Newly unemployed recruiters could be forgiven for displaying a lack of enthusiasm for job hunting: no-one wants to compete with hundreds of candidates for a handful of vacancies. In many cases they’d rather be running their own business, where they can never get sacked again. But they would be entering a market where in January alone, over 2,000 UK businesses went under. As a start-up they’d run a much higher risk ofbecoming one of these casualties.

So an increasing number are seeing the attractions of a franchise, where they can buy into an established name. As Ian Hetherington, managing director of Career Matters Recruitment, says: “Statistically they are far more likely to succeed with the network behind them than as a stand-alone business.” This is a burgeoning trend. Doug Bugie, chief executive of Antal International’s franchised businesses, says: “We must have 100 leads in the pipeline globally and 50 in the UK; that’s about twice the number we would usually have.”

John Warren, franchise sales director for Driver Hire Group, says this is a recent development: “If you’d asked me six or seven weeks ago, I would have said we have a volume, but not the quality. Now we have quality enquiries as well.”

Hetherington, too, recognised the boom and launched his franchise model in January to take advantage of it: in the first six weeks he had 42 enquiries.

By buying into a recognised, established business, recruiters gain a number of things to help stand them in good stead in tough economic times. Clients are seeking security in recognised brands. Debbie Smith, managing director of Network Brand Partnerships, which recently
bought the CNA franchise, says: “The fact we are so big and we have been around for so long gives people peace of mind.”

Sam Collins, senior vice president of MRI Network franchise development, agrees: “They can call and say they are part of a network with 1,000 offices. It’s a better story than saying you’re a one-man band; it adds credibility.”

Franchisees also have the expertise of the network behind them, who will ensure the business is sound. Warren says: “We insist they do a business plan incorporating financial projections. We have to be happy it stacks up from a financial point of view.” The franchise will help with the practicalities of setting up, to enable the business to turn a profit quickly. Many offer a ‘business in a box’ of everything from back office systems to websites, invoicing and even invoice financing. This enables franchisees to get up and running quickly, and Bugie says most make money in the first 90 days.

The networks can also generate work for a new office. The initial training will include new business skills, but once they are out in the market the support continues. The franchises all offer hands-on advice for even the small details of a business-win. Bugie says: “I have had calls from a franchisee saying they ran out of things to say to a prospective client, and to ask what they should say next.”

In addition, they offer networking opportunities and encourage branches to recommend one another. With regard to Antal, Bugie says: “On average just under 30% of business will come from another office. In some cases it’s closer to 50%.”

Some networks also have a national sales team. Driver Hire Group, for example, has national accounts, which it delivers to franchisees, while MRI does business on a global basis and passes the work down to branches. A franchisee will, therefore, get a lot of help winning business. But this isn’t always enough in tough times, so networks also have a number of measures to support struggling franchisees. Most will meet regularly to check you’re on target, break down where you are on your business plan, and monitor the monthly profit and loss accounts.

If things are going wrong, they have a variety of approaches. Sometimes it will be further training and advice to hone the sales skills of the franchisee. Collins says: “We have a training programme taking people from an environment when it was all about candidate generation to one where it’s about clients and new business sales.”

If the skills are there, but the market has dried up, they may offer ways of developing business lines. Smith says: “Having lived through three recessions we know that permanent recruitment will probably dip but interim and temporary will probably increase. We are busy promoting this to our franchise partners as a method of developing their revenue at the moment, and can take them through the process of how to make that happen.”

They can also offer assistance if the franchisee needs to change specialism. Alan Mead, chairman of AMR, says: “We were exclusively recruiting for the property and financial services sectors until May, which have both been hit very hard. We now have a brand new association
with another organisation that recruits blue-collar jobs. Franchisees can opt to take advantage of that as well.”

If things get particularly tight, franchises can help with additional borrowing. Warren says: “If the franchisees need to refinance we can introduce them to another bank and explain government schemes, including the Enterprise Finance Guarantee introduced in January.”

All this support comes at a cost. Most recruitment franchises expect you to pay an upfront fee for your agency. Antal, for example, charges 25,000 in the UK, while Driver Hire Group charges from £35,000, and if it’s selling on an already successful franchise it may cost anything up to £500,000.

On top of that there are the costs of setting up an office that meets the standards required by the franchise. Hetherington puts the cost all-in at up to £80,000 with some franchises. Most will also take a cut of the placement fees, around 10-20%.

The cost of setting up an MRI business used to cost up to £40,000. However, costs are falling, Collins says: “We are reviewing the cost. I wouldn’t be surprised if it was around €30,000 (£26,500) in the near future.” There are also some low-cost franchises available. Mead says: “The cost is typically £15,000 — £5,000 upfront and the rest phased over the first three years of trading.”

Hetherington has priced his new franchise at the cheaper end of the market. The fee is £10,000 plus VAT, and allows individuals to work from home in the early days, without additional staff.

Individuals may be able to finance this through redundancy payments. Smith says this isn’t typical, but that this week she is seeing her first potential franchisee in this position and expects more as the downturn continues.

Far more commonly, franchisees get a loan. Bugie says: “Around 95% of franchisees fund it by borrowing up to 70% of the cost of the fee, plus expenses for the first six months. For the vast majority of them their biggest personal asset is their house, so they use that as collateral. It raises the stakes, but in 26 years with 550 franchises in 35 countries I’ve never seen anyone lose their house.”

Lending has certainly got much tighter in recent months, but Alan Wilkinson, a franchise development consultant with the Howarth Franchising Group, says: “Banks are indicating they will support franchises better than they non-franchised businesses. I have met with the banks that deal with franchising and they said that for the right candidate with the right credit record there should be no problem.”

Many of the franchises have relationships with banks and can help smooth the path for those seeking funding. Mead says: “Because we have a relationship with Barclays about 50% of our franchisees are with them. They know what we’re doing and they tend to look favourably on them.”

The franchise route is therefore possible. It remains daunting, and it’s still a difficult time to pour money into your own enterprise. However, it an pay off. Hetherington says: “There were more millionaires made in the 1930s [during the depression] than at any other time. If you can build a success in difficult times, then when the good times return you will have a phenomenal business.”