There are many misconceptions about the franchising world but, whether we’re talking about estate agency franchises or fast food franchises, it’s a given that someone who wants to buy into a franchised company will need a certain amount of capital to get their business up and running.
While it’s true that it’s not cheap to buy into a franchise, many people are under the impression that it is not an option for them because it’s too difficult to get the money together.
On the face of it franchising can seem expensive. There are numerous initial costs to think about, particularly if you’re opening a cold start.
These costs will include the license fee, refurbishment costs, initial marketing costs and recruitment costs, but you must also ensure that you have a certain level of working capital to keep you going until your business starts to turn a profit.
With conveyancing reportedly taking an average of four months, it may be a while before your first fees start to roll in. It’s also advisable to have some fall-back capital, as with any sort of investment, in case anything unexpected arises.
It’s unfortunate that many people consider these costs and are immediately turned off the idea of joining a franchise, without even a conversation or simple enquiry into whether it could work for them.
I fear that there are so many talented individuals out there in the industry who are not reaching their full potential, and stuck in roles and companies where their progression is limited because they don’t think it is an option for them due to finance.
As a new franchising manager at Winkworth, I know all too well the obstacles that people have to climb to get onto the ‘business ownership ladder’, but finding finance needn’t be one of them. It is not as hard to secure as you might think.
With franchising becoming an increasingly favourable choice for business ownership, there are a number of finance options out there which are available for potential franchisees, including financing companies who support franchises and banks (such as HSBC and Natwest) offering specialist franchising loans.
They take into account a company’s brand strength, office numbers, financial position, the financial reward of being a franchisee and share price (if applicable), so if you’re able to secure a franchising loan in this way, the likelihood is that you’re buying into a company that the bank or financing company has confidence in.
At Winkworth, we have a close relationship with HSBC and Natwest, who recognise our group’s financial success, growing network of offices and back-office support services, and as a result is able to provide funding for up to 70% of the business opportunity for potential franchisees.
This means that where we would advise having a starting capital of up to £200,000 (or £250,000 in London), HSBC or Natwest could fund up to £140,000 (or £175,000 in London) of the business opportunity.
These figures obviously vary between different areas of the country and different franchises, but it can’t be denied that this type of funding could make a huge difference to somebody making the decision on whether or not to start up their own business as part of a franchise.
As the point of these loans is to aid franchise growth, they are also available to current franchise owners wishing to expand into new areas and grow their already existing businesses.
These banks and finance companies are specialists in franchising. This means they also offer brilliant guidance, not just on borrowing money but the entire franchising process.
They are, therefore, a great place to receive objective advice on franchising and they can give a really good idea of what steps you’ll need to take to get started, so it’s well worth getting in contact with them even if it is just a potential idea for you.
From there, the process is very straight-forward and not at all as daunting as you might think.
Plus, for any existing businesses considering franchising, there are also many franchisors who will offer financial rewards for rebranding, making it a really worthwhile option for smaller estate agencies wanting to tap into the backing and support of a nationwide franchised brand.
I often wonder if people in the industry were better educated on the full process of becoming a franchisee - and exactly what they would need to have and need to do – whether many would find the idea as unattainable as they had previously thought.
I do believe that there are many talented professionals in the industry whose careers could benefit hugely from buying into an estate agency franchise – whether your goal is to own your own local agency, or to expand your network with several offices.
Whichever franchise you consider, I highly recommend making that first enquiry, asking some questions and looking into whether it could work for you. You never know what success is around the corner.
*James Campbell is New Franchising Manager at Winkworth