Franchising: strong growth and more jobs

Jigsaw economic growth

The franchise industry is creating jobs and experiencing growth, defying the wider economic gloom.

In the past year, the franchising sector created 73,000 jobs, according to the 28th annual British Franchise Association/Natwest survey. This is a result of the number of franchise units increasing by 4% to a total of 40,100, and of growing franchise businesses taking on more part-time staff.

The number of franchise systems also increased this year. Although 35 systems stopped franchising in the past year, 64 businesses went into franchising, a net increase of 29 franchise systems, bringing the total to 929.

The survey found that the relative contribution of the franchise industry to the UK economy grew over the past year, reaching £13.4 billion, an increase of 8%. In the current economic climate, with the UK having returned to recession, this growth is impressive.

The increase is a result both of an increase in the number of franchise systems and franchise units, as well as the average turnover for individual franchise units rising. On average, turnover per franchise unit rose by 4% from last year.

The survey also noted a decrease in the number of unprofitable franchises –last year, for the first time since 2007, the proportion of loss-making franchises was below 1 in 10. The survey also reported that 90% of franchisees said that they had satisfactory relationships with their franchisor, the greatest proportion in a decade.

The survey also revealed that the average age of a franchisee is increasing. This year, the average age of a franchisee is 49, compared to 46 in 2005. The age group with the highest proportion of franchisees is 41-50, with the second highest proportion being found among 31-40 year olds.

This may reflect experienced workers moving into franchising as a way to be their own boss and have more flexibility as they mature. Often, the opportunity to start a franchise arises when older workers are laid off, with redundancy payments helping to pay for franchise fees.

The franchising model offers the benefits of appearing to be a larger business, standardised products and quality expectation - advantages all heightened in a downturn.

Graeme Jones, head of franchising at NatWest and RBS, said: “The franchising model offers the benefits of appearing to be a larger business, standardised products and quality expectation – advantages all heightened in a downturn. Expectations for growth are high in the sector.”

Brian Smart, director general of the bfa, said: “The last few years have put crippling pressure on businesses, creating some of the toughest trading conditions that many have ever seen.

However, yet again we see the franchise sector proving its value by generating new sustainable business start-ups, jobs and revenue for an economy that desperately needs them. For those who are considering franchising this is obviously an encouraging sign, but we also stress the importance of thorough research and consideration before making any commitments.”

The full 2012 NatWest bfa Franchise Survey is available from the bfa bookshop.

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Jade Dickinson 
Jade started life at Dynamis doing work experience for the content team. Her dedication and keen eye for detail earned her a job with the team and she now assists clients with profile page requirements and email campaign copy.