Franchise Market Survey 2011

The Annual Market Survey of the franchise industry was recently published. Marea Brennan Thorns a founder member of the Qutis Clinics Franchise team commented on key points as follows;

I note that Qutis falls within the Personal Services Sector: hair & beauty.

I liked the following points:

In 2010 franchising extended further than ever before, with a substantial increase in the number of systems in operation in the UK and a corresponding increase in the number of units. This amounts to an estimated contribution of £12.4 billion to the UK economy.

4 in 5 franchisees reckon that being part of a franchise has given them a competitive advantage in the last year when compared with similar businesses that are not franchised.

The growth in franchised businesses is more pronounced in some sectors than others. Personal Services, which includes hairdressers, gyms, and beauty salons has grown by 37% since 2005, and Property Services, which includes estate agents and cleaning services has grown by 18%. These are business sectors reliant on local knowledge which still have significant proportions of small businesses rather than national chains and as such are perfect for rolling out a franchised model. 

Nearly one in five (18%) new franchisees come from

inside the industry, either having worked directly for a franchisor or having been an employee of another franchisee. Of the remainder, the majority move to franchising from salaried employment.

Around one in five initially learns about franchising from trade magazines and a further one in ten hears about the industry either from visiting an exhibition or reading about franchising in a newspaper. In this digital age, even amongst newer franchisees, relatively few cite the internet as the primary source of awareness. This could be a reflection of nature of many franchises or franchisees.

However, the story is quite different when franchisees move on to the research phase. Here the internet is of far greater significance. Of those franchisees who have been in business for up to four years, over half (52%) visited their franchisor’s website for information, just under one in five (18%) visited the bfa website, and one in five (20%) visited other franchise related websites.

Of the websites used by propsects Thebfa.org and whichfranchise.org were the most successful.

On average franchisees indicate that, including working capital, savings, borrowing and other sources of finance, they invested a total of £81,900 when they started up their franchise. This figure is subject to annual variation, but is broadly consistent with the average of just under £70,000 for 2008. What it does indicate is that the initial fees levied by the franchisor (turnkey or otherwise) represent only just over half of the total sum required to set up in business. Glad to see that we fall in line…

We consistently find that two in five (39%) franchisees state that they did not need to borrow any money to fund their initial investment. Gosh! This does suggest quite large sums of funding appearing from somewhere, and in next year’s survey the authors aim to discover the sources of this. Of those that did borrow, the average sum borrowed was £66,500, with one in five borrowing in excess of £100,000.

This gave us great confidence that Qutis combines both franchising and growth in the personal care & beauty sector. To see the full report click here.

 

 

Published by

Stephen Thorns

Owner and co-founder