According to a recent Nat West Franchise report, 9 out of 10 Franchise Businesses posted a profit in 2010.
In contrast to a UK-wide rise in unemployment of 180,000 in 2011, a total of 73,000 jobs were created in the franchise industry.
The Headlines of the in depth report, which was undertaken during January 2011 also detailed the following encouraging points:-
Turnover
Estimating that the total value of the UK Franchise market is in the region of £12.4 billion compared to the previous year (2009) which was £11.8 billion.. The study was field based and focused on the recent results during 2010.
Franchisors
- Using a strict definition of business format franchising, the number of active franchises identified was 897. This represents an increase of 55 franchisors, however this hides the fact that there were 28 departures during the year and 83 new concepts. Of the departures none were due to financial reasons but just withdrew from franchising.
- 78% of franchisors operate an independent system, 12% as a subsidiary of a parent company and 10% on a master licensee basis
- On average franchise systems have been operating for 10 years, though 1/3 have been operating for over 10 years, reflecting the large number of new entrants keeping the average the same on 2009.
- The cost to a business in setting up as a franchise in the first year ranges from £20,000 to £900,000, with the average being £150,000 – £170,000 that has remained fairly static at this level for a number of years.
Franchisees
- The number of non-dairy franchised units is estimated at 36,900.
- The mean average annual sales per unit were £335,000, the same figure as 2009 and similar to 2008, not surprising given the economic situation. However this remains only the sixth time £300,000 was breached. This however reflects a wide range in individual unit turnover.
- Overall franchisee ‘churn’ was 8.8%. This was made up of financial failure (3.1%), Dispute (0.8%), Realising Investment (1.2%), Retirement (1.1%), Ill Health/Domestic situation (1.4%) and ‘Other’ (1.2%). This failure rate was slightly higher than 2009 (2.6%). It is fair to say that these units have been restricted to a small number of franchisors.
- 34% of those who responded operate on a sole trader basis, 14% partnerships and 52% limited companies.
- The average age of a franchisee is identical to the last 2 years at 47, with those having just started having an average age of 39 (down from 42 last year). Also confirming the stability and maturity of the sector is the average time a franchisee has been running their business. In 1992 the figure was 3.9 years and this time it was 8.4 years (having been 7.5 in 2008 and 2009).
- Interestingly 11% of new franchisees came from an Asian background and typically British Indians.
Further, encouring details can be found on the Nat West website :-
