, if some of the franchisees you meet are apprehensive about the information they disclose do not be surprised.
There are various valuable sources of information online, where reviews from past and existing franchisees are available.
Average Sales
Finding out the average sales per unit may be the most difficult to find out, especially since franchisors and other franchisees are not illegally obligated to disclose this information. However, there is a possibility that the franchisor will give you some info in the franchise agreement. Additionally, there are some sources online that offer limited information on the subject. Therefore, be thorough in your research.
Even if you find average sales information, it is important to remember that sales or revenue is not equal to profit. Sales are merely the amount of money the franchise made through sales in a given period, profit is derived after subtracting the expenses. Therefore, average sales should not be considered as the most significant indicator of the success of any franchise.
Franchise Choice
It is a common misconception the term “franchise” usually refers to food franchises UK or international food-related franchises. Nowadays, there are many different types of franchising opportunities to choose from that span across industries and sectors. Some franchise choices are more profitable than others. Do your homework and research about the different options and weigh in the pro and cons.
Don’t be tempted to go for the most popular franchise recognized worldwide because those require significant investments and do not yield profits quickly. Consider home based franchises, van based franchises for low cost franchises option.
Before you select a franchise, do your due diligence that suits your needs and financial goals, and be aware that no matter how profitable a venture may seem on the paper, there will still be risks and challenges that you will have to mitigate to achieve long-term success.