April 2010 Archives

Earlier this year I spent over an hour on the phone on behalf of one of my clients with a reprensentative from the independent research consultancy BDRC. I was answering questions as part of the 26rd annual survey commissioned by the British Franchise Association (BFA). Sponsored by NatWest, the compiled results published earlier this week indicate that:

• UK franchise businesses continue to grow and remain robust despite economic conditions, with the industry contributing £11.8 billion to the country's GDP last year, an increase of £4 million, according to the latest findings from the annual NatWest bfa franchise survey.
• The average turnover figures rose by just under 3% on last year's figure at £335,000 in 2009, with levels in some sectors strengthening as the year progressed.
• Compared to the '90s recession fewer franchise businesses today are trading at a loss, in 1990 only 70% of all franchise businesses were profitable compared to 89% in 2009.
• 2009 was a year where more businesses took up franchising as a business model, with the total number of franchise systems operating in the UK reaching 842, signalling a modest growth from the figure of 835 quoted last year.
• Franchisors' confidence for the future of their business also grew with 94% being optimistic about business conditions, in comparison to only 82% last year.
• Franchisors and franchisees are hopeful about the potential for growth with franchisors on average planning for an additional 8.8 franchisee outlets.
• Franchised businesses dealt with the recession by focusing on growing existing customer bases and increasing spend on marketing and advertising. One indication of how franchised businesses dealt with the difficulties posed by the recession during 2009 is a reduction of full time employees from 239 to 219, but a rise in part time employees.
• There was 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% of recent franchisees women compared with only 21% in 2003.
• 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).
• Whilst almost half of franchises said that NatWest has the most helpful franchise department, for some lack of financial capital has been the biggest barrier for growth.

Franchise Direct one of the leading franchise and business portals recently published a list of the top 100 global franchises. The list was compiled from "thousands of franchises that have invested in international expansion strategies and have been ranked using an objective and measurable criteria.

This criterion includes:

• System size based on numbers of units
• Sales revenue for the system
• Stability and growth
• Number of years in operation
• Market expansion

The ranking is also based on the implementation of:

• Best practice in the areas of franchisee support and training


• Environmental policy


• Social responsibility"

Interestly, only one UK franchisor -- InterContinental Hotels Group - made the list which is dominated by North American brands. Not surprising is the number of fast food and hotel franchisors!

A recent survey from franchise portal TotalFranchise.co.uk that attracts over 40,000 unique visitors per month, confirms what I hear on a daily basis when speaking with franchisee candidates. Specifically, sourcing the franchise fee and working capital is the biggest challenge.

Beyond funding as an issue for 56%, the survey found that the primary concerns for franchisee candidates include:

• 21% lacking confidence in the franchise model to work as expected;


• 4% having a fear of failure;


• 4% having concerns over cash flow whilst building a business and


• 2% having concerns about their skills to run a business.

While these secondary issues can be successfully addressed by franchisors, overcoming the funding issue requires greater assistance from the banks. Of course, franchisee candidates needs to have a decent credit history and some cash to invest in a business. At least once a day I speak to a franchisee candidates who has little or no cash whatsoever, yet they are looking at franchise opportunities. In these cases I educate the candidate on all the options for sourcing funding (family/friends, pension/retirement fund, equity in the home, bank loan, etc.), but advise that they may want to put search on hold. As not only do they need to source the franchisee fee but they also need to have enough to cover business and home expenses for at least 6 months. Without this in place, they are most likely setting themselves up for failure which goes against what franchising is all about!

If you missed last month's franchise exhibition at Olympia and live near Newcastle, would encourage you to attend the Great Northern Franchise Show on Saturday 8th May 2010 at Newcastle Racecourse's Gosforth Park Conference Suite.

Open between 10.00am and 4.00pm, the exhibition will showcase 35+ innovative, inspiring and proven franchised business formulas -- all of which have licenses available for the North East, Cumbria & Scottish Border regions and beyond.

For more information, check out the Great Northern Franchise Show Internet Site.

The winners of the 2010 Franchise Marketing Awards in the UK were annouced last month. The winners included:

Best Overall Marketing Campaign - Dream Doors
The other finalists were Expense Reduction Analysts, McDonalds, Cartridge World & Platinum Property Partners.

Best Website - NBC Bird & Pest Solutions
The other finalists were Expense Reduction Analysts, Cartridge World, Popstar Academy & Home Instead Senior Care.

Best Franchisee Marketing Support - Granite Transformations
The other finalists were Gymboree, Auditel, No Letting Go, EnviroVent, WPA, Dublcheck, LighterLife, Select Group & X-Press Legal Services.

Best TV Advertising Campaign - Tumble Tots
The other finalists were Cartridge World, Dream Doors & Granite Transformations.

Best Print Advert - Dream Doors
The other finalists were EnviroVent, Cartridge World, Chemex & Platinum Property Partners.

Mega congratulations to all of the winners and the other finalists! Savvy marketing is important to the development of any franchise brand and so its good to see these franchisors rising to the challenge.

More roles for women on the boards of UK financial institutions could have made the banking crisis less likely, according to a new report -- Women in the City published by the House of Common's Treasury Select Committee.

The committee found that a lack of female representation in the boardroom has led to a dangerous culture of 'group-think', which makes scrutiny of executive decisions less effective as research has shown that people from the same background and similar experience are less likely to challenge each other.

The select committee also pointed out that the finance sector currently fails to utilise the talents of over half of the population, and therefore has substantial scope to improve its structure and governance. Measures to address the long hours culture, working environment and access to flexible working and family-friendly practices are proposed to ensure that women who wish to progress are not held back. Although the report does not call for legislation to enforce gender diversity at board level, it acknowledges the inevitability of such measures if companies are not able to lead and effect change themselves.

You can read the full report published by the Treasury Committee, here.