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Wednesday, 3 February 2016

Member Blog: Why is franchising in the UK more popular than ever?

By Paul W Davies, Director- Brand Mark Franchising Ltd

The franchise industry was worth over £15bn to the UK economy in 2015 and it’s still growing- why the popularity?

I am a Franchise Consultant to the industry and I want to offer you my perspective on this captivating industry that has made millionaires of some its franchisees and franchisors, although occasionally of course, things can go wrong and investments are lost- but not too often. So, what is franchising?

Business format franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of the franchisor.

So, why would I be interested in franchising?

Well, it’s got a pretty impressive record. Here are some stats you may not be aware of:
  • Throughout the worst of the global recession starting in 2007/8, franchising has remained remarkably resilient, only once recording less than 90% of franchise units in profit;
  • 70% of the very largest units (with a turnover of £500,000 or more) are quite or highly profitable – and none are loss making;
  • A franchised business appears larger than it is and offers other substantial benefits over non-franchised SMEs:

1. Appearing to be a larger business;
2. Quality expectation;
3. Having a standardised product/ service;
4. Limited financial liabilities;
5. Access to bulk buying discounts;

  • In 2015, a record 97% of franchisee-owned units reported profitability, with 56% saying they are ‘quite’ or ‘very’ profitable. 
  • Funding banks like good quality franchises;
Anyway, that is enough of statistics. There is also a fascinating, not to say profitable narrative that goes along with this.  Existing business owners are attracted to franchising for a number of reasons;   -It accommodates potential for more rapid expansion of a brand, -it is the franchisee that will pay for the upfront costs like equipment or fit-out, -owner operators normally out-perform managed outlets,
-owners also help the business grow by developing the number of franchises they buy over time, with agreement from the franchisor;  -franchisees as well as franchisor, have a vested interest in the success of the company, so will add a quality to the business that a manger can rarely achieve.

There is more, much more, that I will be reporting on in due course.

For more franchise revelations, see my blog at:

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