Ulster Bank News

Be your own boss, why not franchise?

Would you like to be your own boss?

Have you thought about franchising?

Franchising can be a very good way of going into business.

Facing a tougher economic climate franchising may be the business model that improves your chances of success.

If you buy a franchise from a well-established, successful franchisor, you combine all the supports of an established business, with being in business for yourself.

Historic research in the Franchise Sector has shown that Franchisees are more likely to be successful than stand-alone businesses in their early years. Statistically it’s estimated between 80% & 90% of franchise businesses are still in operation after 5 years, significantly higher than the 50% rate quoted for stand alone start ups.

At Ulster Bank, we know that franchising is a great way of doing business - As part of a Banking Group with more than 25 years experience working with Franchises we have relationships with the key franchise brands indigenous to Ireland or originating in UK, USA and further afield.

Buying a franchise will not in itself guarantee success but the right franchise, with track record of profitability & growth, combined with your own personal drive & dynamism can bring reward.

In franchising, success is all in the detail - thorough research is key to choosing a winning franchise.

People spend a lot of time researching before they buy a car or a house, so it is reasonable to do at least as much investigation before buying a franchise.

Research is a key element of ensuring you succeed. You need to consider:
• The market for the product
• Proposed location & appropriate clientele
• What you are paying the Franchisor for
• Whether the Franchise concept fit into your goals
• If you are willing to follow the guidelines imposed by the Franchisor as the basis of running your business

It is essential to take independent professional advice before signing a Franchise Agreement – like any major life decision you should take appropriate legal & financial advice before committing yourself long term. It would be unwise to invest in a business to which you are committing a major part of your life, without appropriate professional support.

Think carefully about whether you are cut-out to run your own business - for some people running their own business can be daunting, or too time-consuming. Are you a self starter? Are you motivated to work on your own without the familiar ‘buzz’ of the office environment? Can you adapt to life without a guaranteed wage? Have you the right support from your family & friends?

Consider, how much will it cost?

The average cost of setting up a franchise outlet (including Initial franchise fee, Training Fees, key money on lease and fit-out of premises, working capital) is €226,000 with 60% costing less then €100,000(source 2006 Franchising Survey).

A key consideration is to match your target franchise with your pocket. No point in looking at a €500,000 franchise if you’ve have €20,000 to invest.

Your Franchisor should help you identify the level of costs associated with set-up. You may also receive a set of Indicative financials you should see evidence of a successful pilot scheme.

How can I fund the Franchise

Typical funding in a mix of personal equity, secured & unsecured debt. A rule of thumb is equity required will be between 30% to 50% of set up costs plus the running costs until the business starts to generate cash.

To work out what you can contribute from your own resources, you will need to assess your personal financial situation carefully. Consider what you owe, own & ongoing living expenses & how you’ll fund until your business generates profits.

The Business Plan

You will need a business plan. While the Franchisor can guide you with a Business Plan, you will need to “own” the content.

This Business Plan should cover:
• Information about yourself and your business background.
• Information about the franchise. You will need to do your own research on market & competition in your own territory
• Profit projections and cashflow forecast demonstrating the viability of the business and its ability to meet its commitments, including repayment of the borrowings.
• Market research & competition in your territory
• Information about your personal finances - What do you own (assets, investments, life policies): What do you owe (mortgage, car loans, overdrafts), what you need to live on.

As a bank we look for:
o The right person for the right business - someone who is 110% committed to the success of the business
o An appropriate level of equity
o A business plan that demonstrates ability to repay debt with some margin of error
o A prospective franchisee who has thoroughly researched the idea of franchising, the particular franchise opportunity and the market they are getting in
o Purpose: Is this a good business concept, is it ethical, tried and tested, In a good location, Appropriate to the market, has detailed market research been completed backing up the idea
o The calibre of Franchisor, their track record in franchising & proof of success for existing franchisees will be key
o Security may be required – At minimum all loans will need personal guarantees by the individual promoter or security over other assets you own
o It’s important to understand how current trading environment will impact on ability of your new business to succeed.

At Ulster Bank we believe this is a great time for franchises. Economic slow down can offer good opportunities.

As an Irish Bank involved in franchising for the past 25 years we’ve seen franchise businesses successfully bloom, whatever the economic climate.

To help you with your new venture Ulster Bank are pleased to offer our market leading Start Up Package including:
• Attractive Cash Handling package tailored to your business
• Market leading rate of 5.95% for new business loans to franchisees (for amounts less then €70,000)*
• Transaction fee free banking for 3 years
And a range of other services to help your new business succeed

We’d be delighted to talk to you about your plans at the early stage of research.

Please contact:
Olivia Mangan,
Franchising Executive,
Commercial & Business Banking,
Ulster Bank,
2nd Floor, Block D,
Georges Quay,
Dublin 2.
Phone: + 353 (1) 6084403
Email: franchising@ulsterbank.com

* Lending Terms & Conditions apply. Details available at your Ulster Bank branch. Borrowers must be over 18.