More people are using their redundancy money to run a venture with big-name backing
Being made redundant from a high-level job in the global insurance business might sound like a recipe for hand-wringing and despair. But for Graham Rowan, a former distribution operations director at Prudential UK and Europe, it was an opportunity.
“It was the best thing that happened to me,” he said; agreeing redundancy terms with the Pru enabled him to make some positive changes in his life. “I had been keen to run my own business for a few years and redundancy provided the ideal platform to start.”
Rowan and his wife, Lorraine, considered a number of options before signing up for a franchise with the recruitment specialist Select Franchising. Based in Luton, Bedfordshire, it runs three “brands”: Select Appointments (for office personnel), Parkhouse Recruitment (for industrial, technical and engineering staff) and Select Hospitality (for hospitality staff).
“It offered a professional opportunity and all the support we needed to start achieving results from day one,” said Rowan. “We opened our first branch in Glasgow in December 2006. We have built nine franchises in three locations by reinvesting in the business, concentrating on service, plus a lot of sheer hard work and determination.”
Franchising has the advantage of enabling individuals to hitch their wagons to well-known brands, which ought to give them instant access to customers and provide them with a wide range of operational, training and marketing support. The banks also look kindly on the sector, preferring to advance credit to tried and tested business concepts.
Some of the UK’s best-known brands — including McDonald’s, Domino’s Pizza and Toni and Guy — are franchise operations.
Baguette Express, a sandwich bar chain, has been using the franchising route to roll out across the UK from its Scottish base. Founded by Robin and Billy Stenhouse in 1999, it already has 54 stores across Britain and aims to have 124 by the end of the year.
The upfront costs of acquiring a franchise can range from about £5,000 to about £500,000 and the franchisee must pay a pre-agreed percentage of the profits thereafter.
Suzie McCafferty, who was last year appointed director of franchise for Select, said: “There has never been a better time to help people back into work and create a better future for themselves by getting involved in franchising.”
She believes it is currently in an economic sweet spot. This is because about 90% of franchisees are successful and that people who are made redundant would often rather take control of their destinies than risk being the victims of a further “restructuring”.
“More and more people are turning to franchising to get back into employment or investing in a franchise business as a result of redundancy,” she said.
Alan Adamson, a partner with Green Square, the corporate adviser, stressed that people going into franchising or starting busineses must do so for the right reasons. “Unless you are very driven, you will have a low chance of success,” he said. “There is a very different mindset involved in running your own business compared with being employed. There is no safety net and to make it successful you need to be very proactive.”
John Wright, the national chairman of the Federation of Small Businesses, said: “If someone is made redundant now it can be a good time for them to start a business. This is because, unlike the last recession, many people who have been made redundant have transferable skills that can be put to good use in their own enterprises.”
Politicians are increasingly waking up to franchising’s ability to put wind into sagging economic sails. Recent research from the British Franchise Association showed 476 franchise brands are operating in Scotland, up from 445 last year. The annual turnover of the sector in Scotland is £800m and it employs 34,500 people, 1,500 more than last year.
Last week the sector held Scottish Franchise week in an attempt to cement its position as a contributor to economic recovery. This is the event’s sixth year. The week included a business breakfast attended by Jim Mather, the enterprise minister, and a showcase event at the Glasgow Royal Concert Halls for franchisers to meet potential franchisees.
Mather — who has first-hand experience of franchising, having developed and run the Computerland franchises in Scotland between 1984 and 1994 — stressed the Scottish government is “very conscious of the positive economic role that franchising can have”.
Martin Gibson, 39, was made redundant in November from his job as quality manager at a paper mill in Blackburn, Lancashire, after working there 23 years. He has since put his £70,000 redundancy cheque towards buying a Subway franchise in the county and hopes to take over an existing store next month.
“With Subway you have a tried and tested formula and brand,” he said, “But you can do your own advertising and promotions on a local basis. It was that little bit of freedom that was calling to me. I feel it is my destiny calling.”
Calum Stewart, 50, also turned a negative into a positive through franchising. From Pollokshields, he ran a business installing entertainment systems in new homes, but when the construction industry hit a brick wall last year the business went into administration. He has since invested in an Ovenu franchise.
The company has developed a deep-clean “valeting” process that involves dismantling an oven’s components and placing them in special equipment. Its network of more than 100 franchisees has already cleaned more than 1m ovens, microwaves and barbecues across the UK.
Denise Hutton-Gosney, also went down the franchising route to expand her Carlisle-based Razzamataz Theatre Schools business across the UK. She established the company after raising £50,000 from Duncan Bannatyne on BBC’s Dragons’ Den in 2007.
There are now 31 schools throughout Britain run by 18 franchisees, and Hutton-Gosney has secured a three-year deal with Thomson and First Choice to provide stage academies in 17 of their holiday camps.
“It quickly became apparent that franchising offered a good way to expand the business,” she said. “What we provide franchisees with is extensive support and training as well as branding, marketing and PR help. Razzamataz is already on course to launch six more franchises.
“We are also seeing more and more independent business owners turning to franchising as a means of expanding their businesses in this challenging market — taking control of their future. That is not to say franchising is fail proof,” McCafferty said. “It is not an instant business.”
There can also be issues with some franchisees resenting the highly prescriptive way in which some distant franchisers lay down the house rules.
But McCafferty insisted: “From adversity comes opportunity. Franchising in Scotland creates jobs, jobs create taxes and taxes help us pay off the debts that will help us out of this recession.”
What a nice story, positive and encouraging!