Spring is in the air

Spring is in the air! We don’t need to look at the calendar to tell us that something is stirring. It’s there in the hedgerows, it’s there in the sunlight, it’s there in the occasional warm day. It is for many people their favourite time of year.

But what does that have to do with franchising I hear you cry? This mood of uplift and regeneration is translating to the economy. And when the economy is on the up – at a time when many have lost jobs or are looking for significant change – then franchising is a concept for serious consideration.

A marked upturn

I’ve just been looking at a news item posted by a company that runs booking systems for franchise operations and they are saying that there has been a marked upturn in the last month of bookings and of confidence. This has been mirrored by comments made by franchisors – often those with a customer base of parents and children and up until now have not been able to trade – but they can see a way forward.

Respected economists at HSBC point out that by spring people will be sitting on £200 billion more of bank deposits than they were a year ago. The budget has extended further support to households and the vaccination programme is moving with pace which indicates factors are in place for an economic recovery. The stamp duty holiday has been extended, the VAT rate to hospitality and leisure services extended at a reduced rate until April 2022 and the Chancellor is directing tax incentives to help foster a strong economic rebound.

The Office for Budget Responsibility (OBR) expects the economy to expand by around 4 per cent this year accelerating to 7.5 per cent in 2022 and is not alone in saying that there could be a sense of euphoria leading to a surge in spending once the pandemic is passed. I’ve seen it referred to in various newspapers as “a return to the roaring 20s“!

The OBR also suggests that a further half a million jobs may be lost by the end of this year, but that will represent a peak unemployment rate of 6.5 per cent rather than the 7.5 per cent assumed in its forecast of November last year. All of these pointers are positive, which is why we say, with a degree of confidence, that if you’re looking to invest in a franchise now is the time to begin your search in earnest. As part of your research, I strongly recommend you ask franchisors to give you a very clear picture of earnings potential based on pre- and post-Covid trading – from their real experience rather than from hypothetical forecasting.

More good news

Further confidence will ensue at the announcement of funding support to the industry by HSBC in conjunction with the British Franchise Association (bfa).

The high-street bank and franchise specialist lender has launched its first-ever £500 million fund ringfenced for franchising as part of its commitment to help British businesses innovate and grow as the country looks to rebound from the Covid-19 health crisis.

They commented that franchising numbers are at a record high in the UK, driven by the rise in younger people wishing to run their own businesses and by existing franchisees expanding across sectors, from major food brands and coffee bars, healthcare and phone shops. Franchising has hit record numbers, employing over 700,000 people and contributing an estimated £17 billion to the UK economy according to the bfa.

Despite the challenging economic environment, 62 per cent of UK businesses intend to increase investment in their company in the next year, according to research from HSBC, with the focus on four fundamental areas: employee wellbeing, customer experience, cashflow/capital management and security.

Almost three quarters (71 per cent) of UK businesses expect to have returned to pre-pandemic levels of profitability by the end of 2022 and a fifth by the end of this year and nearly half of British companies (49 per cent) are projecting sales growth.

With UK businesses looking at how they can expand, franchising is the third option to consider alongside organic growth and acquisition. While it requires training and supporting franchisees, it is capital-efficient and lower-risk compared to other methods. For franchisees, the model offers a more accessible way of starting a business, using a tried-and-tested concept.

So, to summarise, the scene is set for positive actions. It is up to you to take them. Good luck!

© Nick Williams – Ashtons Franchise Consulting