Franchise Industry contributes £11.8bn to UK Economy despite Recession

* 94% optimistic about future business
* Nine out of ten businesses are profitable
* 86% increase in the number of women franchisees

UK franchise businesses continue to grow and remain robust despite economic conditions, with the industry contributing £11.8 billion to the country’s GDP last year, an increase of £400 million from last year, according to the latest findings from the annual NatWest bfa franchise survey.

The average turnover figures rose by just under 3% on last year’s figure at £335,000 in 2009, with levels in some sectors strengthening as the year progressed. The survey also revealed that compared to the ‘90s recession fewer franchise businesses today are trading at a loss, in 1990 only 70% of all franchise businesses were profitable compared to 89%in 2009.

2009 was a year where more businesses took up franchising as a business model, with the total number of franchise systems operating in the UK reaching 842, signalling a modest growth from the figure of 835 quoted last year. Franchisors’ confidence for the future of their business also grew with 94% being optimistic about business conditions, in comparison to only 82% last year. Franchisors and franchisees are hopeful about the potential for growth with franchisors on average planning for an additional 8.8 franchisee outlets.

Graeme Jones, head of NatWest’s franchise team, comments, “It’s encouraging to see continued growth in specific sectors, such as personal services, where franchise systems have grown by 38% in five years. We look after more franchises than any other bank and have seen far more optimism from our customers about the coming year in comparison to twelve months ago when confidence levels were low.”

Brian Smart, director general of the bfa, says, “Franchised businesses have weathered the recessional storm extremely well, which we should not be surprised about if we look at how franchising has proven itself over the years. The combination of the wider business support, training and economies of scale, with the determination, enterprising nature and local business focus makes franchise businesses a very robust offering. This year has highlighted this particularly well with success rates of franchise businesses not dropping even in the recent recessionary environment”.

The survey revealed how franchised businesses dealt with the recession by focusing on growing existing customer bases and increasing spend on marketing and advertising. One indication of how franchised businesses dealt with the difficulties posed by the recession during 2009 is a reduction of full time employees from 239 to 219, but a rise in part time employees.

The survey also unveiled a slight decrease in the number of individuals employed in franchising in the last 12 months from 467,000 to 465,000 (full time and part time) across a total of 34,800 franchised units in the UK. More women are now starting to get involved in franchising, with 39% of recent franchisees women compared with only 21% in 2003.

Encouragingly, estimated start up costs have declined slightly, and new entrants can expect to pay £46,700 in franchise fees and other associated costs to their franchisor (down from £50,000 last year). Whilst almost half of franchises said that NatWest has the most helpful franchise department, for some lack of financial capital has been the biggest barrier for growth.

Graeme Jones continues, “The main indicator at the end of 2008 was that the outlook for franchisees and franchisors’ own businesses and for the economy as a whole, was grim. Those questioned in 2009 though were a good deal more optimistic than they were twelve months ago, with fewer mentions of redundancy or shorter working hours. We want to send a clear message out to the sector that NatWest is here to support growth opportunities”.