Partner Article

Franchising – taking the franchisee’s perspective

Franchising has become a global phenomenon with some of the leading consumer brands such as KFC, McDonalds or Subway – all expanding their businesses through this model, and it is no different in the UK. Hundreds of UK businesses have grown using this concept of franchising – from restaurants and bars, to IT support businesses and cleaning companies.

Franchising has revolutionised business expansion in some industries because of its simple model. It involves a franchisor effectively selling a business idea, along with a number of supporting materials and resources, to someone else – aka the franchisee, who wants to run an identical business but in a different geographical area. Let’s explore the process of franchising from a Franchisee’s point of view and to see why this is often a great way of going into business.

What you get and how

Franchising comes with less risk than is usually associated with starting a business from the ground up. As a franchisee, you pay a one-off fee to the franchisor, where you, in effect, purchase the right to operate the business in a defined territory. This means that you utilise the brand name, receive training and support, and are able to use the established processes and techniques proven by the business.

In addition, as a franchisee you would normally pay an on-going percentage of your sales to the franchisor and a proportion of the money is often pooled from all franchisees and used for marketing the brand across the whole franchise network. The franchisor is also expected to provide everything you will need to succeed in exchange for the initial fee – including equipment or vehicles, stock, all necessary documentation, systems, software and operating procedures, as well as training for the franchisee and any new employees.

What about the paperwork?

Even though as a franchisee you operate independently, you do need to complete the financial and tax paperwork associated with any business. Be warned though, while most franchisees intend to be fully compliant, it’s a time-consuming and unwelcome distraction from what they should be focused on – growing the brand and the business.

The sheer volume of regulations, paperwork and decisions when starting a franchise business can be daunting. You will need to handle: business structure, forming a company, registering with HMRC/Companies House, VAT schemes, business insurances, business banking, remuneration structuring, tax planning, life cover, pensions.

Once the business is up and running, keeping it on the straight and narrow will be essential by ensuring the following are all kept in order: payslips, tax and NI deductions, monthly payroll returns, directors’ loans, dividends, VAT returns, company returns, annual accounts, corporation tax, self-assessment return. This will also mean you can monitor your financial position.

Be efficient

The smartest practice is to have an accountancy solution that will deal with all the issues highlighted above, as well as providing traditional accountancy support, in one seamless, package – set up, compliance, systems, advice and planning – all at a cost that is lower than what a franchisee might typically incur in accountancy fees.

Going digital is therefore the key! Online accountancy solutions offer a very cost-effective and hassle free way of providing franchisees everything they need. You can be up and running in 24 hours and automatically get instant access to an up-to-date view of your finances, avoiding delays while information is compiled, submitted and processed by your accountant, with no extra cost. This is invaluable when running a new or established business as you can also easily see how much is needed to be kept aside for your tax bills – a must for financial planning and budgeting.

Technology often makes life a lot simpler, and in this case it streamlines processes, enabling franchisees to stay compliant, access advice and support whenever they need to and keep up to the minute control over their finances.

This removes the admin burden associated with these aspects of running a business, leaving a franchisee to concentrate on growth, knowing that they won’t suffer at the hands of the tax man and they, and the franchisor will always be only a click away from a real time view of how their business is performing.

This was posted in Bdaily's Members' News section by John Hoskin .