The Definition of a Franchise

You’ve dreamed of running your own business, choosing your own working hours, and managing your workload, but what is a franchise? Could it be the way for you, someone with little or no experience as a business owner, to become your own boss? Let’s dive into the world of franchising and learn more about the lucrative cross-sector concept.

What is a franchise?

A franchise is a business model in which a company (the franchisor) grants an individual (the franchisee) the right to operate under its brand, using its systems and support, in exchange for fees and ongoing royalties.

Unlike being an employee, a franchisee isn’t paid a salary. Instead, they get to keep most of the profits their business makes for themselves, after paying small annual fees that cover things like advertising, marketing and general business support. While franchisees run their own day-to-day operations, they must follow the systems and brand standards set by the franchisor.

The International Franchise Association, the world’s largest franchise association, defines franchising as:

“A method for expanding a business and distributing goods and services through a licensing relationship. In franchising, franchisors (a person or company that grants the licence to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the licence to do business under the trademark and trade name by the franchisor) but also provide them with an operating system, brand and support.”

If you fancy learning more about the history of franchising, check out Franchising 101: how franchising began, where we take a deep-dive into the sector’s fascinating origins.

Structure of a franchise business

A franchise package generally falls into one of two different categories: ‘business format franchising’ and ‘product and trade name franchising’. In the UK, the former is much more common. Under this scheme, the franchisee pays an initial fee and ongoing royalties in exchange for use of the business model and support of the franchisor in everything from store design to staff training.

On the other hand, the ‘product and trade name franchising’ scheme is implemented when a franchisor simply offers the franchisee the right to sell their products. This model is more commonly called ‘licensing’ and is favoured by existing businesses looking to incorporate a big brand’s products into their range. You can find out more about the two models in our article ‘what’s the difference between franchising and (brand) licensing?’ if you’re curious.

The franchise industry in the UK

Franchising remains one of the UK’s most resilient and high-performing business sectors, making a significant contribution to the national economy and employment market.

• The sector contributes approximately £19.1 billion to the UK economy each year.
• There are now more than 1,000 franchise systems operating across the country.
• Over 50,000 individual franchise units are currently trading nationwide.
• Franchising supports around 770,000 jobs across a wide range of industries.
• Around 89% of franchise units report profitability, demonstrating the strength of the model.
• The average annual turnover per franchise unit is approximately £400,000.

What does a typical franchisee look like?

There is no single profile that defines a franchisee in the UK today. One of the strengths of the franchising model is its accessibility to people from a wide range of professional and personal backgrounds.

Franchisees include former corporate managers, skilled tradespeople, first-time business owners and experienced entrepreneurs looking to diversify their income. Some are seeking a complete career change, while others are building on existing sector knowledge.

The flexibility of many franchise models also makes the sector appealing to different lifestyles. Some opportunities can be operated from home, while others involve managing premises and larger teams. There are single-unit owners focused on building one strong local business, and ambitious multi-unit operators who expand across several territories.

The latest industry research continues to show that franchising attracts a broad and increasingly diverse range of investors. What unites them is not age, gender or previous career path, but a willingness to follow a proven system and build a business with structured support.

>> Read more: Do you have the profile that franchise networks are fighting over?

How much money do franchisees make?

While income varies widely by sector and concept, the average franchise unit in the UK now generates around £400,000 in annual turnover, according to the 2024 National Franchise Survey. Many franchisors also cite examples of experienced franchisees achieving seven-figure turnovers within a few years of business, so it’s safe to say the industry has plenty of profit potential.

Even if maximising earnings is not your primary goal, it is reassuring to know that a large majority of franchisees report operating profitably. Franchising can provide financial stability as well as a structured route into business ownership, often making the prospect of becoming your own boss more achievable than you might have imagined.

An ever-growing industry

Franchising continues to play a significant role in the UK economy and remains an attractive route into business ownership, accounting for around 3% of the national workforce. With opportunities available across a wide range of sectors and investment levels, there is no single profile of a typical franchisee. If you’re ready to explore your options, browse our UK franchise directory to compare opportunities by sector, investment or location.