BUOYANT FRANCHISE INDUSTRY SHAKES OFF RECESSION WITH RECORD £12.4 BILLION TURNOVER

As the UK looks to its businesses to lead the way to recovery, there are welcome signs of growth in the latest survey by NatWest and the British Franchise Association (bfa). Throughout 2010 franchising has further increased turnover by £600 million (+5%) to £12.4bn. Since 2006, the sector’s turnover, and number of franchise systems, have both grown by 15%, despite a UK GDP growth rate of only 9.4% in the same period.

The number of franchise systems operating in the UK has grown to 897 over the past year, increasing the number of franchise units to 36,900. An extra 56,000 jobs have been created, taking total employment in the sector to 521,000. Franchising is also helping to drive international trade. Around a third of UK franchisors have units located outside of the UK, additionally, 38% of domestic only franchises plan to expand abroad.

Peter Ibbetson, Chairman small business, NatWest, said: “With 87% of franchisors planning to expand in the year ahead, we’re already seeing strong demand for our new £100m franchise fund. We bank more franchise businesses than anyone else so our discounted loans will play an important role in financing further industry growth.”
Brian Smart, Director General of the bfa, said: “Yet again franchising has demonstrated its inherent tenacity and stability, despite a tough climate last year. This means many more sustainable business start-ups and jobs have been created by ethical franchising – further helping the UK economy get back on its feet”.

Four out of five surveyed say being part of the franchise model offers them a competitive advantage over similar businesses that aren’t. Appearing to be a larger business, standardised products/services and quality expectation were cited as the three main advantages. Franchisors also see better prospects for themselves than the rest of the economy, with 75% expecting improvements for their business over the next year while only 31% expect the economy to pick up.

The franchise model is becoming an increasingly attractive option for those looking to run a business for the first time. Two thirds of franchise businesses trading less than two years reported to make a profit. Average start-up costs also reduced for a second year to £46,600.

While 9 out of 10 franchisees remain profitable, confidence may have taken a dent for some as 1 in 8 rely on the public sector for over 90% of sales – proving the industry is not totally immune to the recent economic fall out.

The 2011 edition of the NatWest/bfa Franchise Survey is available now from the bfa Bookshop.