During 2010 the franchise industry has increased turnover by £600 million to £12.4 billion, the latest survey by the British Franchise Association (bfa) and NatWest has revealed.

Since 2006, the sector’s turnover, and number of franchise systems, have both grown by 15 per cent, despite a UK GDP growth rate of only 9.4 per cent in the same period.

The survey has also found that the number of franchise systems operating in the UK has grown to 897 over the past year, increasing the number of franchise business units to 36,900. An extra 56,000 jobs have been created, taking total employment in the sector to 521,000. Franchising is also helping to drive international trade. Around a third of UK franchisors have units located outside the UK, additionally, 38 per cent of domestic only franchises plan to expand abroad.

Peter Ibbetson, Chairman Small Business, NatWest, said: “With 87 per cent of franchisors planning to expand in the year ahead, we’re already seeing strong demand for our new £100 million franchise fund. We bank more franchise businesses than anyone else so our discounted loans will play an important role in financing further industry growth.”

Four out of five franchise owners surveyed said that being part of the franchise model offered them a competitive advantage over similar businesses that are independent. Appearing to be a larger business, standardised products and services, and quality expectations were cited as the three main advantages. Franchisors also see better prospects for themselves than the rest of the economy, with 75 per cent expecting improvements for their business over the next year while only 31 per cent expect the economy to pick up.

Brian Smart, Director General of the bfa, said: “Yet again franchising has demonstrated its inherent tenacity and stability, despite a tough climate last year. This means many more sustainable business start-ups and jobs have been created by ethical franchising – further helping the UK economy get back on its feet.”

Furthermore, the survey found that two thirds of franchise businesses trading less than two years reported to make a profit. Average start-up costs also reduced for a second year to £46,600.

While nine out of 10 franchise owners remain profitable, confidence may have taken a dent for some as one in eight rely on the public sector for over 90 per cent of sales – proving the industry is not totally immune to the recent economic downturn.

Published: 31 May 2011

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