Article from: The BFA (British Franchise Association)

Date: 30 August 2024

Contact:louisebruce@thebfa.org0787 602 6432

Multi-unit, multi brand, multi-millionaires - How franchising is considered a ‘safer' business option for savvy owners and investors

As she celebrates her 25^th anniversary at the BFA (British Franchise Association), CEO Pip Wilkins QFP, has seen and heard it all: "One of the biggest misconceptions about franchising is that it's mainly one-man band oven and drain cleaners, when nothing could be further from the truth. In 2024, whilst smaller, more traditional set ups still exist and are doing very well, franchising is increasingly about high profit enterprises and portfolio investments rather than ‘man in a van' operations."

Founded in 1977 by a group of franchisors to differentiate themselves from rogue operations, the BFA now stands as the undisputed centre of excellence and education for the franchising community. Alongside their education Academy their 350+ member's franchises have all been rigorously checked to ensure they are run along professional and ethical lines. Their standards for entry are high and franchises failing to maintain them are helped to address the problems or ultimately have their membership removed. Their annual awards are the ‘Oscars' of the franchising world, with Diary of a CEO Steven Bartlett the headline speaker at this year's event.

But why is franchising so popular and particularly with successful businesspeople with large portfolios?

The Facts - franchise businesses have a less than 1% failure rate

Franchising is a safer way of doing business, fact. Buying a franchise has a far lower failure rate than people setting up on their own. According to reports 50% of all new businesses fail within 5 years whereas with franchising, failure rates remain very low, with fewer than 1% per year closing due to commercial failure.

Tried and tested business models - that work

But why does franchising have such low failure rates?

Quite simply, franchising works because it is based on tried and tested business models.  The franchisor has spent years honing the business model, so they know precisely what works and what doesn't work. The fee paid by the franchisee every month is a recognition of the access to that cheat sheet to success, along with all the back-end systems such as the website, Google ads, CRM's, apps and accounting packages and social media accounts which are all run for them.

Once a franchisee has undergone their initial training, all they have to do is follow the model. Support from the franchisor and their head office team is there 24/7, ensuring that the franchisee has help in every aspect of running the business and the team can step in to support before issues become problems.

The rise of the multi-unit franchisee

Currently, franchising, in recognition of the incredible success being achieved by many brands across the sector, is undergoing somewhat of a shift away from single owner operators to multi-unit owners. This means franchisees are buying franchises not to learn how to clean ovens or walk dogs, but how to run an oven cleaning or pet care business, that they can scale up by buying multiple territories in a reasonably short space of time. These successes are giving rise to a cohort of multi-million-pound franchisees in the UK franchise sector and to investment opportunities for canny investors looking to add to their business portfolios.

Case Study: Suhail Rehman - Home Instead, Black Sheep Coffee and EasyStorage

In 1990 Suhail began his career as an engineer for British Aerospace. After two years he left to set up a business with colleagues from university. Initially a print and publishing business it progressed into developing and licensing software that would allow any document to be viewed on any device. Handy. Clients included Panasonic, Samsung and Nokia to name but a few. Suhail and his friends turned it into a global company with $70m of investment from VC funders. They were getting ready for an IPO when the 2007 credit crunch hit and the business, following the markets, had to downsize significantly. Suhail sold his shares back to his business partners and faced retirement at the age of 40.

A wise investment

By 2013 Suhail knew he needed to get back to work but knowing how hard it was to set up a business from scratch, and conscious of needing to use his remaining capital wisely, in 2014 Suhail chose to buy a Home Instead franchise. Home Instead is a domiciliary care franchise, an employment agency for care staff, to help people stay in their own homes for longer.

Award -winning franchise

Fast forward ten years and Suhail is now the multi award winning owner of eight Home Instead franchise territories (with another coming on board by the end of 2024), spread across 200 miles of Scotland. He employs 60 staff and 450 care professionals, and his business records an eight-figure turnover with a 12-15% profit margin.

Low risk and full support

Suhail explains why he chose to invest in a franchise: "I didn't want to risk my money on another venture, I'd been there and done that, I wanted to know my money was going to be as safe as possible and I wanted the support of an experienced franchisor."  From 2013 - 2022 Suhail brought eight territories, making him the largest Home Instead franchisee in the network.

12-15% profit margin

But how quickly was he successful, how long did it take for Suhail to reach the eight-figure turnover he now enjoys?  Suhail said: "With a business like Home Instead there is quite a slow initial growth; it took me 18 months to break even and three years until I could take any money out of the business. After three years I was turning over £1m with a 12-15% profit. It would take a further five years until we reached the eight-figure turnover with the profit remaining at 12- 15%. We could drive higher profit figures; however, we choose to invest ahead of the curve and continually invest profits back into the business."

Expanding his portfolio - multi brand, multi-unit

Determined to move forwards, Suhail expanded his empire, introducing two new franchise brands to his portfolio, easyStorage and Black Sheep Coffee. His easyStorage franchise (part of the easyGroup of brands) consists of a modest one territory and 10 members of staff whereas his Black Sheep Coffee franchise is on the rapid rise, employing 22 members of staff and with plans to open six further stores in the next three years.

Differing franchise models

Interestingly, Suhail is discovering that the QSR (Quick Service Restaurant) model is completely different to the Home Instead model he has followed for the past 10 years.

Suhail explains: "With Home Instead the initial investment was relatively low and we had a slow build but with a QSR the upfront costs are much higher to include the premises, fit out and staffing costs etc, but you start making money sooner too. You must also be prepared for your profits to dip and rise on a scale I'd never seen before.  If the weather is bad, our profits can be down as much as 50% in a day; equally if we put on a special offer, we can see an immediate rise. It's a completely different beast to owning a Home Instead franchise which has a gentler rhythm."

Low work commitment

How involved is Suhail in the business today? "In our Home Instead group I've placed a managing director, financial director and a head of operations and head of people. If any decision needs to be made that effects the next 12 months, they deal with it, anything longer than that and it's over to me. I probably come in two or three afternoons a week now; my view is much more firmly on our five-year goals."

How to choose the right franchise for you

Suhail recommends strategic thinking when choosing which franchise brand to invest in: "Choose a brand that is young enough for you to expand as it grows, but old enough that it is fairly established. I pioneered the multi-unit ownership model with Home Instead, which was a great position to be in. Black Sheep Coffee and easyStorage also have room for growth which I'm looking forward to making the most of in the future."

Ruth Brown, COO of Home Instead UK, says: "Suhail is an inspiration. We knew as soon as he came onboard that he would make a success out of his Home Instead journey. You only have to look at his strong team, his high number of clients, and the financial success his business enjoys. He is a perfect example of the scope for growth that exists for a franchise like Home Instead and we can't wait to see what else he achieves."

From the south of Scotland to the south of England, Jasdeep Thandi (39) is the owner of four Anytime Fitness gym franchises.

Case Study: Jasdeep Thandi, Anytime Fitness

Jas has owned multiple business since he was 18 years old and in 2017 decided to combine his background in business ownership, with the expertise of a franchisor, which he rightly suspected, would return impressive results.

Finding success with a franchise

Explaining why he chose the franchising route Jas explained: "It's quite simple, you are more likely to be successful owning a franchise. Or put another way, there is less chance of failure. I wanted to combine my knowledge of business and the relationships I already had, with the experience of a franchisor. I knew from the start that I wanted to scale up quickly with branches all over the country and a franchise is a great way of doing that. They teach you how to put a great team in place to run the business, even though you are hundreds of miles away."

Jas now owns four Anytime fitness gyms in Christchurch, Dorchester, Uckfield and the latest and largest addition to his and the network's portfolio, Brixton in London.

Largest Anytime Fitness Gym

"Before we even opened the doors to Brixton, we had 1,900 members and now, five months later we are up to 2,600. We are already the biggest Anytime Fitness gym in the UK and things are going better than I could have hoped for," said Jas.

Minimal involvement

"With my first gym I lived and breathed it for six months; with the second I put in about four months of hard graft and with the third gym, about four weeks and so on. Now I do an hour or two of phone calls a week. Of course, I could get called upon at any time so I don't think you could commit to a full-time job and owning a franchise, but things are going very well for me."

Risks

Is Jas worried about a recurrence of the pandemic, which saw the demise of many smaller gyms? "Not at all; anything that has already happened, like the pandemic, we have insurance policies to cover. It's the unknown we can't plan or mitigate for, but I'm not worried."

Earning more than a C-suite

What about the all-important question of turnover and profit? Has his leap of faith opening the largest Anytime Fitness gym in the network paid off?

Jas said: "I'm currently making a significant profit from my Anytime Fitness gyms so yes; things are going well.  I honestly think if you are doing a good job, you can make your money back in a year. I'm fairly sure that I earn the same as most C-suite executives make annually, from each gym I own. Yes, it costs a lot to start up but to own any business, where you can turnover more than your build costs in one year, is massive."

Advice on buying a franchise

What would he say to anyone considering leaving the C-suite to invest in a franchise? Jas said: "Do your research, go and talk to the other franchisees first but then don't overthink it; start having the conversation now, don't procrastinate, because it can be a fairly long and drawn-out process. Remember, it is a business, so you will need to be involved, but it's not rocket science, just follow the model."

Leanly staffed investments

Daniel Penn, head of network development from Anytime Fitness said: "The majority of our franchise owners don't come from a fitness background; they are people looking to expand their business portfolios with a good investment that can be leanly staffed. We are honoured to have a vast range of franchisees from first time business owners to multi-unit investors and everything in-between in our network of over 100 franchisees."

A 'safer way to build a business'

Pip Concluded: "Jas and Suhail are prime examples of franchisees who understood from the outset that franchising would offer them a safer way to build a business, without sacrificing any profits. We would encourage anyone looking to diversify their portfolio and invest in multiple franchise territories to heed the advice in this article and visit the bfa website to see the many opportunities of professional, ethical franchises waiting to help them take those first steps to a prosperous future through franchising."

ENDSAUGUST 2024

Notes to Editor 

• The British Franchise Association (bfa) is the voluntary self-regulating governing body for franchising formed in 1977 by the major franchising organisations looking to accredit and promote those franchise systems that meet the strict ethical and business criteria of a good franchise. 

• The term 'franchising' has been used to describe many different forms of business relationships, including licensing, distributor, and agency arrangements. The more popular use of the term has arisen from the development of what is called 'business format franchising.'  

• Business format franchising is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trademark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.  

• The bfa hold a full list of all its members and the code of ethics to which these members adhere to on its website: www.thebfa.org. 

For any media enquiries please contact 01235 820470 or email:louisebruce@thebfa.orgorpress@thebfa.org