Escolar Documentos
Profissional Documentos
Cultura Documentos
PROFESSIONAL SERVICES
FOR FRANCHISING
IN THE U.K.
International Franchise Research Centre Special Studies Series Papers 1-16 Web Versions 2010 p.1
LIABILITY DISCLAIMER 10 London: A Capital City For Franchisee
Recruitment, (Mills, Stanworth &
The information and analysis in each report Purdy), 1997
is offered in good faith. However, neither the
publishers, the project sponsors, nor the 11 The Effectiveness of Franchise
author/s, accept any liability for losses or Exhibitions in the United Kingdom,
damages which could arise for those who (Chapman, Mills & Stanworth), 1997
choose to act upon the information or
analysis contained herein. 12 Franchising: Breaking Into European
Union Markets, (Stirland, Stanworth,
IFRC Special Studies Papers 1993-2001 Purdy & Brodie), 1998
5 The Blenheim/University of
Westminster Franchise Survey: A
Comparison of UK and US Data,
(Stanworth, Kaufmann & Purdy), 1995
6 Developing a Diagnostic
Questionnaire as an Aid to Franchisee
Selection, (Stanworth), 1995
7 Franchising as a Source of
Technology-transfer to Developing
Economies, (Stanworth, Price, Porter,
Swabe & Gold), 1995
International Franchise Research Centre Special Studies Series Papers 1-16 Web Versions 2010 p.2
FOREWORD EXECUTIVE SUMMARY
The advice given to the franchise industry by The franchise industry in the UK finds itself, at
the Franchise Department of the Royal Bank the beginning of the new millennium, in a
of Scotland has always been clear - use the buoyant condition, having grown in maturity
services of professionals who understand and professionalism during the 1990s,
franchising. In other words, professionals who following its initial emergence as a force to be
have a proven track record in providing reckoned with during the 1980s.
guidance to the franchise community. Where
better to find this experience than in the It is notable that the franchise sector
Affiliate Members of the British Franchise possesses sufficient economic muscle to have
association. ensured the development of a professional
infrastructure. The current research, the first
The franchise industry is fortunate to have a of its kind, set out to investigate the extent to
governing body in the British Franchise which franchise-specific professional services
Association that is absolutely committed to were being used in the UK, and franchisors'
promoting ethical Business Format assessments of them.
Franchising. This survey highlights the clear
benefits of being a member of the British The sector has an active and vibrant trade
Franchise Association; not only through the association in the British Franchise
advice and guidance it is able to provide but Association (BFA) that gives the industry
also because of the comprehensive list of profile and helps to establish good practice.
affiliated franchise professionals it has as Although the majority of franchise systems do
members. not belong to the BFA, the largest slice of the
industry in terms of business volume is almost
The survey looks at the views of franchisors certainly in membership. For instance, this
who are both members and non-members of current research showed that the majority of
the British Franchise Association, on the systems over 10 years old and with more than
professional services available for franchising 50 outlets were members. In contrast, the
in the UK. It seeks to establish the benefit of majority of systems 2 years old or less and
taking advice from lawyers, consultants, with 5 outlets or less were not members.
accountants and banks and particularly those Nearly 1-in-3 franchisors contacted the BFA
who are affiliated to the British Franchise prior to launch. The same proportion on non-
Association. members also contacted them again after
launch, compared with twice that number of
The Royal Bank of Scotland has operated a members. There was evidence to suggest that
dedicated Franchise Department since 1984 those who joined the BFA when they were
and is committed to ethical Business Format eligible had already shown a prior orientation
Franchising. It is an Affiliate Member of the towards the use of professional services.
BFA and has experienced Franchise
Managers across the UK who provide advice The specialist franchise units present in the
to franchisors and franchisees on the general clearing banks represent another institutional
principles of franchising. The RBS also has a plank of the sector. Such units are typically
UK network of Franchise Business Managers located within or adjacent to the banks' small
who are dedicated to looking after the banking business sections. Looking at the interface
requirements of our franchise customers. between franchise companies and their
specialist bank lenders, the links were strong
Nigel Thurlow and the banks well-rated by their franchisor
National Franchise Manager clients. Few, if any, franchise companies do
Royal Bank of Scotland not need an alliance with a bank. Our results
indicated that there were 3 banks that had
deep roots in the franchise sector, followed by
2 others that committed fewer resources and
had smaller market shares.
ANALYSIS
METHODOLOGY
The analyses presented here contrast British
A mailed questionnaire was distributed to Franchise Association (BFA) members
nearly 580 franchise companies in February against non-members, primarily to gauge the
2000, using an address list supplied by extent to which BFA membership successfully
Franchise World and based upon their UK influences franchise systems in connection
franchise directory. Our earlier research had with 'good practice'.
indicted that, of around 700 businesses, which
answer to the description of a franchise The most recent BFA/NatWest survey of UK
company in the UK, around 200 are very franchising, published in March 2000,
small systems in their infancy, and thus identified 642 franchise systems. And, at
unlikely, it would seem, to become involved in around the time when their survey was
research such as ours (as noted in our undertaken, towards the end of 1999, it was
44% 36%
26% 45%
23% 40%
26% 20% 35%
30% Proportion
12% 25% of Sample/
Sub-sample
12% 20%
17% (BFA Membership
51 or more 15% Status)
21-50 10%
5%
11-20
0%
6-10
ALL (138)
0-5 Franchise outlets Non-members
(65)
BFA Members
(73)
41% 33%
45%
23% 19% 40%
32% 25% 35%
30% Proportion
25% of Sample/
29% 23%
Sub-sample
20%
(BFA Membership
19% 15%
Status)
11 years or more 10%
18% 5%
6-10
0%
3-5
ALL
BFA Members
estimated that the BFA had a total of 173 Franchising Experience: Number Of Years
franchise system members (Franchise World, Since First UK Franchisee Was Recruited
November/December 1999). The survey
response of 138 franchisors comprised 73 One in three of the sample recruited their first
BFA members and 65 non-members. franchisee more than 10 years ago (i.e. before
1990, Figure 2). Only 37% of the BFA
Size Of Systems: Number Of members recruited their first franchisee within
UK Franchised Outlets the past 5 years, compared to over 60% of the
non-members.
Nearly 60% of respondents had over 20
franchise outlets (Figure 1). This rose to 70% Franchisee Contracts: Lawyers & Value
for BFA-members, but fell to less than 50% for For Money
non-members. This suggests that BFA
members comprise a greater proportion of 89% of respondents assessed the lawyers
mature and experienced systems than their who prepared their standard franchisee
non-member counterparts. contract as 'good' or 'reasonable' value for
money (Figure 3). There were no major
Certain membership criteria - e.g. full differences between BFA-members and non-
membership, requiring a minimum of 4 members, apart from a slight bias towards
franchisees - deliberately screen out the perceptions of 'poor' value for money amongst
smallest (and youngest) systems. Additionally, the non-members.
criteria for other grades - e.g. provisional
membership, which requires emerging Contracts Prepared By BFA-Affiliated
systems to use 'accredited professional Lawyers
advisors' - will also rule out systems that do
not have the finance or the inclination to use Two-thirds of respondents reported having
such advisors, again, perhaps tending to used a BFA-affiliated lawyer, with 82% of
exclude smaller systems. BFA-members doing so, but less than half of
non-members (Figure 4). If it is reasonable to
assume that the value-for-money rating of the
typical BFA-affiliated lawyer would be higher
41%
48%
50%
45%
40%
35%
Proportion
30% of Sample/
25% Sub-sample
9% 20% (BFA Membership
14%
15% Status)
Good value for money
10%
5%
Reasonable value for money 6% 1% 0%
Other Non-members
BFA Members
66%
82% 90%
80%
48% 70%
60% Proportion
50% of Sample/
28% Sub-sample
40%
(BFA Membership
30% Status)
20%
7% 10%
Yes
0%
No
ALL
BFA Members
18%
70%
70%
60%
50%
Proportion
40% of Sample/
Sub-sample
30% (BFA Membership
20% Status)
9% 10%
Don't know
0%
No
ALL
Yes Non-members
BFA Members
Competitive Tenders From BFA-Affiliated said that they did not (Figure 5). There was
Lawyers little difference between BFA-members and
non-members.
Seeking competitive quotations (from BFA-
affiliated lawyers) would appear to be
relatively uncommon: 70% of the respondents
8%
58%
70%
60%
50%
Proportion
40% of Q6 = 'No'/
Sub-sample
29% 30%
(BFA Membership
5% 20% Status)
No data
10%
Other (please state)
0%
Don't know
ALL
BFA Members
57%
69%
70%
45% 60%
50%
Proportion
24% 40% of Sample/
Sub-sample
30% (BFA Membership
20% Status)
17%
10%
Yes
0%
No
ALL
BFA Members
43% 60%
49%
48% 50%
51%
40% Proportion
of Sample/
30% Sub-sample
(BFA Membership
20% Status)
7% 10%
Yes
0%
No
ALL
BFA Members
bands (i.e. smallest and largest) compared to franchises establishing themselves in the UK,
non-members. whereby it was felt that the organisation was
of a reasonable size and already possessed
Another explanation for firms not using the necessary expertise.
consultants could be the case of foreign
53%
60%
50%
BFA Members
70%
79%
80%
60%
70%
60%
50% Proportion
of Q10 = 'Yes'/
22% 40% Sub-sample
30%
30% (BFA Membership
Status)
20%
7% 10%
14%
Yes - Consultant affiliated
0%
No
ALL
BFA Members
90% 73%
86% 68%
80% 100%
54% 90%
51% 80%
69%
70%
49% Proportion
60% of Sample/
60%
Bank 1 50% Sub-sample
40% (BFA Membership
Bank 2
30% Status)
Bank 3 20%
23% 12% 10%
Bank 4
0%
Bank 5
ALL
None of the above
Non-members
BFA Members
Bank 2 (68%) - that lead the rest in terms of Visits From Local Branches
personal contact (Figure 11).
Around half of the respondents received no
Additionally, the suspected targeting of BFA- local visits from any of the named banks,
members, as opposed to non-members, by all whether or not they were BFA members
of the BFA-affiliated banks is evident, perhaps (Figure 13). In comparison to the low level of
most noticeably in the case of Bank 3. Nearly activity by their central franchise team, Bank 5
a quarter of the non-member franchises were appeared to be relying upon their local
without a named contact at any of the central network to maintain contact with franchisors.
franchise teams listed. There was also some evidence here that
Bank 4 was using their local network to make
Banks - Visits By The Central Franchise contact with non-BFA-members.
Departments
72% 56%
56% 44%
63% 80%
40% 70%
60%
30% Proportion
41% 45% 50%
of Sample/
Bank 1 26% 40% Sub-sample
30% (BFA Membership
Bank 2
Status)
17% 20%
Bank 3
10% 10%
Bank 4 21% 0%
None of the above
ALL
Bank 5
Non-members
BFA Members
48%
50%
23%
45%
20% 40%
23% 35%
Proportion
30% of Sample/
12%
None of the above 25% Sub-sample
11% 20% (BFA Membership
Bank 5
15% Status)
Bank 1 14% 14% 9% 10%
5%
Bank 3
0%
Bank 2
ALL
Bank 4
Non-members
BFA Members
80%
90% 100%
68% 90%
80%
70%
Proportion
60%
of Sample/
50% Sub-sample
40% (BFA Membership
14%
30% Status)
20%
6% 10%
Central franchise team
0%
Local branch
ALL
No data Non-members
BFA Members
Preferences For Visits From Banks Additional size analyses of the responses
here suggest that all of the BFA-affiliated
Franchisors expressed a strong preference for banks except Bank 4 may have attempted to
visits by members of (specialist) central target growth prospects amongst non-BFA-
franchise teams as opposed to local branches members, that is, those franchisors having 21-
(Figure 14). This was particularly the case 50 franchise outlets.
with BFA-members (90%).
Extent of Finance Schemes
Specific Bank Finance Schemes With Different Banks
For Franchisees
The data in Figure 15 was re-analysed to
The data shows a marked contrast between indicate the extent to which respondents have
BFA-members and non-members, with 71% schemes at more than one bank (Figure 16).
of non-members having no schemes at all Multiple schemes are rather more in evidence
(Figure 15). However, it is understood that amongst BFA-members than non-members.
the responses overstate bank estimates for
the number of specific schemes in existence, Clearly, some franchise systems will be
perhaps boosted in the survey where viewed as sounder bets than others by the
respondents feel that a recommendation to banking community, and whilst a bank may
use a given bank constitutes a formal well deny liability that the existence of a
scheme. specific franchisee finance scheme with a
given franchisor conveys any 'seal of
In any case, and taking the prospective approval', it is arguable that the existence of
franchisee's standpoint - especially one in schemes with more than one bank may offer a
need of external finance - BFA members as a helpful pointer to prospective franchisees
group would appear to offer a markedly better when assessing a franchise system.
chance of raising bank finance, all things
being equal, than the population of non-BFA
franchisors. This could be a major selling
point in favour of BFA membership.
71%
55%
80%
41%
38% 29% 70%
71%
55%
80%
41%
70%
17% 60%
Proportion
11% 50%
of Sample/
No schemes 40% Sub-sample
8%
1 finance scheme 30% (BFA Membership
2 3% Status)
20%
6%
3
10%
11%
4 1% 0%
5
ALL
6
Non-members
BFA
Members
57% 52%
44% 60%
50%
22%
40% Proportion
of Q18 'None'/
18% 30% Sub-sample
(BFA Membership
20%
Status)
Yes
8% 10%
No
0%
Don't know
ALL
No data Non-members
BFA Members
77% 64%
64% 53%
67%
80%
44%
70%
38%
46% 60%
35% Proportion
50%
41% of Sample/
Bank 1 40% Sub-sample
Bank 2 30% (BFA Membership
Bank 3 13% Status)
20%
Bank 4
10%
6%
Bank 5
0%
None of the above
10%
ALL
Another bank
Non-members
BFA
Members
27% 36%
40%
5% 35%
5% 30%
No data 27%
25%
Other Proportion of
20% Q20 'None/Blank'
Responses
Other (please state) 15%
10%
Prefer neutrality
5%
0%
Nothing to choose
ALL
48%
46%
37% 50%
45%
35%
40%
35%
16% 29%
30%
Proportion
25%
of Sample
17% 20%
15%
Bank 1 10%
Bank 3 10% 5%
17% 0%
Bank 2
Don't Know/No
Bank 4
Good data
Bank 5
Reasonable
Poor
The assessments have been ranked in The accompanying analysis has been based
descending order on the 'good' rating for each on the 73 respondents who identified
bank. Highest is Bank 1 with 48% (+ themselves as BFA members. They were
'reasonable', 16% = 64%, Figure 20). asked to rank in order of importance the three
Combining the 'good' and 'reasonable' most significant benefits that membership of
responses, would rank the Bank 2 equal with the BFA offers their franchise system. The
64% (35% + 29%). ranking for the most significant 'first choice'
benefits of BFA membership finding widest
Banks 4 and 5 fare worst with the highest appeal was (see also Figure 21):
proportions of 'Don't knows', suggesting lower
market awareness. Worst placed in the 1 - To help sell franchises (34%)
marketplace is Bank 5, combining the highest 2 - Access to BFA Network (32%)
proportion of 'poor' responses (17%), the 3 - Specialist advice from BFA (16%)
lowest 'good's (10%) and almost 50% 'Don't
knows'. Interestingly, the second and third choices
were always a combination of the above
Summary of the banks' position: Taking all of options. The first choice 'other' options
the relevant assessments into consideration, it suggested by respondents were:
is suggested that the supply side of the
market for influencing franchisors - as First Choice: 'Other' Benefits
perceived by the franchisors themselves - can
be split into two groups: - Business credibility
- Cheaper rates at exhibitions
Leaders: Banks 1, 2 & 3 - Credibility
- Credibility to our company
Others: Banks 4 & 5 - Necessary for credibility
- Recognition
- The Association
34%
32% 29%
29%
35%
30%
16% 25%
20% Proportion
To help sell franchises of Sub-sample
10% 15% (BFA Members)
Access to BFA Network
Specialist advice from BFA 10%
6%
Other (please state) 5%
Other 3% 0%
No data
3rd most
Social aspect significant
2nd most
significant benefit
Most
significant benefit
benefit
70%
BFA Members
40% 60%
53%
46%
50%
Moderately helpful
5% ALL
BFA Members
54%
8%
70%
60%
46% 60%
50%
Proportion
27% 40% of Sample/
Sub-sample
30%
(BFA Membership
20% Status)
Always
11% 10%
19%
Sometimes
0%
Never
ALL
No data Non-members
BFA Members
69% 42%
62% 70%
51%
60%
50%
Proportion
20% 40% of Sample/
Sub-sample
34% 30% (BFA Membership
20% Status)
7% 10%
Yes
0%
No
ALL
No data Non-members
BFA Members
Compared to the use of BFA-affiliated print Throughout all of the analyses here (Figures
media, a similar proportion of members (62%) 26, 27, 28 and 29), there was a recurring
were influenced where the BFA sponsors a difference between BFA-members and non-
franchise exhibition, but only one in five non- members: a bias towards what could be
members feel likewise (20%, Figure 25). considered 'good practice' amongst BFA-
Indeed, 69% of non-members say they were members. That is, a greater emphasis on
not influenced. seeking sound advice about an important
commercial decision, particularly where the
However, the cost of hiring just a stand at an prospective franchisee could be at a
exhibition, at around £2,000-£5,000 or more disadvantage due to a lack of skilled expertise
is just the tip of an iceberg, and other allied or prior experience.
expenditure such as stand and printing costs,
personnel time, and so on, make exhibition A prospective franchisee finds him/herself
attendance a major investment issue appraising what is often a major investment
compared to print advertising. decision - total outlays exceeding £10,000 are
not at all uncommon - and well-informed,
Thus the BFA influence is not that strong impartial advice could be critical to a
towards non-members in the context of successful outcome. And in the case of
exhibitions. professional advisors, particularly lawyers,
accountants, and the banks, it is arguable that
Prospective Franchisees & the client's interests should automatically
Recommendations To Seek come first.
Independent Professional Advice
The highest level of 'insistence' amongst BFA-
Respondents were asked, when recruiting members occurs in the case of legal advice
new franchisees, whether they insisted or (51%), followed by financial advice
recommended that prospective candidates (accountants and banks, both 34%).
should seek independent professional advice
from a lawyer, an accountant, a bank and Again, taking the prospective franchisee's
43%
53%
60%
51%
50%
49%
40% Proportion
of Sample/
30% Sub-sample
(BFA Membership
20% Status)
10%
4%
Insist
0%
Recommend
ALL
Neither Non-members
BFA Members
standpoint, and especially those most tendency to steer people towards impartial
exposed to making a poor franchise decision advice - than the population of non-BFA
(i.e. least experienced/skilled), then BFA franchisors.
members as a group would appear to offer a
sounder target group - because of a greater
11%
59%
60%
50%
40% Proportion
of Sample/
28% 30% Sub-sample
(BFA Membership
20% Status)
34%
20%
10%
Neither
0%
Recommend
ALL
Insist Non-members
BFA Members
54%
13% 60%
50%
40% Proportion
of Sample/
30% Sub-sample
25% (BFA Membership
20% Status)
33%
10%
15%
Neither
0%
Recommend
ALL
Insist Non-members
BFA Members
26% 60%
38%
53% 50%
32%
40% Proportion
15% 25% of Sample/
30% Sub-sample
(BFA Membership
20%
Status)
No data
8% 10%
4%
Neither
0%
Recommend
7% ALL
Insist Non-members
BFA Members
90%
100%
86%
93% 80%
Proportion
60% of Sample/
Sub-sample
40% (BFA Membership
Status)
20%
10%
0%
14%
Yes
ALL
7%
Non-members
No
BFA Members
Prospective Franchisees: Excluding which could suggest that the banks like to see
Weak Bank Lending Prospects franchisors at least provide some support for
franchisees and their business plans (Q18),
A high proportion of both BFA and non-BFA and, 5 were 'never' users of BFA print media
members adopt a screening process of some (Q27). Nevertheless, not all could be
sort to eliminate under-financed franchisees, described as 'fringe' operators, as one of the
slightly more so in the case of BFA-members respondents in this group is a drinks
(Figure 30). conglomerate.
50%
48% 60%
52%
44%
50%
42%
47%
40% Proportion
of Sample/
30% Sub-sample
(BFA Membership
20% Status)
10%
4%
Provide all data
9% 0%
BFA Members
Lloyds TSB ❏ ❏ ❏ ❏ C
Accountant............................ ❏ ❏ ❏ B
___________________________________
Yes .......................................................... ❏A
No............................................................ ❏B
25 Did you seek advice/information from the BFA:
✓ Against all that apply)
(✓
Prior to launching the franchise ................. ❏A
31 Which one of the following most closely
describes your assistance with a business plan
Subsequent to launching the franchise ...... ❏B for new franchisees: (Just ONE ✓ )
We have had no contact with the BFA ....... ❏C Provide practically all the market
research/financial data that the franchisee
If ‘No contact’, please skip Q26 and go to Q27 will need for the business plan..................
❏A
Provide basic market research/
26 If you contacted the BFA, how would you rate the financial data............................................ ❏B
advice/ information provided overall:
(Just ONE ✓ ) Provide no data at all - it's up to the
franchisee to prepare the relevant
Very helpful............................................... ❏A information ...............................................
Moderately helpful..................................... ❏B ❏C
A waste of time ......................................... ❏C
3
AUTHORS INTERNATIONAL FRANCHISE RESEARCH
CENTRE
Professor John Stanworth is director of the
International Franchise Research Centre The International Franchise Research Centre
and has been engaged in research into (IFRC) is committed to improving the
franchising since the mid-1970's. He also understanding of franchising. This is achieved
leads the Future of Work Research Group, by the publication of impartial research and by
based at the University of Westminster, which the encouragement of informed debate.
has a record of specialist research in
Teleworking, Small Business Development ACKNOWLEDGEMENTS
and Human Resource Management. Studies
have been undertaken for many clients, The International Franchise Research Centre
including the Department of Trade & Industry, is pleased to acknowledge The Royal Bank of
The Department for Education, The Economic Scotland in sponsoring the research, analysis
& Social Research Council and various and presentation of this report.
commercial organisations.
The database of franchise systems used for
David Purdy is a researcher supporting the questionnaire mailing was obtained from
Future of Work Research Group and its Franchise World.
interest in franchising. He has also specialised
in small business research since 1985, and Finally, we wish also to acknowledge the
publications include authorship of 'Risk support of the participating firms, without
Capital for Small Firms', commissioned by the whom the survey would not have been
Small Business Research Trust. He has also possible.
co-authored studies investigating Small
Business Management Development and
Teleworking.