Owning a business and being your own boss is an incredibly exciting opportunity. For some people, this dream goes hand in hand with wanting to start your own business or bring your idea to life. For others, it’s more about being a business owner.
The good news is, to own a business you don’t need to come up with a fresh new idea and start completely from the ground up. You can jump straight into running an established brand by buying a franchise.
Buying a franchise lets you set up your own branch of an existing brand (like opening a McDonald’s restaurant). By doing so, you’ll automatically have access to their name, trademarks, operational system, and trade secrets (including the chicken nugget recipe if you do buy into McDonald’s!).
If this sounds like the option for you, we’re here to help you bring that dream to life with our ultimate guide to buying a franchise business in the UK.
First: make sure a franchise is right for you
Franchises aren’t for everyone. They have a lot of positives (like joining a big brand name that is already well respected!), and success rates are also higher (Othman et al., 2023), but they do come with a lot of caveats.
Buying a franchise is a contractual agreement. It comes with a set of rules that you need to follow, telling you exactly how to run your own business. Yes, you’ll be your own boss. But it’s on someone else’s terms.
The franchise will set out rules for everything, including what hours you can open, your layout, your decorations, your marketing, which suppliers you use, and more. And all of this will be monitored and checked. Plus, you might also face competition from your own brand. If you open up a McDonald’s branch, you might be losing out to another McDonald’s branch in your area.
Lastly, if your franchise is a success – you’ll also have to split a percentage of the profits with the franchise owners. As we said, this life isn’t for everyone. So, make sure that you take a good look at all the pros and cons of franchising before making a decision.
How to buy a franchise business in the UK
Once you’re 100% sure owning a franchise is for you, it’s time to find the right match and get your legal ducks in a row. Ready to start?
1. Find your baseline
As we mentioned earlier, franchises have a lot of control with how you run your business. So the first step on your research journey will outlining the conditions you want to find in a franchise. For example, think about your preferred working hours and days, whether you want to be customer-facing or office-based, and what industry you would prefer.
Once you have that baseline, you can start searching for matching franchises.
2. See open franchise opportunities
There are thousands of franchise opportunities in the UK that you can choose from. Trust us, it’s not just McDonald’s or KFC (unless that’s the path you want to take!).
A great starting place is to use UK franchise directories like The British Franchise Association (BFA), Which Franchise and Franchise Direct, which list all available franchises, tells you about each business and gives an overview of what the franchise arrangement would look like.
We’re big fans of the ‘At a glance’ overview on Which Franchise, which gives quick facts like current UK presence and start-up costs, as well as the testimonial section on Franchise Direct for real-life stories and examples from other franchise owners. These directories are also great because you can narrow your search by industry, size or type.
You can use these directories as your starting point to create a list of possible franchises, before digging down into the finer details.
3. Get all the information
Once you have a shortlist of franchises that look like good options, it’s time to get all the information and facts together. You’ll need to look out for:
- The total cost of purchasing, including all setup fees, stock fees, IT infrastructure, transport and marketing launch costs.
- The likely income you’ll receive, which can be assed by looking at historical profit and loss (P&L) statements from similar operating units of the franchise.
- If the franchise is a member of the BFA, which means that the franchise has to adhere to the European Code of Ethics for Franchising, ensuring ethical business practices and fair contractual structures.
- If there are any exclusive geographic boundaries for the franchise, and what competition you will face in your local market.
- What training and support you will receive, including your initial induction, supplier relationships, and ongoing support and assistance.
- What profit share agreements are in place, and how much you can expect to pay the franchise owner.
- What application process is in place.
It’s also worth looking at testimonials or case studies from other franchise owners to see what their experience was like. If possible, reach out to franchise owners for more information.
4. Explore your financing options
Once you’ve found a franchise for you, you need to get a solid plan in place to fund your purchase. There are a couple of different options and routes you can take here, including:
- Using your own funds, this is either through your own savings, personal loans, or personal equity (i.e. releasing equity through your home).
- Using business bank loans. A lot of high street UK banks (including Barclays, HSBC and Lloyds) have dedicated franchise loan options with their business bank accounts, which could provide a more straightforward path to borrowing the costs you need.
- Applying for the Start Up Loan scheme from the UK government, which provides up to £25,000 per owner to start or grow your business.
- Taking advantage of in-house financing options, provided by the franchise business to make entry easier. This includes deferred initial franchise fees, staged payment structures over the first year, or direct equipment financing arrangements.
It’s worth mentioning that you don’t have to stick to just one method of funding, and that you can use a combination of personal savings and loans to cover the full costs that you need. In fact, some franchises might have requirements in place that a certain percentage has to come from your own funds.
If you’re unsure about the total ownership costs and expected running fees of purchasing a franchise, you can speak to an accountant to help you run all the numbers and help assess the best finance arrangements for you.
It’s a good idea to build these relationships early, as running a franchise business still involves managing your accounts. If you haven’t already, you will want to look up how accounting software can help make your bookkeeping and reports a lot easier, or if you need access to the help of an accountant to manage your books for you.
Not sure where to start? See our reviews for some of the best online accountants in the UK.
EXCLUSIVE OFFERS – Save On Your Accountancy Costs
5. Get legal advice
Buying a franchise is a big legal commitment. Just as you would get a solicitor to help you buy a house, you should see the advice of a business solicitor before you buy a franchise.
A solicitor who deals in franchise arrangements will be able to go over all the terms, make sure everything is fair, and ensure there are no hidden caveats that might come back to bite you further down the line. They will be able to:
- Make sure any verbal commitments or promises are included in writing in your contract.
- Clarify all the initial and ongoing fees that you are liable for, such as management or royalty fees, marketing levies, and software/IT licensing charges.
- Verify that any territory boundaries are clearly defined by postcodes or geographic maps, as well as confirming if you have exclusive operating rights in your territory.
- Look at any non-compete clauses that will limit any future business activities after your franchise agreement.
- Review any requirements to purchase stock or equipment exclusively from the franchisor or designated suppliers.
- Assess any personal guarantees that are in place and your personal liabilities.
- Confirm your term conditions, as well as your renewal process and any probationary periods.
- Review your exit strategy and termination rights, including rules around resale and transferring.
Basically, hiring a solicitor ensures every detail of your contract is understood, correct, and they there to help you.
6. Sign the contract and get ready to launch
Once you’re happy and the franchise agreement is signed, it’s time to get ready to open your franchise. This period normally takes between 90-180 days to complete (depending on the business and franchise!) and will be where:
- You make sure your business is fully registered (see below!)
- You secure any commercial properties needed, ensure you have the right planning permissions and licenses, and complete all the fit-outs needed.
- You complete any mandatory training, which might include head-office induction courses.
- You set up your launch marketing, including setting up social media channels for your branch and running PR campaigns about your launch. Depending on your franchise, you might also have a launch event to get people excited from your very first day.
This part may feel incredibly rapid, but it won’t be long until you are open and running your very own business – with the backing, support and established customer base of your franchise brand.
Don’t forget to register your business
Buying a franchise means that you are buying the right to use a brand name and system. But you’ll still function as a separate business – meaning that you need to register it.
Unless you have a clearly defined agreement in your contact agreement, you can set up your business as a limited company or as a sole trader. We have a lot of guides that outline the differences between these company structures, but the very quick overview is that:
- Limited companies are separate legal entities, which gives you a lot more protection as a business owner.
- Being a sole trader means you are your business, and you’re personally liable for it.
To set up as a sole trader, you just need to register as Self-Employed with HMRC and submit your self-assessment tax each year.
To set up as a limited company, you will need to register with Companies House, which is a bit of a longer and more involved process. You can still do this yourself, but with the headache of managing a franchise on top of all the other red tape, you might want to consider hiring a Company Formation Agent to handle the whole process for you.
It’s a lot quicker, simpler, and will make sure that you register everything you need exactly in accordance with your franchise agreement. To get started, take a look at our reviews of the best company formation agents in the UK and find the best match for you.
Top-Rated Company Formation Agents
| Formation Agent | Cheapest Package | Add On Services | Our Rating | Review | Official Site |
|---|---|---|---|---|---|
 | £102.99 | Excellent | 9.4 | Read Review | Visit Website |
 | £19 | Average | 9.4 | Read Review | Visit Website |
 | £102.99 | Excellent | 9.3 | Read Review | Visit Website |
Ready to become a franchise owner?
Being a franchise owner is a very exciting opportunity – and with our guide on how to buy a franchise business in the UK, it won’t take any time at all until you’re up and running.
Just remember, buying a franchise is a great opportunity to own a business with a reputable name and an established customer base. But owning your own piece of it still means that you have all the responsibility involved with running a business yourself. To make sure that your franchise venture is a success, why don’t you take a look at our other guides on:
- Basic bookkeeping and accounting
- Running UK payroll
- How to market a small business on social media
- The top skills you need to be an effective leader
Looking for more news, tips and advice? We’ve got everything you need to thrive at Business4Beginners.
Do you still have questions about starting ab business? Head to our FAQ page to get the answers.
