Franchise development in an uncertain ecconomy
Nick Strong - MD of Select Your Franchise
I have decided to start my franchise blog in a very significant week for UK and indeed world finance. This week the government has stepped into the banking sector with its £37 billion bail-out plan for Royal Bank of Scotland, Lloyds TSB and HBOS. This is funding that is designed to start banks lending to each other again. It has brought some reassurance to owners of small businesses and mortgage owners. This is because lending capital is more easily available and is offered at 2007 rates of interest.
So how is this news relevant to franchising, and in particular franchise sales and recruitment, in the UK?
UK Franchise development rests on a number of pillars including:
- Successful proven business models that can be replicated by a third party
- Documented and transferable know-how
- Proven and trademarked, protected branding
- Ongoing business development support
- Purchasing finance and working capital being made available via the banks, to individuals, families, partnerships and companies buying a franchise.
Over the last three months the number of potential buyers presenting themselves for consideration to the franchise market has reduced. This is largely due to the lack of confidence created by the press and banks.
Clearly anyone looking to borrow money against any asset to start their franchise business needs to be confident in the institutions that they do business with. So should this week’s announcements give increased confidence to the franchise buyers and sellers of the UK? In a word ‘yes’.
Why ‘yes’? The banks are now stronger and confidence will slowly return. In addition to this, franchise departments in British banks are growing. This is due to: a) the success of business format franchising in the UK, and b) higher security that the franchise system offers lenders and borrowers alike.
Yes it will take time for the economic tide to turn and we may enter recession. However, in good times and bad we all buy goods and services. The consumer’s focus is now more than ever on value and service. This is good news for franchise businesses in the UK as high quality services and value for money pricing is at the core of well run franchising.
It is reasonable for you and me to have greater confidence in the banks and borrowing now. This is because the government’s intervention is predominantly focused on firstly securing you and I, the tax payers, and secondly the banks. As a result RBS and Lloyds TSB/HBOS have promised that they’ll maintain mortgage lending and small-business lending at 2007 levels. This is good news as it gives confidence when managing the risk of launching and building your own franchise business.
Tags: franchise, franchise business, franchise development, franchising in the uk, uk economy
