Sector spotlight: coffee franchises

• Melanie Luff

The coffee industry is booming. 

The growth of the coffee industry over the last decade has been nothing short of remarkable, and shows no sign of letting up. In fact, ‘Britain’s coffee shop sector remains one of the most successful in the UK economy, according to Allegra Strategies.

Over 400 billion cups of coffee are consumed every year and it has become the most sought after commodity after crude oil.

By the end of 2014 there were over 16,501 coffee shops across the UK and by the end of 2015, the number of coffee shops broke the 20,000 marker and figures showed that Brits spent a staggering £7.9 million in coffee shops in 2015.

According to Allegra’s Project Café 2016 report, this incredible leap was driven by a 12% increase in the number of branded coffee chains.

The industry, already proven as stable and in a seemingly perpetual state of growth, is nowhere near reaching its apex.

The branded coffee chain market is an unstoppable business monster, gulping down ‘grande’ sized portions of the food retail sector at an electrifying rate.

The three market leaders currently dominating over half of the chain share are Costa (1,992 outlets), Starbucks (849) and Café Nero (620) who drove the sector’s growth to 15% and generated a £3.3 billion annual turnover last year -  and guess what they are all franchises.

However, this certainly doesn’t mean there’s no room for smaller franchises as Jeffrey Young, managing director of Allegra Strategies points out:

‘There are still thousands and thousands of places in the UK that don't yet have a decent coffee experience’.

So take note, franchisees, the demand for coffee shops will continue to grow as more and more places adopt the coffee culture and cater to Britain’s increasing number of coffee connoisseurs.

The future

The UK coffee shop market is set to exceed the 30,000 market by 2025 and generate a record-breaking £15bn in sales over the next ten years.

While the expansion of the current market leaders – Costa, Starbucks and Caffe Nero – will remain the dominant force, the number of new brands and corporate backed chains is also expected to grow.

Due to the rise of Café culture and the ever growing appetite for quality coffee and a relaxed environment, other sectors such as supermarket chains and pubs are jumping on the bandwagon.

There are now over 8,000 non-specialist coffee outlets in the UK (Tesco’s Harris + Hoole and Greggs’ Moment for example) introducing a new element of competition to the market. 

With the potential for further expansion, this is an ideal moment to jump on board a coffee franchise. The industry, already proven as stable and in a seemingly perpetual state of growth, is nowhere near reaching its apex and is, in fact, about to enter a new, exciting, potentially lucrative phase. 

With expansion comes diversification, meaning as the market grows and competition increases, consumers will begin to look for a unique experience with a trusted brand name: the franchise system is ideally placed to take advantage of this, meaning a profitable future for franchisees.