Franchise offers firm footing for entrepreneurs
OVER the last 10 years, the franchising industry has grown and matured into a significant element of the UK economy.
OVER the last 10 years, the franchising industry has grown and matured into a significant element of the UK economy.The latest NatWest/British Franchise Association (bfa) survey reveals that the estimated economic contribution of the franchising industry has increased from 7 billion to 12.4 billion and now encompasses 809 franchise systems, an increase of 3.5 per cent from last year.
2007 was a year of expansion for the industry, with the total number of franchise units reaching 34,200, which is the highest figure ever recorded since tracking began in 1984. This also marks a healthy increase of eight per cent from the total number of franchise units in operation in 2006.
As the sector expands, so does its profitability, with an impressive 91 per cent of franchised units making a profit during 2007, (93 per cent in 2006), with the average turnover of these units being 360,000. This represents an 11 per cent increase on the average turnover figures reported for 2006 (323,000).
Looking at the reported spread of franchising across the UK, director general of the bfa Brian Smart said: "Franchised businesses now contribute more than 1 billion to the economies of Scotland and six out of the UK's 11 other regions, with the West Midlands also poised to break the 1 billion level.
"Existing systems are spreading into new regions and new systems are being generated in regions where franchising is under-represented – with the support in some places of the Government's Regional Development Agencies.
"Overall, we can look forward to further growth for franchising in 2008, despite a hardening climate for the economy generally."
Mr Smart said there was potential that franchising had to offer existing businesses as an effective route to growth, especially in demanding market conditions.
"Franchising puts the enthusiasm and commitment of the local business owner – the franchisee – in front of the consumer; just where it's needed if you want to compete effectively."
Looking to the future, despite inevitable concerns over the state of the UK economy, the overwhelming majority (81 per cent) of franchisors anticipate that business will improve over the next 12 months, and the majority (53 per cent) of franchisees expect their business to perform likewise.
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