The global economy is withstanding a period of massive instability. With that comes a change in people’s drivers, needs and habits. In the UK figures show that 20% of businesses fail in their first year and 60% will go bust in their first three years. With the high cost of living and discretionary spending still low, starting from scratch as a new business can seem daunting.
An area seeing a rise in interest is the UK franchise sector as people who want to be their own bosses look to do it with systems, processes and support in place. The number of franchises has more than doubled in 25 years. The franchise industry contributes £15 Billion to the UK economy which is an increase of 46% over the past 10 years. The total number of people employed within franchising has reached 621,000 which is an increase of 70% over the past 10 years.
Franchising in the US has always been a popular method of business ownership. However, whilst the UK has a healthy franchise industry, it is still not as popular as in the US where 10% of all businesses are franchises. Peter Boolkah has owned his successful ActionCoach franchise for 15 years. “My coaching business runs globally and I have offices in the US and UK. Before that, I worked for arguably the biggest franchise in the world McDonalds, as a senior member of the operations team. I am used to the franchise system and when it works it is a brilliant way to run your own business.”
Boolkah’s award-winning coaching business helps business owners to scale up and if they want to exit, he guides them through the selling process so that they can reach the optimum price for their business, he says that the systems and processes that ActionCoach have in place for their franchisees is one of the reasons he is so successful. “Franchises give people a business framework, an established brand, a business model and a way of doing business. Instead of starting from scratch, you are buying a system that you then implement. People often start their businesses to be the decision-makers. But there are risks. Just because you buy a business franchise, it doesn’t mean you have a business. You should always consider the scalability of the franchise and the potential growth.”
However, he warns that not all businesses make good franchises and that there are various things to consider and questions to ask when considering buying a franchise. For example, why is the business owner franchising? Is it to scale their business or because their business is in financial difficulty and they need a cash injection? It may be to raise more capital to expand into a new market. “Tim Horton’s the Canadian-based fast food/patisserie franchise which is breaking into the UK market and looking for franchisees. Tim Hortons will be one of the more expensive franchises to buy. It may be a good franchise opportunity as the landscape has changed due to covid. We can work from home quite successfully so people are moving away from cities and into rural areas where they have more space. Those areas don’t have the amount of drive-through restaurants per square mile that the cities have.
One could argue there is a definite market there and a drive-through fast food patisserie on the edge of a busy town and a good route to other towns could work well and see a lot of footfall. Also, the general public loves something new and currently, there isn’t anything exactly like Tim Hortons here. I think the sense of something being new is interesting to people. Wendy’s is also another hugely popular US franchise that is slowly breaking into the UK market. There are just 30 Wendy’s dotted around the UK. This means that every Wendy’s I have ever entered here in the UK is always busy because there aren’t many of them and they are a novelty but a Wendy’s franchise I believe will cost you a minimum investment of £3,000,000. It is therefore out of most would-be franchisee’s grasp.”
There are cheaper franchises available to buy in the UK for under £10,000 including cleaning companies, sports schools, stage schools and website design companies. The advice is to do your due diligence when buying a franchise of any size. Boolkah says you should ask to see financial information and talk to current franchisees and if you have any misgivings or the figures don’t add up then it would be wise not to buy. “Talk to other franchisees and ask them about the level of support they receive from the franchisor” he says.
The International Franchise Association projects franchise employment to grow by more than 10% to nearly 8.3 million workers. Of the nearly 800,000 expected new jobs, many will come in the retail, food and services sectors.
Could now be the time you look at becoming a franchisee?
