Franchise Spotlight: Pawnbrokers

As a lifeline to those with cash flow problems, pawnbrokers are recession-proof and offer lower risk loans than payday lenders. A franchise is a great way into this multi-skilled sector.

The history of pawnbroking begins three millennia ago in China where goods were pawned to finance war, exploration and shipbuilding. Modern pawnbroking – and the ‘three balls’ sign that hangs outside pawnbroker shops to this day – can be traced to northern Italy in the Middle Ages.

Today, the trade primarily serves as a lifeline to those struggling to make ends meet and usually with poor credit ratings.

Sector overview

  • Investing in a pawnbrokers franchise requires a cash investment as banks will not lend to businesses in this sector
  • More than 2,100 outlets lend about £700m and handle two million items a year
  • 4% of the adult population use a pawnbroker, according to Ray Perry, CEO, National Pawnbrokers Association
  • Pawnbrokers typically lend 50-60% of an item’s value on a maximum daily interest rate of 0.8%
  • 88% of people redeem their items, according to Ray Perry, CEO, National Pawnbrokers Association

UK pawnbroking is regulated by the Financial Conduct Authority (FCA) and it may come as a surprise that just 44 complaints about pawnbrokers were lodged with the Financial Ombudsman Service in the financial year 2016/17, compared with 10,329 for payday loans with only 13 upheld.

Customer experience seems to tally with these numbers. The FT quoted one customer who said staff “make you feel welcome”, while 88% of people redeem their items, according to Ray Perry, CEO of the National Pawnbrokers Association.

Why invest?

The sector is not merely recession-proof; it actually fares better during downturns. The number of pawn shops in Britain doubled in the four years following the 2008 crash.

Is it also a business model that cannot be conducted purely online. While banking services have migrated online and to phone lines, pawnbroker services have remained face-to-face and a highly personal experience – something many customers appreciate.

Is a pawnbroker franchise for me?

As a pawnbroker, you are part bank manager, part retailer, with valuation skills not entirely dissimilar to those of an antiques dealer.

Fortunately, as these specific skills are somewhat rare, a pawnbroker franchise will provide full training in these disciplines but skills are required in:

  • Customer service
  • Quickly evaluating the resale value of a wide range of items
  • Money handling skills in what remains a heavily cash-based business
  • Staying abreast of regulations related to lending emanating from the FCA
  • Maintaining detailed, orderly records of transactions, pledged items and outstanding loans
  • Preparing and selling unredeemed items for sale
  • Potentially providing evidence to law enforcement agencies about stolen goods

The structure of pawnbroker franchises

Providing training, marketing support and help with finding premises and fit-out, pawnbroker franchises offer an appealing route into a high-street sector requiring an unusually broad range of skills.

One such franchise system, Cash Brokers, “will invite you to spend some time behind the counter at one of the shops to see what the business is really like.” Total investment needed is a minimum of £100,000.

Pawnbroking franchises also offer the following benefits:

  • Not just recession-proof but perform better during downturns
  • Modest staff requirements: shop can be run by one or two staff
  • Experience in finance, retail or pawnbroking not always a prerequisite for candidates

Make sure your chosen pawnbroker franchise is properly licensed by the FCA. An overhaul of regulations prompted many pawnbrokers to exit the sector and provides reassurance that licensed outlets operate to high ethical and commercial standards.



Joshua Antoniou

About the author

Joshua Antoniou is now Global Account Executive having started at Dynamis in the Customer Service department. He also writes for BusinessesForSale.com & FranchiseSale.com.