Franchising is Booming in the UK
How to make your franchising journey into the United Kingdom smooth sailing.
By Emily Price, QFP
The secondary title is a little misleading. As we all know, franchising is often not smooth sailing, and expansion into new markets always comes with unique challenges particular to the country you are looking to move into. This is no different when looking to expand into the United Kingdom.
However, it doesn’t have to be painful – with the right research, help and advice, your transition into the market can be streamlined and successful.
Let’s quickly get the elephant in the room out of the way: Brexit. At the time of writing this article, the UK was in limbo, where delaying the departure from the European Union would only be possible if the Parliament approves the Prime Minister’s deal.
However, one thing is for certain, the impending removal of the UK from the European Union has not damaged the franchising industry at large in the United Kingdom. In fact, it’s veritably booming.
In December 2018, the British Franchise Association released the bfa NatWest Franchise Survey looking at the franchise landscape. What was reported was record-breaking in many areas. While there are around 10,000 business-format franchises in the U.S., the United Kingdom continues to grow, with 935 recognized franchise systems now operating. We're not up to the kind of scale in the U.S., but franchise systems have always increased since we started running the survey more than 20 years ago.
There has also been a 10 percent increase in the number of franchise units in the last three years, with 48,600 franchise units now in operation in the UK – franchising is growing and showing no signs of slowing down. Turnover generated in the franchising industry has also reached record heights, with an annual turnover of £17.2bn, up £2.1bn since 2015, and contributing 1 percent to UK GDP. Ninety-three percent of franchisees claimed profitability in 2018 too, with 60 percent of franchise units turning over more than £250,000 ($330,000) annually. This success is beneficial for the franchisor as well.
There has been a significant increase in multi-unit franchisees since 2015, as people are taking on local businesses and expanding by adding more territories or acquiring units with a different franchise system. This rise, from 29 percent to 36 percent, shows that people are coming into franchising and not only staying, but expanding, highlighting the benefits of the industry.
And back to Brexit – our analysis shows that although franchisors and franchisees are concerned about what impact the ‘B’ word may have on the economy in general, they remain buoyant about their specifc franchise system/unit.
Putting it bluntly, if you’ve got a franchise with a potential demand in the United Kingdom, it’s a very serious proposal for you to consider coming across the pond.
Find Friends in the UK
Develop trusted partnerships with the right companies when looking to establish in the United Kingdom. At the bfa, we offer a UK Developer membership category, designed for international brands looking to join the UK franchise industry.
The bfa reviews the existing franchise model in its country of origin to ensure a healthy and proven network resides, also providing assurance that the system can adhere to the European Code of Ethics to which all bfa members comply. This enables the bfa to influence strong conduct and standards in the UK, thus supporting a stronger appetite for investors while maintaining a healthy reputation for UK franchising, benefitting all who operate in the industry.
Becoming a UK Developer means the bfa is able to support and represent you during your transition, not only by connecting you to UK franchising experts, but also by giving you access to all the educational tools we create in order for you to fully understand the dynamics within the franchising landscape in the UK.
Test the Model
You will have undergone a rigorous process, and will have done market research and feasibility studies to ensure you transition a model that is relevant to the market, but you still must test the model to ensure that it can work in the UK. We suggest running a pilot directly or selling a master license and ensure the licensee runs a pilot for six months to a year first. We believe this is best practice in ensuring the durability and success of the brand. You can go straight into the market, but it’s essential to have a pilot unit or units to stress test the model.
If you operate a premises-based franchise, you also need to carefully choose the location, and be aware that procedures will differ from the United States. It is very likely you will encounter challenges such as expanding, changing or altering the building, which will involve acquiring planning permission. And you will need to undertake a feasibility study to ensure the buildings and resources you require can and will be available or you may find yourself not opening anything.
Knowledge is Power
The UK franchise industry, unlike the U.S., is not regulated, therefore the role of the bfa is to build and maintain a strong industry collective. This is why the bfa set up and runs the Franchise Training Academy (FTA), a platform containing a suite of training tools and networking events that educate both franchisors and prospects in the best of ethical franchising.
Once a member of the bfa, communication and engagement is key for the bfa to work collaboratively with members, ensuring the environment remains positive and can continue to grow. If you are seeking units or master in the UK, please feel free to direct them to our online certificates, free tools we provide to give insights and support decisions for those considering investing in franchising. The Qualified Franchise Professional program (QFP) is a personal development training program bespoke to franchising professionals wishing to strengthen or evidence their industry knowledge. You can access the certificates and the QFP registration forms via our website, thebfa.org.
Emily Price is Chief Operating Officer for the British Franchise Association, after previously working with the senior leadership team in Barclaycard HR. Find out more about the British Franchise Association at thebfa.org.