STARTING your own business can be an exciting way of breaking out of the rat race. But for many, it is a huge step into the unknown and requires a lot of confidence.

The need to raise finance, write a business plan and forgo job security are some of the challenges facing budding entrepreneurs. And they have to develop a product or service to sell.

One solution for those keen to start up on their own but wanting to keep a little job security could be franchising. Some of the best-known brands on the high street are run by franchisees, such as Subway, Threshers and Domino’s Pizza.

And with the number of franchise formats having risen 60% in the past 10 years, there are some 760 business ideas to choose from. The franchising sector has a turnover of more than £10 billion and employs 364,000 people so there is a lot of choice if you decide it is for you.

Franchising essentially means starting up your own branch of an established business format. You pay a fee to buy the franchise, which will include such things as the shop fascia, signs, stock, equipment and support, so your outlet looks and operates in the same way as every other outlet of the franchise. Then you run the outlet as if it were your own business, taking a share of the profits and making decisions such as hiring staff.

So what are the key aspects of a franchise that you need to consider before taking the plunge? One big advantage is that it is a safer, lower-risk way of getting into business. Franchising has a much higher success rate than going it alone — while nearly a fifth of entrepreneurial start-ups fail in the first year, 92% of franchisees are still going strong after 12 months.

Janice Sandwell at Business Link said: “We have found that, especially for older people, buying a franchise is a safer route to starting a business.”

Against that, however, you need to balance the cost of buying in. Although franchises offer something of a safety net for budding business people, initial costs vary greatly. Prices range from £8,000 for a less well-known business to more than £200,000 for a high-street brand.

“If you are going for one of the bigger, more established franchises, they can be quite costly, but you are buying a brand that people already know,” said Sandwell. “If you go for the smaller, cheaper franchises, then those brands are not so well-known. It depends on the amount of risk you are willing to take.”

Which brand you choose will also decide how much input you have in the business model. Sandwell said: “When you start with a smaller franchise you probably have a bit more leeway, whereas when you go into one of the big franchises everything has to be done in a particular way.”

Budding franchisees have a great variety of industries to choose from: hotels and catering, retailing, property services and transport to name a few. It is a good idea to think carefully about your personal characteristics before making a choice.

Claire Lambert, a former paediatric nurse, chose Jo Jingles, a music and singing club for toddlers and pre-school children.

“It wasn’t a conscious effort to find a franchise. But I saw an ad in a magazine, asking if you could sing and liked working with children. And I thought, yes, I can do all that,” said Lambert.

Initially the franchise was not available in Lambert’s area, but six weeks before her third baby was due, they rang back. “I thought if I don’t do it now, somebody else is going to do it.”

After picking her franchise Lambert was able to hit the ground running. She said: “It allowed me to run a lot faster than if I was going in from scratch.”

Eight years on Lambert’s franchise is still going strong and had a turnover last year of £93,000. “When you go into business there is always the worry about when you are going to start making money. But if you do your homework, it is easy to find out if the franchise is successful.” ()

Lambert also got a lot of support from the franchise network. She was given training and all the business knowledge she needed. “There are training courses three times a year,” she said. “And the franchisor has a website where franchisees can swap and exchange ideas.”

It is the continued support that attracts many to the franchise world. Clare Carter worked as an area manager for Royal Bank of Scotland before starting up her Molly Maid business, a cleaning franchise.

“I’d always had the backing of a huge organisation, a peer group, and I had enjoyed the atmosphere of a big working environment. I felt that, if I was going into business on my own, I would be more successful if I had support,” she said.

Carter’s own experience of unreliable cleaners made her think it was an area with potential. Her research began with a trip to a franchising exhibition, looking at the different types of cleaning franchises available. “I needed something that would provide nearly the same level of income, if not more than I was earning at the bank,” said Carter.

She was able to start trading almost immediately but, having taken on new staff, was suddenly taken to hospital with a perforated appendix. While that might have spelt the end for an entrepreneur going it alone, in Carter’s case the franchisor took over running of the firm while she was recovering, dealing with appointments, staff wages, customer relations and restocking.

As Dan Archer of the British Franchise Association puts it, running a franchise is being in business for yourself — not by yourself.

The pros and cons

Advantages

Your business is based on a proven idea, so the risk of failing is lower

You will benefit from a support network that will provide training and help in setting up the business

Many of the decisions affecting the business have already been made for you, such as the design of the shop fascia, or how big your sandwiches should be

It can be easier to get financing for your business because banks are happier lending to a proven franchise

You will benefit from national marketing and advertising, which would be out of reach for a stand-alone entrepreneur.

Disadvantages

The initial costs of buying into a franchise can be high

There is limited scope for individual flair and creativity as the business will have to be run using the franchisor’s guidelines

There may be termination restrictions, meaning you cannot go into a similar business after finishing with the franchise

Other franchisees could damage the brand’s reputation, something over which you have absolutely no control.

Finances in first year

Domino’s Pizza
Minimum personal investment £80,000
Minimum total investment £230,000
Average weekly sales £7,000
Annual turnover £364,000
Royalty (5%) £20,000
Operating profit £28,000

Maid2clean
Minimum personal investment £1,900
Minimum total investment £9,999
Hours of cleaning 8,034
Annual turnover £20,925
Agency commission £2.50 an hour
Operating profit £13,875