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What Can We Learn From the 2018 Franchise Landscape?

February 22, 2019
What Can We Learn From the 2018 Franchise Landscape?

Last year, NatWest and the bfa compiled a wide-reaching report on the 2018 franchising world and its outlook. It detailed how the industry has grown into a fully autonomous hiring machine, and proudly claimed that 93% of franchisees reported profitability in 2018 – a figure much higher than most SMEs.

The report essentially provides an overview of UK franchising and demonstrates that, with a UK contribution value estimated at £17bn, the sector is healthy and heading for future development. In this article, we’ll be breaking down the key takeaways from the report and what lessons they bring for the future of franchising.

The sector is stimulating the job market

At the time of the report’s release, the franchise industry had 700,000 employees working within its 935 UK franchises. With over half in full-time employment, almost all reported viability in their franchise business. 48,600 units are home to budding franchisees, with the hotel and catering sector providing the majority in the last 25 years.

But not only have franchisors reported success, franchisees who have invested in multiple units have increased to 36% too. It’s clear that individuals feel more confident supporting an industry that is community-led and follows proven models, as opposed to traditional business strategies.

As one third of franchisees now operate multiple units, the bargaining power shared between the franchisee and franchisor has changed. Multi-unit owners are able to recognise opportunities for franchises that could make them more profitable as they become available – further increasing their stake.

Franchisees continue to fare better against SMEs

It’s a figure often bounded around, but statistics do confirm that around half of all non-franchised startups fail within five years – in fact less than 1% of franchise businesses in the period covered closed down as a result of commercial failure. This has led banks to largely favour lending to businesses within a franchise model over a standalone company.

Over half of franchised businesses now report a turnover above £250,000. While this has possibly increased over the past few years by typically larger franchises, there is no significant difference in profitability between larger and smaller ones.

Additionally, what makes the difference between franchises and SMEs starker is how franchisees running multiple units tend to report higher profitability in general. For some non-franchised businesses, the process of launching multiple units causes them to spread thin. However, while there is concern in the economy at large, the majority of franchisees are confident in their own business for the foreseeable future.

The industry is becoming more diverse

Previously, franchising has been male-dominated, making up 70% of franchisee owners, whereas women make up approximately 65% of those employed within franchise units. However, since 2015, the industry has had a 20% increase in its female franchisees (to 37%).

There is additionally a growing number of under-30s joining the industry. This age group now makes up 18% of all franchisees and is set to rise. Perhaps more remarkably though, is that 52% of franchisees under the age of 30 are female – possibly predicting a gender balance in the industry in future generations. The sector gives women a unique opportunity to become their own boss at a young age by being franchisee business owners.

While none of this is certain, trends indicate the industry is becoming more notable in its success, especially while big-name brands are facing closure this year after a drought in customers over the Christmas period.

The sector is maturing, and the time is ideal for entrepreneurs who are considering the prospect of buying a franchise for sale. Interested in coming on board? Request a call with our recruitment team! They are more than happy to guide you through the process.

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