High-street clones look out of touch

Franchising: a book by a KPMG analyst debunks the notion that it's simply a licence to print money

Franchising may be a more risky business than has been thought, according to a book by a KPMG analyst. There is a 70 per cent chance of a franchise group not making it to its 10th birthday, according to the research, and half will not even reach five years old. Previously it had been accepted wisdom that franchises had a five times greater likelihood of success than other forms of new business.

The Franchise Paradox, by Stuart Price, (Cassell, pounds 65) suggests that while some big franchise operations, such as McDonald's and Kall-Kwik, offer effective support and a willingness to learn from franchisees, some of the others offer little. They should see franchises more as a two-way flow, says Mr Price.

"The franchise industry places excessive stress on uniformity and conformity, an approach which is out of touch in today's competitive business market," he argues. "How can franchisors enforce standardisation, rather than encourage innovation, and also simultaneously expect fewer failures than independent businesses? No one would expect a company that was prevented from using new ideas and entrepreneurial insight to survive for long." One of the errors stressed is the danger of placing too much reliance on the franchise operator, making individual franchisees less inclined to take responsibility for their own businesses. A course run by Middlesex University addresses precisely that weakness.

The post-graduate Diploma in Franchising Management, which is to begin in February and has just started recruiting, is the first of its kind in Britain.

It is being backed by the British Franchise Association, and Martin Mendelsohn, a franchise specialist and partner at Eversheds, a firm of solicitors, has been appointed visiting professor in franchising to oversee the diploma programme.

"The diploma has been developed in response to a clear market need," says David Kirby, Dean and pro-vice-chancellor at Middlesex University Business School. "There is currently a shortage of training available in the specialised skills required for managing and operating a franchise operation." He says that the course will give participants a distinctive qualification and provide them with standards to guide them. Martin Mendelsohn adds: "One problem is that few people are taking up franchises who have experience of more than one franchise, though that is changing. This course will enable people active in franchise management to get a broader perspective." He expects the course to be attractive to accountants, bankers and other professionals who are called on to advise clients buying franchises.

The university welcomes further applications. To minimise disruption to new businesses, participants will study on a part-time basis, across two years, with most lectures taking place on Saturdays.

Another initiative last month saw the opening of a permanent franchise centre in London. The London Franchise Information Centre can be visited on a drop-in basis, Monday to Saturday, with 15 franchise operators showing resident exhibitions. An independent franchise counsellor and a NatWest adviser can be seen on an appointments basis.

If these initiatives are successful they will boost the domestic franchise market. Although the franchise sector is growing at an annual rate of 8.5 per cent, and is now worth pounds 6.4bn, it is being led by United States franchisors, according to a survey conducted by the European Franchise Federation. American companies are responsible for 20 per cent of the British franchise market.

Peter Stern, the head of the franchise section at NatWest, which sponsored the survey, says: "It is interesting to note that nine out of 10 North American franchisors operational in Europe have units in the United Kingdom. This is by far the highest percentage and clear evidence that Americans see the UK as the gateway into Europe. The future for franchising in Europe is bright and the number of pan-European franchisors is likely to grow at an increasing pace."

q Details of the Diploma in Franchising Management can be obtained on 0181-362 5000. The London Franchise Information Centre is at 22 St Andrew Street, London; tel 0171-583 6955.