What is franchising and what makes franchising a good bet?
Here's what the British Franchise Association has to say:
Business Format Franchising: The granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trademark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis. Both parties will sign a franchise agreement which is a legally binding contract, outlining obligations and responsibilities and usually lasts for 5 years. The franchisee pays an initial fee to get started and then an ongoing monthly fee which is usually a fixed amount or a percentage of turnover. In return, the owner of the brand (the franchisor), provides everything they need to start and run their business successfully. Usually, they will deliver all the initial training, tools, equipment and systems required and provide ongoing support through refresher training, business reviews and business planning.
The fundamental elements of a business format franchise are piloting to prove the idea works and can be replicated; initial training to franchisees in the operation of the business; the ownership of the business by the franchisee and the capital investment they will have to make.
The provision of ongoing support is a vital element. Whilst the franchisee is the owner of the business, it is important to bear in mind that it is the franchisor’s system and brand that the franchisee is operating under. An ongoing dialogue between franchisor and franchisee is crucial therefore in contributing to the success of each individual franchise unit and consequently, the franchise network.
The 2018 bfa NatWest Franchise Survey has shown that the franchising industry is growing more than ever before. The industry now contributes £17.2 billion per annum to UK GDP, employing 710,000 people, with 93% of franchisees claiming profitability and less than 1% of franchisors closing per year due to commercial failure.
More Franchise Systems
There are now 48,600 franchise units in the united kingdom, a rise of 10% from 2015. There are also 935 business format franchise systems, around double of what there were 20 years ago.
Millennial Drive in Franchising
There are more younger people than ever taking up a career in franchising as a franchisee. This is in part second generation franchisees seeing the benefits of keeping the business, and more people choosing business ownership with the backing of a network as they look to determine their own future. Currently, 18% of all franchisees are under the age of 30 as per the findings of the 2018 bfa NatWest franchise survey, a significant rise from the previous survey in 2015.
Multi-Unit Ownership on the Rise
Franchisees are increasingly choosing to own more than one franchise unit, sometimes with the same brand and other times with separate franchise systems. 36% of franchisees now run multiple units, a rise of 7% from the previous franchise survey. People are seeing value in staying in the franchising industry and expanding, and with more younger franchisees taking ownership of franchise units, this also opens up opportunities for the next generation to stay in the industry longer and build up their portfolio.
More Women in Franchising
Franchising is ahead of the wider business world when it comes to women owning and running their own business. 30% of all franchisees are women, and as per the findings of the 2018 bfa NatWest