About franchising & the bfa
What is Franchising?
Business format franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of the franchisor.
The franchisee also receives initial training and ongoing support, comprising all the elements necessary to establish a previously untrained person in the business. The legal contract – the Franchise Agreement – between the two parties, sets out the obligations and rights of both franchisor and franchisee and determines how long the franchise arrangement will last usually 5 years but can be longer. This will include renewal options.
The principle is simple. Instead of developing company-owned outlets, some businesses expand by granting a franchise to others to sell their product(s) and/or service(s).
Who is in control?
Each franchise business is owned and operated by the franchisee. However, the franchisor retains control over the way in which products and/or services are marketed and sold, and controls the quality and standards of the way in which the business is operated.
What are the cost implications?
The franchisor receives an initial fee from the franchisee – payable at the outset – together with ongoing management service fees. Usually, these fees are based on a percentage of annual turnover or mark-ups on supplies. In return, the franchisor has an obligation to support the franchise network. Notably this includes training, product development, marketing and advertising, promotional activities together with a tailor-made range of management services.
History of Franchising
There’s literally something to suit whatever your passion may be.
In its earliest form, franchising first appeared in the UK with the advent of the tied pub system. However, franchising became more widely used in the US. First came the car dealership model pioneered by General Motors in the early 1900s, granting exclusive rights and territories. Then, oil companies and grocery stores began to take advantage of a business model that offered them a route to fast growth towards national distribution – but with reduced risk.
Business Format Franchising
After the Second World War, franchising grew rapidly driven by soft drinks giants such as Coca-Cola and Pepsi who developed a franchise system whereby their franchisees carbonated and added water to centrally-manufactured and distributed highly-secretive syrup recipes, bottling and selling it locally.
Business format franchising was firmly established as a distinct business model and proven system in the 1950s. in 1961, Ray Kroc, one of the McDonald brothers, opened the first restaurant in their name in Des Plaines, Illinois and purchased the brand outright to which the huge growth in this modern system of franchising can be attributed.
In the 1950s and 1960s franchising boomed with huge growths in population, economic output and social change. Franchises also began to appear internationally including in the UK for the first time. Catering companies led the way.
Food giant J Lyons & Co (Wimpy, Lyons Maid and Mr Softee) led the way. ServiceMaster, a major international franchise business today, began franchising in the UK in 1959. By the mid-1960s some of the largest fast-food brands had become well-established international franchises, led by McDonald’s and KFC.
However, by the 1970s, franchising in the UK slowed. This was due partly to the faltering economy – but more because of the damage done to its reputation by non-franchise systems such as pyramid schemes who had, falsely, described their businesses as franchises. However, they were really based on false promises of lucrative returns on investment, which rarely came to fruition, and many pyramid schemes collapsed and are now illegal in many countries.
Birth of Ethical Franchising
By the end of the 1970s, eight of the largest franchise brands in the UK – ServiceMaster, Dyno-Rod, Holiday Inns UK, Kentucky Fried Chicken, Wimpy International, Ziebart GB, Prontaprint and Budget Rent a Car – realised they had to do something to differentiate their ethical business practices from illegal pyramid and other schemes. So, in 1977, the British Franchise Association (bfa) was formed.
With no set standards in the UK, the industry created its own regulatory body to accredit a company’s suitability for membership based on strict criteria related to operational practices, business procedures, franchise agreement terms – and the support offered to franchisees.
These founding members and the bfa’s early work on business ethics restored credibility to the business model and, with the economic boom of the ’80s and ‘90s, new brands came into UK franchising which are household names today.
During this time, the Association recognised that, to be more representative of a growing industry, we should accept professionals with specific expertise and experience in franchising as Affiliate Members. Recently, the bfa has opened up membership to include franchisees of bfa accredited member networks, and suppliers.
Franchising is now a flourishing industry boasts nearly 1,000 brands in a multitude of different sectors. Nowadays it’s an eclectic mix of businesses encompassing everything from hairdressing to photography, pet care to children’s sports coaching.
Franchising has never been in better health than it is now. The authoritative annual research into the state of the industry – the universally respected bfa/NatWest Franchise Survey – has shown both short- and long-term growth trends to be very strong in the sector – including prior to and since the economic downturn in 2008.
After a slight downturn in that year, every year following has shown growth in terms of numbers of brands franchising, numbers of franchisees, numbers employed in franchise businesses and the overall turnover of the franchise sector.
These figures, combined with impressive trends going back to before the turn of the century and uninterrupted by the recession, consistently show around 90% of franchisees reporting profitability and less than 4% of franchise businesses failing for commercial reasons each year.
Those statistics compare favourably to figures estimating that between half and two-thirds of all independent start-ups close within their first three years. It’s clear that the advantages inherent within a franchise business – including economies of scale and support of a large brand combined with local marketing and business owners – make them particularly robust and, statistically, much more likely to succeed.
One of the most important changes in franchising took place in 2012 with the advent of Franchisee Membership to the bfa. For the first time, franchisees were given the opportunity for direct representation on the Board of the bfa, and therefore can contribute to the future evolution and governance of their industry. It was the first membership scheme of its kind for any franchising association in the world. It now ensures that all stakeholders of ethical franchising can continue to move the UK industry forwards as it grows further in size, stature and importance to the economy.
From its feudal roots to becoming one of the fastest-growing sectors of the UK economy, franchising has come a long way. With many more people now taking charge of their careers and family life by running their own business through franchising.
Role & History of the bfa
The British Franchise Association (bfa) is the voice of ethical franchising in the UK. We represent our members and help to promote them within the industry and beyond. As well as providing information and advice to businesses planning to franchise – or people considering joining a franchise – we also work closely with our members to help develop their expertise in the industry. We also speak on their behalf to the media and government.
Critically, the ability of franchisors to attract potential franchisees to invest in their systems depends on their own reputation – and on the reputation of franchising in general.
It was for these reasons that in 1977, representatives of major franchise companies in the UK decided to set up their own association. As a result, the bfa was formed to act in the interests of the industry to assess and accredit franchising companies against strict criteria in relation to the structure of the franchise business, the terms of the contract between franchisor and franchisee, testing of the business system – and, therefore, its success as a franchise.
To become a member of the bfa, all franchisors and professional advisors to the UK franchise industry must be accredited. They must apply to the bfa to be tested against our strict and extensive accreditation criteria. Only if they pass are they then able to join the bfa as a member, enjoy the benefits of membership and become represented by the British Franchise Association.
More recently, the bfa has engaged with franchisees by:
Developing awareness campaigns to consumers
Launching industry recognised qualifications – i.e. the Qualified Franchise Professional (QFP)
Developing nationally recognised educational franchise seminars
Launching the first UK Franchise Trust whose trustees help to educate individuals and develop the necessary skills and capabilities
For more information, click on a link.
In the early days, franchising focused in a limited number of markets – predominantly fast food, motor distribution and hotels – developing a degree of uniformity in each sector's structure and operation. Today, many different business sectors are represented from insurance services, hairdressing and quick print and design, to cleaning and care services and education. However, each business has its own characteristics – and pitfalls. Against this changing background, the bfa has developed quality standards and minimum operating requirements so that potential franchisees can be confident that our members and professional advisors are reputable and have met the bfa’s criteria for due diligence.
Further, the bfa:
Defines the UK’s only recognised code of practice for ethical franchising, based on the European Code of Ethical Franchising
Supports the industry’s annual research – the bfa NatWest Franchise Survey which underpins ethical franchising – and has done for 30 years
Presents the industry’s two national awards each year – the bfa HSBC Franchisor and Franchisee Awards – and has done for over 20 years.
Benchmarks quality in UK franchising with the introduction of the bfa’s Qualified Franchise Professional (QFP) qualification
Please note: Membership of the bfa, at any level, does not provide any warranty as to the likelihood of achievement of commercial success by any franchisee. As with any business venture, you must investigate every franchise proposal thoroughly before committing yourself. Therefore, we try to provide as much objective information as possible and help guide you towards the right information about franchising so that you can undertake your own due diligence.
Joining the bfa
Membership of the bfa is open to:
Franchisors and professional advisors to the franchise industry that can satisfy our accreditation criteria
Franchisees of accredited franchisor brands
Suppliers providing valuable services to the franchising industry
Because of the extensive amount of work that has been undertaken over three decades to develop, protect and promote the bfa’s quality standards, membership brings with it invaluable credibility and recognition of compliance with quality standards and ethics in franchising. This differentiates bfa members from those businesses that have not been accredited to the same rigorous standards.
In addition to the credibility that membership brings, there are also many other benefits of membership.
These include opportunities to:
Network at bfa events
Attend bfa training courses and educational seminars
Participate in, or be associated with, many of the bfa’s activities and promotions
Take advantage of the considerable influence the bfa exerts at home and abroad
Undoubtedly, the major benefit is the credibility and recognition that come with accreditation which is the unique differentiator in franchising.
For more information, click on the link to read or download Membership Benefits.
Governance of the bfa
The British Franchise Association is a membership organisation which is governed by a Board of Directors which is supported by a small number of committees. This helps to ensure that the management team at head office can provide the best support and representation for members in accordance with their needs and views.
Board of Directors
The Board of Directors comprises:
11 Full Member franchisors
2 Associate Member franchisors
3 Professional Affiliate Members – at least one being a legal representative
The bfa Chief Executive
All franchisor and affiliate positions on the board are appointed through nomination and election by the membership, with the three franchisee members being appointed to the Board. The Chief Executive is the only Executive Director of the Board and leads the teams of staff that operate the Association on a daily basis.
Chairman: Trevor Brocklebank, CEO, Home Instead Senior Care
Chief Executive: Pip Wilkins QFP
Full Member Representatives
Sean Derrig, Chemex International
Duncan Berry, Bluebird Care
Michael Eyre, Blazes Renewables
John Spencer, NIC Services Group
Simon Bartholomew QFP, Oscar Pet Foods (representative for international)
Ken Deary QFP, Right at Home
Craig Brown QFP, Signs Express
Full Member to be elected
Full Member to be elected
Associate Member Representatives
Louise Harris QFP, Wilkins Chimney Sweep
Associate Member to be elected
Affiliate Member Representatives
Carl Reader QFP, d&t
Roz Goldstein QFP, Goldstein Legal
Shirley Hughes QFP, Franchise Careers Centre
Catharine Chalton, Home Instead Senior Care
David Padmore, McDonald's
Mike Hurley, Dream Doors
Sean Goldsmith, Shuttercraft (South West)
Nick Lyons, No Letting Go (London/South East)
Dave Price, Marston’s (Midlands)
Michelle Fenwick, Heritage Healthcare (North)
Suzie McCafferty QFP, Platinum Wave (Scotland)
Vicki Mitman QFP, Birketts LLP (Affiliate)
There are five main committees, each of which has representation from franchisors, franchisees and affiliates. These committees feed into the main Board of Directors, making recommendations for key elements of the Association’s strategy and operation:
Finance and General Purposes Committee
Quality Standards Committee
External Relations Committee