Money Making

ADVANTAGES
You could get into business with
a lower investment. Riccardo Scala,
founder and CEO of the new Beat
Theory Fitness franchise, which has
recruited its first franchisee and is
in discussions with another 15, says:
“At present, the standard franchise
fee is £15,000 plus VAT and the
total set-up cost required from a
franchisee is £78,000 plus VAT.
“But for the first five franchisees
we are offering a £7,000 discount,
as we are waiving the induction
training fee and reducing the
opening stock package. So for them
the total investment is £71,000 plus
VAT.”
You get a chance to influence
the development of the franchise.
Len Rainford, who runs franchise
consultancy The Franchise
Specialist, says: “Being the first
means you are closer to the owner
of the business and will probably
be able to exert your influence and
ideas as the network develops.
“You are likely to be part of
the decision making process and
determine the direction of the
franchise, so you’re helping to create
something with huge potential as
the brand grows.”
David Baxendale, the second UK
franchisee with SMART repair
specialist Revive!, says: “As an early
franchisee, founder Mark Llewellyn
invited me to become a director of
the business, so I was a franchisee
and director at the same time and
helping to refine the franchise
model.
“Revive! UK has always had
a franchisee steering group that
discusses how it could be changed
and improved. Some of the earliest
franchisees are still in that.”
You get more attention from
the franchisor. Suzie says: “Even if
the franchisor doesn’t have a large
experienced support team, you
can be sure they will be absolutely
dedicated to you. There’s no
chance of you feeling like just a
number when you’re one of the first
franchisees.”
David adds: “In the very early
days, Mark let me and some of the
earliest franchisees stay in his house
in order to keep costs down while we
were training.”
DISADVANTAGES
Increased risk. Len says: “Being a
pioneer in a new system often means
being a guinea pig and involves a
certain amount of risk.”
With an established franchise, you
can see its performance over time and
ask existing franchisees what it’s like
working with the franchisor. Early
franchisees must try to make up for
the lack of these comfort factors by
researching the track record of the
franchise executives.
Ask about the performance of
the business before it turned to
franchising. For instance, Riccardo
says: “Our training concept has been
operating since 2011, so we have a
five-year proven track record that the
public want our service.”
Len says: “You must be satisfied
that the company is well established
and has run a successful pilot
operation. Check they have used
advisers with a proven track record in
franchising.”
If the franchise is being operated
successfully abroad, go over and meet
franchisees.
The system may be slow to grow
and there may be changes. Len says:
“Creating a brand through franchising
doesn’t happen overnight and it can
be frustrating in the early days, as you
want everything to happen quickly.
“Systems and methods will change
as the business evolves and you need
to be prepared to embrace these.”
The support team may be
inexperienced. “Everyone involved
HOW IT FEELS TO BE AN EARLY FRANCHISEE
As one of the first Wilkins franchisees, Mark Frost got a larger
territory and better price
will be, to a certain extent, learning on
the job,” Suzie says. Check how many
of the franchise executives and support
team have been recruited from other,
successful, franchises.
Deciding whether to be an early
franchisee is always challenging. Len
advises: “Do due diligence on every
aspect of the business. Meet and talk
to as many people involved as you can -
and listen to your gut instincts.”
Mark Frost, owner of Wilkins Chimney Sweep, Worthing, says: “As one of the first three
Wilkins franchisees, I got a larger territory and a better price, plus more attention from the
franchisor.
“However, starting a new franchise is a steep learning curve for franchisor and franchisee.
There were some aspects of the business I felt could do with tweaking. My suggestions were
taken seriously, and in some cases acted upon, but the franchisor has spent time and money
building the franchise model and suggesting tweaks will by no means change it.
“Buying an untried franchise carries an element of risk, but I did as much research as
possible and was hopeful it was a workable, sustainable business model that would prove
profitable and enjoyable. I was right.
“I didn’t have the benefit of a large network of other franchisees to ask for advice, but I’ve
probably had more freedom to do things my way, before habits across the network have
become too entrenched.”
He advises others considering becoming early franchisees: “Research the sector, the
franchisor and their business history - use LinkedIn, ask questions and make sure you
trust them.”
MAKING MONEY 49