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NatWest Notes on Franchising

Winning Franchise Formula Still a Safe Bet (3 March 2003)


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Franchising is still a safe bet for many budding entrepreneurs, according to the 2003 NatWest/British Franchise Association (BFA) survey, with 91% of franchisees claiming that they made a profit in 2002. 

The industry now has an annual turnover of £9.5 billion and the average franchise generates £299,000, an increase of 2% from 2001. The amount of turnover however, varies greatly depending on the type of franchise operation. 

As the franchise industry is maturing, so are the new franchisees, with nearly 70% over the age of 40, an increase of 20% since 1992. The average length of time for which franchisees have held their business has also increased from 3.9 years in 1992 to 6.3 years in 2002 and the average initial cost of starting a franchise is now £59,200. 

Franchisors remain positive about the future and prospect of expansion, with 79% of franchisors and 62% of franchisees expecting their business to improve in 2003. The average number of franchises operated by a franchisor increased by 9% in 2002 to 49 and this year growth expectations are again high, with the average number franchises predicted to increase by 15% to 57. Training is also now provided by 99% of franchisors, a huge increase from the 68% reported in 1992. Despite their optimistic outlook however, two in five franchisors state that they may not be able to realise these high expectations due to a lack of suitable franchisees. 

Mark Scott, National Franchise Manager, said: "These figures underline the immense contribution that franchising makes to the UK economy. It is encouraging to see that the industry is both profitable and is maturing in terms of both length of service and age of entrepreneur." 

Sir Bernard Ingham, President of the BFA, said: "Two facts from the 19th annual NatWest/BFA survey show how important this sector is. First, the sector is a major employer with a record 326,000 people earning their living in it. Second, its turnover is at a record high £9.5 billion. 

"What is more, franchisors and franchisees alike are very optimistic about the future of their business. With 91% of franchisees reporting they are profitable, franchising would clearly be growing faster if only franchisors found it easier to recruit suitable franchises with whom to develop their businesses."

Key Findings - NatWest / BFA Survey 2003

General

  • There are an estimated 677 franchise systems in operation in the UK.
  • There are an estimated 326,000 people employed in franchising.
  • The initial cost of starting a franchise is £59,200 on average.
  • 91% of franchisees claim to be profitable.
  • On average franchisees pay an estimated 7.2% of their turnover in recurring fees to their franchisors.

Relationships

  • 40% of franchisors report that a lack of suitable franchisees continues to thwart their plans.
  • Relationships between franchisees and franchisors continue to be healthy, with 87% reporting satisfaction in their dealings.

Profile of franchisee

  • It is becoming less common for franchise development managers to specify particular characteristics when looking for franchisees, with 83% not specifying an age range and 94% not specifying gender.
  • Self motivation remains the most important attitude sought (57%), although there has been a marked increased in the number of franchisors looking for candidates who are hard working (20%) and have a hands on approach (13%).
  • 85% of all franchisees are married.
  • 74% of franchisees are male.
  • The average age for a franchisee is 45.
  • Two thirds of franchisees were in salaried employment before taking out their current franchise.

Other

  • Training is now provided by 99% of franchisors, a huge increase from the 68% reported in 1992.

NatWest franchising checklist

  • Take a critical look at your strengths and weaknesses - are you sure you have the capacity, temperament and skills to run your own business? Marketing and selling skills are becoming more important in running a franchise.
  • Make sure you have the full support of your family - the additional responsibilities and demands on your time will inevitably cause some strain.
  • For new franchisors, check they have run a pilot, how long did it operate, is it still trading and what has it achieved in financial terms? If no pilot was operated, how does the franchisor know the franchise and therefore will you be successful?
  • Examine how well known the franchise and its service/product are. A good reputation is a head start in business.
  • Look at the market as a whole - find out who your competitors are and how strong their position is.
  • Examine costs closely, in particular the franchise fee and monthly management fee, and whether they are reasonable and value for money; will the margins be sufficient to support the business after payment of regular fees to the franchisor? As a guide, the average franchise fee is £20,000, although this is skewed in view of a small percentage of higher figures. Ongoing fees average 11.4%
  • Is the training provided by the franchisor sufficient to enable you to run the business successfully?
  • Seek professional advice from an accountant about income and profit projections and from an accountant about income projections and from a solicitor about the legal agreement. Both should have a good understanding of franchising and preferably be affiliated to the British Franchise Association.
  • Talk to the NatWest Franchise section about the financial aspects of running a franchise and ask them to put you in touch with your nearest area franchise manager.


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The Study Prep School
Sue Burns - Jun 15, 2018
"An extremely professional service was provided for our sports day. The photographers are excellent, providing great quality photos of the children in all events. Highly recommend DE Photo to anyone."


Prospect House School
Si Vedat - Jun 13, 2018
"DE Photo were excellent this year. Photographers were great and Richard Chubb was very accommodating."


East Area Prep Schools
Richard Brearley - Jun 08, 2018
"The photographers were excellent and provided a very professional service. I would be very happy to recommend them to other organisations."


Sawtry Colts Football Club
Shelley Harding - Jun 02, 2018
"Tony and his team were a great addition to our football tournament and the quality of the photos they took were brilliant. As soon as we have a date for next years tournament I will be booking Tony and his team as soon as possible. "


Beaconsfield Town Youth FC
Brian Lewis - May 28, 2018
"Very professional, polite and accommodating team. I would certainly recommend them for large football tournaments !"


Wigmore Youth FC
Dan Jones - May 27, 2018
"We had DE Photo at the Wigmore they done an amazing job plus made it a great event. We will look to make further bookings with them."


Bourne Town Juniors Football Club
Steve Moss - May 26, 2018
"Tony and the team attended our Annual Tournament again this year. As previous years, the level of service was outstanding. Tony and the team are a huge part of our event and our team. We look forward to them being involved again next year."


Beaconsfield Town Youth FC
Brian Lewis - May 26, 2018
"Excellent service, very professional and a pleasure to work with. Will definitely recommend them for large football tournaments such as ours !"


Copthorne Prep School
Jeremy Coulson - May 25, 2018
"Another excellent performance from a thoroughly professional outfit. This is the 5th year that we have used DE Photo for our sports day and football tournament and they have always done an excellent job. Happy to recommend them to everyone."


Henfield FC
Nicky Smith - May 19, 2018
"I would highly recommend DE Photo, we have used them for our football tournament every year and the quality of their photos and the service they provide is excellent. They are also super organised, very polite and helpful... we will be booking them again for next year!"


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