BY NIC PATON
Photography: Alamy
Ever flown home from holiday wishing you could live abroad? One way to make it happen is with an overseas franchise.
Franchising is when you buy the right to set up under the umbrella of a larger company in a specific location, using their name, logo, look, equipment and so on. You pay a monthly fee for the privilege, and in return you own the business and get support, training and backing from an established name.
An £11.4bn industry in the UK, many franchising companies operate abroad, which can be a much safer option than setting up overseas as an independent business. Three Brits who have taken the plunge explain…
Oven cleaners
PAUL JEAVONS, 40, and his wife Susan, 39, sold their laundry and cleaning business in the UK in 2004 to start a new life in Gandia, north of Alicante, running an OvenU oven-cleaning franchise (www.ovenufranchise.co.uk), as well as their own building business (www.build4uspain.com). OvenU operates more than 100 franchises in the UK, as well as businesses in Spain, France and Australia.
AVERAGE INITIAL INVESTMENT: €5,700 (£4,950) start-up fee plus €9,250 (£8,000) licence fee.
MONTHLY FEE: from €212 (£184).
PROFITABILITY: A single franchise can expect to make profits of €23,150 (£20,000) in the first year, rising to €34,700+ (£30,000+) in the second and third years.
“We’d been to Spain many times over the years, had watched all the expat-abroad programmes on TV and it got to where it was a case of either forget it and shut up, or get on and do it,” says Paul.
“We knew of OvenU because we’d had our own oven cleaned by them, so we got in touch with the franchisor and found there was an opportunity to set up in Spain. The great thing was that they sorted out all the legal and contracts side, and the training and so on.
“My initial intention was to try and break into the Spanish market, but as the Spanish grill more and eat more cold foods, they don’t tend to use their ovens in the same way, so they don’t need cleaning as much. So we’ve ended up with mostly the British expat market.
“It’s a good idea to have a skill you can fall back on if things don’t go as planned. For example, I have my building business, which has become more important during the recession because, with more expats going home, the oven-cleaning business has slowed – hopefully only temporarily.
“Having said that, we don’t regret moving here and wouldn’t go back. The climate and scenery are fantastic, we’re 15 minutes from the beach, we have a house with a pool, and our children – Rebecca, 8, and Lucy-May, 2 – love it. They go to the local school and speak Valencian as well as English.
“It’s a very safe, friendly community and we have a lot of friends here now.”
Water coolers
Former IT consultant ALISTAIR BOURNE, 34, his wife Treena, 36, and their three boys (all under five!), moved from the UK to Faro, Portugal, in 2004 to start up a franchise selling water coolers, filters and bottled water through Cool Oasis (www.cool-oasis.com), which operates eight franchises in Portugal, Spain and the UK.
AVERAGE INITIAL INVESTMENT: €65,000 (£56,000).
MONTHLY FEE: none, just a modest margin on products.
PROFITABILITY: Franchises are expected to break even within six to seven months and to have repaid the initial investment within around 19 months. A franchise with 100 clients is expected to make a gross profit of almost €4,000 (£3,400) a month by the end of one year, rising to over €6,000 (£5,200) by the end of two years and nearly €10,000 (£8,700) by the end of three years.
“In a way it was quite a spur of the moment decision,” says Alistair. “I was on holiday in Majorca and met a friend who’d decided to sell water coolers through Cool Oasis and we got talking about it. The more he said, the more sense it made.
“My market is probably about 90% expat British or Irish, and I now have around 350 clients, but you have to recognise that the work is likely to be quite seasonal. Gaining enry into the domestic Portuguese market was always going to be a challenge because it’s so tight-knit.
“There are massive upsides to being here. While you’re no longer on holiday, the weather is fantastic and the lifestyle is great.
“We now have a lot of good friends, both expat and Portuguese, who are lovely people. We feel really accepted. It’s a very healthy, outdoors lifestyle.”
Theatre Schools
Actor and musician WARREN WEBLEY, 34, has been running Stagecoach theatre schools (www.stagecoach.es) in Cártama, Marbella and Fuengirola near Málaga since 1999. The company also runs franchised schools in the UK, Canada, USA, Malta, Germany, Greece, Ireland, Gibraltar and Australia. The figures below are based on UK franchises (amounts vary from country to country).
AVERAGE INITIAL INVESTMENT: £25,000 (including start-up fee of £16,500 plus VAT).
FEE: 12.5% of revenue, plus 2.5% of revenue for advertising, marketing and promotion.
PROFITABILITY: over £17,000 a year per school, and franchisees often run two or three schools.
“I already knew about Stagecoach because I’d been working with them in the UK, so when I was asked if I’d help run the schools in Spain, I had a good idea what to expect,” explains Warren. “It was only a three-month contract and I’d just bought a house in Chiswick! But the other franchisee was looking to wind down, so I simply took it over and here I am, 10 years later!
“The Spanish business system is very different to that in the UK, and Spanish law is very complex, so having the support of a franchisor behind you can make a big difference.
“As with any business, you’re likely to be working very hard in the early days and you have to be disciplined – just because the sun is shining and there’s a pool doesn’t mean you can flop into it!”
But when you can, it only serves to highlight the advantages of running a franchise in Europe – the lifestyle is definitely all part of the whole tempting package.
10 things you need to know when buying a franchise:
1. Buyer beware. Franchising is an unregulated industry so it’s imperative you carry out stringent checks on the business before making your investment.
2. Within the UK, the industry is accredited by the British Franchise Association (BFA), so it’s worth asking the franchisor if they’re a member.
3. There are different associations across Europe, overseen by the European Franchise Federation (www.eff-franchise.com)
4. You will normally buy a particular site, outlet or premises, or operate within a specific geographical area.
5. Franchising attracts many mid-life career changers, with the average age for a franchisee being mid-40s.
6. You may not need a specific background in the industry you’re buying into, as you’ll get training, but it’s a good idea to ensure that if it is, say, a heavily sales-based or people-oriented franchise, that you’ll be comfortable with that.
7. It can be worth appointing a specialist franchising solicitor to vet the initial franchise contract and a franchising accountant to manage your financial affairs. The BFA has lists of both on its website (www.thebfa.org).
8. Beyond your initial fee and start-up costs, you will normally be expected to pay a monthly fee or “royalty” to the franchisor, often calculated as a percentage of turnover or as a mark-up on supplies.
9. You will be expected to follow, and stick to, an agreed and tried-and-tested business model.
10. Though the failure rate for franchises is lower than that for independent businesses, just because you’ll be be part of a wider network and brand does not in itself guarantee success – you should still expect to have to work hard to get it off the ground.
