Franchising guru Richard Pakey discusses why the UK offers plenty of business potential for overseas investors.
This month I will be comparing franchising in different countries and focusing on businesses which seek to branch out into new markets overseas. What are the opportunities and what must franchises consider before putting down roots in the UK? In this article I will discuss why franchisors think the UK is a great place for revenue generation and expansion.
Franchising in the UK is unregulated
The fact that franchising in the UK is unregulated, compared with most other countries, will not have been missed by overseas franchisors. Those keen to explore the options of moving to the UK will have experienced plenty of regulation in other countries.
There have been many calls to regulate the franchise sector in the UK, over numerous decades, but it remains simply a talking point and nothing else. There are no signs to suggest that anything will happen anytime soon, and this can only be viewed as a positive way of encouraging new franchising investment into the UK.
Franchising remains small in the UK
Without being too specific, the number of franchise systems in the UK hovers at around the 1,000 mark. This is good news for overseas investors because it highlights there is still plenty of scope for expansion. For example, franchised systems in the United States and Australia are between five and 10 times larger than in the UK – with regards to percentage of population. Thus, the opportunity to launch a franchise in the UK is huge.
The UK economy is stable
Despite many months of pandemic uncertainty, and no country has escaped this terrible virus, there have been many reports predicting that the UK economy will bounce back strongly. This is welcome news for all investors, as the UK is seen as a stable market, with a high population, living on a small island and with plenty of spending power. This looks good to potential outside investors.
Franchising is booming
Many employees have been made redundant, or forced to accept lower wages or fewer working hours, since the start of the pandemic. This has left many people feeling vulnerable about a future which appears to be out of their control. So they start searching for alternative options, such as self-employment.
And this is where franchising comes into its own. Franchising has generally been overlooked as an option, with many people wrongly believing it is a route into business for only wealthy individuals and large companies.
Yet franchising allows business owners to be in charge of their own destiny. This is not to say franchise companies don’t fail – they do – but for many decades this sector has been considered one of the best ways of investing capital into a business opportunity. Although this phrase has been repeated many times, ‘people become franchisees because they want to be in business for themselves, but not by themselves‘.
Franchisors need to publicise expansion to generate interest
Budding franchisees are rarely enticed by what they see as a sleepy network. Much better to observe a brand that appears to be growing and going places. Such as a business that generates plenty of creative PR, as well as an abundance of good news stories. This in turn will fuel a larger number of franchise enquiries, as more and more information becomes available about the various brands which currently exist across the UK.
Once spotted by potential investors – in this case franchisees – this will inspire budding new business partners to undertake research about a company, to discover whether a particular franchise would be a good fit for them. But if a brand fails to make itself heard in a competitive business world, what chance of it becoming a target of those seeking to move into the world of franchising?
‘Risk v Reward‘ of expanding into the UK
By and large, the rewards probably outweigh the risk. However, launching into a new country is never without its issues. And what route should a franchise take when making such a move? Should it offer a UK Master Franchise? This seems the most likely option because it illustrates that the Global Franchisor is happy to take a more hands-off approach.
Therefore, this is most likely to result in the Master Franchise belonging to a local investor who has a deep knowledge of regional markets and its associated legislation. However, the Global Franchisor will need to feel confident that the Master Franchisor has enough capital invested in the company to maximise business opportunities.
If not, then the Global Franchisor may need to start its own corporate site, although managing franchisees from a distance obviously creates its own problems. Either way, a full root and branch investigation needs to be made before a decision can be taken. Yet the UK remains a great option for overseas franchises seeking international growth. It’s time to start investigating.
