HSBC View: How the UK franchising sector has fared during 2011
Cathryn Hayes - HSBC Head of Franchising
There is no denying that 2011 has been a difficult year for UK businesses. The economic recession forced sweeping changes in strategy for many businesses – add to this the change in Government at last year’s general election, increased unemployment and reported lack of available credit and it’s not surprising many firms have struggled.
However, with significantly better success rates than other businesses, the franchise industry is key to promoting job creation, stimulating economic growth and encouraging new start-ups. This is mainly due to the wide spectrum of industries covered by franchised businesses, the strength of the business model and the support provided by franchisors and other franchisees within the same networks.
Nowhere is this success more evident than this year’s bfa HSBC Franchisee of the Year Awards. Financial stability, innovation, creativity and the relentless pursuit of success were just a few traits demonstrated by this year’s finalists.
The overall winners, Mike and Catharine Chalton from Home Instead Senior Care in Wirral, showed that their key success was providing excellent customer service which has resulted in their business going from strength to strength. They are a true credit to the franchising industry, and an inspiration to small businesses across the UK.
So what about finance? Put simply, there is still plenty of funding available for sound business propositions. Your franchisees are in a stronger position than a standalone start-up business because of the help and support available to them. Requests for funding are more likely to be agreed if franchisees present a professional and credible business plan.
This could be the time to think about switching your business. There is often a nervousness that surrounds ‘switching your bank’, for fear of disrupting vital transactions. The UK’s leading banks, including HSBC, have signed up to a banking industry code that means they must make account switching speedier and easier for customers who have made their mind up their mind to change.
We have consistently welcomed new franchise business, and we are confident that by the time 2011′s Christmas trees have been packed away HSBC Franchise Unit will have improved on our 2010 lending figures by 200%.
Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com
Tags: cathryn hayes, franchise industry, franchising, hsbc, uk economy
HSBC Growth Grants could benefit Franchisors
Are you are a franchisor with an annual turnover of between £100,000 and £2m with ambitions for growth?
HSBC are currently offering the opportunity for businesses to win one of four HSBC business growth grants that are on offer to entrepreneurs seeking to expand their businesses.
Two grants will be awarded to businesses using innovative ideas to grow their businesses within the UK and two further grants will be awardded to businesses that have the aspiration to develop their opportunities overseas.
For fill details and an application please visit: http://www.businessgrant.hsbc.co.uk/. Closing date for applications is 31st December 2011.
Tags: Franchise Finance, franchise funding, hsbc
International franchising advice from HSBC
Cathryn Hayes - HSBC Head of Franchising
A diverse range of sectors lend themselves to successful international franchising. A common example is retail, particularly the fast-food sub-sector.
In recent years there’s been a growth in service industry franchises such as in the cleaning and maintenance sectors, as well as management consultancy, and there’s been a big increase in home care. Numerous successful home care franchises are being operated all over the world, including in the UK.
Well-known British franchises
Several established UK brands – including Marks & Spencer – have sold international franchises for years. Providing jobs for more than 75,000 people worldwide, there are currently more than 300 M&S stores in 40 territories, many of which are successful franchises. Other well-known examples include Costa Coffee, Clarks and Toni & Guy.
Some UK businesses sell franchises in the UK and beyond, while some only sell overseas. To increase their chances of success, some UK businesses set up overseas subsidiaries or joint ventures first to establish their brand and then, armed with greater local market awareness, they begin selling franchises. Importantly, the business model must translate and provide returns for both parties.
Franchise agreements
Buying a ‘master franchise’ can give rights to an entire country. Other options include a regional/area franchise, down to a single-unit agreement. Bigger geographical exclusivity comes at a price.
The franchisee usually pays the franchisor an initial sum upfront. Then they pay a monthly fee – normally a percentage of turnover. The franchisor provides training and ongoing support. Some agreements simply involve the franchisee buying products from the franchisor, rather than paying a monthly fee.
Welcome cash injection
International franchising can provide brand owners with a welcome cash injection and a regular, predictable income stream, without the risks, investment and resource commitment of establishing their own presence overseas. Franchisees are no less motivated to run the business successfully, and it is firmly in their interest to do so.
As well as enhancing a brand – providing its reputation stays intact – franchising can be a way to spread development costs across a wider set of markets. The overseas franchise must be properly resourced and operated if standards are to be maintained. Potential partners must also be carefully selected and should understand and respect the brand.
UK business models may need some tweaking, if they are to work in overseas markets. There are questions of language and culture that need to be considered, too. The cost structure in another country could be very different, which could have implications for your franchise.
Key recommendations for UK businesses considering becoming international franchises
Early on, it’s a good idea to speak to a specialist international franchise consultant affiliated to the British Franchise Association (bfa). You should also make sure your intellectual property is safeguarded, and seek tailored legal and tax advice. Agreements should be drawn up by a qualified professional – preferably an experienced franchise lawyer affiliated to the bfa.
Someone within the organisation needs to take charge of managing and developing franchising activity. This must also be properly resourced and can mean significant people, time and money.
Research is crucial, too. You must consider which franchising model is best for your business and identify territories in which your franchise is most likely to succeed – it might not work in some places. Carry out thorough due diligence on all prospective partners. Pilot your franchise before making it generally available. This enables you to iron out any minor problems before committing major resources.
- Visit the website of the bfa. See the organisation’s international page for links to international franchise organisations.
- Visit the International Franchising Association website.
- For information about overseas markets, visit the UK Trade & Investment website.
- Find out about how HSBC can support your efforts to become an international franchisor. You can email us or call 0800 234 6224.
