FRANCHISING: A SUCCESSFUL BUSINESS MODEL

The growth of franchises in Ireland is a clear indication that the sector is buoyant and provides enormous opportunity, not only for business people looking to get involved in a franchise but also for new franchise systems to enter the Irish market. Niamh Mac Sweeney reports.

The high-tech and manufacturing sectors in Ireland took a massive blow recently with the announcement of hundreds of job losses. But employment prospects for those involved in the franchise sector continue to flourish. Franchises continue to employ a record number of people and are proving to be more successful than standalone businesses.

Over the last number of years franchising in Ireland is growing at the rate of about 12% per annum.

A Successful Business Option

The Bank of Ireland Franchising in Ireland Survey 2004, found there was a combined turnover for all the franchise businesses in Ireland in the region of €1.2 billion. The industry employed more than 22,000 people full time. A new report due to be released later this year will reveal that these figures have increased considerably. Currently the turnover for franchises is closer to €17 billion and in terms of employment franchises employ more than 24,000.

According to the Irish Franchise Association (IFA) 60% of stand-alone businesses fail in the first five years in comparison to 97% of franchise businesses, which are still operating 15 years later.

Record Employment

RECORD EMPLOYMENT IN FRANCHISES

EMPLOYMENT IN THE FRANCHISE SECTOR IN IRELAND 1995 – 2003

Survey 1995 1997 1999 2001 2003 Employment 4,900 7,400 9,600 14,400 17,890 Change +48% +51% +30% +50% +24%

Although in the late 80s and early 90s franchising was in its infancy in Ireland and although today it is still young in comparison to the United States and elsewhere, franchising in Ireland has still shown a very good track record and considerable growth in terms of uptake, turnover and employee numbers.

There are a number of contributing factors that can be attributed to the success and growth of the franchise concept here in Ireland. One of the main factors is the continued growth and buoyancy of the economy. Another factor, which is probably more significant, is the fact that there are an ever-increasing number of people who have a desire to be their own boss. These people are discovering that franchising can be more successful than stand alone business start-ups and so are prepared to start a franchise business due to the simple fact that what they are buying into is a proven and tried and trusted method of doing business. The fact that full support is given to franchisee’s makes it an attractive proposition to many budding business people who do not necessarily know everything about running a business.

Less Risk

According to John Green Chairperson of the Irish Franchise Association (IFA) people that become involved in a franchise are “buying into a proven method of doing business. All of the problems that are normally associated with starting a business have already been ironed out before it is franchised and that is what makes it so successful,” he says.

Demand and appetite for expansion, is clearly driving the growth of the sector. Green points to almost full employment and more disposable income in the country as obvious indicator as to why franchises in Ireland are thriving and enjoying greater turnover year on year. He maintains that because people have more money and because they want to spend more quality time with their families they are prepared to spend more money on services that they wouldn’t have maybe bought into years ago.

Is Franchising For You?

Franchising as a business option is extremely attractive to many people, but it is not for everybody. If you take the strict entrepreneurial type who starts something from scratch, generally they are the people who are going to be involved with master franchises. For instance someone who wants to buy a single unit franchise would have an entrepreneurial streak but they would not necessarily be the instigator or the creator of a concept. But franchising is still very suitable for people with an entrepreneurial spirit. What makes the concept so successful is the fact that if you invest in a franchise business you are equipped with all the necessary knowledge, skills and support to run that business successfully.

Supporting Franchises

Unlike stand-alone business start-ups franchises receive little or no state funding or support. According to Green this is because franchising is perceived as less in need of funding in comparison to the manufacturing sectors and high-tech industries. “In terms of state funding there isn’t really any because they look on franchising as being a service business” he argues, but adds that it is debatable whether this is true because franchises are creating significant employment with turnover continuing to grow each year.

Green maintains that regardless of state support for franchising there are other sectors that value franchising. “The banks obviously look very favourable on franchising because they know how successful it is. They look at each individual applicant on their own merits. They are more willing to finance franchise businesses than stand alone businesses because the track record is there,” he says.

The Future For Franchising

Green is determined that he would like to see franchising become more valued by the powers that be, in its own right. He says the sector deserves this recognition due to the simple fact that “it is a good source of employment by virtue of the fact that we have 22,000 full time employees in a relatively small number of franchises compared with other businesses.” He explains that he would like to see the government recognising that fact and realising that manufacturing and high-tech industries are important but they are not everything. “As we have heard in recent weeks there have been a considerable number of job losses around the country, but that doesn’t really happen with franchising, in fact the opposite is happening and more jobs are being created,” Green says.

Green argues that the reason why multinationals are favoured over franchises is because when multinationals arrive in this country they bringing in a couple of hundred jobs and that makes the headline. But he also argues that franchises should not be discredited because they are making a considerable contribution to the employment figures in Ireland. “A master franchise may have 50 franchises in Ireland but they will not take on hundreds of people at the one time so it might be spread out. It’s not in one single area and for that reason they don’t really look on franchising as being that strong. But it certainly is a strong industry,” he says.

Indigenous Franchises

The Irish Franchise Association is working towards building the image of the industry and is determined to get the point across that franchising is a thriving industry, one that continues to grow each year. “We see that not only are franchise businesses being brought into Ireland but also there are indigenous franchises starting up here now which is great. We have a number of indigenous franchises that are growing steadily in Ireland and eventually they will expand and start to move out of the country. So instead of bringing in a franchise into Ireland we are able to franchise out of Ireland as well,” Green explains.

A SIGN OF SUCCESS

Signs Express has committed itself to sizable expansion in the Irish market over the next 12 months with territories available countrywide.

As full members of the Irish Franchise Association and British Franchise Association, Signs Express has a reputation for providing excellent service and quality products. The network continues to go from strength to strength with group turnover at unprecedented levels.

With established centres already in Dublin and Bray in the South and Derry and Belfast in the North, Signs Express is delighted to announce that a new franchisee, Michael O’Hara, has just opened in Sligo.

Opportunities To Grow

The shear breadth of the signage market allows franchisees to continually develop and grow the business and provides excellent opportunities for repeat custom.

Successful franchisees are those who have proven management skills and good sales and marketing ability. They also have commitment and enthusiasm, are able to manage a team and have drive and determination.

The Franchise Package

With no previous experience required, the management franchise package includes full training and ongoing support in all areas of the business from a team of 25 industry professionals based at the company head office. A dedicated National Accounts team organises nationwide campaigns for leading companies including Mercedes-Benz, McDonalds, and Wiltshire Farm Foods to name just a few.

Each Signs Express franchisee operates from an industrial unit with custom designed vehicle application bay and the latest sign making equipment to complete high quality signage solutions.

Franchisee Case Study

Signs Express franchisee Richard McGonigle opened his production centre in Derry after previously working as a Software Developer. Richard wanted a change and had always aspired to start his own business.

“I decided that a franchise was the best option to suit my needs as it was a tried and tested idea and could provide me with the vital start I needed in business. After seeing the Head Quarters and the amount of support that was offered, I was delighted to be awarded the franchise for the Derry area.” McGonigle continued, “we have only been up and running for a short time but are already finding a lot of customers are coming back for repeat or similar orders. The brand image is what gets us a lot of our jobs, people recognise the brand and realise that they are not working with a ‘fly by night’ company but a reputable business.”

Although the business is still in its infancy McGonigle has been able to achieve great sales so far. “The biggest satisfaction I get is driving about the city and seeing more and more vehicles and signage we have produced. Every day is different too, which is very challenging yet rewarding,” he says.

Contact: Tony Marsh Signs Express Franchise
T: +44 (0) 1603 625925
W: www.signsexpress.ie