Bank of Ireland:

Do you think about doing something different with your life? Would you like to be your own boss, but find the transition from employee to business owner too big a leap? Orna Stokes, Bank of Ireland Business Banking, Franchise Development Unit Manager, asks have you considered buying into a franchise?

Franchising is proving to be one of the best ways of going into business for yourself. By buying into a well-established franchise you can get the best of both worlds. You become your own boss, but still have a full range of support provided by people who have started and developed a successful business in the sector you are interested in.

No business venture guarantees success, but franchising can limit the risks - you, as a franchisee, are operating a business format that has been successful for other people. Franchising is big business in Ireland, turning over €1.2bn in 2004 and still growing. It is particularly attractive to the growing number of employees who avail of redundancy or early retirement packages, who then want to set up businesses of their own.

Doing the Groundwork Before you rush out to buy a franchise, consider the idea fully. Don't forget that when you sign a franchise agreement, you are tied into a partnership with the franchisor for a defined period of time. Assess your life skills - buying a franchise is a great chance to match your skills and interests with a sound business opportunity.

Is franchising suitable for you? Do you really want to be your own boss? Are you comfortable with the idea that the 'buck' stops with you? Can you adopt someone else's ideas or will you be tempted to re-invent the wheel? Buying a franchise is about buying a business model and following a system.

If franchising appeals to you and you've found a business that interests you, do your research into the market and the franchisor. Consider the costs and how it fits your pocket. You should take professional advice from an accountant and a legal franchise expert. Involve your family to make sure they're comfortable with this life change. You will need the support and understanding of those closest to you. Franchising is a long-term commitment, so make sure you like what you are getting into! The Costs of a Franchise The average cost of starting up as a franchisee in Ireland is €220,000 (source BOI 2004 Franchising Survey). However, depending on the franchise you choose, investment could be as little as €10,000 or as much as €500,000. Franchisors will advise you on the level of costs associated with set-up, but typical costs involved in a franchise include initial start-up costs such as deposit, initial franchise fee and working capital; and ongoing investment costs such as fixtures, fittings, equipment, signage and other items specified by the franchise agreement. You may also have costs such as Key Money for a premises lease, which may be considerable!

Ongoing Costs You will be expected to pay either a management services fee (c7% of turnover) or a fixed fee (average €7,000) to your franchisor for the term of the franchise agreement.

Advertising levies are also payable to the franchisor. This money is pooled into a promotional fund to build the brand. It is generally c2-3% of turnover.

Funding Your Business Investment Lenders will expect you to put up a significant portion of the start-up costs in cash - this can be as low as 30% for established franchise models in mature locations, but can be higher for less proven franchises. Funding is generally provided through a mix of term funding, asset finance and overdraft facilities, designed to match the needs of the particular franchisee. Personal collateral is generally required for facilities. When approaching a bank for funding, you should provide a business plan.

Franchising offers a very exciting way to go into business for yourself, and offers high potential for success when you choose the right franchise for you. Happy Franchising.

Article published on: 15th Dec 2005