The UK Franchise Industry Research Report 2013 is the third study by MBA students from the University of East Anglia (UEA) and Franchise Development Services (FDS).

The report is the result of months of detailed research by the Business School students and one of the UK’s most experienced franchise consultancies and publishers.

While the number of franchise systems operating in the UK has increased to 1,426, the number of franchisors making higher profits has also increased. A large number of existing franchisors are also positive about their business expansion in 2013.

The findings confirm the industry remains strong and is expected to flourish despite the current economic outlook. The report has identified a strong desire in owning a franchise from all the regions in the UK, as a result of the range of franchise opportunities on offer and the prospect of high profitability and growth opportunities.

Utilising FDS’ databases of franchisors, prospective franchisors and prospective franchise owners, the report analyses trends, business sectors and determines which geographical areas of the UK areof most interest to individuals looking to own and operate a franchise.

Professor Roy Seaman, Managing Director of FDS, comments: “MBA students of the UEA have once again produced a comprehensive review of franchising in the UK and identified trends that will be of great value to all established franchisors, businesses considering franchising and individuals who want to own a franchise.”

The need to raise awareness

The report reveals a need for trade associations to promote and raise awareness of franchising in general. With a number of people totally unaware of franchising in the UK, the study recommends a campaign that would explain the benefits of franchising and outline the advantages of buying a franchise business over starting a completely new one.

Many franchisors have claimed that there is inadequate marketing undertaken for the industry, making it less favourable than it actually is. This is limiting the potential of finding adequate franchise owners, which in turn, is limiting the growth of the industry.

Government support

In terms of support, the latest report indicates that the Government should be doing more to encourage growth in the UK franchise industry. Those surveyed indicated that more support for franchisors and their franchise owners in helping them grow their business is required.

An area of concern was bank lending and financial support, as this was seen as one of the key barriers to growth in new franchise opportunities across the UK. The report highlights that there is a requirement for the government to work with banks to make it easier for business to access grants that support franchised businesses. In summary, franchisors are stating that the Government and the banks should make it easier and more attractive for the right people to come into franchising.

Summary of the findings

Existing franchisors

• There are now over 1,426 franchisors operating in the UK.
• Despite the recession, franchisors have achieved and exceeded their turnover targets in the last two years.
• The number of franchisors making higher profits has increased.
• Lack of funding, public awareness and qualified candidates are the most common barriers to growth in franchise networks.
• Existing franchisors are planning to expand their networks in 2013 across all areas of the UK with the South East being the most popular.
• Faster national expansion, brand awareness and customer demand were most favourable reasons for franchising a business.

The current economic conditions and franchise owners recruited not all meeting expectations were seen as major factors that have affected franchisors’ businesses in the past year.

Individuals looking to own a franchise
The most popular business sectors to own a franchise are currently in the food and beverage, retail, business-to-business, delivery, distribution and service sectors.

• Working from home is the most desired place of operation for individuals looking to own and operate a franchise.
• The average amount of capital available for investment is £49,500.
• Economic conditions and difficulty in borrowing from banks are key factors preventing individuals investing in a franchise.

Businesses considering franchising

• Services, food and retail are the business sectors showing the greatest interest in franchising.
• Geographical areas showing the greatest interest in franchising include London and the Anglia region.

In summary, the latest study has indicated that the franchise market in the UK has the potential to develop further and offer future growth opportunities for the benefit of the UK economy. It is the government, trade associations, and banks that all need to work together to continue to make this happen. Published by FDS, the report is available to purchase in digital format.

Published: 25 January 2013

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