The level of success of a franchise entity compared with a stand-alone business is well documented, but how about an already successful overseas franchise network looking to branch out into new countries, in this short report we discuss some of the elements why franchisors are so keen to explore the UK for new revenue generation and expansion.
Franchising In The UK Is Unregulated
Compared with most other countries, the fact that franchising in the UK is unregulated will not have been missed by overseas franchisors wanting to enter the UK, most of these brands will be used to regulated activity and disclosures, so they will already be well versed to enter the UK market.
Whilst there have been calls to regulate the franchise sector for many years, this is still very much a talking point with no signs that it will happen anytime soon, this can only be seen as a positive step to encourage further franchising investment into the UK.
The Total Number Of Franchise Systems In The UK Is Small
Researching for this report to obtain a definitive figure has been a challenge! However, without being too specific the number of franchise systems in the UK hovers at the 1000 mark, and this is good news because it does show that the UK is still way down on other developed countries, for example, when we think about franchised businesses, most people align that with countries like the United States and Australia to name a couple, and these are up to 5 or 10 times larger with franchised systems, which in percentage terms compared with population is quite considerably larger than the UK, showing again the opportunity to launch in the UK.
The UK Economy Is Stable
Of course, several months of pandemic uncertainty has been terrible for everyone, and not one country has been immune, however, recent reports that the UK economy will bounce back more strongly than predicted is welcome news for any type of investor, already seen as a stable market, with a high population on a small island with high spending power is good news from outsiders looking in and this leaves little doubt within many companies due diligence when looking to expand.
Franchising Is Currently Booming during 2021
Many employees have either been displaced or made redundant during the course of 2020 and 2021, and even the fear of this creates an environment whereby a sense of fight or flight response is considered, this often unflappable group would never even consider anything other than employment but situations often outside of their control will encourage them to look at alternative options, such as self-employment and this is where franchising comes into its own, where ‘franchising’ in general has been overlooked in the past, often purely because of the incorrect thought process that it is maybe reserved for people or companies other than ex-employees.
Franchising, now it is on the radar, could be the difference between being made redundant again or instead, being in charge of your own destiny, and whilst it is not really a fair reflection to say that a franchisee cannot lose their own franchise, or the franchise will not suffer in a poor economy, franchising has proven over many decades one of the best ways of investing capital into a business opportunity.
It is often repeated in franchising circles that one of the reasons that some people want to enter the world of franchising as a franchisee is that they want to be in business for themselves, but not by themselves, many consultants will remark that this is a common quote by individuals when speaking to them, it is a welcome thought too as that does show that the intention is there and will be well received by franchised brands looking for the right fit, it could be a case of franchisors literally making themselves available (via marketing) to this highly receptive group of potential franchisees.
Franchisors Need To Show Expansion To Fuel Franchise Enquiries
Franchisees are rarely drawn into a sleepy network, far better to see a brand that is growing and going places, with creative PR and good news stories, this can further fuel franchise enquiries because information will be available in places other than the franchise directories, this will be great for any brand at is highly likely that any potential franchisee will look to do some further research on any franchise give that this might be the very first time they will be looking to buy a franchise, and the fact that it is a considered purchase, searching the web and picking up any information they can to help them come to a decision on whether it is the right brand or business for them.
Risk Versus Reward Of Expanding Into The UK
By and large, the rewards probably outweigh the risk, however, launching into a new country is not without risk! How the franchise wants to expand can make an impact of the growth of their network. Do they grow via a UK Master Franchise? This is the most likely route as it will mean more hands-off from the overseas entity, while they then end up with someone local, who understands the local market and works within the parameters of the local law, but who might also be underfunded and could hamper the natural growth. Then there is the option for the holding company to open their own corporate site, and ensuring the most appropriate UK team at an arms-length distance can be equally challenging, then there is a question on what will happen with site two, three and so on!
The UK could well be a great option for you to grow, especially if you are overseas and are looking for International growth, lets discuss the merits of this when you are ready to do so!
This post was written by Richard Pakey, Regional Director at Lime Licensing Group.
