Force is with the franchise

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The Independent Online
FRANCHISED business accounts for a fifth of all UK retail trade and the figure is growing, according to the latest NatWest/ British Franchise Association survey, writes Roger Trapp.

Annual turnover of true franchises - where a business format is involved - rose 9.4 per cent in the year to pounds 7bn. But when car dealerships, soft drinks franchises, the licensed trade and petrol retailing are included, the figure climbs to pounds 36.6bn.

The number of fully-fledged business format franchises increased 5 per cent to 568, continuing a trend that has seen the figure grow by more than 50 per cent in the past four years. The past 12 months have seen the number of franchise units rise 8.6 per cent to 29,100. If the 5,100 franchised milk delivery services are excluded, the growth rate is 11.6 per cent.

Although the industry remains bullish, franchisors are less upbeat about the economy in general, suggesting that the recovery has peaked. The positive outlook is demonstrated by the fact that franchisors do not see barriers to expansion overseas. Most think that the introduction of EMU will not affect plans, with a quarter saying it will make expansion more likely. France, Germany, Spain and the Republic of Ireland are see as the top priorities for expansion. However, they do see limits on growth within the UK, with the biggest barrier believed to be a lack of suitable franchisees.

Brian Smart, director general of the British Franchise Association, said: "Franchising continues to mature as a business format with more than a quarter of a million people employed in the industry. The average length of time that franchises have been operating in the UK has increased from 7.9 years to nine years, which is encouraging."

Peter Stern, head of NatWest's franchise section, which has conducted the survey with the association for the past 14 years, added that the future of franchising was bright, with 89 per cent of franchisors and 85 per cent of franchisees expecting their own businesses' prospects to improve.