UK Franchising Stats

Franchising offers the smart route to becoming your own boss

If you feel you’ve reached a glass ceiling, lack decent prospects in your job, think you could do better on your own or are ambitious and motivated by more money or a better work-life balance, a franchise could literally be life changing.

Franchising is often misunderstood, but at its heart is a simple concept - a company (franchisor) grants a licence to a person (franchisee), which entitles the franchisee to run their own business under the brand, systems and support of the franchisor.

Franchising by the numbers

• Industry turnover: £15.1 billion.
• Franchisee businesses: 44,200.
• Employment: 621,000 jobs.
• Business failure rate: under five per cent annually for 20-plus years.
• Franchisee profitability: approximately 90 per cent annually for 20-plus years.

Source: British Franchise Association/NatWestFranchise Survey 2015.

Self-employed

A franchisee is therefore self-employed, owning and operating their own company. If you’ve ever ordered a pizza from Domino’s or a sandwich from Subway, the store you bought it from was run by a franchisee, not a corporate multinational.

The idea is that someone else has tried and tested the model, demonstrated a system of success and is offering the chance to others to replicate their results.

A franchise network is a group of business owners, alongside the franchisor, who share ideas, experiences and challenges, with the overall whole being greater than the sum of its parts.

Initial and ongoing fees

A franchisee pays initial and ongoing fees in return for a proven business model, established brand and full support in every aspect of running a business he or she can call on any time.

The initial fee gets the business launched and off the ground - including any office kit out required - while ongoing monthly fees are most commonly a proportion of turnover, usually around 10 per cent.

Training and support offered might be expertise in a particular area of recruitment, marketing or the running of a business itself. Because a franchisee is self-employed, they’re responsible for the administration, taxes, pensions for employees and so on.

The franchisor will help with all these aspects and more, as required. That means it’s your skill set, aptitude and suitability to the business that matter more than your career experience to date.

It’s also a sector with no prejudice on entry. For example, franchising enjoys a higher rate of female ownership than small and medium-sized enterprises generally, one in five new franchisees (less than two years) are aged under 30 and older franchisees are valued for the experience they bring to a network.

Pros and cons

It’s important to understand the positives and negatives of being a franchisee:

Advantages:

• Avoiding the trial and error period in launching and growing a business and the associated costs.

 

• Lower risk. Statistically, a franchise business is much more likely to succeed than going it alone.

 

• Training and support on all aspects of running a business from experienced people.

 

• Access to technology and systems you wouldn’t typically have as an independent.

 

• Being part of a bigger brand, generating recognition, loyalty and expectations.

 

• Access to shared experience and know-how, from both the franchisor and other franchisees.

Disdvantages:

• There’s a system to follow. If you want carte blanche over all operational decisions, franchising may not be for you.

 

• Standards and policies must to be adhered to.

 

• Initial and ongoing fees will be paid to the franchisor.

 

• Other people can influence the standing of your brand.