When thinking of franchise companies, your mind may go straight to the American giants such as McDonald’s, Subway or Starbucks. We don’t often associate everyday businesses with franchising, when in fact, 80% of the UK franchise market is UK-owned and developed. The franchise industry is becoming stronger and stronger over time, and the number of franchised businesses has reached around 48,000 units, with around 710,000 people employed within the sector. The NatWest study into the UK franchise market showed that 92% of franchised companies were running in profitability, and even more recent studies have suggested that figure is more likely around 97%.
According to NatWest, as of 2018, the franchise industry was worth £17 billion and has proven it has a lot to offer to the UK economy as a key player in the UK business world. Unlike traditional start-up businesses, the rate of failure is extremely low, with less than 1% of franchised businesses closing due to failure. The industry even remained steady during the last recession, showing the strength and longevity of the franchise business model.
Franchising is a reliable business model for both the franchisee and the franchisor. For the franchisee, it’s a lot less risky than opening a business from scratch and so by opening a registered franchise business, you are provided with an existing, proven business model. For the franchisor the risk of failure is also reduced as expansion through franchising is a lot more affordable than company-owned expansion, with considerably less upfront capital needed.
One factor that is a major part of success for franchisors and franchisees is the brand recognition associated with an -established organisation. Customers may be already aware of the brand or can look it up easily to get a sense of who they are and build trust. In a franchise business model, methods and operations have already been tried and tested , and so it reduces the time for trial and error or cost of failings and mistakes within a start-up.
Recent data from the past few years shows that the number of new franchised businesses has only increased by a fairly small margin of around 1%, however, the number of actual franchise units has grown by around 25%. It is thought that one of the main reasons for this is the increased growth amongst the very largest franchise systems in the hotel, catering and personal services sector over the last 5 to 10 years. In this country alone, franchising systems continue to be owned by UK owners. Further to that, 4 in 5 UK franchise systems are run by the owner of the business.
Some notable industries that have seen exponential growth are coffee shops - for instance, 10 years ago Costa Coffee had 170 units, they now have 2,300! Another growing franchised industry are care homes: Bluebird Care Homes, for instance, has grown from 35 units to 188 in less than 10 years.
Looking at the wider picture of the sector across the last 25 years, it is thought that the number of franchise units in the UK has nearly doubled, with much of this increase being pinned on the hotel & catering sector. The ever-growing rise of pub chains, coffee shops and fast food stores has increased the sector to 48,600 franchised units that exist in the UK today.
It may not surprise you to know that the franchise industry contributes just over £15.1 billion to the UK economy. When you hear “franchise”, you probably think of the main players, however, newer, smaller franchises that are a vital part of the UK franchise industry have grown by a whopping 10%.
Franchising likes new ideas – business models that come to market as new franchises are often in high demand – particularly if they are in a new sector or a sector that is growing significantly and a proven franchise can offer individuals the opportunity to get into a growing market at an early stage and benefit from the business model that the franchise offers.
The UK franchise market has also shown itself to be incredibly recession-proof. Between 2006 and 2016 there was a 70% increase in the number of people employed by franchises, from 365,000 to over 600,000 people. Plus, more than 50% of franchises have a turnover that exceeds £250,000 with an incredible 97% of them running a profit.
If you have ideas of forging your own business and shaking things up in your chosen industry, have you thought about opting to join a franchise instead? It might feel like you don’t have a lot of control, but that couldn't be further from the truth. Franchising offers strong branding as well as the chance to join an established business, plus many franchises are always on the lookout for franchisees, a testament to the consistency of the business model for both parties.
There are loads of benefits to joining a franchise but we’ve distilled it down to 6 of the best reasons:
If you own a business in England, Scotland or any other areas in the United Kingdom and you want to franchise it to help drive growth, sky-rocket your brand recognition and work with a company that you can trust, then The Franchise Company is for you. Have a read about our history and how we can help you, then get in touch and let’s get talking about franchising your business!