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International franchisors should take advantage of the U.K.’s absence of a language barrier.
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Words by Kieran McLoone, deputy editor for Global Franchise
• Population: 66.65 million
• Size: 243,610 sq. kilometers
• GDP: $2.38tr
• Franchise market value: $21.5bn
Despite its comparatively small surface area when positioned next to the rest of Europe, the U.K. has a surprisingly deep and intricate relationship with franchising. Both domestic and international brands have managed to thrive in Blighty, and as a result, the country’s youth are hopping on board the franchising train: currently, around 18 per cent of franchisees in the U.K. are under the age of 30.
If you’re looking for a vibrant international market where innovation is being driven by up-and-coming entrepreneurs, and the native English-speaking consumers present zero language barrier for most Western concepts, then this could be the ideal country for European expansion.
From strength to strength
According to a 2018 study by the British Franchise Association (bfa), franchising contributes more than $21.5bn to the U.K. economy and employs over 710,000 people. profitability, and less than one per cent of franchisors closing per year due to commercial failure.
In fact, over half of franchisees in the U.K. declare an average annual turnover of over £250,000 (around $312,740), and the franchise industry’s overall revenue has grown by almost 50 per cent over the last decade.
For proven concepts that generate sustainable revenue, the potential for rapid growth is likely, as 35 per cent of franchisees in the U.K. currently run multiple units; a seven per cent increase since the survey was last conducted in 2015. The United Kingdom’s franchising demographic is also a rich and diverse one, with 65 per cent of people employed within the industry being female.
Tackling the market
The most common approach international brands have when franchising in the U.K. is with a straightforward master licensing agreement: “The majority of large international brands operating in the U.K. do so with a strong master licensee,” says Emily Price, chief operating officer of the bfa. “We see this working best when the international franchisor has an open mind to be flexible and amenable to regionalizing the model.”
That being said, testing the waters is always encouraged: “We would strongly recommend, regardless of the style of franchising, that a U.K. pilot is run and remains as a testbed for developments,” continues Price.
Incoming businesses may still be apprehensive about the potential impact that Brexit will have on franchising in the U.K., but the general consensus is that the separation from the EU is unlikely to affect the laws that impact franchisors within the country, despite the fact that most of the U.K.’s laws are based on those of the European Union.
As always, international brands should conduct thorough research into the specific factors that affect them in this unregulated market, and perhaps consult with the bfa for specialized information: “The bfa often speaks with international franchisors in their due diligence stages for the U.K.,” says Price. “The bfa’s code of ethics and standards provide a fantastic guide for what an ethical business format franchise model should look like.”
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