The franchise sector is bucking economic trends and outpacing UK recovery with strong and consistent growth, says Cathryn Hayes, British Franchise Association head of business support
UK franchising has demonstrated strong growth, particularly compared to the relatively slow growth in GDP over the last few years.
Recent figures from the Office for National Statistics show the overall pace of economic growth slowed in 2015, with the annual growth rate running at a modest 2.2 per cent, a decline from the 2014 figure of 2.9 per cent.
With interest rates set to remain low, not many forecasters expect growth to pick up in the near future, although even at these low growth rates, the UK has one of the fastest growing economies.
Franchising in the UK is not dependent on any one sector, which perhaps goes some way to explaining why it has been so resilient to recessionary pressures
But there is some way to go before economic growth brings the feel good factor after the squeeze in average wages since the recession, which saw median incomes for employees fall by more than 9 per cent in real terms between 2009 and 2014.
Franchising remains profitable
Yet the franchise sector shows a very different picture, one of strong and consistent growth over a long period – no boom or bust here. According to the British Franchise Association/NatWest Survey 2015, the contribution of franchising to the economy is £15.1billion, up 10 per cent since the previous survey two years ago and an increase of 46 per cent over the past ten years. And franchisees reporting profitability made up a very healthy 97 per cent in 2015, a new record.
More than 621,000 people are employed in franchising – up 70 per cent over the past ten years – one of the key statistics which clearly demonstrates the value of this diverse sector to the economy.
Crossing a wide range of industries, franchising in the UK is not dependent on any one sector, which perhaps goes some way to explaining why it has been so resilient to recessionary pressures, when the wider economy has been challenging.
This remarkable growth has been supported by a number of factors:
• Industry spread – franchising is represented in a wide range of sectors – domiciliary care, fast food, automotive services, children’s activities – to name just a few
• Coverage across the whole the UK – not just London and the South East. Excellent growth has been seen in most areas, with the North West and Midlands being particularly strong
• Huge variety in the types of businesses in franchising, from small, home or van-based owner-operator franchises, right up to the multi-unit and multi-brand, major employers who have built big businesses under the franchise umbrella.
Future of franchising
So, what next for the thriving franchise sector? Millennials should bring new energy to franchising. Without the long-term careers with one organisation that were available to their parents, they will need to find their own way and will have a different, more energetic outlook perhaps.
Multi-unit franchisees with strong businesses across a number of brands should continue to grow their empires, bringing strong employment opportunities to local areas.
And it is likely that household-name brands will use the franchise model to drive further growth, not just because it involves lower capital outlay, but also because franchisee-owned businesses demonstrate improved customer satisfaction and share of wallet by delivering great service.
Some things won’t change; there is still a place for smaller, lifestyle franchises as well as big brands. Van based, home based, retail, owner-operator, management franchise, white collar, business to business or business to consumer – franchising really does have something for everyone.