Rise of Franchising: Why franchising is growing in the UK.
They say that there are no certainties in life – this is particularly true when it comes to business. You might have a killer idea and the best quality product or service, but this alone doesn’t guarantee success. While it’s true that there’s no such thing as a bulletproof business, franchising seems to survive both economic and political instability.
Does this sound like the type of business you would want?
For the uninitiated, franchising involves buying into a brand, for example, McDonald’s which is already established, and then opening your own branch of that company. For the franchisee (the person buying in), this means that they get to start a business for themselves, selling a product or service which already has an established customer base.
Franchising is the art of starting your own business without the inherent risk of setting up something from scratch. A great opportunity for the franchisee, but it’s also great for the franchisor being able to expand rapidly without investing a huge load of time and money.
The first ever franchise was thought to have launched in 1851 by Singer Sewing Machine Company, since then, the industry has continued to grow. It has enjoyed particularly spectacular growth over the last five years or so – even during a global pandemic.
Why is franchising growing?
In the ‘olden days’ if a business wanted to expand internationally, they would have to embark on an endurance test of regulations, language barriers and travel expenses in order to set up a branch of their business overseas. Not so with franchising.
Unlike the traditional business model, a franchisee will be a resident of the new country – which means that language barriers won’t be a problem and the franchisee will have a knowledge of the country and culture that the business owner is unlikely to share.
For many brands, the key to success is in international expansion and, franchising is, by far, the simplest and most cost-effective way of doing this.
The pandemic saw many businesses close their doors for good. As we mentioned earlier, the franchise industry withstood the climate and continued to grow.
Although it’s not always the case, often franchise businesses sell low cost, everyday products such as fast food and coffee. Even when a country is going through a recession (or a pandemic), these businesses tend to survive. While people may tighten their belts by giving up luxury products and services as they ride out the storm, most, are unlikely to sacrifice their daily cappuccino or weekly pizza.
A huge number of franchise businesses trade in repeat purchases which are part of their customers’ lifestyle. For the same reasons, franchise businesses tend to survive compared to many independent ones.
Built for Success
Every year, many people opt out of the rat race to follow their dreams and set up their own business – only to see it fail within a year.
Starting a business from scratch takes time and money and carries a huge amount of risk. While franchising in most cases involves a financial investment on the part of the franchisee, this is usually a fraction of what they’d spend on going it alone and, the risk factor is considerably lower with this model.
Banking on Support
Banks and other lenders have become increasingly reluctant to fund brand new businesses with nothing behind them but a dream and somebody confident enough to pursue it.
On the other side of the coin, somebody seeking finance to buy a franchise business has a much higher chance of becoming the banker’s friend. This is simply because funding for a business with a national or global brand behind it is a much safer bet than an independent one. Because of this, loans for franchise businesses have increased exponentially while those for new businesses dwindle even further.
Franchising is a more accessible way of starting a business – with a business model already in place, a credible brand, potential to expand and plenty of funding initiatives to help you get started, it makes sense then that more and more people are choosing the franchise route.
It is clear that franchising is a robust business model with many benefits for the franchisor, franchisee and customers.