By Claire West
The latest survey by NatWest and the British Franchise Association (bfa) shows one sector is more than playing its part in re-balancing the economy. While other sectors have struggled, the franchising industry has punched well above its weight over the past year in key areas such as growth, job creation and export.
While UK GDP grew by 0.7% in 2011, the franchise industry increased economic contribution by 8% as turnover rose to £13.4billion. While other sectors contracted over the year, 9 out of 10 franchise businesses posted a profit over the year — reducing loss-makers to pre-recession levels. Further growth is likely as 76% of those surveyed expect business to improve in the coming months (compared to only 44% of all SMEs). Most (80%) believe that franchising gives them a competitive advantage over other small businesses as they have the support of a larger brand.
In contrast to a UK-wide rise in unemployment of 180,000 in 2011, a total of 73,000 jobs were created in the franchise industry. This comes as the number of franchising systems operating right across the UK increased to 929, with 40,100 franchise business units employing 594,000 staff. The number of larger franchise units employing more than 11 staff increased by 30% in the past year according to the survey.
Graeme Jones, head of franchising at NatWest and RBS, said: “The franchising model offers the benefit of appearing to be a larger business, standardised products and quality expectation — advantages all heightened in a downturn. Expectations for growth are high in the sector and we’ve invested in the largest specialist team of managers of any bank to ensure it happens.”
Brian Smart, director general of the bfa, said: “The last few years have put crippling pressure on businesses, creating some of the toughest trading conditions that many have ever seen. However, yet again we see the franchise sector proving its value by generating new sustainable business start-ups, jobs and revenue for an economy that desperately needs them. For those who are considering franchising this is obviously an encouraging sign, but we also stress the importance of thorough research and consideration before making any commitments.”
Strong export activity for goods and services may also have helped franchising weather the economic downturn better than most, with one in three already trading overseas. Franchising also looks to be setting the pace for future export growth, of those non-exporters, 38% plan to do so in the future compared to only 22% of SMEs not already trading abroad.