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The business landscape for Franchising in Ireland

Irish SMEs are undoubtedly operating in a challenging environment – Business Information Provider Vision-net reported that 1,930 businesses in Ireland closed their doors during 2011.  

But Vision-net statistics also tell us a story of entrepreneurship – 14,654 new firms were incorporated and 26, 605 business names were registered in 2011.

The story continues
And this story continues in 2012 – last week alone saw  212 new companies & 591 new business names registered and 12 company closures (source Vision-net).

We cannot dismiss the scale of business closures, but we should remember that SMEs remain the vibrant and determined backbone of Irish employment.

So in 2012 the SME landscape is a story of the courage – and perhaps trepidation – of small business owners – a landscape where Franchising can play a bigger part.

Some would-be business-owners may not see themselves as entrepreneurs – they may be more comfortable setting up businesses in association with established brands, which offer proof that others have already built profitable businesses using their well-proven business models – franchising can offer these potential business owners a logical route to business ownership.

Essential elements of a successful franchise business
The act of buying a franchise licence is not, of itself, a guarantee of success – there are essential elements to a successful franchise business:

  • A well proven business model, run by an experienced management team, which has already proven franchisees can set up in new locations and build profitable businesses.
  • A franchise support model which includes training, mentoring and supports to help a franchisee get started and become successful.
  • Franchise Documentation – A Legal Franchise Agreement, developed by a reputable franchise lawyer, and a documented Operations “manual”
  • A prospective franchisee who is prepared to work long hours, and follow the model that has shown itself to work.
  • A clearly identifiable market for the product or service the business offers, at prices that generate a high enough profit margin to meet franchisor and franchisee expectations.
  • And a bit of luck. But you can reduce the ”luck” factor by doing your research and “sense-checking” the concept you intend to buy into.    You do need to take independent legal and financial advice, before committing yourself to your investment in a franchise.

In Franchising, as with any other start-up, would-be business-owners should expect to commit their own cash and assets to support their new business as well as borrowing from a bank.

The amount you can borrow, will essentially come down to two basic issues. Firstly, how much will it cost to get the business established and secondly much cash will the business make to repay the debt? As a rule of thumb, 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. 

A Competitive package
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 to provided for new business development purposes without need for personal guarantees to be backed by assets.**

*Rates quoted effective as of 13/03/2012 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 to arrange a meeting.