How to run your own successful retail franchiseMatt
Here’s how you can invest in, and run your own successful retail business…
You might not realise it, but some of the most well-known and successful businesses in the UK are retail franchises. That means that rather than being one corporate operation with a top-down organisational structure, each outlet is an individual part of a larger whole. What this also means is that if you’re looking to get into retail, there could be a way of doing it that helps you avoid the incredibly difficult early stages of the industry.
The retail industry in the UK
Retail is a huge industry in the UK and is very often the barometer of how we are doing as a nation. If the retail sector is in good shape, the wider economy tends to be doing equally as well. If retail is struggling, it’s a sign that things are not looking so good. That’s how important the sector can be.
According to the Office of National Statistics (ONS), there are nearly 200,000 retailers registered in the UK, with more than 300,000 outlets across the country. Almost a third of all consumer spending goes through retail outlets- with a massive £358 billion worth of sales made in 2016. However, retail is constantly in a state of flux and the full effect of online retail is now making itself known. Which is why despite the overall healthy outlook, it’s not so easy for retail businesses to make it on the high street.
The death of a dream
We’ve all seen it happen countless times. A new shop opens up. The location is not great, and you wonder whether or not they’ve done their market research. After a few months of little to no custom, the ‘closing down sale’ signs go up and soon enough it’s back to being a vacant shop front. It’s sad really, because that short-lived shop probably represented somebody’s dream. For years they had wanted to be their own boss, and run a successful retail business based on their own ideas and hard work. But it’s exactly this kind of passion that can blind people to the realities of retail.
It’s a notoriously hard and fickle sector of the economy. Shops can be doing well for years, decades, even generations. Then along comes a financial crash, a tightening of belts, and suddenly the family business can no longer survive. Years worth of hard work undone in a few months. Retail is very demanding, requiring a keen eye for detail and constant market research, branding, publicity, stock sourcing and more. And very often this is just too much for small businesses to handle without the support and experience of a parent organisation.
Which is why retail franchises are an increasingly popular way of entering the market. But with retail franchises available in everything from fast food to pharmacies, choosing your niche can be difficult. Especially when you don’t necessarily need any prior experience before entering the field.
How to choose a retail franchise
You should try and think about retail franchises that have some longevity. Use yourself as an example. When times are tough and belts need to be tightened, what are the first things to go? Luxury items, non-consumables – in short, things you can live without. So try and avoid franchises that are faddy or may be under threat if the economy shows signs of slowing.
The best franchises are often in the consumable markets, where you can establish a strong consumer base that will stick with you even in the tough times. Food shops, off licences, corner stores – the bread and butter of the retail world. They might not make the headlines but they generally last.
You might even consider franchises in an area that thrives in economic downturns. Buy and sell franchises like Cash Converters and CeX swap consumer goods for cash, offering the chance to buy them back later.
Conversely, you can’t generally go wrong with quality. It might seem strange, given what is written above, but franchises that offer genuine quality products – even non-essentials – tend to do well over time.
You need to think about what kind of franchise will suit you and your business ideas. What kind of products do you want to sell? Are you going to aim for the top, middle or bottom end of the market? All of these questions will inform your decision about what kind of franchise you should buy.
It’s well worth trying to talk to other retailers who have bought into the franchise. Find out what their experience has been, what advice they have to give you, and how they found the experience of setting up in a crowded market place.
Of course, there are many sizes and varieties of franchises out there. The household names like McDonalds are at the very top end of the pyramid and need large-scale investment. But there are also countless other opportunities in all areas of retail. And it is possible to start small and grow from there.
What it takes for a retail franchise to succeed:
One of the key factors for successful retail franchises is brand recognition. People like to buy from brands they know and trust. Buying a retail franchise takes the uncertainty away for many shoppers, letting them buy products with which they are already familiar. It also means you have a readymade customer base.
This is perhaps the key factor for any business. Finding the perfect position can be tricky, which is why support from the franchise is invaluable. Their research, knowledge and experience will help you to find and secure the right premises, at the right price. This is one of the hardest things for any retail business. And when the margins are slim between success and failure, location can make all the difference.
In an industry like retail, every decision counts. Order the right stock at the right time and you’ll sell, sell, sell. Get it wrong and you’ve got a stockroom full of last season’s toys getting dusty and losing value. As well as advice, you’ll get training from your franchise and a chance to draw on the experience of other franchisees.
The margins you make between buying and selling stock is essentially your whole business. If you can’t charge more, the best way to make money is to pay less. As a sole trader it can be hard to get the best deals on stock, but as part of a larger franchise, you have larger buying power and greater economies of scale, so you get better rates and your profits go up. This is an advantage many retail businesses only obtain after years of risky expansion.
In such a big industry, where the margins between success and failure are small, working within the franchise structure can give you the advantage you need to make the difference. With support and experience behind you, you can avoid the pitfalls that many new retail businesses confront and succumb to. Don’t end up another empty shop front masking a failed dream. With retail franchises you can survive and thrive in the retail sector.