Poundland Franchise - Do They Actually Franchise?

07/12/2018 08:00 | Start a business

poundland franchise

In recent years, Poundland has become one of the country’s most recognisable and popular discount retailers. This makes it a tempting target for those looking to open their own franchised business. Here, we take a look at whether the company offers franchising opportunities and what alternatives to the discount chain are out there.

Poundland franchise UK

Poundland is one of the largest discount retailers in the UK, expanding to such a size that it has now spread overseas. The business was founded in 1990 and was an immediate success. By the end of its first year, several new stores opened. Through 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 know today. Though it had grown into a multi-million-pound business by 2004, the economic recession stimulated further growth, as customers cut back on spending and looked for ways to make savings wherever possible. By 2006, the company recorded a profit of £4.1 million, and by 2009, this was as high as £12.7 million.

In 2010, the company sold to Warburg Pincus for £200 million, who then floated the business in 2014. In 2016, Steinhoff international acquired it for £610 million.

Poundland franchise opportunity

Currently, Poundland does not offer franchising opportunities. Though in the past it has considered doing so, there are no plans to adopt a franchise model to facilitate growth in the UK. At the moment, the international arm of Poundland, known as ‘Dealz,’ is also operated according to a private ownership model. It boasts stores in Ireland, France, Spain, and Poland.

The company's overwhelming success has allowed it to achieve rapid growth over a relatively short period, allowing it to expand without adopting the franchise model. Though it may consider master franchising arrangements to facilitate movement into new international markets in the future, it is unlikely that franchising will be an option in the UK going forward.

Poundland franchise cost

As Poundland doesn’t offer any franchise opportunities whatsoever, it’s impossible to put a price on an individual store. However, we can look at the business’ financial performance figures over the last few years. In the first six months of 2018, the chain posted sales of £1.1 billion, down 5% on the same period the year before. However, Poundland is still outperforming the vast majority of retailers on the high street, and its managerial team argue that the chain is both stable and secure.

However, there are financial difficulties at Steinhoff International, Poundland’s parent company. Recently, discrepancies in Steinhoff’s accounts saw 90% of its share value wiped off in a matter of days. This resulted in many rumours suggesting that Poundland was soon to be sold on again. To counter these harmful rumours regarding the business’ instability and to guarantee Poundland’s continued independence, the chain replaced £180 million in investment that was earmarked to come from Steinhoff, with an independent loan. This has acted to secure the business’ future and limit the damage Steinhoff would do if it suffered further problems.

Poundland competition

Poundland has managed to outlast and out-compete the vast majority of its competition, ensuring that it remains the number one discount store in the UK. Initially, Poundland faced stiff competition from both 99p Stores and Poundworld, as well as other chains such as Wilko and Home Bargains. The competition was particularly intense in the midst of the economic recession when a high number of discount retailers competed for a growing market.

In 2015, Poundland acquired the 99p Stores business and began converting these stores into Poundland-branded locations. Though a number of these stores were forced to close the following year, the vast majority remain in operation. In early 2018, the announcement came that Poundworld was struggling financially. In July, they entered into administration, and by August, all the business' stores had closed. This means that, out of the three biggest discount chains, Poundland is the only business still standing.

Franchising alternatives to Poundland

Perhaps due to the success of Poundland and the intense competition within the sector, there are relatively few franchises considered as serious alternatives to the chain. While discount retailers would seem to suit the franchise model particularly well, the difficulty in establishing such a business in a saturated market can be intimidating. Despite this, at least three franchises have attempted to do so, and all are now resounding successes.

Cash Generator

Launched in 1994, Cash Generator is just a little younger than Poundland. Despite being substantially smaller than its most obvious competitor, it still boasts a remarkable 700 franchise units in around 21 provides consumers with value for money purchases and considerable savings, allowing it to thrive in similar economic circumstances to Poundland. To become a franchisee, you'll need to raise an initial investment of £80,000. However, a total investment of nearly £240,000 is required in the long run.

Cash Converters

Cash Converters is a second-hand goods specialist that offers would-be franchisees the opportunity to own and operate a high-quality, profitable retail business. With an established brand and a strong franchise network (the franchise encompasses 700 locations, in more than 20 countries), Cash Converters is one of the most attractive investments on the franchising market. A minimum initial investment of £39,000 is required to launch a franchise, though a total investment of approximately £100,000 will be needed to secure its future.

CEX

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, mobile technology, or hard to find electronic equipment. With such a recognisable brand image, it's safe to say that the £40,000 required to invest represents excellent value for money. The franchisor is also able to offer high quality support to all new business owners.

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