Franchises defy downturn

by Kate Pritchard - Monday, 23rd February 2009 -

Sandwich chain Subway announces plans to open 600 stores in the UK and Ireland. Pizza delivery service Domino's says sales have increased by ten per cent. Fast-food outlet KFC plans to create 9,000 new jobs. How come these fast-food chains are bucking the trend?

One word: franchises.

“While many industries have been hit by the recession, sectors within the franchise industry are demonstrating significant growth – from second-hand stores and car repairs to security companies and fast food,” says David Tuck of The British Franchise Exhibition. “Banks have confirmed their ongoing – and in some cases increased – commitment to lending to these prospective franchisees, as they offer an approved business model.”

According to the annual NatWest/BFA franchise survey, a stonking 91 per cent of franchisees claim their business traded profitably last year.

“The failure rate among franchisees is much lower than for stand-alone start-ups,” comments Cathryn Hayes, who has been head of franchising at HSBC since 1994. “This is predominantly due to the support that the franchisee receives from its franchisor and other franchisees in the network, who can help newcomers avoid the pitfalls associated with starting a business. The risk of lending to a franchisee is lower than to a conventional SME. Applications for finance will therefore be looked at more favourably.”

Want to know more about franchising? Then get yourself down to the British & International Franchise Exhibition at Olympia London on 20 and 21 March.

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