UK Franchising

UK Franchising

This report examines the UK franchising market, although it excludes two kinds of business relationships which are similar to, but not the same as, franchising. These are motor vehicle dealerships and tenancy agreements in the public house industry. UK franchising is an important part of the economy. Franchising extends across all areas of the economy, but it is especially influential in the arenas of retailing, food, and business-to-business (B2B) services. The turnover of the franchising industry in 2005 was an estimated £10.3bn, which represented a 13.2% increase on 2004. The market is generally split into dairy franchises and non-dairy franchises. The total number of non-dairy franchises is estimated to stand at around 29,100, while dairy franchises total less than 2,000.

This is a dynamic market, constantly attracting both new franchisors and franchisees. For the franchisees, the attraction of owning a franchised business is that they are trading with a recognised brand name or, if it is a new company, then a brand name that will be developed by the franchisor. The investment needed varies hugely, starting at around £10,000 and rising to over £300,000 for the most expensive franchises (such as McDonalds). A lot of new franchisees are aged 35 to 50, with some business experience behind them. The British Franchise Association (BFA) is seeking to encourage more women and ethnic minorities into the sector. For the franchisor, franchising is a way of expanding a presence in the market but at a much reduced cost.

The industry is maturing and the age of most franchisees is also increasing, but this is inevitable in an industry that has been a feature of the economy for several decades. Nevertheless, new franchisors are still coming into the market. Some originate from abroad, especially the US, and some have been developed in the UK. They are in all sectors, especially personal services, B2B services and food. There is clearly a lot of competition between the franchisors to win new franchisees, and the competition for suitable franchisees has probably never been hotter. There is much financial support available and interest rates are low, but there are not enough appropriate franchisees available, therefore the franchisors are placing more emphasis on the support that they can give once a franchisee has signed the contract.

Key Note is forecasting a small increase in franchising turnover for 2006 and beyond of 2% to 2.5% a year. The number of franchised units (i.e. outlets) is likely to grow at about the same pace.

This report examines the UK franchising market, although it excludes two kinds of business relationships which are similar to, but not the same as, franchising. These are motor vehicle dealerships and tenancy agreements in the public house industry. UK franchising is an important part of the economy. Franchising extends across all areas of the economy, but it is especially influential in the arenas of retailing, food, and business-to-business (B2B) services. The turnover of the franchising industry in 2005 was an estimated £10.3bn, which represented a 13.2% increase on 2004. The market is generally split into dairy franchises and non-dairy franchises. The total number of non-dairy franchises is estimated to stand at around 29,100, while dairy franchises total less than 2,000.

This is a dynamic market, constantly attracting both new franchisors and franchisees. For the franchisees, the attraction of owning a franchised business is that they are trading with a recognised brand name or, if it is a new company, then a brand name that will be developed by the franchisor. The investment needed varies hugely, starting at around £10,000 and rising to over £300,000 for the most expensive franchises (such as McDonalds). A lot of new franchisees are aged 35 to 50, with some business experience behind them. The British Franchise Association (BFA) is seeking to encourage more women and ethnic minorities into the sector. For the franchisor, franchising is a way of expanding a presence in the market but at a much reduced cost.

The industry is maturing and the age of most franchisees is also increasing, but this is inevitable in an industry that has been a feature of the economy for several decades. Nevertheless, new franchisors are still coming into the market. Some originate from abroad, especially the US, and some have been developed in the UK. They are in all sectors, especially personal services, B2B services and food. There is clearly a lot of competition between the franchisors to win new franchisees, and the competition for suitable franchisees has probably never been hotter. There is much financial support available and interest rates are low, but there are not enough appropriate franchisees available, therefore the franchisors are placing more emphasis on the support that they can give once a franchisee has signed the contract.

Key Note is forecasting a small increase in franchising turnover for 2006 and beyond of 2% to 2.5% a year. The number of franchised units (i.e. outlets) is likely to grow at about the same pace.