HR & Management

Franchising: From a franchisee’s POV

5 min read

16 April 2014

Franchising is really quite simple: 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 explore why this is often a great way of going into business.

What you get and how

Franchising comes with less of the risk associated with starting from scratch – with proven ideas, processes, training and marketing, removing much of the uncertainty of a normal start-up. As a franchisee, you pay a one-off fee to the franchisor, where you are essentially purchasing 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 – 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 are subject to the same myriad of financial and tax regulations associated with any business. 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 business can be daunting for franchisees, many of which are doing so for the first time. They need to deal with things like: 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, the list of activities required to keep it on the straight and narrow continues: payslips, tax and NI deductions, monthly payroll returns, directors’ loans, dividends, VAT returns, company returns, annual accounts, corporation tax, self-assessment returns…so knowing your financial position and what you’re owed and budgeting for your tax liabilities, is crucial.

How to help yourself

The smartest, quickest and most efficient way to be on top of your new franchise is by going digital. Online accountancy solutions can offer a very cost-effective and easy 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 – no 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.

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.

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, with the peace of mind that they won’t fall foul 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.

John Hoskin is a director of CleverAccounts.com, an online accountancy firm that seeks to simplify the task of business accountancy.

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