Franchise Focus Business News…

A new franchise self-regulatory body has just been launched. The Approved Franchise Association, brainchild of Craig Brittain, will be operating to improve self regulation of the franchise industry in the UK.

Craig told Franchise Direct “The BFA have rarely seen any real competition, and witnessing the rapid growth of the AFA, and the way it is being received by the Franchise Community, will no doubt be causing them to ask questions of themselves about their offer, and considering it’s true financial value and worth in a free market place.“

The AFA will be entering into direct opposition with the British Franchise Association, who have been operating since 1977.

With bfa membership fees starting at nearly £2,000 annually  the AFA is expected to provide a cheaper alternative to regulation of the industry.

He said: “I am delighted to be part of this new and exciting organisation. The franchise industry has grown significantly over recent years and the introduction of this new association can only be of benefit to this very vibrant sector of the economy.

“We aim to make a difference. Our values and principles ensure our organisation remains focused and driven by our collective objectives, surrounding the growth, development and awareness of the Franchise Industry within the United Kingdom.”

He continued “competition, although not always welcomed by all, brings along with it choice.  The choice here is for Franchisors to freely decide for themselves what each association offers, and which is for right for them.

“We pride ourselves on our organisations’ modern style.  Form filling is electronic; communications are quick and effective; and we will never overcomplicate any issue. “

Richard Cobb and Anna Baker from the Business Group at Michelmores provided legal advice to AFA. Richard Cobb said: “It is estimated that there are over 1,000 franchises in the UK and the number is set to increase as this is a tried and tested way of growing a business or setting out in business for the first time.

“Achieving the right relationship between franchisor and franchisee is critical and the AFA’s guiding principles offer the sector a viable alternative association and accreditation system to address the issues involved in a highly professional manner.”

Revealed by the Smith & Henderson Franchise Satisfaction Benchmark

Smith & Henderson, a specialist franchise research firm, has announced  the winners of the inaugural Best Franchise Awards. This follows an industry-wide study of franchisee satisfaction, involving over 1,000 existing franchisees, to understand what franchisors best deliver on their promises, training, support, financial and non-financial rewards.

“With almost 1,400 different franchise opportunities available in the UK, prospective franchisees are faced with an overwhelming challenge when trying to find the very best franchise opportunities,” said Steven Frost, Partner at Smith & Henderson.

“What makes these awards unique is they are based on what the real experts think – actual franchisees who work in those businesses day-in-day-out and their first hand experiences. The four franchisors recognised in this year’s awards are in an elite group and represent the very best franchise opportunities in the UK today.”

The industry-wide study of franchisee satisfaction, known as the Franchise Satisfaction Benchmark, involved gathering feedback from over 1,000 franchisees. Questions included everything from training and support, the actual franchise system, the relationship with their franchisor, the value of the franchise and ongoing management fees, and how the rewards on offer compared to their expectations.

Franchisors from all corners of commerce participated, ranging from children’s sports coaching to business coaching; from lawn care to domiciliary care; and from retail to accountancy.

Presented with the awards were:

Best Training & Support: TaxAssist Accountants
TaxAssist Accountants provide tax accountancy services and advice through over 200 offices in the UK and Ireland. Recognised as having the Best Training & Support, TaxAssist franchisees rated the quality of its initial training and support, head office, marketing and franchisee-to-franchisee support the best in the UK.

Most Recommended Franchise: Puddle Ducks

94% of Puddle Ducks’ franchisees would recommend its franchise to a prospective franchisee – the highest in the UK.

Best Growing Franchisor (franchisors with 8-14 franchisees): Jasper’s Online
Jasper’s Online provides corporate catering throughout the UK. It was rated the best franchisor with less than 15 franchisees (a minimum threshold for entering the main awards).

Nathan Siekierski, Director, said, “Being able to compare your franchise model to the industry standard is something new and refreshing in the franchising world. Winning an award based on franchisee opinions is the icing on the cake and makes the hard work of the Jasper’s team worthwhile.”

Best Franchise Conference Seminars

As well as the awards, franchisors benefited from seven best practice seminars from:

• Smith & Henderson
• The Franchising Training Centre
• O2
• The Alternative Board
• Puddle Ducks
• Home Instead Senior Care
• Coconut Creatives

These were attended by over 50 franchise professionals and designed to help them improve franchisee satisfaction and develop even stronger franchise networks. Matt Trevor-Roper, Tony & Guy, summed up the day: “A fantastic opportunity to go behind the scenes and find out other businesses’ approaches to running a successful franchise operation,” while Dan Archer, Home Instead Senior Care said, ““A really valuable discussion of franchising best practice - book next year now!”

With a dozen additional franchisors already registered to participate in the 2012 Franchise Satisfaction Benchmark that did not take part in 2011, Smith & Henderson is on target for 80 franchisors to participate in 2012 as the programme becomes a key feature in UK franchising.

Representatives from Recognition Express, ComputerXplorers and the ZipYard franchises led the British Franchise Association delegation to the Houses of Parliament this week.

The group met with MPs including Andrew Bridgen MP for North West Leicestershire who were interested to learn more about the benefits of franchising and how this business model could help regenerate the UK economy.

Nigel Toplis is the managing director of Coalville based Bardon Group. Within the group sit three of the country’s most successful franchises; Recognition Express, ComputerXplorers and the ZipYard.

Mr Toplis said: “Despite the fact that franchised businesses in the UK last year turned over £12.4 billion employing over half a million people, awareness of franchising as a business model is still very low. The meeting with MPs was set up so that BFA members could brief them in more detail about the concept of franchising and its continuing success.

“It’s a proven fact that success rate amongst people starting up their own business as a franchisee is far greater than those who set up without the backing of a proven business model and ongoing support from the franchisor.”

Key business and political  figures have shown interest in franchising and entrepreneurship as a means of boosting job creation and economic expansion.

According to Prof Roy Seaman, managing director of Norwich-based Franchise Development Services (FDS) “We are talking next year of creating 100,000 new jobs through franchises,” he said. “Franchises are a solid foundation with which companies can expand and new jobs can be created.”

With redundancies and unemployment at levels not seen since the early 80s, franchising is offering a solution to get Britain working.

That number represents a 33 percent jump in the number of international units operated by those franchisors in the past 10 years.

In addition to the United States, countries such as England, Australia and Canada have found a high level of success in spreading their franchise concepts domestically and around the world. And additional players like France, Spain, and Germany are getting into the international franchising game, and also experiencing marked success.

With the launch of our new franchise portal for Mexico last month (and another soon launching for South Africa), it’s obvious that a worldwide financial malaise hasn’t stopped the growth of franchising. But where are some places where franchising may boom next?

The U.S. Department of Commerce estimates that over 75 percent of the expected growth in the world’s trade over the next two decades will come from developing countries, specifically emerging markets.

Eighty percent of the world’s population lives in these emerging markets, but they currently only combine for an estimated 25 percent of the world’s gross domestic product.

When you hear the phrase “emerging markets” typically the first countries to come to mind are the larger ones such as the “BRIC” countries of Brazil, Russia, India and China, along with maybe a couple others. However, smaller countries have future growth potential that simply shouldn’t be ignored.

Many of the countries that warrant consideration are part of regions once unified, but have since dissolved into historically-new entities. Places such as the former Soviet Union, former Yugoslavia, and other countries in Eastern Europe fit into this description.

According to the East Europe Franchise Association, the region – that also includes some countries geographically located in central Europe as well – is a vast and emerging marketplace for franchising consisting of 30 countries with over 450 million people.

So where are the main growth areas within this vast and emerging marketplace? Kristin Houston, leader of the U.S. Commercial Service Global Franchise Team, points to the countries of Ukraine, Slovakia, Poland, Hungary, and the Czech Republic. These five countries have grown 67 percent in the last three years alone. The sectors of retail, automotive services, real estate, education/training, hotel and hospitality, and quick-service restaurants are currently the most in-demand franchise areas.

Here are some additional quick facts on the franchise landscape in these specific countries:

Ukraine

• Around 42 percent of the Ukrainian franchising market consists of non-Ukrainian franchising brands
• Fast food is the predominate franchise industry in the country
• Some areas Ukrainian franchising businesses have been successful in include office supply delivery, outsourcing services, staff and management training, copy and printing services, and translation services
• Other franchise sectors with a strong base in the country are in customer service such as cleaning and washing services, repair, tourism, ticket delivery, organization of entertainment, etc.
• Banking and financial-related systems are newer areas gaining traction
• Franchise relations are regulated by the Civil Code of Ukraine and the Commercial Code of Ukraine, with special chapters of these acts dedicated to franchising
• Hotel and hospitality is highly regarded as a future growth area

Slovakia

• There are over 100 franchising models present in the Slovak market, of which about two-thirds are within the retail trade sector and about one-third in services
• The Slovak Franchise Association has adopted the European Code of Ethics for Franchising
• There are currently no specific regulations in Slovakia in regards to franchise agreements

Poland

• Has some of the most developed franchise systems in Eastern Europe
• There are over 300 franchising brands in Poland and more than 13,500 franchising outlets
• Around 30 percent of the franchising systems in Poland come from foreign countries with most foreign-based franchise systems coming from Germany, France and the U.S.
• Popular franchise sectors include the following: textiles, retail food sales, professional development services, body care salons (hairdressers’ services and beauty salons), fuel stations, financial services and fast food
• The majority of regulations applicable to franchise agreements are found throughout the Polish Civil Code, the Commercial Companies Codes, the Act on Abatement of Unfair Competition and many other laws since Polish law does not specifically regulate franchising agreements

Hungary

• The Hungarian franchise market consists of approximately 300 brands, 50 percent of which are Hungarian owned
• The other 50 percent of the Hungarian franchise market are either subsidiaries of international companies or Hungarian master franchisees
• Some of the first franchises in Hungary included popular hotel chains and fast food franchises
• Several Hungarian franchise companies are active internationally
• Under Hungarian law, a franchise agreement is considered an atypical agreement, and neither any specific law nor the Hungarian Civil Code regulates these agreements

Czech Republic

• There are around 150 franchise brands are in the Czech Republic
• Like many other European countries, the Czech Republic lacks legal regulation specifically applicable to franchising
• About 62 percent of the franchising concepts are in the service sector, and 38 percent are in retail
• Almost 50 percent of franchise concepts operate in food and beverage, real estate or clothing/shoes sectors

To fully find success internationally, a franchisor will have to adjust and adapt their model to not only the regulations (including currency exchange and tax laws) of where they desire to operate, but also that area’s language, working hours, and culture.

In addition, the fact that there are few established franchise laws in many of these countries shouldn’t discourage franchisors from establishing outlets in these countries.

Organizations such as the International Franchise Association offer franchisors who seek to operate internationally many of the resources needed during the process.

Also, although they are becoming more financially-sound and developing a stronger middle class, these countries still haven’t been cultivated by a high number of franchisors. Consequently, hopeful entrepreneurs within these countries are generally eager to learn business principles through the methods and procedures franchisors have to offer.

Franchise businesses have quite a bit to offer emerging markets because they are designed to be replicated. Thus, they require less experienced entrepreneurs to begin, and provide business-learning opportunities within a support structure. All of this can help emerging market countries further develop their economies.

According to Kristin Houston, “95 percent of the world’s potential consumers are beyond U.S. borders.” Going International is a way for franchisors to sustain growth opportunities for their business for years to come, and it wouldn’t be surprising to hear of major franchise growth in the East Europe region in the not too distant future.

Sources:

Franchising World Magazine (March 2011), U.S. Commercial Service, East Europe Franchise Association,

International Franchise Association, Australian Trade Commission

The British Franchise Association (bfa) last Friday, announced the finalists for this year’s franchise awards. In their 21st year, the awards celebrate franchising across Britain and in particular, highlight individuals which the bfa believe have contributed substantially to the franchise industry over the last year.

2009 was a particularly tough year for the UK economy as it struggled to regain its foothold amidst the great recession, so the awards should be interesting in terms of who the bfa have been the “saviours” of the franchise industry during its toughest times.

Split into three categories, the finalists are:

Franchisor of the Year Award

• Auditel
• Autosmart
• Bluebird Care
• Domino’s Pizza
• Driver Hire
• McDonald’s
• TaxAssist Accountants
• Wiltshire Farm Foods

HSBC Franchisee Support Award

• Countrywide Grounds Maintenance
• Monkey Music
• Revive!
• X-Press Legal Services

Express Newspapers Brand Builder

• Cook
• LighterLife
• Smallprint

The finalists are a good mix of both international brands (McDonald’s and Domino’s Pizza) and homegrown British franchises (Auditel, TaxAssist Accountants and Bluebird Care), as well as a wide range of industries from food franchises, to care franchises and right through to white collar franchises in the business and financial sectors. Last year’s winners, Franchisor of the Year – Countrywide Ground Maintenance (gold – first), TaxAssist Accountants (silver – second) and Wiltshire Farm Foods (bronze – third) appear again, marking each franchise as a major player within the British franchise industry.

The winners will be announced on June 2nd at a ceremony in Nottingham and more on the awards can be found on the bfa Franchise Awards site.