Moving From Employment To Self-Employment

Each year, around 3,000 people make the decision to purchase a franchise in the UK. Some will take a virgin territory, and some will buy an existing franchise as a resale. Around two thirds of these new franchisees come from an employment background, with only one in six having been previously self-employed. Interestingly, of the people coming directly from employment, around one in four will have previously worked either for a franchisee or for a franchisor as an employee. These people have seen franchising at close hand and decided that they would be better off as a franchisee than as an employee.

When considering the move from employment to self-employment, there are many factors to consider. The first is which sector you want to operate in. Some people will want a business in an industry they have previous experience in. Around 75 per cent, however, will choose a new sector in which they have no previous experience. This is possible in franchising, unlike in non-franchised self-employment, because the franchisor will deliver comprehensive training on how to do what they do, and will support you through this learning curve and throughout the operation of your business. The next factor to consider is the investment level that you can afford or are willing to commit to a new business venture.

There are many franchise opportunities in the market at below ten thousand pounds and some that require hundreds of thousands of pounds of investment. Often, a franchise fee will include a turnkey package of equipment and stock but sometimes there are additional expenses on top of the franchise fee. A prospective franchisee should investigate this carefully and also consider how long it will take to reach profitability – ie, how much additional working capital they will need. Whilst only around half of new franchisees need to borrow money, the franchise-friendly banks will lend, for the right franchisor, and subject to status.

Then comes the difficult decision of which franchisor to choose within your chosen sector and investment criteria. Some sectors can have a plethora of franchisors operating in competitive markets. Some investors will want to joinan established franchisor with many existing franchisees but others may
prefer to look at an opportunity with a business that is new to franchising but has the experience of operating company- owned outlets. These ground floor opportunities often have the benefit of having more available territories and may even offer a lower entry franchise fee for their first few franchisees.

Typically, when deciding which franchise to investigate, a prospective franchisee may draw up a shortlist of around eight
to 10 franchisors and apply for their prospectus, look at their website, and commence their due diligence.This may then lead to meetings with anything from one to five of these franchisors.

During these meetings
and subsequent conversations and investigations, both parties will decide if the other is right for them, and if it is, then the franchise agreement is signed, and the franchise fee paid.There is one other factor that
people often consider; I call this the ‘interdependency factor’. The question here is what can the franchisor offer me
for my franchise fee that I couldn’t get by spending my money setting up my own business instead? The answer to this will vary from franchise to franchise, but could include better buying power from suppliers, centralised services and bespoke operating software.

In all cases, this would include being able to trade using the franchisor’s brand, being trained in tried-and-tested methods, and having the help and support of people who have done it before and learned the lessons.Moving from employment to self- employment is a big decision, and will probably be life-changing. If your chosen business is a franchise, and if you choose wisely, then it becomes a far less risky move, and one that should prove to bea fruitful one to be satisfied for the sale of your franchise to proceed with the franchisor’s consent.

Alan Wilkinson has 15 years’ experience in franchising and has held positions in Recruitment, Franchise Management, and National Sales.

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