There are pros and cons of chosing to take the franchise option to expand. Angela Youngman reports
Many people who run successful nurseries think of opening more than one – but how can standards be maintained when operating on several sites? And what of the costs involved? It can be an expensive business. Likewise nursery managers often think of setting up their own business but are aware of the risks involved. Franchising is one possible solution to these problems.
So what is franchising? This is where the possessor of a successful trading concept (the franchisor) expands by granting a licence to another (the franchisee). This licence entitles the franchisee to trade under the same name as the franchisor, and to take advantage of an operations package containing all the elements necessary to establish the business and run it. The franchisor provides ongoing support as necessary.
Monkey Puzzle Day Nurseries is one company that has taken this route to expansion. A family business based in Cambridgeshire, it was first established under the Ladybird name in 1976. More nurseries subsequently opened as the business moved to Hertfordshire and eventually the name Monkey Puzzle Day Nurseries was adopted. A change of name creating a protected trademark was essential if expansion was to be a success since a number of unrelated businesses were trading under the Ladybird name.
Taking the decision to franchise
Mark Crosby of Monkey Puzzle explained, ‘We wanted to expand but we didn’t want to go down the conventional route of employing managers which most large companies use. The reason our business is successful is because parents can talk to the owners of the business and we wanted to keep that contact yet develop onto multiple sites. Franchising was the answer since it maintains standards, provides expansion and keeps the owner involved at a local level.’
The decision to opt for franchising as the expansion route was taken in 2004, with the first franchisors being recruited a year later. There are now 13 nurseries in locations as far away as Cheltenham, Essex and London. Franchisees are responsible for the day-to-day running of their own individual businesses. What Crosby and his team provide is the know-how and the skills.
‘We help find locations and assist in the planning process. We provide training so that the franchisee can pass the suitable person inspection by Ofsted. Help is given in recruiting staff, setting up the nursery, and we provide ongoing support. We do frequent inspections to make sure that all our policies are being adhered to and this maintains standards. It also ensures that everything is up to scratch when Ofsted do their inspections. There have been very few problems and these have centred around staffing issues which we have had to solve,’ comments Crosby.
Franchisees are given all the help necessary: plans for daily routines, room layouts, menus and equipment. An educational coordinator ensures that each franchisee has a curriculum in place, which reflects the needs and cultural differences of the children in their care. Before starting work in their new business, the franchisees are given full training. This comprises sessions in business operation, the concept, Ofsted compliance issues, marketing and the day-to-day running of a nursery. This is followed by a period at one of the Hertfordshire nurseries where the new franchisee shadows the manager and gains ‘hands-on’ operational management experience. Finally, on site at the franchisee’s own premises, a member of the support team provides guidance through the setting up phase and employee recruitment.
Setting up as a franchisor is not an easy option. To be successful, it needs to be a strong business with a clear format that can replicated elsewhere. Dan Archer of the British Franchise Association says that most new franchisors can expect at least a year of preparation before any attempt can be made to sign up franchisees. The BFA runs seminars for prospective franchisors covering all the necessary costs, the steps which have to be taken, the manuals drawn up and the controls which need to be in place. ‘It can take £30,000 to £50,000 just to get a franchise concept off the ground,’ he says. Returns on this investment may not be seen for several years. Just as when selecting staff, care has to be taken in selecting the right franchisees otherwise disputes can arise, possibly even clashes of temperament.
Becoming a franchisee is a slightly less expensive option. Establishing a Monkey Puzzle franchise requires a one-off £18,000 licence fee that covers all training, assistance and long-term help. In addition, there are all the setting up costs involved in running a business. Financing packages are generally available from major banks.
Former engineer Mark Bates is a Monkey Puzzle franchisee. He now runs a nursery in Leamington Spa. ‘My background is in engineering which is a declining market in this country and I needed other ways of making money. Childcare is an expanding business and the Monkey Puzzle concept looked good. It has worked better than I ever expected. They helped me find trained staff. I am very hands on and work in all aspects of the business. As the owner of the nursery, I am here to talk to parents at any time.’
Operating a franchise can be a good way into the childcare sector since it cuts down some of the risks. People with little or no experience can within months be operating a successful nursery. For someone with experience, it may not be the best answer. Mark Bates points out: ‘If I had known the team I was going to get, I could have done it without having to buy the franchise.’
However, as a means of long-term expansion it definitely has advantages. Once a franchise is up and running, it does enable speedy roll-out of the business concept. Bates is already planning to open more during his five-year franchise licence period. After that, a further licence can be acquired to extend the franchise if he and the franchisor so wish.