Franchise Market Profile: Facts and Figures

The franchise market in the UK is vast. Many businesses that have become high street names are in fact franchise operations. If you intend to enter the franchise business for the first time, understanding how the franchise business is structured, and how the franchise market is developing is important. The more you know about the franchise market as a franchisee, the more confident you’ll be when you begin to look for a franchise to buy.

The Franchise Market

One of the most comprehensive surveys of the franchise market in the UK is carried out annually by NatWest and the British Franchise Association. From their last survey the franchise market as a whole has evolved rapidly over the last year. The key findings of the survey are highlighted below:

• The franchise industry as a whole is now worth near £11 billion
• The franchise sector has grown by 44% over the last 10 years alone
• There are now 34,000 franchisee outlet that equates to 781 unique franchise platforms
• Over 90% of all the franchises surveyed made a profit
• The turnover per franchise is estimated at £323,000
• Average turnover of a franchise has increased by 83% over the last 10 years
• Franchises now employ over 370,000 people
• Half of all franchisors have plans to expand their franchise market overseas
• Europe has become the most favoured region for franchise expansion
• Franchise expansion in Australia has declined by 6%
• The average age of a franchisee is now 46 increasing on average by 6 years over the previous year’s survey
• Over 50% of all franchisees have no higher education qualifications
• The average cost of setting up a franchise is now £155,000
• The business format used by franchisees is now sole trader 36%, limited company 49% and 15% as partnerships
• A quarter of all new franchisees come from an Asian background
• On average it takes six months to find, plan and open a new franchise for business. However, it can take nearly eight months for franchise businesses that have a catering element as there is often a delay in obtaining all the required permits and sourcing appropriate premises for the new franchise
• The contribution of franchises to the UK economy is now 15%

Successful franchises that are reaping the benefits of a buoyant franchise market include Cash Converters, Dominos Pizza Group that will open an addition 50 stores this year alone. Franchises are also successful across the B2C and B2B markets. Niche markets as well as national chains are proving that the franchise platform can be highly successful.

The Natwest/British Franchise Association survey also revealed that new franchisees are using more time to plan the new franchise they want to buy. Reading the franchisor’s website is still the most popular route for information with 70% of new franchisees visiting the website of their franchisor. Attending franchise exhibitions are also highly popular ways of fact finding with over 40% of new franchisees attending an event. Seminars held by NatWest and the British Franchise Association were used by 5% and 6% of new franchisees respectively.

The cost of starting a new franchise continues to be wide. The average cost can be well over £100,000, but there are still many franchise opportunities that do no require this level of investment. When sourcing financial support the banks are still the most popular with over 80% of new franchisees borrowing from their banks, with over 90% borrowing more than £20,000. The average borrowed is now nearly £30,000.