Franchising has long been a cornerstone of entrepreneurship in the UK, providing a way for individuals, like you, to start your business with the backing of a proven brand and established systems. With an estimated 48,000 franchised units across the country and contributing over £17 billion annually to the economy, franchising is a significant player in the UK business landscape. However, as industries evolve and consumer habits shift, many are asking whether it's time to rethink the traditional franchising model—and whether aspiring entrepreneurs should consider franchising as their entry point into business ownership.
In this article, we’ll explore the current state of franchising in the UK; why change may be on the horizon, and how individuals can approach franchising as a viable path to business ownership.
The State of UK Franchising Today
The UK franchising industry has been remarkably resilient, even through economic downturns. From fast food to fitness centres, education services to cleaning companies, franchising spans a wide array of sectors. Its appeal lies in the fact that franchisees benefit from established brand recognition, training, and ongoing support—advantages that mitigate many of the risks associated with starting a business from scratch.
Let’s look at the numbers:
- Survival Rates: According to the British Franchise Association (BFA), over 90% of franchise businesses are profitable, and their five-year survival rate is significantly higher than independent startups.
- Employment: The franchising sector employs over 700,000 people in the UK, underscoring its economic importance.
- Growth Sectors: In recent years, sectors such as health and wellness, technology, and eco-friendly businesses have shown significant growth within the franchising space.
Factors such as technological advancements, changing consumer preferences, and the rise of independent online businesses are forcing franchisors and franchisees alike to adapt.
What’s Changing Within UK Franchising:
1. Technological Disruption
The digital revolution has fundamentally transformed how businesses operate and how consumers engage with brands. Franchises that fail to adopt modern technologies—whether it's for marketing, operations, or customer experience—risk falling behind. For instance, the rise of online food delivery platforms has disrupted traditional restaurant franchises, forcing them to rethink their models.
2. Consumer Behaviour
Today’s consumers are more conscious of sustainability, health, and social impact. Franchise systems that rely on outdated practices or fail to align with these values may struggle to attract modern customers. For example, fast-food franchiseshave faced growing scrutiny over their environmental impact, prompting some to adopt greener practices.
3. The Rise of Independent Startups
The accessibility of online tools and platforms has made it easier than ever to start an independent business. Entrepreneurs can now build e-commerce stores, launch digital marketing campaigns, and even manage supply chains without needing a franchise’s infrastructure. This shift raises questions about whether franchising remains the best option for aspiring business owners. It is often reported, with fair reasoning, that franchising is not, and should not, be for everyone!
4. Franchisees
While franchising offers many benefits, it’s not without its challenges. Franchisees often face strict operational guidelines, limited creative freedom, and ongoing fees that can eat into profits. Some may feel stifled by the rigidity of the franchise agreement, especially if the franchisor is slow to adapt to market changes.
Is Franchising Still Relevant?
Despite these challenges, franchising remains a highly attractive option for many aspiring entrepreneurs. Here’s why:
1. Lower Risk
Starting a franchise involves less risk than launching an independent business. The franchisor’s proven business model, training programs, and ongoing support provide a safety net that many entrepreneurs find invaluable.
2. Brand Recognition
A well-known brand can attract customers more quickly than a new, unknown business. Franchisees benefit from the trust and reputation that the brand has already built.
3. Training and Support
Franchisors typically provide comprehensive training to ensure franchisees are equipped to run their business successfully. This is particularly appealing for individuals who lack prior business experience.
4. Access to Networks
Joining a franchise means becoming part of a larger network of business owners. This community can offer valuable insights, support, and collaboration opportunities.
Is Franchising An Option for You?
Before diving into franchising, it’s essential to evaluate whether this business model aligns with your goals, skills, and financial situation. Here are some key considerations:
1. Assess Your Goals
- Are you looking for a structured business with clear guidelines?
- Do you prefer the security of an established brand over the creative freedom of starting your own venture?
2. Understand the Costs
Franchising requires an upfront investment, which can range from a few thousand pounds to over £1 million, depending on the brand and sector. Additionally, ongoing royalty fees and marketing contributions are typically required.
3. Evaluate the Market
Research the demand for the franchise’s products or services in your target area. A great brand won’t succeed in a market that doesn’t need it.
4. Review the Franchise Agreement
The franchise agreement outlines the terms of your relationship with the franchisor. It’s crucial to understand your rights, obligations, and any restrictions before signing.
5. Seek Professional Advice
Consult with a franchise consultant or solicitor who is an expert in franchising to ensure you’re making an informed decision.
How Franchising Could Evolve
For franchising to remain relevant and competitive, the industry may need to embrace significant changes. Here are some potential areas for evolution:
1. Increased Flexibility
Franchisors could offer more flexible agreements, allowing franchisees to adapt to local market conditions or experiment with new ideas.
2. Technology Integration
From advanced analytics to AI-driven customer service tools, adopting cutting-edge technology could help franchises stay ahead of the curve.
3. Focus on Sustainability
As consumer demand for eco-friendly businesses grows, franchises that prioritise sustainability in their operations and products will have a competitive edge.
4. Improved Franchisee Support
Providing additional resources, such as mental health support, peer mentoring programs, or financial planning assistance, could enhance the franchisee experience.
5. Diversification of Opportunities
Expanding into emerging industries, such as renewable energy, telehealth, or digital education, could open up new opportunities for franchisors and franchisees alike.
Conclusion: A Time for Change and Opportunity
The UK franchising industry can be very feasible for you. For aspiring entrepreneurs, franchising continues to offer a proven pathway to business ownership, but it’s crucial to approach this model with a clear understanding of its benefits and challenges.
As the industry evolves, both franchisors and franchisees have the opportunity to shape the future of franchising in the UK. Whether you’re considering starting a franchise or are a franchisor looking to adapt, embracing change will be key to thriving in this dynamic landscape.
Richard Pakey is a franchising expert and Managing Director for the award-winning Lime Licensing Group and can be contacted in the following ways:
Email: richard@limelicensinggroup.co.uk
Mobile/text/whatsapp: 07904 697591