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Recession? Not in the franchise industry! According to recent research by the British Franchise Association and NatWest, the number of franchised units has increased by 4pc in the past year, rising to 40,100 in the UK and 929 franchises in total, with 29 new systems. This means that the franchising industry in the UK is now contributing around 13 billion to the nation's economy and looking ever healthier, even as many traditional high-street businesses are struggling to thrive.
This figure is an increase of 8pc from the previous year and is attributed to two things: the greater number of franchise units and the increase in actively franchising systems. Here is a closer look at some of the positive trends associated with the franchise industry and some of the different areas that are benefiting from the growth in successful franchising.
81pc of franchisees also believe that they have a real competitive advantage through owning their business via the franchised model compared to small independent businesses. Confidence is a key measure for economic success and in fact much of the economy is predicated upon business confidence. For those considering investing in a franchise, this confidence translates into an ever broader offer of varied franchises, from traditional fast food and catering through to business services, printer inks, dating services, nursery services and eco-friendly consultancies and many more. The variety of buy-in costs is attractive too, with an increasing range of franchises available to invest in with less than 5000 of capital.
The franchising model is proving to be good news for employees too. Those involved in the industry are now estimated to be 594,000 in total, a rise from 521,000 franchise employees in 2011. Part of this has been attributed to the increase in flexible and part-time work. Franchising continues to offer some excellent opportunities for those seeking part-time work and there are a number of franchises which have been set up specifically to cater to people with families or other obligations who want to enter franchising in a 'softer' way and build up their businesses until they are ready to take them forward on a full-time basis. Many franchisees start up their new business on their own and perform all the roles involved until their business grows enough for them to start taking on new staff.
The franchising sector is continuing to mature and the franchisee base is getting older, with a mean age of 49 in 2012 compared to 46 in 2005. Franchisees are also generally becoming more educated, which is broadly in line with the UK's tendency towards higher and further education. 72pc of franchisees are still men, although the gender disparity is reducing over time as 38pc of new recruits to the industry were female in 2012, compared to 16pc just six years earlier.
The average franchise cost is 14,000 for those investing in personal services, through to 105,000 for those investing in catering or fast food. Average turnover for each franchised unit, on the other hand, stands at just under 350k, which is a rise of four per cent from 2011. An increasing number of new franchisees are entering the industry for second careers, including a large number of new investors who previously worked in the public sector and who have had severance packages to invest in new ventures. Many people who formerly worked in corporate roles are now keen to be self-sufficient and take responsibility for their own futures through business ownership. The franchise model is seen as attractive because it offers a proven system, a recognised brand and a strong network and support model.
Most franchises are still operated as single units, with around 73pc of franchisees owning just the one franchised business. However, it's interesting to see that the number of franchisees with multiple units is growing, to 27pc in 2011 compared to just 22pc in the previous year. Profitability across the industry is also looking good and there has been a decrease in the number of franchise units that are reporting a loss.
In short, franchising offers some excellent opportunities for those looking to become self-employed and benefit from having their own business with a proven system, affordable entry costs, support and training, a recognised brand and the help of an established and comprehensive network.