Why Franchise. Franchising has attracted some 34,000 people in the UK to invest in their future in self employment. Here are 15 reasons why franchises offer an attractive business opportunity. 1. Established brand value. Prior to launching a franchise, the franchisor has developed and established attractive and meaningful branding for the operation, and as the network of franchisees expands the national recognition of this brand grows.
When a franchisee enters into a mature franchisee network, they will benefit from the national name recognition the brand has built when it comes to their own marketing initiatives, while even new launch franchises have invested in professionally designed and intellectually protected branding to benefit its franchisees. 2. Accessing a proven system. Most franchises are launched based on an initial head office or pilot operation that has been trading for at least one year.
This is essential in enabling the franchisor to solve the teething problems any new business faces. The franchisee will benefit from lessons learned by the franchisor during this period through ongoing advice and support. 3. Offering a product or service in demand. The pilot operation not only developed the operating systems and procedures of the business – importantly it also established a proven demand for the product or service. 4. A low risk route into self employment.
Franchising has traditionally a lower associated risk than starting up your own business independently. The proven nature of the business concept, combined with the training and support provided by the franchisor, lead to a lower level of failure. The 2007 NatWest/British Franchise Association UK Franchise Survey reveals that 93 per cent of franchisees reported profitability last year. 5. Professional initial training. All business format franchises provides comprehensive initial training to prepare the franchisee for launching and the ongoing operation of the business.
The franchisee can enter into self-employment confident that they are well prepared to tackle the challenge ahead. 6. Established profit margins. Setting price levels to balance between competitiveness and profitability is a complicated process, often involving some trial and error that can prolong the development period of the franchisees business before break even. The franchisor will be able to help franchisees set the right pricing levels from day one to ensure they are not under or over quoting, maximising the profits their business generates. . Recommended suppliers or direct supply. The franchisor will be able to offer assistance in sourcing the products and services that franchisees will require to operate their business, and in some cases will even act as the franchisees main supplier. 8. Ongoing training. Whether the franchisees initial training is one week or two months, they won’t be expected to absorb everything immediately. Many franchisors stagger their initial training to help franchisees learn while they are ‘on-the-job’.
This commitment to ongoing training also enables established franchisees to benefit from improvements in the franchisor’s training provision, and eases the introduction of new products or services to the business. 9. Continual support. Having the back up of a larger company is one of the main reasons cited by franchisees for the success of their business. Rather than searching for solutions on their own every time a difficulty arises, having a head office team to consult on the end of the phone will provide great reassurance. 0. Support from other franchisees. Franchisees benefit from the success of their fellow franchisees, either indirectly by the improved reputation of the brand or directly through referral business in their own areas. They are therefore incentivised to assist each other and there is often a good level of communication across a network. Franchisors often encourage this by hosting quarterly regional get-togethers, partnering franchisees for larger jobs and maintaining franchisee intranet sites.
Some franchisors even establish mentor programmes, where more experienced franchisees provide practical advice and guidance to new launch franchisees. 11. Economies of scale. By joining a national network of franchisees, franchisees are becoming part of a large group of buyers with the ability to negotiate preferential prices from suppliers and generate other economies of scale, such as in delivery charges. Franchisees may even be able to secure exclusive access to a product or service. 12. Referral business.
The standardised nature of a franchised business’s product or service means that franchisees in other areas will be able to pass on recommendations and referrals from their clients to businesses in their territory. This is a powerful sales tool when marketing to businesses who may have offices already being serviced in other areas by other franchisees in their network. 13. National and international contracts. As the franchise develops a countrywide presence, the franchisor will be able to market to large companies and win national business for its franchisees, providing their business with a regular stream of high value, repeat business. 4. Continual research and development by the Franchisors. The economies of scale derived from operating a national network of franchisees encourage the franchisor to invest in research and development to improve the product and service offering and compete on a national and international level. As a result franchisee will benefit from continual improvements to their business. 15. Ownership of an appreciating asset. As the franchise industry has matured in the UK we have witnessed growth in the market for re-sales.
Many prospective franchisees want to benefit from the training and support of a franchisor, but seek to purchase an existing franchisee’s business in order to guarantee a customer base from day one. Other franchisees prefer to launch a franchise in a fresh territory, build it up to a manageable level and sell it on as an asset. Why Subway. Subway is a franchise fast food restaurant that primarily sells sandwiches and salads. It has over 29,045 franchised units in 86 countries as of March 2008 and is the fastest growing franchise in the world.
Currently, Subway is the third largest fast food chain globally after Yum! Brands (34,000 locations) and McDonald’s (31,000 locations). Subway is expected to be the second largest fast food chain by the end of 2008 overtaking McDonald’s. In the UK and Ireland the company hopes to expand to 2,010 restaurants by the year 2010. There are currently 1297 Subways in the United Kingdom. Subway restaurants have been consistently ranked in Entrepreneur Magazine’s Top 500 Franchises, and was selected as the #2 overall franchise in 2008.
Additionally, it was ranked as the #3 “Fastest Growing Franchise”, and the #1 “Global Franchise” 14 years running. Many restaurant analysts attribute Subway’s fast growth to the growing concern on health by restaurant customers, a trend that Subway has taken advantage of in its marketing and with other major fast food chains like McDonald’s following suit. In addition to traditional restaurants, Subway operates in many non-traditional locations. For instance, there are over 900 Subway locations inside of Wal*Mart convenience stores in America, 200 on military bases and n petrol stations, in addition to at least three located inside the Birmingham International Airport – as well as an increasing number on college and university campuses, In 2000, Subway added seasoned breads and a line of specialty items to its menu and in 2003, most Subway markets switched their beverage contracts to supply Coca-Cola products exclusively, having previously served Pepsi. Subway gave customers the option to have their sandwiches toasted in response to increased competition from rival sandwich chain Quiznos Sub, which popularized toasted sandwiches.
In Australia, the introduction of Fresh Toasting enabled the Subway Franchise to prevent Quiznos from gaining market share. The TurboChef and Merrychef toaster ovens are a microwave and convection oven hybrid. Subway menus vary by store, by country and by market. These are considered country optional program (COP), store optional program (SOP), market only program ( MOP) — in Muslim countries omitting ham and other pork cold cuts — but retain core items which are included at every store.
The main food sold by the store is Submarine sandwiches, sold in “Six-inch”, “Footlong”, and the new four inch “MiniSub” sizes. All Subway stores offer customers lettuce, tomato, onions, bell peppers, cucumbers, olives, jalapenos and pickles, as well as market selected options such as carrot, corn and radish. Like other fast-food restaurants they offer limited time offers from time to time. In addition to their standard menu, Subway also offers catering for all types of occasions.
They offer “Giant Subs”, which are a minimum of three feet long, and also offer a sandwich platter. These giant sandwiches can be ordered in bulk and to nearly any specification, something which Subway has promoted as a part of their campaign to tailor every sandwich to the individual customer’s taste. All Subway restaurants in Muslim countries serve a Halal menu. There are also at least two Subway restaurants in the United States that do the same, and a faster growing number here in the United Kingdom where there is a large Muslim population.
The success of these stores has been mixed, but has resulted in plans to open more in certain areas. In addition to its corporate positioning as a more health-conscious restaurant, much of Subway’s rapid growth can be attributed to its uncommon business model. Unlike most franchisers, the parent company does not operate any restaurants. Local franchisees operate the stores, and in most markets Subway enters into a contract with a franchisee to be its Development Agent for that market.
The Development Agent is then responsible for developing new locations, evaluating stores on at least a monthly basis, and assisting franchisees with whatever needs they may have. Doctor’s Associates, Inc. takes an 8% royalty on all gross sales from each store, while between 3 and 5. 5% (depending on market) of gross sales go into a fund, the Subway Franchisee Advertising Fund Trust, also known as SFAFT which is operated by a board of directors voted on by Subway Franchisees. Contrary to other major franchisers, Subway’s parent company does not make any contribution towards advertising the chain.