What’s Happening In Franchising Right Now

We asked some of the industry’s leading names what’s happening now and what’s coming up. Linda Whitney reports

The franchise sector is thriving. Pip Wilkins, chief executive of the British Franchise Association, says: “The latest bfa/NatWest franchising survey 2015 shows the number of franchisee owned businesses has increased by 14 per cent in two years to 44,200.”

The total turnover of franchising is increasing and over half of franchisees now claim an annual turnover of more than £250,000. A record 97 per cent of franchisee owned units reported profitability and a record number (91 per cent) of franchisees say they are ‘mainly’ or ‘definitely’ satisfied with their franchisor.

Leading The Way

But which franchise sectors are growing the most? “In terms of new applications for bfa membership, the domiciliary care sector has shown a real boom in the last three to five years,” Pip says.

Suzie McCafferty, managing director of franchise consultancy Platinum Wave, agrees, adding: “The recruitment sector is also seeing an increase in placements and the greater the demand for these services, the greater the appeal of that type of franchise.”

The food and catering sector is also strongly tipped for growth. “New food franchise brands are launching all the time,” Suzie says. “Quick service restaurants will continue to lead the way,” citing newly franchised Chinese restaurant and takeaway Hotcha.

Len Rainford of The Franchise Specialist, which offers franchise consultancy and recruitment services to franchisors, says: “Fast food is one of the top three growth areas. People looking for fast food franchises account for about a third of the potential franchisees we see.”

Len has also researched the coffee shop market. He says: “The number of UK coffee shops is forecast to grow by 30,000 in the next five years, so I expect to see more franchised coffee outlets.”

He also sees a trend towards more ‘quirky’ food franchises. He cites Dum Dum Doughnuts, which offers artisan made doughnuts (and recently made headlines with a gold leaf topped creation that sells for £1,500), and new franchise Poco Coffee Shop, where each outlet is different.

As established food brands in the UK run out of scope for expansion, Suzie forecasts their continued overseas growth, especially in the Middle East.

Multiple Outlets

The multiple outlet franchisee is becoming more common - 29 per cent of franchisees now run multiple units. Many food franchises specifically look for franchisees willing to ‘go multiple’.

“Franchisors are realising that if they have a great operator in their network, they should let them grow, rather than limit their potential to a single territory,” Suzie says.

She also expects growth in franchises providing children’s and pet services: “Often they are at the lower end of the investment scale and people can see a strong demand for the services.”

Franchisee Profile

Meanwhile, the profile of franchisees is broadening. “One in five franchisees who launched their business in the last two years is under 30 years old,” Pip says. “I think it’s helped by the bfa’s campaign to promote franchising to younger people and the new annual award for younger franchisees.”

Suzie adds: “We have seen an increase in enquiries from ex-services personnel. As more franchisors provide impressive case studies of thriving exforces franchisees, it prompts greater interest from those about to leave the services.”

Surprisingly, the bfa/NatWest survey found a slight downturn in the number of women getting into franchising. Pip says: “I don’t think it fully reflects the situation. The drop in women could be a result of the way we count them, so we may have to reexamine that.

“In the US the number of women in franchising is growing, often because they are joining men as partners in a franchise business. We expect to see the number of franchise outlets in the UK solely or co-owned by women rise, as it has in the US.”

One aspect of franchising that has not changed is the ongoing lack of suitable franchisees. Pip says: “Franchisors identify their primary barriers to growth as lack of finance capital and lack of suitable franchisees. Franchisors have worked out what makes a good franchisee and are using more rigorous selection processes, but finding the right franchisee is still like finding a diamond in the sand.

“Judging by discussions with franchisors, an established franchise will find one or two franchisees per 100 enquiries.”

Len adds: “When I first started in franchising with Amtrak in the early 1990s, I’d say one franchisee was recruited for every 20 enquiries. Now people request information packs online from many different franchises before approaching just one or two, so the lead to recruited franchisee ratio has ballooned.”

Suzie says: “If a franchise can nail its recruitment marketing procedures, then it shouldn’t struggle for candidates, but there is fierce competition to attract the very best applicants. The brands that are the most open, honest and transparent will usually secure the best people.”

Lessons Learned

What lessons do these trends provide for prospective franchisees looking to choose and buy a franchise?

Len suggests going to meet franchisors in person early on: “These days that rarely happens. It could impress them and increase your chances of being recruited.”

Suzie advises considering your appetite for risk and thinking longterm: “Investing in a brand tipped to be the next big thing in burgers or pizza is a different proposition to a franchise trying to capitalise on a sudden, Olympics driven jump in demand for Brazilian snacks.”

Some years ago franchised fish pedicure salons appeared, where customers immersed their feet in tanks of fish that nibbled away hard skin on the feet. But official concerns about health - of both customers and fish - led to their swift disappearance.

Suzie says: “They were the talk of the town, until the craze crashed faster than it started following many negative accusations.”

She adds: “Take lots of advice and follow your instincts.”