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How SME businesses can expand through franchising

Written by Alan Wilkinson on Tuesday, 19 January 2021. Posted in Analysis

A combination of COVID-19 and Brexit has led to an unprecedented year for many businesses across the UK.

How SME businesses can expand through franchising

A combination of COVID-19 and Brexit has led to an unprecedented year for many businesses across the UK. With ONS statistics showing 695,000 workers had dropped from company payrolls since March when the pandemic struck1, the strain of the year’s events on SME businesses is apparent. However, with franchises proving to be stable and, in some cases, thriving over lockdown, there's little surprise that some SME businesses have decided to turn to franchising for expansion in 2020 and onwards. 

The Franchising Centre (TFC) has had an increasing number of enquiries from businesses from a range of sectors looking to franchise. Sectors including the hospitality, education, outdoor, cleaning and healthcare, to name just a few, have all enquired about the possibilities of franchising for business expansion.

“Many businesses have had to adapt to survive over the course of 2020. At TFC we help businesses take that step into franchising, whether that be initially preparing the business to franchise or helping to find franchisees to expand their network. For example, this year businesses in the hospitality industry have been affected by the lack of dine-in customers. So, restaurants have looked to franchise into takeaway businesses in order to expand their customer reach and survive the closure of restaurants,” said Alan Wilkinson, the Head of Franchising at TFC.

“There's a range of benefits to franchising an SME business. The first being that it means you can expand your business into other locations benefiting from the local knowledge of your franchisees. As a business gains a reputation but can’t expand quickly enough to a wider geography, competitors can step in to take that primed customer base. Franchising allows you to develop a network of provision sharing the effort between you and your network of franchisees. 

“The cost of expanding a business is always forefront of a founder’s mind. When you partner with franchisees, you can widen your brand’s reach whilst sharing the costs and rewards. The franchisee certainly benefits from this partnership too as they get to launch a business without the initial start-up costs involved in starting a company from scratch and ongoing support from a team who have experience in running the original business. 

“Of course, you can choose to expand by opening new offices or retail units without franchising, but how committed are those staff running that location for you? A franchisee has skin in the game. They are the business owners of these new locations and their future prosperity is at risk if they put in a lack lustre performance or don’t follow your franchise model and operational guidance. Would an employee reach for growth goals, guard its reputation with their life and readily share best practice with other locations?”

Experienced business owners often make good franchisors. Your deep understanding of the business, what it takes to stay ahead of the competition and how to win and retain customers are all priceless when it comes to developing franchise systems. Choice Home Tutoring and Prefect Equipment are two SMEs who decided to expand through franchising during 2020.  

Colin Murphy from Choice Home Tutoring, a children’s tutoring business, explained how their franchisees helped to adapt the business when the threat of COVID-19 loomed, “Despite the initial panic created when the pandemic hit in March, we worked closely with our franchisees and created strategies together to continue to deliver our services. With more online provision, marketing activity and a pooling of resources, our business is now in a stronger position than it was before March and is still expanding - we're about to sign our next franchisee in Oxford. 2021 is looking very promising.”

Jaqueline Stretch, the Franchise Director of Prefect Equipment said, “We franchised our locker business in February this year because logistically it was becoming too difficult for us to meet the demands of our clients. As our warehouse is situated in Derby, we struggled to install and maintain lockers in distant locations. We now have 12 franchisees allowing us to provide a more localised service to our clients. Because we decided to franchise, we exceeded our sales target by almost four times more than what we expected this year. 

“Before we franchised, we relied on Prefect growing by word of mouth. However, our new franchisees have injected enthusiasm into the business. They are proactive in approaching schools, which has in turn helped us to reach new schools we perhaps wouldn't have found ordinarily. Our business simply wouldn't have been able to grow like it has this year without franchising.”

1 ONS, Labour market overview, UK: September 2020 

About the Author

Alan Wilkinson

Alan Wilkinson

Alan Wilkinson is Head of Franchise Development at The Franchising Centre, working with UK brands wishing to expand through franchising. Alan has 25 years’ experience of developing franchise businesses in the UK, having helped over 125 brands to launch their franchise concepts.

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