Business Essentials: Will it be love at first sight in franchising?

The owner of Mars & Venus wonders if expanding the introduction agency will be like a blind date, writes Kate Hilpern

If you're looking for love and live in South Wales, you need look no further than the Mars & Venus introduction bureau. So pleased is Rosemary Robertson with the success of her business that she is considering franchising as a way of replicating it in other parts of the UK.

Since the business was set up in 2001, for professional single people living in Cardiff and the surrounding area, it has gone from strength to strength. As Ms Robertson says: "Having been divorced myself for seven years, I identified a need which was not being met nationally or locally - that is, an agency that doesn't match people by computer or any lengthy psychological screening, and doesn't involve blind dates."

The solution, she decided, was to encourage people to meet potential partners naturally - by socialising - with a bit of background help from the agency. "Membership lasts 12 months and includes the opportunity to come along to our organised dinners and other events," she explains. "I meet every member personally on the first occasion and am always present for the first half-hour of every event. This approach means I can then match appropriate people at future events."

Some other introduction agencies work similarly, she admits. "But they are far more expensive and don't have my hands-on approach, and many have consequently failed." In fact, she adds, her own membership price was once set too high. "For Cardiff, £180 was expensive. So last year I dropped it to £90. People have flooded in ever since. We have a great success rate of people dating and leaving us, so it's crucial to keep membership high."

A further reason for maintaining healthy membership levels is that dinners are the most profitable aspect of the business, mainly due to the favourable terms she has with restaurants in Cardiff, which enjoy the return trade. "Consequently, we are able to provide wine, a two-course dinner and coffee at between £30 and £45 per head, and have a margin of profit. Other activities such as golf and sailing tuition are similarly worked."

This relatively straightforward way of earning profit quite quickly from a business that can be run from home is one of the reasons why Mars & Venus would be a popular franchising opportunity, Ms Robertson believes. She already has interested parties in Edinburgh and Bristol.

"I'm thinking of asking £5,500 plus £500 working capital," she says. "For this, someone would receive a stationery pack, a website, training and continuous support. People will just set up on their own if I charge more."

But like many businesses considering franchising, she is keen not to undersell herself. Another concern is that most franchisees are charged an annual licence fee - a percentage of their turnover. "But most of the spend in this business is in cash, so it would be easy for them not to declare the full amount."

The prospect of franchising is exciting, says Ms Robertson. "But I'm not sure how it would work in practice."

www.cardiffintroductions.co.uk

WHAT THE EXPERTS SAY

Mark Scott, national franchise manager, NatWest

"As with any sound franchise, Rosemary has first demonstrated that the business model works.

"The next step is to speak to the British Franchise Association [BFA] to determine what initial and continuing charges she should levy, and to gain help in drawing up a legal agreement.

"The initial fee should offer value for money for the franchisees and also cover Rosemary's costs in setting them up. The management service fee is where she should realise a profit through a regular payment. In a cash business, fixed fees are not unusual, but they can make a franchise look expensive at the outset; a percentage of turnover is more common. In any event, the average initial franchise fee is around £12,000 and the average continuing fee around 10 per cent of turnover.

"As for a pilot, while it is good there are two interested parties, Edinburgh may involve too much travelling to support; Bristol may be a better option."

Brian Lewis, owner, Cash Generator (the franchised retail store group)

"I know franchising is a great success in the UK, but Rosemary needs to ensure that her model can be replicated and is not unique to her own hands-on approach.

"A common problem with new franchisers is that they underestimate the amount of training and management support required to guarantee the success of the franchise network and the building of the brand.

"What research has Rosemary undertaken in Edinburgh and Bristol to find out how much she can charge for the services provided? She must learn from the failed companies and the mistakes they made, and amend her own business plan to ensure similar errors are avoided."

Simon Wise, deputy director, BFA

"My advice would be to run an arm's-length pilot scheme in a separate city to ensure the concept will work in a different area. Rosemary should fund the operation for at least 12 months, and this will give her an opportunity to look at the financial structure she needs, and also at the types of people she should be trying to recruit as franchisees.

"At the same time, the pilot will help her develop her operations manual and business know-how. She will be able to identify any potential weaknesses and build confidence in her format - vital when seeking investors to grow your business.

"Rosemary should talk to the BFA's professional advisers, such as a franchise consultant or lawyer. They can help get her ready to apply for a Provisional Listing with the BFA - a category specifically for companies new to franchising."