(Originally appeared in the Sunday Business Post 22 April 2012)
Sunday Business Post: What is the current state of the franchising sector in Ireland?
Ulster Bank: Recent years have seen strong growth in the number of franchise brands in Ireland.
The 2010 All-Ireland Franchise Survey (UCD Smurfit Business School in association with Ulster Bank) highlighted the Irish Franchise Sector generates turnover of €2.419bn p.a., through 4,086 franchise units. Jobs in the sector have increased every year since 2006 – there are now 43,000 full-time equivalent jobs.
While historically franchise brands have originated from the US and UK, we are seeing growing numbers of indigenous franchise brands, as can be seen from the impressive shortlist of Indigenous Brands in the 2012 Ulster Bank Irish Franchise Awards.
Like the rest of the economy, the franchise community has been operating in a challenging business environment. However, changing spending patterns are creating opportunities for services that extend the lives of consumers’ assets (such as carpet cleaning, clothes alterations, small car repairs), support the way consumers live today (e.g. home care for the elderly, home delivery for internet purchases, exercise and parties for kids) and provide services to businesses cost-effectively (virtual office services, business cost management). In our social life we are going for less formal meals out, and for more value-for-money quality casual dining.
More people are considering franchising as a way to open their own businesses.
Sunday Business Post: Why is Ulster Bank so committed to offering supports in this area?
Ulster Bank: At Ulster Bank, we think it can make sense to go into business by buying a franchise licence – If you buy a franchise licence from a well-established brand with satisfied, profitable franchisees your chances of success are higher than if you start a business from scratch.
Some things to watch out for:
- Check the franchise brand you are buying into is already successful – similar outlets should be trading well & generating profits.
- You are buying a package of training, business tools, products, marketing and management supports, do they exist?
- Are other franchisees happy with business performance and the franchisor’s supports?
- Does the business model make sense? Will people buy what’s on offer, at prices that make profits for you?
- What about documentation? Has a solicitor written the legal agreement, and has your own solicitor reviewed it and explained its contents to you?
Sunday Business Post: How accessible is funding for new franchise businesses?
Ulster Bank: Funding is available for people investing in well-run franchise brands, where demand for services is evident. How much you can borrow, will essentially come down to two basics – how much will it cost to get the business established and how much will the business make to repay debt?
Would be business-owners should expect to commit their own cash & assets to support their new business as well as borrowing from a bank. The rule of thumb is that franchisees should expect to invest cash to cover at least one third of the costs of set-up and any expected losses, before the business starts to make profit.
What is your advice in terms of key considerations for potential franchisors? How should they go about ensuring their business model would make a viable franchise operation?
Franchising is a way for profitable businesses with a number of “company owned” units to grow while sharing the risks and costs of expansion.
Developing supports for a franchise business involves time, effort and expense but a well-managed franchise can expand effectively.
Some considerations for potential franchisors:
- Be prepared to give business owners reasons to belong to your brand.
- Everybody needs profits – the model must generate enough to cover your royalty fee and leave a realistic return for franchisees.
- Prospective franchisees should expect a well proven business model, with established outlets.
- A Franchise Agreement, written by a reputable franchise lawyer, and a documented “Operations Manual” are essential tools when franchising.
- A robust franchisee recruitment & selection process will weed out unsuitable candidates early on.
- Your support model should include training & supports to help franchisees get started and grow.
- Provide strongly branded products and services, with a suite of marketing & PR supports for your franchisees.
- Introduce business metrics so you can identify when franchisees are “going off course”.
- Coach your franchisees to be the best –their problems can damage your brand.
Sunday Business Post: Which particular products and services does Ulster Bank offer potential franchisees and start-ups?
Ulster Bank: Ulster Bank offers a very competitive package for franchise and start-up customers. Ulster Bank’s Start-up Business Loan rate of currently 4.1%* variable is available for Start-up Loans up to €70,000, while loans of up to €30,000 can be provided for new business development purposes without need for personal guarantees to be backed by assets.**
*Rates quoted effective as of 05/04/2012 and subject to change. Rate available to new business customers only.
**Lending terms and conditions apply. Details available at your Ulster Bank branch. Borrowers must be over 18.
The Commercial Manager at your local Ulster Bank branch will welcome the chance to discuss your plans to start your new business. Call into your local branch to speak to a Commercial Manager today or phone 1800 28 30 96 or email firstname.lastname@example.org to arrange a meeting.