While it's a business model that has been around for a long time, accountants appear to be somewhat wary of franchising.
It’s understandable that practitioners may not want to feel they are losing their identity and autonomy under a franchise, but perhaps the franchise experience is different to how it’s perceived.
AccountingWEB blogger First Tab awoke a sleeping dragon when he brought the subject up in a recent blog.
Self-admittedly without much practice experience, First Tab weighed up the pros and cons of joining a TaxAssist franchise.
“I remain impressed with TaxAssist. I spoke to eight to 10 franchisees. All of them said their investment was worthwhile. It’s now crunch time - yes or no?” he asked.
AccountingWEB members were quick to raise their opinions of franchises, some of which David Paulson, senior manager at TaxAssist agreed to address.
“I have no idea why accountants seem against franchises, other than losing their own identity or not wanting to be constrained,” he said.
“There is no reason not to consider a franchise. Do your research, go and meet with the franchisor and speak to as many franchisees as you can, who will tell you really what it is like.”
Worry: Franchises aren’t good for established firms
Flash Gordon raised the fear that franchises were not advantageous for already set-up firms.
“For someone who's already built something, whatever size, I think you're going to find it equally hard because you have to want to change what you do,” he said.
Paulson argued that while the majority of those who join TaxAssist are start-ups, they have seen an increase in longer-existing firms.
“We are seeing an increase in people with fee banks up to £50,000 joining us as they have grown the business so far and need the support to start employing staff and taking their business to the next level,” he said.
When asked about what happens to existing clients, Paulson said that subject to a minimum free bank value of £5,000, the fee bank is not subject to management service fees for the first two years.
Worry: No guarantee fee banks will increase
Another member who said they were "firmly in the no camp", Two sheds brought up the subject of fee banks.
“Are you sure they would increase massively?” they asked. “Am I right in saying TaxAssist do not give any guarantees?”
Paulson said this was difficult to answer, as it depends on the practice and practitioner.
“There will always be exceptions,” he said.
“There are many entrepreneurial accountants that operate individually and have grown substantial businesses but in the main yes, the growth we see our franchisees achieve does often exceed that of new start-ups going it alone.”
Worry: You have to be a certain type of person to be a franchisee
Other members were concerned that you have to be a “certain type of person” to make a franchise work for you, something Paulson said is in fact true.
Apart from potentially needing to relocate, as franchisees are allocated an exclusive territory, you need to be business-minded, entrepreneurial and able to follow the franchise model.
“On top of the business experience that you would expect, we’re looking for people that are disciplined to follow the model which is true of every franchise,” said Paulson.
“Whilst we do of course listen to ideas from our network, if you are the sort of person that wants to change everything and forge your own path then a franchise may not be right for you.”
Worry: The support network isn’t enough
Papalazarou was in favour of franchises, saying the support network is “valuable” and if they had money, they would consider joining TaxAssist.
“I am currently starting up and the amount of time taken up dealing with admin before I can think about generating fees is definitely a burden,” he said.
Paulson said one of the upsides to a franchise was that you’re in business for yourself, but not by yourself.
“A good franchise will provide you with all the support that you need to run and grow your business. They will invest in researching new products or routes to market leaving you free to manage your business, “he said.
“As a sole practitioner, you have to source providers for technical support, CPD, marketing, website, leads etc. Whilst your institute may provide some of this with a franchise you should expect to get it in one package.”
The franchisor will also train you on the system and procedures, so when it comes to day one, you have a clear plan of what you need to do next, he added.
Worry: No autonomy/hard to exit a franchise
Although all TaxAssist franchisees are required to use CCH Central accounting software, they are free to choose their own bookkeeping and payroll software and they can benefit from preferential rates from recommended suppliers.
While practitioners won’t be able to enjoy the same autonomy as going solo, it’s arguable that the support network and benefits such as a potential increase to fee banks and preferential rates from software suppliers may be worth it.
While franchisees are locked in for a fixed term, there is a way out if someone wants to leave for any reason.
If you want to exit the franchise at any point, Paulson said a deferred sum is payable and when a franchisee has paid, they are free to continue trading under their own name and location, and keep their clients - although they are required to rebrand and change letterheads.
There are three banks (NatWest/RBS, HSBC and Lloyds Banking Group) who themselves are members of the British Franchise Association and understand franchising. As well as better access to bank financing the contribution ratio, interest rates and other banking terms tend to be better for a franchise.
The franchise banks will lend between 50% and 70% of the total investment including working capital with interest rates, for a secured loan, of between 4% and 7% above base rate. Apparently, banks like franchising as franchisees are more likely to pay them back.
There's no guarantee of success with franchise working for everyone, as the proverb goes, you can bring a horse to water, but you can't make it drink. In other words, while a franchise will provide you with the tools of the trade, the only way you'll be a success is through hard work and dedication fuelled by you.
Would you consider/are you in a franchise? If so, what's your perception/experience of them?