Extract taken from 'Starting Your Own Sandwich Shop' - Andrew Johnson

A few points to consider

Its one thing deciding that you want to go into the sandwich business, its quite another deciding on the best way to do it. Its not something that can be decided on the spur of the moment, a lot of research will be needed. Essentially though, for all practical purposes, there three avenues open to you.

• Purchase an existing business and take it on as a ‘Going Concern’
• Buy a Franchise
• Start your own business from scratch

This book focuses on starting your own business, rather than buying a franchise or taking over a going concern. Its how I entered the sandwich trade, and hopefully I can steer you in the right direction and help you to avoid some of the mistakes that I made.

I am also aware that starting a business from scratch is not for everyone, and so a few words on the other options open to you would be in order. You will have to decide on the best course of action that would suit you. Personally I believe that starting your own sandwich shop offers the most benefits, which I will outline.

Buying an existing sandwich shop

There is no denying that buying a business outright is the quickest way to enter the market. On the surface, it also looks to be the easiest option, certainly your workload will be less than when starting from scratch. The advantages of buying an established business can be considerable, but there are potentially major downsides as well

Advantages

• Getting finance should be easier because the business is already an established and proven operation.

• There will / should already be a customer base, and a share of the market, the business should already have a good reputation

• Your re-modelling costs might be limited to just a bit of modernising or updating

• The business should be profitable, and creating an income, without you needing to alter the business model

• Existing employees will be experienced, and you can draw on their knowledge.

Disadvantages

• Shopfitting costs could be far more than you anticipated, especially if equipment is worn out and needs replacing. You won’t easily be able to judge the mechanical condition of the refrigeration equipment until you have taken possession.

• There could be hidden problems, which the seller is unlikely to reveal, and which cause unexpected expense down the line.

• There could be problems with existing staff, which you would be obliged to solve. You can’t just renew the employee base when you take over. The existing employees have a multitude of rights to protect their interests.

• Its possible that the seller knows of outside developments that could affect the viability of the business, if you or your legal team don’t pick up on them, then the long term future of the business could be doubtful.

• It could be that the profitability of the business has been falling for a long while. The trend might continue, regardless of what you do. For example, a few years down the line its possible that the area could be seen as less desirable by customers. This is a fairy common occurrence. One part of town is on the up and up, but another may be falling into decline. You might struggle to sell the business when the time comes.

Before choosing to start a sandwich shop from the ground up, I did consider buying a going concern. But even the best shops had a slightly worn look to them, which meant that re-modelling would have been necessary. The other point that bugged me was that most business are not sold with the freehold rights to the property itself. I was never comfortable with the idea of paying someone a lot of money for their business and not actually owning the property itself. Finally it struck me that buying someone else’s business, meant buying all their problems as well.

Buying a business might seem the easiest way to get started but it can be fraught with dangers, you can reduce the risks by seeking professional advice. You will need guidance on how to value a business, including its intangible assets. The financial strengths and weakness must be analysed. You also need to find out why the business is being sold.

Some proprietors claim to deliberately underestimate their takings, in order to reduce their tax bill. Don’t fall for this trick, even though its prevalent. You can only judge the profitability of a business by analysing the accounts, and seeing how much tax has actually been paid over the years.

Taking on a Franchise

Typically the owner of a business ( the franchisor ) grants a person the right to trade using their business model, brand name and ideas. In exchange for this, the franchisee pays an initial fee and an annual royalty to the franchisor. Quite often the person taking out the franchise will only be granted the right to trade in a specific geographical area.

Examples of typical franchises include Burger king, Subway, O’Brien’s and Pronta –Print . There are thousands of franchises available in the UK in all business fields.

Who would choose a franchise ?

If a person wants to run a business, but is not confident of their ability to get things off the ground, then a franchise could be the answer. Basically, the franchisor will guide you every step of the way, and the end result is that your shop will be virtually identical in look and operation to the rest of the chain. In some cases, the franchisor will help you find a suitable property as well. As with any other business choice, there are pros and cons to consider , before you decide if franchising is the best way forward for you.

Advantages of taking on a franchise

• You get to open your business on a proven business model

• Advice and information should be readily available.

• You won’t need to spend time considering interior décor, equipment needs, suppliers, or a menu. The franchisor will supply a blueprint for all of this and more.

• You will be able to speak to other franchisors about their experiences and probably receive training in an existing shop.

• You will have more time to concentrate on the day to day running of your business.

• You will have the benefit of an established brand, and this should translate to higher sales through higher customer confidence.

Disadvantages

• You will have to pay an upfront sum, which is called the initial franchise fee. This sum is non-refundable if the business doesn’t work out. In addition to this, there is usually an annual royalty due as well, normally a percentage of sales. The initial fee can be anything from £7000 to £20,000. For a business start up, this is serious capital.

• There is very little flexibility in the business model. You have to stick to the guidelines laid down by the franchisor, you can’t change the décor or the menu, for example. If you enjoy creativity, this can be stifling.

• If there is friction between the franchisor and the franchisee, the latter invariably comes off worse. Arguments or disagreements can cause big headaches for the franchisee. At times like this, you realise that running a franchise doesn’t really make you make you the boss, you are still answerable to others. Surely the idea of independence was a factor in deciding to become self employed ?

• Some franchisors help you find a suitable location, but insist that the lease of the property is in their name, not yours. If things go wrong, you can’t just drop the franchise and try something else. If the lease is not in your name, you aren’t really in business for yourself, but more of a manager, albeit a manager that’s put up the capital for the venture.

• Not all franchises have a happy ending. If the holding company folds, or has a policy change, you could be left out on a seriously precarious limb.

Please don’t assume that buying a franchise equates to an easy ride. Far from it, you will have to work just as hard as someone who starts from the ground up. A franchise is most definitely not a passport to easy riches and short working hours. If you are interested in franchising then contact the ‘British Franchise Association’ who can provide you with the ins and outs of the franchising world. Their number is 01491 578050 or log on at www.british-franchise.org Make sure you thoroughly investigate your short-listed franchisors, stick to those with a proven track record, who willingly allow you to contact their existing franchisees.

A final point on franchising. Do you really WANT someone to hold your hand and lead you all the way ? isn’t half the fun and satisfaction doing it yourself and creating your own business, rather than just following someone else’s lead ?

Starting your business from scratch

I carried out a lot of research before deciding that that I wanted to start from the ground up, it wasn’t a decision that was taken lightly. Plenty of businesses were visited, with varying price tags, but none really caught my imagination, and all needed re-modelling of some kind. There was no guarantee that altering an existing business, by means of re-decorating, renovating or replacing equipment, was going to be cheaper than starting from scratch with an empty shell of a shop. This was the deciding factor against buying a going concern.

There is a major benefit to investigating sandwich shops that are for sale, even if you have no intention of actually buying one. As a potential buyer, you are shown around the whole operation, including food preparation and public serving areas. It’s a great way to get ideas and see how things are done, and also to see how some things shouldn’t be done!

Advantages to starting your own sandwich shop

• You can start with an empty shell of a shop and fit it out just the way you want it, like a sculptor starting from a block of stone, or an artist with a blank canvas.

• The refrigeration and other equipment will be either new or from known sources, not someone else’s ‘clapped out junk’, with potential mechanical faults.

• The money you spend will go towards the actual business start up costs, there won’t be any ‘Goodwill’ to pay. When you buy a going concern, you are paying for the fact that the business already has a customer base. The goodwill of this customer base is often of debateable value.

• You get to choose the location of the shop, based on your own criteria.

• The satisfaction of actually starting a business is greater than just buying some else’s

Disadvantages

• It can be harder to raise finance, lenders are usually more wary of business start ups.

• The process of starting a business involves a lot of steps, each requires co-ordination. You will function as overall project manager. This means handling all aspects, from finding a location to overseeing tradesmen fitting out the shop.

• Costs for the project can rise unexpectedly unless you keep a firm grip on them

• There is a danger that you spend forever investigating and researching, without ever actually committing to the business.

Starting your own business can be daunting, but if you break the whole project down into small steps, the concept does become manageable. A flow chart offers a practical way to lay out each step of the business process, it’s a method chosen by a lot of new business people.

The important thing is to put all of your ideas and thoughts onto paper, and take it from there. It’s the best way of organising everything into a kind of logical order. You can’t keep it all in your head, performing a juggling action from one thought to another, that’s just not practical.

I simply used an A4 pad and wrote a list of what had to be done. As each task was completed, it was crossed off. It might sound simplistic, but it worked for me. This won’t be the only list you make, but it can be the master one. The major tasks on your list should correspond fairly closely to the chapters in this book, although the order you carry them out might differ.

I can’t pretend that starting a business is easy, its hard work and there will be times when you are dog tired, stressed out and irritable, when nothing goes right, and you doubt your own sanity for starting out in the first place.

Despite this, and admittedly I am somewhat biased, I believe the satisfaction and other benefits you get from creating your own business cannot be equalled by taking on a franchise or buying a going concern.

Sources of advice and information

Nowadays more than ever, there are plenty of sources to help you get off the ground. Over the past ten years or so, small business development has become a serious issue, its promoted right from government levels to the high street banks.

• Most of the major banks have a section that deals specifically with the needs of small businesses. They can provide you with start up information and advice on all aspects of the venture.

• Your local chamber of commerce – an invaluable source of information for the new and established business person alike.

• Business Link – Many publications available for download on www.businesslink.gov.uk or call them on 0845 600 9006. I regard this as one of the finest websites for the budding small business person. Information is laid out clearly and concisely.

• Small Business Service – A government run information portal which offers practical advice and information for the new start up. It is affiliated to Business Link and is well worth a look. www.sbs.gov.uk

• The Department of Trade and industry – Although this site is directed at the business world in general, it is the key website for anything business related and should be on your list . The information available to browse is truly vast. You can log on at www.dti.gov.uk

The more research you do, the easier your business life will be. For example when you deal with your accountant or solicitor, you will save a lot of time ( and fees ) if they don’t have to explain the basics of business to you. Since this information is available online and for free, it makes sense to take advantage of it.