Navi Mumbai, Maharashtra -- (SBWIRE) -- 03/23/2012 -- Franchising Market Report 2012

This Market Update examines the UK franchising industry and updates the key issues affecting the market since this report was last published in 2010. Despite the UK economy suffering badly as a result of the global financial crisis in 2009, the UK franchising market has been resilient and grew by 3.5% between 2008 and 2009. As the economy strengthened in 2010, growth increased to 5.1%, and despite the return of financial difficulties, growth is estimated to have been 3.2% in 2011. In 2011, the value of the franchise market was £12.8bn, 3.2% higher than in 2007 before the recession struck.

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Franchising has continued to show its resilience both in terms of revenue and in terms of the number of franchisees and franchisors. An estimated ten new franchisors are thought to have entered the market in 2011, along with 200 new franchisees, across six distinct sectors. Banks are keen to back new franchises, as they are generally more successful upon start-up than new businesses. For instance, in 2011, NatWest announced that £100m of loans would be available, with specific concessions for new franchisees.

Certain sectors have performed more successfully in the past 5 years than others. Hotels and catering, personal services and business and communications services have all shown growth since the recession, while store retailing has bounced back since significantly declining in 2008. On the other hand, property services and transport and vehicle services have fared worse, as consumer demand has declined.

The franchising market has been lucrative because it takes advantage of the business models established by successful brands. For an average investment of £46,000, franchisees get the opportunity to operate a proven business model with support from the franchisor. In return, the franchisor earns continuing fees from the franchisee and benefits from quick expansion.

Key Note estimates that the UK franchising market will grow by 1.6% in 2012 in terms of turnover, reflecting the UK’s poor growth forecasts and rising unemployment. Rising unemployment is one potential reason for why the volume of franchisees has been forecast to increase in 2012.

With large numbers of public-sector workers made redundant, many could turn to franchising as a form of employment. Personal services and hospitality franchises — driven by increased domestic tourism — should continue to grow. However, franchises that require the use of a private car could struggle, due to the increasing cost of fuel and motoring in general.

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