11 June 2015
UK Economic Recovery Reflected in Boost to Franchising Sector
With more than 500,000 Brits employed in the franchising sector, which has a collective turnover in excess of £13.7 billion, it is small wonder that attendees at the British & International Franchise Exhibition were quite so upbeat.
With over 500,000 Britons now employed in franchising across the UK and with the industry turnover amounting to £13.7 billion, the organisers of the British & International Franchise Exhibition 2015 understandably maintain there has never been a better time to adopt the franchise business model.
The two-day event is the UK's largest international franchise exhibition. This year it played host to more than 100 franchise brands across a wide range of sectors, including property, food and drink, retail, homecare, fitness and cleaning.
Adrian Goodsell, Director of Franchise Sales at the Venture Marketing Group, the show organisers, said: "Being part of a franchise provides an excellent chance to start your own business, but with the measured support of an established brand behind you.
"This show provides a rare platform to get face-to-face with top international professionals. It allows you to take on-board sound advice before starting on your own journey."
Underlining the vibrancy of the sector, Andy Brattesani, Head of Franchising at HSBC, one of the event's sponsors, said: "This year will mark a turning point for ambitious British businesses, as they look to capitalise on the UK economic recovery and invest in growth.
"Franchising can be a safer option than going into business on your own. A franchisee should have a tried-and-tested format to follow, training and support from their franchisor, and a network of fellow franchisees to speak to. Although franchisees own and operate their own business, they are not going it alone."
A case in point would be Cafe2U, an Australian-founded mobile coffee business. The company has been selling franchises for 10 years, resulting in some 220 people now running their own mobile coffee business under the Cafe2U banner.
Explaining its appeal, Tom Acland, Cafe2U's Managing Director, said: "The Cafe2U franchise model has no hidden costs. The fee covers a Mercedes-Benz van, all the relevant supplies and the start-up costs. All exclusive territories have equal business opportunities, with any variation in return depending on how many hours you wish to work. The difference is entirely up to the operator. Most of our franchise partners successfully run just one van in one territory.
"The model is built around the working week. This means that revenue from events and weekend activities can significantly increase earnings."
Enjoying a similar success, but catering more to four-legged family members, was Oscar Pet Foods, a family-owned business, based in the north of England. Its model sees franchisees providing a pet care service, delivering a range of pet foods, treats and pet accessories direct to the door.
Janet Walmsley, the company's Franchise Recruitment Manager, said Oscar's currently has 90 franchisees across the UK, delivering to 60,000 households. In total, she believed there was scope for up to 350 franchisees in the UK, with each maintaining an exclusive territory.
Explaining its approach to new sign-ups, she said: "We have designed a launch programme that supports all the elements required in the first year of trading. This includes a PR launch and customer acquisition campaign."
One company looking at expanding into the UK and beyond is Nostrum, a Cataluña-based low-cost food provider. The business launched in Barcelona in 2000 and saw The British & International Franchise Exhibition as an opportunity launch its franchise model across Europe. According to Guillemette Schortgen, Nostrum's International Franchise Developer, the business now has 130 stores within Cataluña and the rest of Spain, as well as outlets in Andorra and France.
Addressing its future plans, she said: "At a rate of four franchises opening a month, we are looking at reasonably rapid expansion for Nostrum. Part of our thinking is that we would like to appoint master franchisees – operators with the financial capacity to open a kitchen close enough to supply a minimum of 50 stores."
Somewhat further down the international franchising route, Global Photo Booths has just sold 15 of its units to operators in Russia. Dave Prosser, Sales Director at the Worcestershire-based business, said: "We have been manufacturing photo booths for the last five years, all with our own proprietary software. We now have customers as far afield as Canada, Hong Kong, Malaysia, Nigeria, Singapore and, most recently, Russia.
"Each franchisee covers an exclusive and clearly-defined geographical territory, all based on a variety of criteria. This is intended to give every franchisee an equal opportunity, no matter which territory they have purchased."
The cost of each photo booth to a franchisee is £7,495 (HK$90,000). There is also a monthly management fee of £495 (HK$6,000), which is designed to cover search engine optimisation (SEO) and 24/7 support.
Another company enjoying the benefits of international franchising success is Anytime Fitness, with the Minnesota-based gym operator now having 2,800 clubs across the world, as well as some 2.5 million registered members. According to Richard North, the company's UK Franchise Sales Manager, the business now opens a new club every working day.
He said: "Anytime Fitness is in 23 countries around the world, including China, Dubai, Malaysia and Singapore. We also have two clubs in Hong Kong.
"It will typically cost a minimum of £260,000 (HK$3.1 milion) to open a new club. This covers the cost of the franchise fee, security fit-out and all costs related to first opening the doors.
"Typically, equipment is purchased on a lease scheme. Lease purchase payments are paid monthly for between three to five years, after which the franchisee owns the equipment. More than 60 per cent of franchisees actually go on to own more than one club."
While many companies were looking at exporting western know-how into Asia, one London-based company seemed to be prospering by doing just the reverse. The Chopstix Noodle Bar, an Orient-style fast-food operation, now has 45 restaurants operating across the UK and the Republic of Ireland.
With his PR hat clearly on, Menashe Sadik, one of the company's Founding Partners, said: "If you have ambition, an entrepreneurial spirit, experience in the food industry and the desire and passion to run your own business, then you could be our next Chopstix franchisee or license owner."
Despite the impressive growth of Chopstix, the granddaddy of fast-food franchising clearly remains the mighty McDonald's. It was no surprise, then, that the burger giant also had a notable presence at the show.
Addressing an audience of would-be McDonald's franchisees, Bryan Rupping, who runs two McDonald's outlets in the south of England, said: "It took nine months to complete my training. This was a mixture of actual work in restaurants and classroom study.
"As a franchisee, it's a hands-on role leading the team. We also become very much part of the communities that we serve. Being a franchisee is not for everyone."
According to Rupping, a franchisee since 2011, it costs between £125,000 to £325,000 (HK$1.5 million – HK$4 million) to set up a McDonald's outlet. On top of that, there one-off franchise fee (HK$360,000) and a training deposit (HK$60,000), refundable when training is completed. Where he's 'lovin' it' or not goes unrecorded.
The British & International Franchise Exhibition 2015 took place at London's Olympia from 13-14 March.
Simon King, Special Correspondent, London