If you want to be your own boss, but find the idea of starting out completely on your own with an untested business idea too scary, then franchising could be the ideal solution for you.

The way franchising normally works is that a business owner (the franchiser) licences others (the franchisees) to use their business idea. The franchisee usually pays the franchiser an initial fee followed by an ongoing percentage of profits or set fee in return for being allowed to trade using the franchiser’s established business idea and name.

The franchisee owns that business outlet, but the franchiser usually provides support in terms of marketing and operations and also has some control or restrictions on how the business can be run.

Franchising is a very popular business model and many international brands operate in this way.

Advantages of franchising

  • You are going into business using a proven idea that has been successful
  • You get help and support from the franchiser
  • You can use an established and recognisable business name
  • You will normally have an exclusive territory of that particular franchise
  • It may be easier to raise finance for a tried and tested business idea

Disadvantages of franchising

  • The costs of buying the rights to use a franchisee can be high
  • There will be restrictions on exactly how you can run the business and sell the products
  • As with all things, the fact that there is not as much risk with a franchisee means that the financial rewards for the franchisee may not be as great as with a completely independent business
  • You can only sell your franchise on to someone approved by the franchiser

For more information on franchising, go to the British Franchise Association website.