Franchising contributes £11.8bn to the UK economy

The UK franchise industry contributed £11.8 billion to the country’s GPD last year, despite robust economic conditions. According to the bfa franchise survey, this figure represents an increase of £400 million from the previous year.

Key Stats

· 94% optimistic about future business
· 9/10 businesses are profitable
· 86% increase in the number of women in franchising

The bfa survey revealed fewer franchise businesses are trading at a loss compared to the 90’s recession. In 1990 only 70% of all franchise businesses were profitable compared to 89% in 2009. The average turnover of franchised businesses rose by just under 3% against last year’s figure of £335,000.

The number franchise systems operating in the UK increased from 835 to 842, signalling modest growth from the previous year. Franchisors confidence in business conditions rose to 94% compared to 82% last year.

Graeme Jones, head of NatWest’s franchise team, comments, “It’s encouraging to see continued growth in specific sectors, such as personal services, where franchise systems have grown by 38 per cent in five years. We look after more franchises than any other bank and have seen far more optimism from our customers about the coming year in comparison to twelve months ago when confidence levels were low.”

Brian Smart, director general of the bfa, says, “Franchised businesses have weathered the recession extremely well, which we should not be surprised about if we look at how franchising has proven itself over the years. The combination of the wider business support, training and economies of scale, with the determination, enterprising nature and local business focus makes franchise businesses a very robust offering. This year has highlighted this particularly well with success rates of franchise businesses not dropping even in the recent recessionary environment”.

The survey revealed how franchised businesses coped with the recession by focusing on growing existing customer bases and increasing spend on marketing. One notable indication of how franchised businesses dealt with the poor economic conditions was to employ part-time staff and to cutback full-time employees (from 239 to 219).

An increasing number of women are getting involved in franchising, with 39% of new franchisees being women, a large increase when compared to 23% in 2003.

Estimated start-up costs have declined slightly, and new franchisees can expect to pay £46,700 in franchise fees and other associated costs, down from £50,000 last year. Mr Jones added: “The main indicator at the end of 2008 was that the outlook for franchise owners and franchisors’ own businesses and for the economy as a whole, was grim. Those questioned in 2009 though were a good deal more optimistic than they were 12 months ago, with fewer mentions of redundancy or shorter working hours.”

Mr Smart continues, “It’s been a tough time for businesses across the UK but franchised businesses have clearly shown a high level of stability and robustness and made a valuable contribution to the UK’s economy last year. The survey paints a very positive picture of future realistic success for the industry in the coming year.”

Franchisees and Franchisors are hopeful about the potential for growth, with franchisors planning, on average, for an additional 8.8 franchisee outlets.

For more information on franchising visit the British Franchise Association