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Press Room

Bumper Year For Franchising Growth
(13 March 2006)

2005 was a bumper year for franchising according to the latest NatWest/ British Franchise Association survey, which shows that on key turnover and employment measures, 2005 was a record-breaking year. For the first time in franchising history, the industry’s annual turnover broke the 10 billion barrier, rising 13% to 10.3 billion.

The number of franchise systems is also growing at its fastest rate since 1999. There are now 759 active franchises identified in the UK, a net increase of 6% over the last 12 months. Over the last ten years, the number of active franchising systems has expanded by an impressive 60%. From 1995 to 2000 the annual growth averaged at 7%, before slowing to 3% for the remainder.

More importantly, 92% of franchisees claim to be trading profitably an increase from 88% in 2004 and business confidence remains reasonably optimistic. Almost 9 in 10 franchisors and 61% of franchisees expect their own business to improve over the coming year. This is fuelled by the fact that faith in the wider economy has bounced back, possibly after fears of higher interest rates, a house market slump and a collapse in consumer spending proved to be largely unfounded.

In the last ten years, the turnover of the franchising industry has grown 75% from 5.9 billion to 10.3 billion and franchising now employs 141,000 more people (from 223,000 to 364,000) than it did a decade ago.

The average turnover for franchised businesses broke through the 300k barrier in 2005, as turnover rose to 318,000, an increase of 9% (27,000) from 2004. Due to the diversity of franchising, over a quarter of franchisees (27%) report an annual turnover of 50,000 or less, while at the other end of the spectrum a similar proportion claim a turnover in excess of 500,000 and 4% more than 2 million.

Mark Scott, National Franchise Manager for NatWest, said: "This has been a tremendous year for franchising and shows how the industry has gone from strength to strength, experiencing growth with all of the key indicators, such as turnover, profitability and growth. This success is a true testament to the people involved in making the industry so dynamic."

The latest survey further cements the position of franchising as a vital contributor to the UK economy as a whole. Brian Smart, Director General of the BFA, said: “In passing the 10bn mark the industry highlights something that those within it have known for some time - franchising is big business.

"Ten consecutive years of growth in the number of franchised businesses, together with record levels of employment through franchising and a new high for the industry turnover means that more businesses are generating more turnover than ever before through franchising."

Notes to editors:

  • This is the 22nd annual survey conducted on behalf of the British Franchise Association (BFA) and sponsored by NatWest. Copies of the survey are available from the BFA, Thames View, Newtown Road, Henley-on-Thames, Oxon RG9 1HG, telephone 01491 578050 or visit the website – www.thebfa.org
  • The British Franchise Association (BFA) is the only voluntary accreditation body for franchising in the UK. Its remit is to develop and continuously improve the standards of good practice in franchising and to accredit franchisors who meet these standards. The BFA now represents some 280 UK franchise brands each vetted against a strict code of business practice.
  • The survey also reinforced the importance of the internet and the bfa’s own website in generating awareness amongst prospective franchisees. www.thebfa.org delivered enquiries to over 80% of its member businesses in 2005.
  • Winners will receive prizes in the order in which they are drawn:

NatWest Franchising Checklist

  1. Take a critical look at your strengths and weaknesses – are you sure you have the capacity, temperament and skills to run your own business? Marketing and selling skills are becoming more important in running a franchise.
  2. Make sure you have the full support of your family – the additional responsibilities and demands on your time will inevitably cause some strain.
  3. Choose some existing franchisees to talk to – don’t just speak to those recommended by the franchisor – and ask how their business is performing and what support and service is being provided by the franchisor.
  4. For new franchisors, check they have run a pilot, how long did it operate, is it still trading and what has it achieved in financial terms? If no pilot was operated, how does the franchisor know the franchise and therefore will you be successful?
  5. Examine how well known the franchise and its service/product are. A good reputation is a head start in business.
  6. Look at the market as a whole – find out who your competitors are and how strong their position is.
  7. Examine costs closely, in particular the franchise fee and monthly management fee, and whether they are reasonable and value for money; will the margins be sufficient to support the business after payment of regular fees to the franchisor?
  8. Is the training provided by the franchisor sufficient to enable you to run the business successfully?
  9. Seek professional advice from an accountant about income and profit projections and from an accountant about income projections and from a solicitor about the legal agreement. Both should have a good understanding of franchising and preferably be affiliated to the British Franchise Association.
  10. Talk to the NatWest Franchise section about the financial aspects of running a franchise and ask them to put you in touch with your nearest area franchise manager. You should also contact the British Franchise Association, Thames View, Newtown Road, Henley-on-Thames, Oxon RG9 1HG, telephone 01491 578050.