Franchising contributes £11.8bn to UK economy

UK franchise businesses continue to grow, with the industry contributing £11.8 billion to the country's economy last year - an increase of £400 million from the previous year, according to the latest findings from the annual NatWest bfa franchise survey.

The average turnover figures rose by just under three per cent 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 1990s recession, fewer franchise businesses today are trading at a loss. In 1990 only 70 per cent of all franchise businesses were profitable compared to 89 per cent in 2009.

In 2009, more businesses took up franchising as a business model, while franchisors' confidence for the future of their business grew with 94 per cent being optimistic about business conditions, compared to only 82 per cent in the previous year. Franchisors and franchise owners 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, said: "It's encouraging to see continued growth in specific sectors, such as personal services, where franchise systems have grown by 38 per cent 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, said: "Franchised businesses have weathered the recession 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 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 per cent of recent franchisees women compared with only 21 per cent 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.

Mr Jones added: "The main indicator at the end of 2008 was that the outlook for franchise owners 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 12 months ago, with fewer mentions of redundancy or shorter working hours."

Mr Smart said: "It's been a tough time for businesses across the UK but franchised businesses have clearly shown a high level of stability and robustness and made a valuable contribution to the UK's economy last year. The survey paints a very positive picture of future realistic success for the industry in the coming year."