Royal Bank of Scotland tell of the benefits of franchising

Article by David Williams Q.F.P.

The Royal Bank of Scotland

Starting up a business by way of a franchise has become more and more popular over recent years. People from all sorts of backgrounds are attracted to it and their circumstances can vary tremendously, as well as their motivation for doing so. So what is the attitude of the banks to this type of venture?

Start ups and franchising

The UK sees the creation of thousands of new business start ups every year and this represents a very important opportunity for the banks. As well as many new starts each year there will also be a high number of young businesses that, for a variety of reasons, will cease to trade. The advantages that a franchise may bring can help to mitigate against some of the threats that a new business will face during its early yet critical trading period, as well as providing a framework for the medium and long term.

So what are the advantages that a bank will see?

For decades now banks have seen that an established and ethically run franchise can deliver advantages –

  • Potential franchisees are screened and in some cases have to undergo very detailed training before finally being accepted.
  • The support at the pre start up and start up stage carries throughout the term of the franchise agreement, albeit the type of support will change as the franchise matures
  • It’s a proven business model, that is other people with no or limited experience at starting up and running a business will have succeeded – there will be people who will not succeed for various reasons but in comparison with other types of start ups the level of failure will be much lower.
  • The costs involved in starting up will be understood by the bank and the business plan can also be compared to their experience of existing franchisees that bank with them.
  • The combined marketing power of a franchised business will help to raise the profile of the brand and service to a level that an independent small business would struggle to achieve
  • The systems that the franchisee adopts should include controls and reporting, so the bank will be able to get hold of timely and accurate information on how the franchise is performing
  • Product and service development is carried out, usually independently of the franchisees, so that they can focus on their business in the knowledge that the future direction of the business is being catered to.
  • Franchisees themselves will have carried out a good level of research and due diligence in order to establish whether the franchise is the right one for them.

The benefits to you the franchisee

These advantages that the banks see tend to manifest themselves in the following ways –

  • Banks with a good understanding of franchising will have a dedicated franchise team making the whole process of raising bank finance if required and opening an account that much simpler.
  • The amount of finance that the bank may provide could be higher than that offered to a non franchise start up dependent upon the track record of the franchise and it will be structured appropriately.
  • There may be other related banking products which are offered on special terms to franchisees.

Next steps

The most important thing is that you fully research the franchises that you are interested in – make sure that they are well run on an ethical basis and also determine whether you can work with the franchisor and that you will enjoy the challenge – starting up any business, franchised or not, is hard work!

For further information on how RBS can support your franchise aspirations contact 0800 073 0265 (Text Relay 18001 0800 073 0265). Calls may be recorded.

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Last Updated: 20-January-2014