Newsflash: There are more franchised businesses operating in the UK than ever before. The latest UK Franchise Survey, sponsored by NatWest and the British Franchise Association released in April, records that there are now 34,200 franchise units established, which represents eight per cent growth over the previous year's figures.

So why are British prospective business owners continuing to flock to franchising? Of the established franchisees that responded to the survey, 23 per cent listed 'growth potential' as the primary reason for selecting their franchise, which is reflected in the industry's turnover statistics with the franchise sector continuing to outperform the economy according to the survey. Franchising accounted for total sales of £12.4 billion in 2007, an incredible increase of 15 per cent on the 2006 results. This compares very favourably with the general UK economy's 3.1 per cent GDP growth last year, meaning that franchising represents an increasing slice of UK commercial activity.

ENTREPRENEURIALISM ON MAINSTREAM TV
This desire to invest in a business that can be built into a serious platform for growth is reflected in, and possibly cultivated by, the proliferation of TV programmes focused on entrepreneurialism such as Dragon's Den and The Apprentice. The latter was recently highlighted as a huge driver of interest in franchising by Domino's Pizza Business Development Director Andy Emmerson, who revealed: "Since The Apprentice was first aired in 2005 Domino's has seen a 10 per cent year-on-year increase in enquiries about becoming a store owner. We think it's great that mainstream TV is promoting entrepreneurialism and if you are prepared to put in the hard graft, then there's still lots of great career opportunities to be had and money to be made from running your own enterprise. "Franchising is an ideal way to start your own business as it provides entrepreneurs with most of the same freedoms associated with running your own company but often with better rewards and lower risk, which is particularly important in today's economic climate."

In fact Domino's Pizza's franchise sales team experienced a 50 per cent leap in enquiries during the run of The Apprentice last year, reaching what they called a "franchise flash point" on Thursday 27th May 2007, the day after the 'firing' of Ghazal Asif. The sales team anticipates a similar surge in enquiries from potential entrepreneurs inspired by the current series and predicts that this year's franchise flash point will be Thursday 15th May.

THE AMERICAN FRANCHISING EXPERIENCE
The popularity of franchising in the USA has seen the sector continue to chart huge growth, reaching economic output of US$800 million in 2005 according to research conducted by PricewaterhouseCoopers on behalf of the International Franchise Association Educational Foundation. The report revealed that the USA is served by more than 900,000 franchised businesses (including those owned by franchisors), which represented slightly over three per cent of all business establishments in 2005.

Matthew Shay, president and CEO of the International Franchise Association, comments: "Franchising now provides more jobs than many other sectors of the economy, including the durable goods manufacturing and financial activities sectors. It is clear that franchising is a critical engine of economic growth in the US powering local communities across the country."

SHELTERING UNDER A NATIONAL BRAND
Of course many business start ups offer growth potential, but it is the proven nature of franchised concepts that attracts many investors who in times of increasing uncertainty are recognising the value of sheltering their business under an established corporate identity. In fact, a 'well known brand' is the second most popular reason for selecting a franchise investment according to the UK Franchise Survey (with 19 per cent of respondents listing it as their primary criterion).

Those who take up these national brand opportunities are benefiting from the tried and tested nature of the concepts, procedures, products/services and marketing practices of these businesses and bypassing the early trial and error stages of business start ups which can delay profitability or even cause the business to fail. This has led to a stellar 91 per cent profitability reported by franchisees in the UK survey.

Graeme Jones, Head of NatWest's Franchise Team, comments: "With confidence in the franchise industry riding high, and with such positive prospects for expansion, it is little wonder that the sector has experienced such rampant growth over the past 10 years. Franchising continues to significantly outperform UK economic growth and franchisors and franchisees remain confident about the prospects for their business."

ECONOMIC INSTABILITY NOT A CONCERN
Interestingly, of the franchisors surveyed in the NatWest/bfa survey, 81 per cent anticipate that business will improve over the next 12 months. Brian Smart, Director General of the bfa, reflects that: "Franchised businesses now contribute more than £1 billion or more to the economies of Scotland and six out of the UK's 11 other regions, with the West Midlands also poised to break the £1 billion level. Existing systems are spreading into new regions and new systems are being generated in regions where franchising is under-represented - with the support in some places of the Government's Regional Development Agencies.

"Overall, we can look forward to further growth for franchising in 2008, despite a hardening climate for the economy generally. In demanding market conditions, it becomes more difficult for businesses to differentiate themselves on price, which means that customer service becomes more important than ever. It is therefore testimony to the enthusiasm and commitment of franchisors and franchisees that they continue to drive new business and retain it with such vigour."

Text: Stuart Anderson