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Franchising world eyes opportunities to grow

A recent seminar run by the British Franchise Association (BFA) brought together franchisors, franchisees, consultants and finance providers to discuss the prospects for the sector.

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Early in the day speakers from the funding community shared valuable insight into what they value from franchisors seeking to finance their expansion. This goes beyond just the numbers, and should involve demonstrating an understanding of the bigger picture: your industry, the territory, the brand and your people.

Peter Howe, Franchise Development Manager at NatWest, explained that, along with a strong and coherent business plan, the chances of getting the right investment for a new franchise are increased by effective preparation. “A demonstration of groundwork gives us a good place to start,” he said. “And you really need to have an eye for detail: a good business plan is really key; it needs to be robust and well defined.”

“So take the time to review what you’re applying for, and show us you understand the risks that you’re running.” In addition, banks want to see positive lines of communication: “If there is an issue emerging then talk to the bank about it and tell us what you’re doing to address and mitigate it to reduce the risk. All of that will help us move our dial a bit,” Peter said.

A joined-up approach to monitoring performance

For those franchisors already on their expansion journey, there was a consensus on the need to develop better systems and processes to both capture precious data and improve the monitoring of financial performance across their networks.

Phil Archer, Head of Funding and Business Development at d&t chartered accountants, said that technology and systems can make a vital contribution to improving financial performance. “If you’re not joining up when you put the data together what you’re then doing on a regular basis, then you’ve got no hope of PDCA – Plan, Do, Check, Action,” he explained.

“You do need to be going through that data regularly, and at the end of the first year, you should be able to reset your cashflow forecast and position. It’s not expensive to do, and it allows you to use your software to set your financial goals for the year ahead.”

The value of good communication in the franchising world

Later in the day, delegates also took part in roundtable discussions across a range of issues, from cryptocurrencies to initial investment and funding. The challenges of balancing risk, recruiting suitable franchisees, finding the right advisers and embracing new technology all came under the microscope. The chance to debate these topics was priceless. As one participant put it: “Being here to discuss the issues we all face is such an important and useful experience – it’s vital.”

Euan Fraser, Managing Consultant at AMO Consulting, brought the session to a close by taking the audience through the challenges facing those franchisors looking to expand their franchise network. “It might be that they can’t invest in growth or can’t afford experts,” he said, explaining that developing an effective franchisee recruitment plan involves understanding the differences between single- and multi-brand operators, whether to use management or direct franchisees and developing a united marketing plan.

And he challenged the audience to consider whether they are providing their franchisees with a clear pathway to growth: “To do that you need to analyse their business objectives and sales; analyse their profits and how the sales mix and overheads affect that; and you need to understand the investment they’ll need – and when.”

Euan concluded by urging franchisors to take a proactive approach: “Whether that’s communicating with your bank, paying your creditors, working with franchisees to manage risk or studying up to become VAT-savvy – get on the front foot.”

It was an inspiring message on a day when the unique opportunities offered by franchising were once again to the fore.

More information

The British Franchise Association is a voluntary self-regulatory body for UK franchising and has been representing and setting standards for the industry since 1977. Find out more information or advice about franchising your business or investing in a franchise.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the NatWest Group Economics Department, as of this date and are subject to change without notice.

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