The franchisee trends driving a £15bn sector
Franchising is booming. Here, the bfa's Paul Stafford reveals more about the people driving franchising growth. Could 2016 be the year you join them?
In January the bfa/NatWest Franchise Survey revealed that franchising is operating at record levels in terms of overall turnover (£15.1bn), numbers of businesses (over 44,000) and jobs (621,000). These three key metrics all showed double-digit percentage growth over the last two years.
Beyond the headline figures, some interesting trends were revealed about the people who are the driving force behind that growth – the UK’s franchisees.
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Millennials are out in force
Combining comprehensive training and ongoing support with the passion, drive and fresh ideas that younger franchisees bring to a network is proving to be a winning formula for many growing brands. Almost one in five franchisees (19%) who launched their business in the last two years was under 30 years old, up from 14% five years ago.
Some have previously worked for other franchisees, learning the ropes of the business and understanding how to enjoy their own success first-hand; others are graduates looking for a better alternative to a testing jobs market. There’s also the option to go into business with family members or friends.
It’s a natural match: franchising’s proven business systems and knowledgeable people to call on helps to fill any gaps in experience, while skills in areas such as social media knowhow ensure that younger franchisees have plenty to contribute, even in the most established brands.
That’s confirmed by the fact that some very well-known brands have franchisees under 30s as their number one in the country… the youth of today are really flying high in franchising.
Business dreams becoming business reality
Over the last 15 years there has been a clear rise in the numbers of people moving from employment to becoming their own boss with a franchise. In 2001, 52% of franchisees were previously employed, with 33% formerly self-employed.
Fast-forward to 2015 and 74% of franchisees traded their job for a business, with 20% making the switch from self-employment outside franchising (the remainder starting after redundancy or having already been a franchisee elsewhere).
With entrepreneurial spirit never higher in the UK, evidenced by the record number of businesses now in operation according to the ONS, it’s natural that people looking for alternatives to the job market are attracted by the proven systems, support and business model offered by any good franchisor. Being the boss for the first time can be daunting, but that trepidation is diluted by the structures in place in a franchise worth joining.
Opportunity knocks for the ambitious
Business appetites are growing and with them, bigger operations are being created. In 2015, 29% of franchisees ran more than one outlet or unit, up from 21% in 2010, with some having tens of millions in annual turnover and over 1,000 employees. One in five currently operating a single business said they planned to take on another at some point in the future.
Long popular in catering brands, multi-unit franchisees are becoming more and more commonplace across all sectors. It’s a natural progression as franchising continues to mature: franchisors are happy for proven franchisees to take on further outlets, given how expensive and time-consuming it can be to find the right ones; and a franchisee who has had success with a system feels confident they can replicate it.
Confidence breeds success
Alongside a bright outlook for their own businesses, with the majority stating they expect growth in 2016, franchisees reported record satisfaction levels with their franchisor. Over 90% said they were ‘definitely’ or ‘mainly’ satisfied.
That’s easily linked to the fact that franchisee profitability levels have been around 90% for more than 20 years consecutively, and that commercial failure rates have been below 5% over the same timeframe.
But it’s also important to remember that mindset is no small factor in business success – it might be an indefatigable work ethic or simply a positive outlook for the day to come. It follows then that having experienced people to support you, or simply to discuss ideas with, fosters the right mental approach for a business that’s going places.
Franchising revolves around communities: local business owners backed by a larger brand. As a consequence, it’s a sector that’s on the up across the country, not just London and the south-east (where growth has of course been predictably strong).
The biggest growth rate over the last two years has actually come from the West Midlands region, where franchised businesses now contribute £1.5bn to the local economy, up 25% since 2013. The north of the country is also well served, with franchises accounting for £3.2bn and over 130,000 jobs; the government would do well to take note of the consistent growth here when promoting its ‘Northern Powerhouse’.
As franchising continues to grow and mature, new trends will appear over time. One thing will remain the same though: whatever their background or experience, great franchisees will continue to underpin a dynamic and diverse sector. Here’s to their success in 2016.