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Business format franchising is a popular and successful way for companies to expand and for people to start their own business with less risk.
How franchising has increased
In 1984, sales of products or services through franchised outlets in the UK was worth less than £1bn. By 2002, this figure had risen to £9.2bn. The number of franchise systems and franchised outlets has also increased substantially.
Franchising helps companies expand
Franchising is growing globally, particularly in continental Europe. It makes it easier for companies to expand internationally - some franchising companies are now among the largest multinational operations in the world.
Franchising trade body
There's no regulatory legislation that applies specifically to franchising, as there is in the US. However, there is a trade body (the British Franchise Association) which sets the standards for the business conduct of franchising companies.
What is franchising?
Franchising is a system for marketing goods or services. The franchisor will grant a licence to a franchisee to operate a business under a name and system to market your products and/or services for a specified period.
The franchise agreement
The franchise agreement is usually subject to renewal by the franchisor, provided the franchisee is not in serious breach of its terms.
The appeal of franchising
Franchising can offer the franchisee less risk. The franchisee trades under an established name, using a proven, successful business system. They enjoy the benefits of national advertising and marketing programmes, and much better purchasing power. Franchisees don't generally need any previous experience of a type of business, as training and ongoing support is provided.
Franchisees
The franchisee also has the benefit of the full commitment to the continuing success of their business, since the franchisers income is dependant on theirs. If they aren't successful, neither are is the Franchisee. This close inter-dependence is unique to franchising.
How successful are franchises?
Franchising relies for its success on its popularity with the franchisees. So it's important to know how successful franchisees generally are in the marketplace. You can find out from the annual NatWest/British Franchise Association survey. This has consistently shown that the failure rate of franchisees for financial reasons is substantially below that of the failure rate for independent small business start-ups.
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