Large building with businesses - Franchising: a thriving business model in the UK

Franchising in the U.K. is nothing new. In fact, a very early, primitive version of franchising can be traced back to feudal Britain. Fast forward to 2015-2016, and the franchise industry is thriving. As with any type of business relationship, franchising within the nation has gone through its ups and downs over the years. But thanks to a growing economy, this business model is stronger than ever, and is not showing signs of slowing down anytime soon.

2015: A Banner Year for Franchising in the UK

In 2015, Britain had the fastest-growing economy among the G7 countries, so perhaps it’s no coincidence that 2015 was a banner year for franchising, with success stretching to just about every business sector. According to the British Franchise Association (BFA), there are currently nearly 1,000 franchise brands operating across the U.K., with more than 44,000 franchise outlets employing 621,000 people across all industry sectors (321,000 are full-time employees). It’s no surprise that London is the clear startup capital, followed closely by Manchester, Birmingham, and Glasgow.

The 1950s, '60s, and '70s: From Boom to Bust

In modern times, long after the primitive feudal franchise efforts, Britain experienced a franchising boom in the 1950s and ‘60s, with catering businesses leading the way. However, when the economy took a turn for the worse in the ‘70s, pyramid schemes were commonly disguising themselves as franchise companies, giving legitimate franchise businesses a bad name, so franchising as a whole experienced a sharp decline. In 1977, eight of the largest franchise brands in the U.K. joined together to form the British Franchising Association, producing the first and only code of practice for ethical franchising in the nation. These brands were ServiceMaster, Dyno-Rod, Holiday Inn U.K., Kentucky Fried Chicken (KFC), Wimpy International, Ziebart G.B., Prontaprint, and Budget Rent a Car.

Climbing Back Up

As the most recent franchising figures prove, the downturn of the 1970s is a thing of the distant past.

There are three main trends that stick out when looking at the franchising industry as a whole in the U.K today. First, Britain is seeing fewer actual franchisees (down 15 percent from back then), but more franchise units in total. In fact, 30 percent of current franchisees run multiple units. On top of that, one in five franchisees are expected to increase the number of units they own in 2016. Secondly, there is greater diversification among multi-unit franchisees, with more and more multi-unit owners now owning two or three different brands within their total franchising business portfolios. Finally, franchise businesses are growing, with an increasing number of employees (10 or more) on staff and higher turnover rates. The latter reality is largely due to the hospitality sector, in which employee turnover has traditionally been higher than in other sectors. An astonishing 97 percent of franchises are showing profitability, and yet another sign of franchise health is the number of U.K.-run franchise systems that exist, of which 80 percent are now U.K.-based.

When it comes to popularity, health and fitness brands are seeing a surge in growth as British society focuses more on activity and fitness. Some of the more traditional franchise sectors — transportation, vehicle services, corporate, and commercial — are showing very little growth, while store retail is actually struggling to show any growth at all.

Franchising in the UK Today: Some Fast Facts

  • There are nearly 1,000 franchise brands operating across the U.K.
  • More than 44,000 franchise outlets now employ 621,000 people across the nation
  • Thirty percent of current franchisees run multiple units, with one in five expected to increase the number of units they own in 2016
  • Franchise businesses are expanding, with an increasing number of employees on staff and higher turnover rates
  • Ninety-seven percent of franchises are turning a profit
  • Eighty percent of the franchise systems that are run in the U.K. are now U.K.-based
  • Health and fitness brands are seeing a surge in growth, while store retail is struggling to grow at all

High Hopes for the Future

There’s no doubt that franchising will continue to flourish throughout the U.K. as new brands, both of the homegrown and international variety, appear on the scene. The annual British & International Franchise Exhibition took place on March 11 and 12, 2016 in London, and was able to attract even more franchisees who are ready to take their businesses to the next level.

To stay up to date on the latest franchise news, to learn more about franchising or a particular franchising opportunity, and to gain access to our complimentary collection of Franchise Disclosure Documents, sign up for your free membership to Birkhoff Research Group»
 

image: Elliott Brown (Creative Commons BY)
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