Retail Franchise UK – the TOP 10 MUST KNOWS about finding and running successful UK Retail Franchises.
The retail sector is the holy grail of every market-oriented economy. A timely look at the state of UK retail franchises to help our readers gain some important insights.
If you’re looking to really understand how the franchising business model works, there’s no better place to start than learning how a typical retail franchise UK works.
There are quite a few reasons why UK retail franchises have been the flagbearers of the whole franchising movement (which we can gladly say is here to stay for good). Just think about the names that come to your mind when you think of franchise businesses, your local high-street bookstores, grocery stores, fashion outlets and even restaurants – they all carry that important ‘retail gene’ that is integral to how they operate.
The retail sector, however, has been plagued with numerous problems in the last ten years so, as online shopping has turned the whole landscape upside down. So, every retail franchise UK – at least for the next few years – will need to pay a good deal of attention to future-proofing their operations. If you’re buying a UK retail franchise with a target period of 3-5 years (aiming at a successful exit), you can afford to put this perspective on the backburner.
At any rate, the sheer variety of options available makes retails franchises UK incredibly impressive – and daunting. The investment levels vary drastically, from a few thousand pounds for a vending machine to over a million pounds for a brand-name high-street store, and so do the challenges associated with running the franchise.
In this article, we’ll mainly concentrate on the most common and popular types of UK retail franchises, and try to touch upon the investment requirements, pros and cons, along with a quick study of the overall retail market in the UK.
Thinking Of Buying A Retail Franchise UK? Understand The Industry First!
Buying a franchise is – for most franchisees – is a huge decision. Investing your hard-earned money into a business that you have little idea about is a story that rarely ends well.
So, before you actually go about considering retail franchises UK, it’s essential to take an overview of the retail sector in the UK.
- The retail sector – on the whole – is the largest private employment creator in the UK. It’s estimated that over 3 million people are directly employed by UK retail businesses.
- The UK retail sector is a reliable mirror of the overall UK economy.
- At over £360 bn per year, the UK retail sector is a massive contributor to the UK economy. In fact, many experts believe that the smallest upheavals in the retail sector have huge downstream effects on the economy (a sort of butterfly effect).
- Every third pound spent by the UK consumers goes through the retail sector and its direct peripherals. This also means that the retail sector is the single largest sector to attract consumer spending.
- Over the last five years, the retail sector in the UK has grown at around 4-4.3% per year – comfortably above the overall growth of the UK economy.
- Close to 300,000 independent retail outlets exist in the UK. From the numbers point of view, it can be inferred that each unit is responsible for the direct employment of 8-10 employees.
- The retail sector – pretty much singlehandedly – accounts for 5-6% of the UK GDP.
- The retail sector also accounts for the largest number of franchise units in operation.
It should be clear by now that each and every retail franchise UK has the benefit of operating in a well-defined, robust sector. That, however, doesn’t mean that it’s smooth sailing – breaching the retail markets is considered by economists and marketers to be one of the most difficult things in business, made even more difficult by the meteoric rise of online shopping.
Close to 20% of all retail sales in the UK are now made online – something retail franchises UK just can’t ignore.
Factors To Consider When Buying A Retail Franchise UK
Buying a new franchise – especially when you have no previous business experience – can be a daunting task to say the least. For our readers who are considering investing in franchise opportunities, our collection of free franchising guides is a great starting point.
Retail franchises UK are nothing like other franchise businesses – they have their own whims and fancies they need to look after. Every franchisee looking to buy a retail franchise UK needs to thoroughly understand how the retail supply chain works.
Regardless of the industry or sector you want to operate in, you’ll always have to face competition – there’s no such thing as an uncharted territory in business. This idea – a business truism, nothing less – holds far truer in case of retail businesses than any other.
So, every retail franchise UK has to assess, face and beat the competition that comes their way before they can turn any profit. There are no easy measures, but you can certainly make sure that you’re setting your business up for minimum competition if you get your franchise market research right.
No points for guessing this one – most retail sales are directly proportional to the amount of footfall.
There’s a solid reason why retail businesses do their best when they have the luxury of operating from a premium, strategic, high-street location.
As a would-be retail franchisee, you’ll need to spend a great deal of time factoring the pros and cons of the location you will be operating from. The best locations never come cheap, and the cheapest one will hardly ever help you clock enough sales to break even.
Typical retail businesses – like book shops, for example – exhibit this angle very well. A book store at a busy train station or airport will always be better placed than, say, a book store in a sleepy suburb of a mid-sized town – even when they are identical in all other aspects, including the franchisor.
Recommended: 7 Steps To Take Before Starting Your Own Franchise
Many franchisees fail to factor in the importance of staying on the right side of technology. This should, ideally, be a thing that you consider while choosing your franchisor.
The entire retail industry has already been disrupted by e-commerce. But some businesses will always be susceptible to even more disruptions in immediate future than others.
For example, a book store business will always have to worry about new generations of e-readers further eating into their market, while other retail businesses like cosmetics are more or less immune to technological disruptions.
The Social Spread
The social spread is an interesting phenomenon.
It’s common knowledge that millennials love to shop online – the seniors, not so much.
This balance will, of course, keep changing as we move along. For now, when you’re assessing retail franchises UK, keep an eye on what the primary target demographics are, how that will change in 3-5 years and how you can minimise your social spread risks.
The Franchisor Side Of Things
While discussing retail franchises UK, it’s important not to lose the focus from the ‘franchising’ aspect. In other words, it doesn’t suffice to treat a retail franchise UK as just another retail venture – because it’s a lot more than that.
Much of your success as a UK retail franchise will come – in the initial phases, at least – from what the franchisor brings on board. The most important factor here is, quite obviously, the brand value – as it reflects in the ongoing commissions/royalties you’ll be paying.
The training, know-how, territory, inventory and other factors will reflect in the initial franchise fees.
When you’re choosing a retail franchise UK, don’t overestimate the importance of the one-off franchise fees. Focussing on ongoing royalties and marketing expenses is usually the better bet, because these – over months – have a considerably larger impact on your numbers than the franchise fee.
To learn more, please go through our How To Choose A Franchise guide.
How Much Do Retail Franchises UK Cost?
Retail franchises UK show remarkable diversity in terms of sizes, industries, business models and scalability. In other words, all the factors that typically influence the minimum initial investment for a franchise business tend to exhibit a broad range.
So, it’s rather difficult to come at an accurate number (or a range, for that matter).
A review of dozens of UK retail franchises shows that a typical franchise unit can cost you anywhere between £30,000 and £200,000.
Some of the premium retail franchises (for globally renowned brands) require franchisees to invest over a million pounds just to get started, among other requirements such as previous business experience, industry connections and ability to raise additional money.
How Do UK Retail Franchises Make Money?
The revenue model followed by UK retail franchises is similar to most other franchise models. The major differences usually lie in how the supply chain is managed, what the franchisor’s involvement in the business is and how the franchisor gets paid.
Two straightforward models exist in this context.
- The Royalty Model
Franchisors prefer this model because it offers them more ‘skin’ in the game once their franchisees start scaling up and clocking more sales. A fixed percentage of monthly/weekly revenue is paid back by franchisees to the franchisor, in addition to other expenses such as business assistance fees, marketing fees and IT fees. Franchisees can pay themselves once all these outgoings are accounted for.
A common retail franchise UK shells out 10-12% of operating income in outgoing streams to the franchisor.
- The Monthly Model
The monthly model stipulates a fixed sum of money to be paid by franchisees to the franchisor, regardless of the sales volume. This immediately puts the franchisor in a position of handicap, because they lose the advantage of scale while bearing the risks.
On the other hand, it may appear more reliable for small franchisors, as it guarantees a fixed stream of income. As far as franchisees go, this model gives them an immense incentive to scale up rapidly.
More and more UK retail franchise businesses now use a composite of these two models. The franchisor is guaranteed a minimum fixed commission each month, with an added royalty component that keeps reducing as the sales volume goes up.
Should You Buy A Retail Franchise UK?
Buying a franchise can be a life-changing event for many. You’ll be investing a sum that is at least worth one whole year’s income if not more, and that definitely calls for covering every base.
To run a successful retail franchise UK is all about managing three things:
- The inventory – Your franchisor will have a huge role to play in this regard. Ideally, you don’t want to work with a franchisor that forces you to replenish inventory regardless of the sales – that’s a red flag in most cases.
- The marketing – Again, most franchisors take it upon themselves to run your marketing campaigns for you. Be sure about how much you’re spending in terms of local marketing, digital marketing and offers/deals.
- The staff – As a retail franchise, you’ll definitely be hiring staff (fewer than 10, in almost every case). Be sure to hire the right people for the right job, create a well-oiled hierarchy and hone your people skills.
Top Retail Franchises UK
Here’s our list of some of the most popular retail franchises in the UK. Do take a look at what these bring on board to get an idea about what you should expect from your franchisor.
1. Mac Tools
- Minimum Initial Investment: £5,000 (plus VAT)
- USP: High-quality tools for retail sale
- Full training and business support
- Very low investment required
- High scalability
- Decades of industry experience and goodwill
- Full BFA Member
- Minimum Initial Investment: £40,000 (plus VAT)
- USP: Bespoke bathroom fittings and accessories
- Extensive training provided
- No previous experience required
- Recognisable brand name
- Minimum Initial Investment: £35,000 (plus VAT)
- USP: Premium French wine (suppliers and distributors)
- Highly valuable brand name
- Efficient and proven supply chain
- Ideal for wine/alcohol enthusiasts
- Can be a great secondary stream of income for your existing food business
- Minimum Initial Investment: £40,000 (plus VAT)
- USP: Popular greeting card business
- Over 12,000 franchise units in operation (UK + Ireland)
- A great high-street retail business
- Over 15 years in business
- Well-established corporate partnerships
- Full BFA Member
5. Smiley Booth
- Minimum Initial Investment: £14,995 (plus VAT)
- USP: Bespoke photo booth franchise
- A training course on offer
- No previous experience required
- Marketing support
- Digital marketing support
- Lead generation support
UK Retail Franchises – The Takeaways
- Stay on top of your numbers at all times.
- Create a conservative business plan before investing. Hire a professional business advisor if the need be.
- Research the territorial rights and the location you want to operate in.
- Talk to operational franchisees.
- Take a look at retail franchise resales.
- Understand the business thoroughly before putting your money on the line.
Running a retail franchise can be overwhelming – even for the seasoned pros. If you are one, we’d love to hear from you. Send in your experiences here and we’ll consider featuring you on our popular franchise success stories page.