British business has found itself facing a number of headwinds over the first six months of 2025. Some have blown from these shores, factors like inflationary pressure and rising costs, while others have blown from across the pond, with tariffs and trade high on the list of concerns of many franchisees.
In this environment, you might be expecting franchisees to feel downbeat. Although, according to the British Franchise Association, the sector contributes over £19.1bn to the UK economy annually and employs over 770,000 people, it is rarely spoken about by commentators and government.
But, all the while, franchisees and their staff have continued to work hard, and as revealed in new Barclays’ Business Prosperity Research, where we survey over 1,000 UK business leaders, few franchisees are expecting a downturn over the coming months, the opposite in fact…
Strong pipelines and high hopes for H2
When asked in early May of 2025 about their prospects for the remainder of the year, franchisees are feeling very positive. 73% are reporting a strong business pipeline, with only those in the technology and telecoms sectors feeling stronger, while a full 96% are expecting their business will be more profitable in the next quarter.
There is confidence and long-term confidence
Looking ahead for the rest of 2025, 90% of leaders in franchised businesses have said they’ve got confidence in their future prosperity in the UK. That is 4% higher than the wider average of 86%.
Looking even further ahead, 92% said they feel confident about the next three years, and only marginally fewer at 89% said they felt confident about the next five years. Again, this is a touch higher than the wider averages, which are 86% for the next three years and 84% for the next five.
This chimes perfectly with what our clients are telling us, where the overwhelming sentiment right now is one of measured optimism. Despite facing into a complex economic backdrop, many are navigating the landscape with remarkable agility and purpose.
When it comes to investment, AI and cyber resilience are high in franchisees’ thinking
Posed with the question “If your business received additional funding equivalent to 10% of annual profit, in which areas would you choose to invest?”, franchisees are thinking resilience first.
Perhaps with the recent cybersecurity troubles of a number of high street businesses, a quarter (25%) named cybersecurity and data protection as a key target for investment, while 23% named the adoption of artificial intelligence, using technology they could buy in. 16% also want to develop their own in-house AI practises, and 20% would use extra income to enhance their supply chains.
Franchisees are also looking to AI to cut costs, with 40% naming its implementation and technology integration as how they plan to offset the cost of rising goods and services.
When asked about cost-cutting, 23% are looking to shrink headcount, and 38% are targeting outsourcing some key functions in the months ahead.
Our clients are looking to make sure that when they invest, they are prioritising innovation, embracing sustainability, and building future-fit teams. They’re also grateful to be part of collaborative relationships with franchisors, they are providing their businesses with a strong foundation in what are still uncertain times.
Inflation is franchise businesses’ biggest barrier to growth
It is not all smooth sailing, and the role of inflation is by far the biggest worry in the mind of franchisees as we approach the second half of 2025.
Almost two-fifths (39%) named it as their biggest barrier to growth, putting it 13% higher than any other concern given. The role of AI is there too, despite many looking to its rollout to make savings, 28% named competition from AI as a barrier to growth, putting it ahead of rising material costs, rising wages and the wider economy.
Labour shortages, rising input costs, and the ongoing balancing act between maintaining brand integrity and meeting local customer demands remain core challenges. The regulatory environment continues to evolve too, demanding more attention and adaptability from business owners.
A model fit for the future
Franchising continues to evolve, but its core strengths remain unchanged. If anything, the challenges of recent years have only reinforced just how robust and adaptable this model really is.
To support business to invest for growth, Barclays £22bn Business Prosperity Fund is available for new and existing Business Banking customers and UK Corporate Banking clients across the UK to apply for lending and refinancing on existing projects. Businesses can find out more and read further business insights at: home.barclays/businessprosperity.
