Answers

I have a great music recording business which is about to expand. I will probably expand 'in-house' but may consider franchising - what are the pros and cons for either?

Peter Williams: Angus, it's good to hear that your business is doing well and that expansion is on the cards. As the proprietor of a successful company-owned operation, you are in direct control of developments and responsible for all that entails: the establishment of new outlets, the employment of a growing management team and workforce, and so on.

This may call for a substantial capital requirement and the operating costs might be high, but if the profitability produces an attractive return on your investment you might decide to maintain that course.

Conversely, in pursuing the franchise route, your operation would be owned and operated at local level by independent parties - your franchisees. They would be responsible for their individual setting up and development costs, in return for which they would take the profits.

As franchisor, you would be remunerated primarily by a continuing fee or royalty, usually linked to franchisees' turnover, and also by an initial fee payable at the outset. Mutual profitability of both franchisor and franchisee is fundamental to good franchising practice and therefore it will be important to ascertain that the trading margins are adequate.

Although you would assume clearly defined responsibilities concerning the training and continuing support of your franchisees, for which there would certainly be a cost implication, the fact that your overheads are significantly lower could make franchising your preferred option.

There is obviously much for you to consider and I hope you will pay a visit to the National Franchise Exhibition, attend the seminars provided for prospective franchisors and also talk to the B.F.A., the bank franchise departments, specialist lawyers and experienced consultants. Between them, they should be able to give you a good insight to ethical franchising and be useful to your decision making process.