UK Economic Growth and Franchising
Joel Caws - Technical Director, Select Your Franchise
Encouraging economic news emerged this morning that the economy in the last quarter of 2009 grew by 0.4%, higher than the 0.3% previously estimated. Although this might appear to be small, it comes as a positive boost to many. Experts do maintain however that progress is likely to be slow and some of the growth in the last quarter of 2009 could be attributed to public spending which is normal in the run up to Christmas. It will be interesting to see if the upward trend continues into 2010 when the figures for 1st quarter of 2010 are published.
For the majority of the franchising industry, its still business as usual. The word from the Banks is that they continue to remain positive for lending to franchise start-ups which might give some reason to those thinking of starting their own business to go the franchise route. For further information on the best way to present your franchise start-up to a bank you can read this helpful article from Cathryn Hayes, Head of Franchising at HSBC.
In general, franchises have historically remained strong through recessionary times due to their proven business model and many being built around providing highly desirable or ‘must have’ services which can help make them resistant to recession.
If you are considering franchising as a way to start-up in business then you can start your search by viewing some of the online franchise directories or joining social groups with relevant discussions on franchising.
Advantages of Franchising
Nick Strong
As a first time business person the key advantages to franchising for your business future are clear and compelling. They most commonly are:
- Proven and replicable business formula
- Documented operations manual for you to follow
- You work for yourself but not by yourself
- Your chosen franchisor should provide you with ongoing support in field and classroom
- Access to specialists in accounting, sales marketing and administration
- Referrals from national accounts may sometimes be available
- A win-win relationship where the franchisor must work with you to help ensure both your and their success
Clearly the above mentioned advantages of franchising are very helpful and go a long way to minimising business failure. However, it is vital for the would be franchise buyer to know that successful franchising is all about following a proven system enthusiastically and competently.
There is little to no room in franchising for creativity and experimentation. The franchisor has often spent years and many thousands of pounds testing the target market to identify what works best.
It is the franchise brand owners responsibility to provide the proven format for your success. Following that system will help ensure your success and business future.
Clearly then, it is vital to identify that the franchising format that interested you is successful. It is always worth reviewing the options available and then requesting and reading the franchisor’s literature. This on its own is not enough though.
It is vital that you ask the franchisor for contact details for his franchisees, give them a ring and find out how they are doing. Are the franchisees profitable? Are they happy with the support they receive? Would they do it all again if they were you?
The answers the franchisees give will quickly prepare you for the trading journey you might expect should you buy the franchise to trade in your area.
Clearly there is risk in any trading agreement. It is vital to have your family’s backing before you go into self employment as there will be ups and downs on the way.
Franchises can be purchased from £5,000 to £1,000,000. There are franchising opportunities that can be developed both part time and full time and in practically every area of business and walk of life.
Its your future and if you are hard working, enthusiastic and a good system follower then business format franchising could offer many advantages for you and for your and your family’s future.
2010 Budget Reaction for Franchise Business
Carl Reader, Dennis & Turnbull Ltd
The Chancellor gave his Budget on 24th March 2010 and the changes announced will affect all franchise businesses.
50% Tax
It was confirmed that the new 50% rate of income tax will come into effect from 6th April 2010 for those with income over £150,000. Personal allowances will also be restricted for individuals with income over £100,000.
Capital Gains Tax
Capital Gains Tax rates have remained the same. However, the lifetime limit for Entrepreneurs’ Relief has doubled to £2m for disposals made from 6th April 2010. The Inheritance Tax nil rate band has been frozen at £325,000 until 2014/15.
Stamp Duty
It was announced that no Stamp Duty Land Tax will be payable by first time buyers on completion of the purchase of homes below £250,000. This takes effect immediately for 2 years until 25th March 2012. The rate of Stamp Duty Land Tax charged on purchases of properties over £1m will be increased to 5% with effect from 6th April 2011.
Corporation Tax
There will be no increase in the rates of corporation tax for 2010/11 which will remain at 21% for small companies and 28% for large companies.
Capital Expenditure
There is a boost to franchises purchasing plant and machinery. The annual investment allowance has increased to £100,000, giving a 100% first year allowance on capital expenditure up to this level. Any additions over this amount will also receive capital allowances of 20%. This applies to equipment bought after 1st April 2010 for companies and 6th April 2010 for unincorporated businesses.
VAT
The VAT registration threshold has been increased to £70,000 with the deregistration limit increased to £68,000. The fuel scale charges have also been increased for periods starting from 1st May 2010. It is worth noting that payments made by cheque to HM Revenue & Customs will now be treated as being received once the amount has cleared through their bank account and not when the cheque is received.
Business Rates
With regard to business rates the government will fund a temporary increase in the level of rate relief so that small firms occupying properties with a rateable value up to £6,000 will pay no business rates for 1 year from October 2010.
Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.
The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.
Tags: budget 2010, carl reader, finance, franchise accounts
