Poundland Franchise – Does it actually franchise?
Originally uploaded on 07/12/2018. Updated on 10/06/2019.
In recent years, Poundland has become one of the country’s most recognisable and popular discount retailers. Since it was first established, it has expanded across the globe to find international customers. This makes it a company of interest for those aspiring to open their own franchise business. Here, we’ll find out whether the company offers franchising opportunities and whether there are any alternatives to the discount chain out there.
Poundland was founded in 1990 and was an immediate success. By the end of its first year, several new stores had opened. In the 1990s, the business grew steadily but surely, expanding into new markets up and down the country. However, it wasn’t until the late 2000s that Poundland became the high street superpower that we would recognise today.
It was already hugely successful by the time the economic recession hit. As customers cut back on spending and looked for ways to make savings wherever possible, they turned to Poundland for discount purchases. In 2006, the company recorded profits of over £4 million and, by 2009, it had reached £12.7 million.
In 2010, the company was sold for £200 million to Warburg Pincus, which then floated the business in 2014. In 2016, Steinhoff international acquired it for £610 million.
Poundland Franchise UK
Currently, Poundland does not offer franchising opportunities and, although it has considered doing so in the past, the business currently has no plans to adopt a franchise model to facilitate growth in the UK. What’s more, Poundland’s international arm, Dealz, is also operated through a private ownership model. It boasts stores in Ireland, France, Spain and Poland.
Poundland Franchise Opportunity
The company's overwhelming success has allowed it to achieve rapid growth over a relatively short time period without adopting the franchise model. While it might consider master franchising to facilitate movement into new international markets in the future, it is unlikely that franchising opportunities will be available in the UK going forward.
Poundland Franchise Cost
As Poundland doesn’t offer any franchise opportunities, it is impossible to put a price on an individual store. However, we can look at the business’ financial performance figures over the last few years to get an idea. In the first six months of 2018, the chain recorded sales of £1.1 billion, a reduction of five percent from the same period in 2017. However, Poundland is still outperforming the vast majority of retailers on the high street, and its managerial team assert that the chain is stable and secure.
Despite this, Poundland’s parent company, Steinhoff International, have reported financial difficulties. Recently, discrepancies in Steinhoff’s accounts meant that 90 percent of its share value was wiped out in a matter of days. As a result, rumours that Poundland was soon to be sold again spread across the market. To manage these harmful rumours regarding the business’ instability and to guarantee Poundland’s continued independence, the chain replaced a £180 million investment from Steinhoff with an independent loan. This has secured the business’ future and limited the damage Steinhoff could do if it suffered further problems.
Poundland has managed to outlast and outdo the vast majority of its competitors, so it remains the top discount store in the UK. Initially, Poundland faced stiff competition from 99p Stores and Poundworld, as well as other chains such as Wilko and Home Bargains. The competition was particularly intense during the economic recession when a high number of discount retailers attempted to secure their place in an expanding market.
In 2015, Poundland acquired 99p Stores and began converting them into Poundland locations. Although Poundland were forced to close a number of these stores the following year, the vast majority of them remain in operation.
In early 2018, it was announced that Poundworld was struggling financially. In July, the business entered into administration and by August, all the business' stores had closed. This means that, of the three biggest discount chains, Poundland is the only business still standing.
Franchising Alternatives to Poundland
Due to the success of Poundland and the intense competition within the sector, there are relatively few discount store franchises. While discount retailers would undoubtedly thrive under a franchise model, the difficulty of establishing such a business in a saturated market has meant that few have survived. However, there are some successful, recession-proof franchises that are looking for franchisees. Let’s take a closer look.
Launched in 1994 by Brian Lewis, Cash Generator is a slightly younger business than Poundland. Despite being substantially smaller than its competitor, it still boasts 700 franchise units in 21 countries, which makes it the largest network of second-hand product shops out there. There are 200 Cash Generator locations in the UK, selling electrical and media products such as televisions, games consoles, mobile phones and DVDs. However, franchisees who opt to join the brand will benefit from multiple income streams, as Cash Generator offers international money transfers, currency exchange and other financial services as well as second-hand products.
To become a franchisee, you'll need to invest at least £80,000, but a total investment of up to £240,000 will be required in the long run. In return, the Cash Generator franchise team make sure that all its franchisees are equipped with the tools and skills to ensure that their franchise runs smoothly for years to come. New franchisees can expect to be enrolled onto a dedicated, six-week training scheme that will provide them with a basis of knowledge in business management, retail operations, customer service, lending practices, currency and money transfer operations. Having completed this programme, there is no reason why franchisees shouldn’t see success with a Cash Generator franchise.
Cash Converters is a second-hand goods specialist that offers entrepreneurs the opportunity to own and operate a profitable retail business. It is an Australian business that was first formed in 1984, when Brian Cumins opened the first Cash Converters store in Perth. Subsequently, more stores were opened in the country, before the brand was brought to the UK in 1992. International expansion continued over the following years, as Cash Converters was introduced to New Zealand in 1993, France, the US and South Africa in 1994, Spain and Canada in 1995, and Malaysia in 2001.
Today, there are more than 700 Cash Converters stores spread across 20 countries in four continents. 200 of the brand’s stores are in the UK, making it a recognisable brand among Brits. With its established brand identity and a strong franchise network, Cash Converters is one of the most attractive investments on the franchising market. A minimum initial investment of £39,000 is necessary to launch a franchise store, but a total investment of around £155,000 will be needed to secure its future. However, this is a profitable business that states that franchisees could generate income of up to £17,000 every month.
Finally, if you’re convinced that franchising is the way forward, CeX is an interesting alternative to a Poundland franchise. It retails second-hand consumer electronics and entertainment technology and has quickly become the go-to retailer for any customer with an interest in gaming or hard-to-find electronic equipment. This is not all CeX offers, however. Customers can also sell their old or unused technology or media to the business, so it is popular among people who want to make money from old belongings. Stepping inside a CeX store, you should expect to find mobile phones, computers, televisions, video games, DVDs and CDs, all for a fraction of the price of their brand-new counterparts from other stores.
Launched in London in 1992, CeX has expanded over the years and now has a huge international customer base in the UK, Ireland, Spain, Portugal, Poland, the Netherlands, Mexico, India and Australia. The brand currently operates more than 600 stores in total, many of which are run by franchise partners. The brand relies heavily on the franchise model in the UK, as 267 of the 385 UK stores are run by franchisees. To join the franchisee pool, you will need to have funds of between £150,000 and £250,000. This is a significant sum, but it will give you access to a world-renowned brand and an established customer base. If things don’t go to plan and you find yourself regretting your investment, you can turn to CeX’s ‘buy-back guarantee’, which gives you a safety net when you first set up your store. By following the brand’s established business model, however, you are likely to reap the rewards of investing into a world-renowned brand.
Discount stores are a great option for prospective franchisees who want to take advantage of a thriving market. However, they aren’t the only options, so why not read more about our top recession-proof businesses to see if any of them fit your requirements?
Alice Tuffery, Point Franchise ©
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