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The U.K.: Your European hub?

 The U.K.: Your European hub?

The U.K.’s franchise scene is brimming with both domestic and international brands that have successfully caught the attention of its discerning consumers. But in a post-pandemic and post-Brexit world, is there room for further competition?

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Words by Kieran McLoone, editor of Global Franchise

The U.K. has been recognized as a small island with huge franchising potential for a number of years, as shown by the variety of large international names that have opened countless units across the country. All the biggest brands in the food and beverage industry are present – including the likes of Domino’s Pizza, McDonald’s, KFC, Burger King, Subway, and Five Guys – but beyond QSR, the market is populated by a number of other sectors rife with successful concepts.

In fact, according to the British Franchise Association’s (bfa) latest study from 2018, 935 franchise brands operate in the country, with an estimated 700,000 people working in the franchising sector; generating revenues in excess of £17bn, or around $23.77bn.

These figures are set to be updated with the release of the bfa’s newest survey later this year, but the message is clear: franchising is a popular and lucrative business model in the U.K., and even a global pandemic can’t put a stop to the opportunity that it presents.

“Not a lot has changed in terms of why people see the U.K. as attractive, even after the pandemic,” says Pip Wilkins, CEO of the bfa. “We’ve got a relatively stable economy and always have done. Franchising in the U.K. is unregulated, which is attractive.

“Not a lot has changed in terms of why people see the U.K. as attractive, even after the pandemic”

When you look at legislation in places like the U.S. and Australia, there’s a lot you need to do from a legal perspective to comply and go ahead. We are self-regulating here, and the banks are massively supportive of franchising.”

Entering the market, on your terms

Because the franchise market in the U.K. is a relatively mature one, businesses can employ a number of different expansion methods and still find a whole host of entrepreneurs willing to sign up and grow. In fact, around one-third of U.K. franchisees operate multiple units as of 2018 – a figure that was only around 25 per cent in 2013, just five years prior.

“Really ambitious multi-site and multi-brand franchisees are a trend that we’re seeing here, and there’s a whole tribe of multiunit franchisees in the U.K. now,” says Suzie McCafferty, CEO of franchising consultancy Platinum Wave. “There are some serious multi-site operators that used to own concepts like Domino’s Pizza and KFC, who now often have 10 or 20 premium brands as part of their portfolio.”

The popularity of multi-unit franchising the world over was highlighted by Global Franchise’s recent content campaign, Multi-Unit Month, but it’s certainly not the only method that brands can use to grow and thrive throughout the U.K.

As Gordon Drakes, a partner at law firm Fieldfisher, explains: “Master franchising is a very common model which we’re seeing a lot of in the services sector, especially. It would typically require the master franchisee to open a number of units themself before sublicensing down, and we see that but less so than multi-unit.

“Really ambitious multi-site and multi-brand franchisees are a trend that we’re seeing here”

“Joint ventures are often talked about, but in practice I don’t see them that much in the U.K. I’m only aware of two recent examples, one of which was Wingstop a few months ago. The brand entered the market through a multi-unit agreement with a franchisee, and then decided that they wanted to invest their own funds to accelerate that growth.

“The other big one was a joint venture with Five Guys. What tends to drive a joint venture is the finance side of things – joint ventures can be very complicated things to set up, though, so I don’t see them as much.”

A discerning consumer base

For many reasons, the average U.K. consumer is a popular prospect for franchise brands of all sectors – both in terms of prospective franchisees, and also an ideal audience for products and services.

There’s zero language barrier with other English-speaking countries, for one, which isn’t an aspect that brands can count on elsewhere in Europe. This can be a huge draw, as it means that marketing materials don’t need translating, and neither do franchise-specific documents like the FDD.

U.K. consumers are also abreast of the latest tech trends, too, which can either be a benefit, or a problem for franchise concepts that may be lagging behind.

“The U.K. consumer is very tech-savvy. You need to have an offering that’s very sophisticated with e-commerce and in the ways that the brand interacts with consumers online,” says Drakes. “If you’re not at the forefront of that, you’ll be lagging behind brands already established in the U.K.”

Aside from tech, there are other reasons why a large international brand may not quite gel with U.K. audiences: “An interesting example is Chick-fil-A, which had a bad time in the U.K. press due to the story of the founders and their religious leanings. That didn’t resonate with some U.K. consumers,” says Drakes.

“If there’s a cultural or prominent dynamic about a brand, they need to be wary. British society is quite secular and consumers in this country don’t like brands that are overly earnest about their cultural or religious values.”

“You need to have an offering that’s very sophisticated with e-commerce and in the ways that the brand interacts with consumers online”

Chick-fil-A opened in the U.K. October 2019, and was met with protests from LGBTQ+ advocates upon arrival. It soon announced that it would be closing the store; an indication that even a strong brand name in the States sometimes isn’t enough for expansion across the pond.

Brexit: a roadblock for your brand?

Anyone following European politics over the past few years will know that the U.K. officially left the European Union on the 31st December, 2020 at 23:00 GMT. The exact implications of this event are still yet to be determined, but franchisors cannot afford to completely ignore what it could mean for their growth in the U.K. – and beyond.

“A question which is too generic and difficult to answer is: what impact has Brexit had? That needs to be thought through and drilled down into,” says Graeme Payne, partner at Bird & Bird LLP. “Depending on your business, Brexit may have had zero impact. But if you’re heavily reliant on supply chains, then there’s been a practical as well as quasi-legal impact on supply chains.”

As always, your own due diligence is key to determining whether political or cultural shifts such as Brexit could hamper growth. That being said, there are still a number of sectors that seem largely unaffected by either Brexit, or the global pandemic.

“Depending on your business, Brexit may have had zero impact.”

“Both because of the pandemic and because of the U.K.‘s socio-demographic makeup, domiciliary care businesses will continue to do well,” continues Payne. “But almost like food, people are going to be very selective and if one provider doesn’t deliver, people will happily shop around.”

Should you franchise in the U.K.?

Almost any kind of business can thrive in the U.K., provided it prepares thoroughly beforehand and presents an exceptional product or service. Consumers in the country respond to quality, but building your network on a legacy alone won’t always be enough to succeed.

“The first thing we say to brands coming into the U.K. is: don’t expect to take your brand and pop it into our country and expect everything to work perfectly. Coming into the U.K. is like going into any other market; whether there’s legislation and regulation, or not,” says Suzie McCafferty.

“When we’ve been helping to land food franchise brands in the U.K., it’s about looking at everything from the menu, to the profile of customer, to the in-store experience. Do the research first into all of these areas, and then take the time to adapt your model properly to the U.K. market.”

Three big U.S. brands growing in the U.K.

Popeyes

The Louisiana fried chicken franchisor has plans to launch in the U.K. this autumn, and recently announced the key players helming the Popeyes UK leadership team. CEO Tom Crowley is set to lead the endeavor, and will be joined by Tom Byng, CDO, David Carey, CTO, and Neil Williamson, COO. Collectively, the group has over 100 years of collective F&B experience.

Wendy’s

Known for its iconic square burger patties and snarky social media pages, Wendy’s launched in the U.K. in June 2021 with plans to expand throughout the southeast over the coming year. It will use its platform in the U.K. to ultimately develop throughout Europe; showcasing the springboard potential of the country.

Send Me A Trainer

The one-on-one personal training franchise that launched in 2020 has already identified the U.K. as a viable development market, awarding its first overseas agreement in the country in January. Throughout 2020, the brand awarded 10 territories across the U.S., and plans to launch in Glasgow and then expand throughout the U.K. soon.

Key Event

International Franchise Show

When: October 1 - 2, 2021

Where: Excel London

Why attend:

• Over 250 exhibitors, including more than 50 international brands

• An estimated visitor count of more than 10,000 is expected, any of who could be a possible master franchisee

• More than 25 franchising industries are represented

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