Should you take on a franchise?

Posted 07/09/2017 : By: Debbie Dennis

It contributes more than £15bn annually to the British economy and has seen a 70 per cent increase in its workforce over the past decade. Could taking on a franchise, with the flexibility and autonomy it promises, be the answer for corporate leaders seeking a fresh start? Director asks a selection of sector experts and franchisees for their insights.

In a column for Malaysian newspaper The Star last year, an astute business commentator going by the name of Sir Richard Branson noted that “the world is acquiring a more entrepreneurial mindset, especially with the emergence of a younger generation that prizes flexibility”. It should come as little surprise, then, that franchising – in essence, the granting of a licence by one party (franchisor) to another (franchisee), enabling the latter to trade under the former’s brand – is gaining in popularity.

According to the latest survey by the British Franchise Association (BFA) and NatWest, published last year, there were 44,200 franchisee-owned businesses in the UK employing 621,000 people, representing a 70 per cent growth in the sector’s workforce over 10 years. The researchers also found that its annual contribution to the British economy was £15.1bn – an increase of 46 per cent over the decade. More than half of the franchisees reported that their annual turnovers exceeded £250,000.

From the franchisor’s point of view, licensing a brand makes perfect sense. Who wouldn’t want to harness the capital, skill and effort of other highly motivated people to replicate a proven business model, while retaining ownership of all intellectual property and avoiding major investments and liabilities? But what is driving so many more people to become franchisees?

Nicola Lucas is an associate at Nockolds Solicitors, a practice that advises on all aspects of franchising. She believes the sector’s rise is rooted in the “broader increase in self-employment after the 2007–08 financial crisis. This has given people, perhaps having been made redundant, more freedom to carry out the businesses they want to.”

Lucas also says younger people, especially those lacking a killer commercial idea of their own, have been increasingly drawn to the concept. A fifth of new franchisees in 2014-16 were under 30, according to BFA/NatWest research. “Millennials don’t want to wait for work to come to them,” she says. “They’re quite different about how they approach their careers.”

But it’s not just a generation Y thing. People of all ages are benefiting from the relative autonomy offered by a career as a franchisee. As Martin Jones, MD of Home Instead Senior Care, wrote in a letter published in the March issue of Director: “Franchising as a business model provides older people, perhaps disenchanted with their careers but apprehensive about going it alone, with the perfect way to set up their own business and become their own boss, within tried and tested parameters.”

Lucas adds that the relative flexibility of franchising is an attraction for anyone needing a better work-life balance. “A lot of options suit people who need a vocation that fits around their lives, such as parents of young children,” she says.

Franchising has matured greatly over the past decade, thanks in no small part to the BFA’s strong guidance, according to Nick Williams, who has been managing consultant at Ashtons Franchise Consulting since 2001.

“The model is able to offer investors a genuine, replicable, successful way of establishing their own business, with an expectation of support, guidance and mentoring thereafter at a personal and business level,” he says.

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