With over 40,000 businesses – many of which are home-grown – adopting the franchising model of business, the future of franchising in the UK appears bright.
Franchising is a peculiar business model. While it’s old enough for us to spot trends, draw inferences and create projections, it’s still novel enough to have that element of uncertainty about it. That said, it wouldn’t be too difficult to argue that franchising is both exciting and full of possibilities.
Superficially, franchising works as a business in itself, easily boiled down as a B2B arrangement. At its heart, however, it manages to stay unique, in that no other business model relies so heavily on gathering, combining and focussing the resources from multiple entities towards a common goal. This very facet of franchising – the ability to make people work on their own and be successful at that without getting hamstrung for the want of resources – is what makes franchising tick. In the UK, more specifically, the state of economy, culture and finances are immensely conducive for the franchising business model to work.
If you are thinking of franchising your successful business or buying and running a franchise in the UK, there’s a lot to look forward to and be excited about. In this article, we will try to discuss the four major reasons why franchising is here to stay in the UK.
1. The Entrepreneurial Spirit is at an All-Time High
The word ‘entrepreneurship’ has gained enormous prominence and weightage in recent times. One could argue that the word is thrown around quite recklessly nowadays, but it hardly takes away from the fact that the spirit of entrepreneurship is at an all-time high around the world, and the UK – being one of the most important economies in the world – has managed to lead the way in this regard.
More and more people have started exploring ways of creating new products, building new services, generating employment and working for themselves. This idea, while clearly tangible for those in the know, can be easily substantiated for the rest with available data. In 2014, the number of ‘start-ups’ and new businesses stood at 581,173. This number rose to 608,110 in 2015, and 657,790 in 2016. Conservative estimates put it close to 700,000 for 2017 – a trend that shows an average growth of 6-8 per cent per year. (Sources – Centre for Entrepreneurs and Financial Times).
Blazing a trail, alluring as it may be, is not an easy thing to do. This becomes even more apparent in a competitive market like the UK. From the umpteen hurdles on the money front to sheer lack of experience in making ideas work, numerous roadblocks make the life difficult for start-ups. The next best thing, in many cases, turns out to be relying on an established business model – in other words, franchising.
2. Franchising is Size-Agnostic
The most commonly used metric to judge the performance of a business is its gross revenue and the profitability linked to it. Comparing these numbers with the size of the overall industry and the corresponding numbers generated by close competitors gives us a good idea about how a particular business has been faring.
A clear distinction can be made between the ‘bigwigs’ and the small players through these numbers. This further leads to the ideas, thinking, strategic planning and business models becoming a direct function of the size of the business.
The emergence of the Internet has helped blur – if not erase at all – such boundaries. Franchising, being size-agnostic, perfectly fits the scheme of futuristic things in this aspect. From multi-billion pound corporations like McDonald’s and Domino’s to neighbourhood gyms and carwash businesses, almost every successful business can be franchised if there is enough demand to replicate the success. This level of flexibility is unprecedented and a promising sign for franchising in the UK.
3. Franchising Paves the Way for Profitability
At the outset, it must be made clear that no business model is entirely immune to risks. All business models – without exceptions – are likely to fail to turn profits in. Not only that, the lack of profits often follows the erosion of the invested capital. The whole idea behind running a profitable business venture can thus be boiled down to minimising these risks.
Franchising, if the track record is anything to go by, holds a considerable edge over new and independent businesses as far as risks are concerned. According to a review published by the British Franchise Association, close to 97% of franchise units opened in the past five years have attained profitability, with 56% of these registering ‘substantial’ profits. The average survival rate for SMEs in the UK has hovered around 55% during the same period. This schism in the probability of achieving profitability largely stems from the fact that franchisees are not required to invest heavily in the development of a ‘proven-to-work’ business idea, allowing them to register sales and book profits relatively more quickly, cheaply and repeatedly.
In times when tech start-ups are more prone to never take off than ever and other small businesses routinely struggle to secure funding, it won’t be a surprise if franchising grows to be a mainstream business model that fosters innovation without sacrificing financial pragmatism.
4. Career Satisfaction is Real and Necessary
The concept of career satisfaction is rather new. Many of us still can’t say that we are always at peace with the career choices we make – but the number of people doing something about that ‘nagging’ feeling is rapidly increasing.
An average UK worker spends a staggering 90,000+ hours – 10 full years and counting – at work. If these hours are spent doing things that one isn’t passionate about, it’s quite naturally bound to lead to varying levels of discontent, frustration and stress. The numbers show that close to 33% of UK workers harbour such feelings that eventually affect their productivity, creating a vicious circle. On the other hand, 91% of the franchisees across various industries in the UK are found to be content with their business and the franchisor.
Wanting to be happy and content, through diverse means, is the eventual aim for most of our actions. Career satisfaction is real, important and increasingly shifting towards the centre of professional choices made by a large section of the UK workforce. In such times, franchising can very well prove to be the game changer for those who want to balance their professional successes with the personal ones.