With the potential for an increase in the uptake of franchise services, the future looks promising for those looking to invest in a franchise opportunity. This potential for growth could be an exciting prospect for franchisors and franchisees, provided that the Labour government delivers on their manifesto.
With thanks to Suzie McCafferty of Platinum Wave, Rich Chambers of Get A Drip, Hannah MacKechnie of Radfield Home Care, Samantha Acton of Domestic Angels, HSBC and a few anonymous sources, the following points were the most salient for the franchise industry.
Rich, the Franchisor of a rapidly growing franchise in the health and wellbeing sector, believes that Labour has a significant chance to showcase their economic prowess. He is optimistic about a more centrist government that recognises the crucial role of small businesses and franchises in bolstering the UK’s economic growth.
Change
Samantha, who already has a voice at the table for change in government, feels that “a substantial change in government will always bring challenges and opportunities to any business sector. Generally speaking, the franchise industry is a massive collection of small businesses that make a substantial positive economic difference to UK PLC.
Typically, our ability to survive and thrive as businesses during such change nearly always boils down to our capability, even inclination, to flex and evolve rather than us being the benefactors of politicians understanding SMEs. An example of less than-desirable SME understanding is the intention of this government to change several employment items, which will necessarily increase business costs but not balance the increased turnover impact with a suitable upward movement in the VAT threshold to allow the micro to small sector to ‘breathe’ and grow.
As always, the devil is in the details, with the Labour government manifesto only providing a high-level indication of legislation intention. On the plus side, they have stated that there will be a full consultation, including with business before legislation is passed.” Samatha is waiting for their call…
Monitoring regulatory changes is essential to ensure compliance with health, safety, and tax regulations. It is vital that Franchisors keep abreast of these changes and inform their Franchisees of changes that will affect them – the Operations Manuals will have to be updated as change remains the norm!
Healthcare
Social care reform proposed by Labour emphasises ‘home first’ care and developing hospital discharge partnerships. The domiciliary home care sector can only benefit in this scenario.
The NHS is already under such immense strain that they cannot deliver even primary care to many. It certainly cannot continue as it is, but reform plans are primarily contingent on being able to recruit more staff. There has been no indication of where these people will come from since the post-Brexit restrictions have depleted the workforce.
The door is wide open for private medical options – private healthcare insurance, paying for surgery to jump the waiting lists, or simply having access to a GP. These are potentially big businesses, and there is already a proliferation of private GP clinics on our high street.
Rich Chambers of Get A Drip (providing innovative Longevity Wellness solutions through franchise partners) felt that the Labour government’s focus on public health and support for small businesses aligns well with their mission and presents a promising outlook for the franchise sector within the healthcare category.
Labour’s commitment to improving public health will likely increase awareness and demand for preventive health services. Their investments in healthcare infrastructure and wellness promotion could foster a supportive environment for health-focused franchises. Potential benefits include subsidies for health services, tax incentives for preventive care, and broader public health campaigns, all of which can enhance the reach and impact of those in the self-care/health market.
The growth in people looking to develop their well-being rather than waiting until something goes wrong will feed into those businesses that offer preventative solutions.
Hospitality
Suzie McCafferty of Platinum Wave Franchising voiced concerns about the impact on the hospitality sector. The new Labour government has indicated plans to raise the minimum wage closer to the living wage for over-18s and phase out zero-hour contracts. While these changes will likely be implemented gradually, they could significantly impact the hospitality sector, where franchisors and franchisees must closely monitor these developments. Increased operating costs could further squeeze tight profit margins, making some business models unworkable. However, the franchise industry has a history of adapting and surviving despite cost increases and other challenges.
Recruitment
Rich reports that Labour’s focus on improving worker rights and wages presents opportunities and challenges. Higher wages and better working conditions benefit employees but may increase operational costs for franchisees. However, a well-compensated and motivated workforce can enhance productivity and customer service, ultimately benefiting the franchise. Striking the right balance will be critical.
Suzie felt that, on the positive side, better pay and working conditions might help alleviate the current recruitment struggles faced by many employers. Attracting more talent could benefit the franchise sector, making it easier to maintain high service standards and customer satisfaction.
Education
Labour intends to charge VAT on private school education. That may put private education out of the reach of some people. Those people will search for alternatives to educating their children and may invest the resources in private tutoring and extra-curricular activities to supplement the education provided at state schools. There is no additional promise of investment in the already failing state school system, which means many may be overwhelmed, and the educational standards will worsen.
Those in the tutoring market may thrive if they can offer sound educational options to their participants.
Those in the after-school market may thrive as parents invest in supporting their children’s social interaction and those educational foundations.
The nanny agencies, nurseries and after-school care clubs may find themselves busier than ever as parents who previously boarded their children need to find somewhere for them during the working days. This increased demand could present a significant opportunity for growth in this sector.
Residential property
The proposed changes in the education sector could lead to a migration of families to areas with high-performing state schools. This could boost the house-move market, creating opportunities for agents, conveyancing solicitors, estate agency board services, and storage and removal companies.
Commercial premises
Rich spoke for many when he identified that an overhaul of business rates is vital. The Labour manifesto recognises the challenges facing the High Street, advocating for redistributing the tax burden to online and digital companies. It is unjust for high street businesses to bear a disproportionate share of business rates, especially when they play a crucial role in supporting local communities. A fairer business rate system would help ensure the sustainability of ‘brick-and-mortar’ stores.
Business support
Rich advised Labour’s policies aimed at simplifying the tax regime, increasing access to financing, and providing robust support for startups are highly beneficial for the franchise sector. These initiatives can lower barriers to entry for new franchisees and support the expansion of existing ones, which translates to greater opportunities for growth and innovation as there are various entry points to becoming a Franchisee.
Labour’s efforts to curb tax avoidance and evasion by investing in HMRC and closing loopholes may be a positive step towards a fairer tax system, but it’s crucial that HMRC remains objective and does not impose overly burdensome compliance requirements on businesses. Excessive compliance demands could deter new investments into the UK, which they specifically aim to encourage!
Whilst talking with Anne O’Reilly (Business Growth Coach & Franchise Advisor at Results360), she reminded me of the government-funded Growth Accelerator Programme back in 2019. It’s felt that the Labour Start-Up, Scale-Up proposition is similar and aims to attract new businesses to build in the UK if they can make it work to increase employment opportunities.
Banks
The banks (and many hopeful homeowners!) are predicting interest rate cuts in both mortgages and business lending. Still, the general feeling is that, whilst this will happen, it will be a slow and cautious action.
A better rate and stability should encourage large deals, particularly in the QSR or property-based sectors, that have previously fallen away, with a loss of opportunities for local employment and the local economy. Rate fluctuations can shake even the most determined franchisees and entrepreneurs when doing deals worth millions.
Legislation
A recent communication to British Franchise Association members highlighted two further pieces of legislation that we will need to watch for potential impact.
Digital & AI regulations
Franchises operating in digital markets should be aware of Labour’s intentions to introduce new regulations for digital markets and artificial intelligence.
This will likely include stricter controls and greater scrutiny, potentially impacting how franchises use digital platforms and AI (Mayer Brown).
Environmental initiatives
Labour’s Green Prosperity Plan aims to achieve a zero-carbon electricity system by 2030. This includes investing in renewable energy and infrastructure projects, which could create opportunities for franchises involved in green technologies and services (Mayer Brown).”
Summary
Suzie’s summary, however, is that potentially, best of all, a new government can bring a general swing in the public mood towards optimism. The recent years of political and economic instability have created an environment of caution, discouraging entrepreneurs from franchising their businesses and individuals from investing in franchise opportunities. With a sense of greater stability, people may feel more confident in taking risks and exploring the benefits of franchising. This much-missed and much-needed optimism could lead to a surge in franchising activities, offering significant opportunities for both existing franchisors and aspiring franchise owners.
Rich feels that the Labour government’s policies offer opportunities and challenges for the franchise sector. Creating a supportive environment for small businesses and prioritising public health can help franchises like Get A Drip to thrive. Careful navigation of changes in labour laws, regulatory requirements, and business rates will be crucial for ensuring sustainable growth.
I’ll leave the last word with Hannah MacKechnie of Radfield Home Care, who succinctly summarised the general temperature of responses: “Whatever your political views, it is good news to have a clear way forward with a leader that the country has chosen. This should usher in a period of stability for the country and bring with it a renewed optimism for those considering starting up their own business.’”
