Today I’m looking at what’s going on in the business world and how it might affect the franchise industry.
5 million people are paid less than the living wage
The ‘living wage’ is the basic amount that a person needs to earn to comfortably get by – in the UK at the moment this is calculated as £7.20 per hour, or £8.30 if you live in London. According to a survey by consultancy firm KPMG, one in five working adults in the UK are earning less than this amount. Advocates of the living wage, including London mayor Borris Johnson, claim that employees who earn the living wage, as opposed to the minimum wage of £6.19, are happier and better workers. KPMG state that as part of their research, they ‘have found that the improved motivation and performance, and the lower leaver and absentee rate amongst staff in receipt of a living wage means that the cost is offset and paying it is the right thing for our business.’
So, what does this mean for franchising? Those people who aren’t in receipt of a living wage are less likely to be able to scrape together the capital to pay a franchise fee, so they’re unlikely franchisees. Would you, as a franchisor, implement the living page for your employees and employees of your franchisees? It might mean higher costs to start with, but according to advocates, this can be offset by better employee results.
Work barely worthwhile for second earners because of childcare
So, you’re a two parent family with two children. Both of you work, and you both earn £22,000 per year. Strangely, due to a mixture of benefits, childcare costs, and taxes, you can end up only £4,000 better off than a similar family earning £20,000 less. The Resolution Foundation’s Counting the Costs of Childcare report shows that increasingly it pays to have one parent at home while the other works.
Franchising can offer ways around this – couples can, for instance, purchase a franchise together and work around their family commitments together. Alternatively, some franchises even offer the opportunity to take your child with you. One example of this is The Creation Station, who state that some of their franchisees bring their children to classes so that they can spend more time together. As the parents affected by this issue are generally of middle-income (earning between £17k and £42k) they would be in a resonable position to secure capital for investing in a franchise.
The economy’s on the rise!
According to Charlie Bean, deputy governor of the Bank of England, there is ‘reason for some optimism’ after recent GDP figures showed the economy grew 1.0% between July and December. We are taking his advice and not getting too excited, however, due to the possible ‘false positive’ induced by the fantastic success of the Olympics over the Summer.
Franchising has continued to thrive in spite of the recession, so there’s probably room for a spot of back-patting in the industry with news of national economic growth. Hopefully the growth will continue, and the economic climate will carry on improving.
Times are hard here in the UK, with the economy growing one minute and shrinking the next. High unemployment figures reflect the nation’s struggle to get by, and it is a difficult road back into work with dozens of people applying for any one vacancy.
Although it all may seem doom and gloom, one industry that has flourished amidst the chaos has been franchising. People in secure jobs are significantly less likely to throw them away and seize the franchise opportunity and the inherent risks, whereas it may be argued that people who are unemployed have less to lose. Redundancy payments can provide some of the starting capital necessary to buy your own franchise, and the lack of employment can provide suitable motivation for those who would have liked to purchase a franchise before but were too comfortable in their jobs.
A franchise can help you break into business without being completely on your own. In purchasing a franchise from a range of franchising opportunities you are getting a proven business formula, along with all the training and support to get your business up and running.
If you’re unemployed at the moment, it is a good time to sit back and take stock of your life and where you want your career to go. Do you want to go back to the comfort of a salaried job, or do you have a passion that you want to bring to your own business? Perhaps you’ve always fancied starting your own beauty business or wanted to do your own web design? As long as you’re enthusiastic and willing to put in long hours and hard work, a franchise could be for you, allowing you to get back into work without the endless chain of Job Centre visits and interviews. There are even some low cost franchises out there that may be ideal for someone who is facing the financial struggles of unemployment.
Banks are inclined to look favourably on first time business people wanting to buy their own franchise. With as many as 9 out of 10 franchises running profitable businesses, it pays for banks to take an interest. Franchises are substantially lower risk than original businesses, although it is always worth noting that no new business is completely without risk.
With all this in mind, could buying a franchise be right for you?
With a rainfall that was double the average, June 2012 was the wettest in the UK since weather reports began over 100 years ago according to the news. With the slow economic recovery still blighting the employment market it might seem like the unusually wet weather just about sums up the current British outlook!
The recently released franchise survey, commissioned by the bfa & NatWest paints a markedly different picture for the franchising industry. Despite the downturn, franchise business in 2011 weathered the economy better than you might expect and in fact the number of surveyed UK franchisees reporting a profit exceeded 90% for the first time since 2007. Overall network turnover figures were seen to increase also which is encouraging news to anyone who might be considering starting up a franchise but is unsure because of the current economic stormy waters of recent years.
If you have never previously considering franchising, then the franchise survey is just one signpost that starting a franchise business still remains a solid, proven route into self employment. Of course there are risks with any business investment, but choosing a proven franchise system helps to minimise those risks, especially those of starting up a brand news business with no track record, existing branding or support to help you through those crucial early years of getting established.
If you want to know more about franchising, then you can read our series of 10 Franchise Tips or, if you are already in the know, go straight to our franchise directory and browse from a wide range of franchise business options.