Why Would You Franchise in the U.K.?

Why Would You Franchise in the U.K.?

Don’t be put off by Brexit procrastination, says Brian Duckett. The UK has a proven record of franchise success and may be the ideal location for your next expansion

The commercial property market is a nightmare. Candidates take forever to make a decision. Roll-out is slow until there’s evidence of success. And now there’s the perceived threat of Brexit. That’s what some prospective investors say of the UK.

So why would you bring your franchise to the UK when there are many other places to go?

Let’s start by getting Brexit out of the way. Nobody knows what’s going to happen with that but anyone taking on the master franchise for the UK is going to be operating that business in, and usually only in, the UK.

Therefore, whatever the UK’s trading relationship with other countries, what matters is the UK. If there is demand for the product or service which is the subject of the franchise, then there’s no reason not to go ahead.

Brexit may be used as an excuse from a candidate for delaying making a decision but it will not be a valid excuse. Find out the real reason for their reluctance, answer that objection, and away you go.

Brexit effect

Many US, Canadian and Australian brands have chosen the UK as their first step into Europe, subsequently using it as the location for a European head office. Will Brexit affect their ability to easily move from there to other European markets? 

As far as I know, there has been no mention of restricting the export of business formats from the UK to EU countries; the only potential restriction seems to be on the movement of people. Anyone buying a master franchise to operate in Spain is likely to be Spanish and is likely to be operating solely in Spain, so again no problem.

With more than sixty million people who need to eat, buy clothes, maintain their properties and businesses, educate their children and look after their old people, the UK itself is one of the world’s largest economies. It’s also a mature franchise market. There is no restrictive, franchise-specific legislation.

There are however many experienced franchisors and franchisees who understand how franchising works. Both parties are actively supported by the banks, which have seen the continuing growth and success of franchising here over the last thirty years or more, and by a thriving British Franchise Association.

There are now a number of franchisors, and indeed multi-unit franchisees, who are looking for additional opportunities. Some franchisors are building multi-brand franchise groups by acquiring existing networks from within the UK or master licences from overseas.

Some multi-unit franchisees are considering trying out life on the other side of the relationship by becoming a franchisor or master franchisee. These people are good operators;  they understand franchising;  they have the money or the track record to borrow the money;  and the banks are willing to consider lending it.

A few words of caution – and a guide to benefits

Firstly, it’s true to say that UK buyers rarely get carried away with enthusiasm and are unlikely to do a deal quickly. They will take a long time getting into the detail of how everything will work and will check out the performance of a franchisor both in their home market and in other international territories.

They will probably want to see evidence of some market research having been done on the UK market and they will want to know what support will be available, online and in person, once they start trading.

The good news is that once they make up their mind to proceed, doubtless having prepared a comprehensive business plan and budget, they will do so with efficiency and effectiveness both in building the brand and building their franchised network.

The second caveat is around payment of the initial fee for the rights to operate in the UK market. In days gone by the banks would include this element in the amount which they were willing to lend. This is now less likely as they take the view that such amounts are an equity investment by the new business owners.

Everything upfront

This doesn’t mean that the normal country exclusivity fee cannot be obtained but it often means that the suggestion will be that is paid in a number of instalments. These could be linked to time, number of units opened or other criteria but there will be delays.

In my opinion this is not a bad thing. I would always prefer to pick the right master franchisee who will build the business over time than simply pick the one who has the money to pay everything upfront.

To finish on some more positives, the UK has some of the best franchise consultants and lawyers in the world, some of whom have their own networks in many other countries. For franchisors coming from English-speaking countries the particular advantage is that the UK can indeed be used as the first step towards global presence.

Once a business has proven it can travel, firms such as my own can introduce it to associates around the world who in turn will help to find the local franchisees. This is often done from a database of qualified potential investors but can also include advice on how best to market the opportunity in a particular country.

Lastly, let’s look at the UK’s track record in welcoming overseas franchisors to its shores. Around twenty per cent of the franchised networks currently operating here have their parent offices in another country.

This shows that many concepts which originated elsewhere have been adapted to our market by people who understood franchising and who were committed to making those concepts succeed.

Useful links:
5 more reasons to consider a UK franchise

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