Franchising Trend Continues to Grow

Franchising Trend Continues to grow contributing in excess of £17 billion to the UK economy.

This is a £2 billion increase from the last statistics in 2015 proving that franchised businesses continue to make an important contribution to the local economy of all UK regions.

The sector has also seen an increase in the number of people working in the industry with the majority being female. Three-quarters of franchise units employ staff with 30% employing six or more members of staff.

Up until 2015 the vast majority of new franchisees derived from within the industry. Since 2018 there has been a reverse with many new franchisees entering the industry due to previous unemployment and/or redundancy. That said, due to the number of mature franchised businesses, many new franchisees are those taking over an existing franchise as opposed to starting the franchise from scratch in a new territory.

Males continue to dominate as franchisees although the number of female franchisees has increased by 20% since the 2015 statistics. Franchising is becoming more attractive to the under 30s with 18% of all franchisees being under 30.

Franchising continues to focus around urban areas due to the greater density and larger potential marketplace. Whilst franchising was originally dominant around the South West and West Midlands over the past two decades this has become more widespread around the UK.

The number of franchised units in the UK has risen to its highest at around 48,600. This is nearly two times more than 25 years ago when the number was estimated to be around 20,000.

The biggest areas of growth continue to be hotel and catering and personal service.

• Costa Coffee had around 170 franchise units in 2009 whereas today the number is around 2,300
• Subway had around 1,500 units in 2009 increasing to around 2,200 today
• Bluebird Care has grown from 35 units to 188 units in the last ten years. Home Instead has grown from 18 units to 190 units in the same period.

Statistics have shown that around half of non-franchised start-ups fail in the first five years, whereas two in five established franchised businesses operating in excess of five years are highly profitable. Overall more than half of franchised businesses now turn over more than a quarter of a million pounds with only 2% operating at a loss.

Data shows that there is no significant difference in respect of profitability between smaller and larger franchised businesses, although most franchised businesses are sizeable enterprises. Sector level profitability is highest in the hotel and catering sector at 96% followed by business services at 76% and retail at 78%.

Nearly four in ten franchised businesses can be operated from a home or a home office as opposed to shop or retail premises associated with the hotel and catering and retail sectors. Figures show that 73% operating from a home or a home office are profitable with those operating from a shop or retail premises at 93%.

Despite all of the unrest and uncertainty around Brexit, both franchisors and franchisees remain confident about their franchised businesses. They are not however so confident about the economy!

The statistics in this article have been taken from the 2018 BFA NatWest Franchise Survey.