Franchising is on the rise: Here’s why

31/05/2018 17:00 | Start a business

Franchising is growing

Franchising is a relatively new business model, and, in some circles, it still has a lot to prove. For many years, there have been discussions concerning the longevity of such a business model and questions have been asked as to whether people will still be franchising in 10 or 20 years. However, the rising popularity of franchising suggests that it's here to stay and will continue to prosper. Here, we take a look at the factors fuelling franchising’s continued success and unstoppable growth.

The current state of franchising in the UK

In the UK, franchising is moving from strength to strength. In the past decade, it has increased by more than 10%, and there are now more than 1000 different franchises operating in the UK and over 550,000 individuals employed by franchises. It has proven extremely popular amongst younger business owners, who are starting to recognise the advantages of buying into an established business over starting from scratch. As the franchise market has matured and the first few generations of successful franchise owners near retirement age, we’re seeing large numbers of younger franchisees stepping in to take up the reigns. This makes it an exciting time for franchising as a whole.

Though it’s clear that franchising is becoming an increasingly common business model, understanding why it’s experiencing a dramatic upswing in popularity isn't so easy. To help unpick the situation, we compiled this list of the five most important reasons that franchising is on the rise.

1. More varied franchise opportunities

There was a time when franchising was synonymous with fast food chains and large-scale, rapid expansion. In recent years, this has changed considerably. Franchising extends to almost every industry, and the model is applied to virtually any type of business. While franchising remains a useful tool for large-scale expansion, it’s also being used as a means of developing smaller networks that prioritise exceptionally high product, service, and customer service standards over quick, boundless expansion. This has allowed a more extensive array of businesses to adapt their structure to become franchise companies.

In many ways, diversification has been the critical factor in bringing franchising to a much broader market. Its association with fast food has been replaced by an understanding that franchising can work in a variety of different contexts and can be used to facilitate the growth of incredibly different businesses.

2. Extensive training programmes

Franchising has also grown in popularity because of the way the majority of franchises offer excellent training programmes and high quality, ongoing support. In an increasingly competitive job market, individuals understand the advantage of receiving advice, guidance, and assistance. A large number of franchisees view their partnership with a franchise as more than just a job – it’s also an educational opportunity.

In many cases, popular franchises can deliver incredibly useful, practical training programmes that utilise years of experience and a great deal of expertise. They can help franchisees become proficient in business management, logistics, or people management, providing them with the skills they require to go on succeed on their own.

3. More experience of success

Over the last decade or so, franchising has been advertised as having an unbelievable success rate. While such figures may not always be entirely accurate, this type of marketing has brought a lot of individuals into the franchising market and raised awareness of how successful franchisees generally are.

Though some success rates may have been embellished, there can be no hiding or massaging the fact that the franchise model has matured to a point where there’s now a large number of individuals with both franchise experience and expertise. This has given younger franchisees the confidence to enter the system. By ensuring new franchisees have the backing of talented and experienced older franchisees, demonstrating that franchising can be a hugely successful business model, and insisting on increasingly high standards of service, franchising has attracted a new generation of entrepreneurs who are desperate to manage and grow their businesses.

4. Established brands

Part of the appeal of franchising is that individuals can begin working and growing a business as part of an established brand. Rather than competing with thousands of other startups – all of whom are offering a similar product – individuals can concentrate of making their business work and not obsessively worry about marketing and getting the brand name out there. For many business owners, the process of creating, developing, and publicising a brand is more of a distraction from day-to-day operations than anything else. While advertising and marketing still play an essential role in most profitable franchises, they are not the be-all and end-all of business operations.

5. Greater flexibility in franchise investment

Flexibility in how much you need to invest and who can help you invest in a franchise has also contributed to franchising’s growing popularity. Now, potential franchisees can choose between a business that requires an initial investment of £500,000, or a business that asks for £15,000. The range is enormous and has broken down barriers to entry amongst those who may never previously have been able to afford a franchise. Likewise, a growing number of financial institutions are partnering with the British Franchise Association (bfa) and established franchises to offer financing packages. In some cases, these banks will cover up to 70% of the initial investment in a franchise. All of these factors have resulted in fewer obstacles to those who want to become franchisees.

Conclusion

There exists a wide variety of reasons that franchising has grown in popularity over the last decade. First and foremost, it has demonstrated that it’s a business model that can succeed, should basic principles be followed. However, franchises have also worked hard to develop their franchise packages and ensure they’re making an appealing offer to franchisees. At the same time, financial institutions have begun to recognise the benefit of financing franchisees, and a more substantial amount of funding has become available. Combined, these factors have resulted in franchising expanding to new audiences and converting many business-orientated individuals into the next generation of franchisees

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