THE VIABILITY OF FRANCHISING: THE UK BASE STUDY

The Viability of Franchising

Table of Contents

1.Introduction1

1.1 Research Question1

1.2 Background2

1.2.1   UK3

1.3     Project Aim and Objectives4

1.4   Project Outline4

1.5  Summary4

2. .Literature Review8

2.1              Introduction8

2.2              Franchising13

2.2.1        Overview15

2.2.1.1 Mintzberg's framework15

2.2.1.2 Entrepreneurial form18

2.2.1.3 Confederation form20

2.2.1.4 Carbon-copy form24

2.2.1.5 Transition paths27

2.2.2        Business Model32

2.2.3        Role of the Franchisor34

2.2.4        Role of the Franchisee35

2.2.5        Applicability37

2.3              UK Survey38

2.4              Profitability38

2.5              Summary39

2.Findings & Analysis42

3.1              Introduction42

3.2              Findings42

3.3              Analysis43

3.4              Summary44

3.Conclusion47

4.1              Research Overview47

4.2              Key Findings47

4.3              Recommendations49

4.4              Project Evaluation51

4.5              Future Research55

4.References61

5.Appendices80

Introduction

1.1 Research Question

Whether or not the franchise model is still viable for businesses in UK?

Discuss the franchise Business Model?

What is the role of the Franchisor?

What is the role of the Franchisee?

Examine the importance & success of franchi9sing system in UK?

1.2 Background

Aspiring entrepreneurs are being encouraged to realise their career ambitions by joining the multi-billion pound franchising sector. The franchising network in the UK is worth 10.3 billion, which includes 33,500 franchisees, who employ a further 364,000 workers. Revenue generated from franchising across the West Midlands contributes 829 million to the region's annual turnover. Latest figures taken from a survey carried out by NatWest bank and the British Franchise Association (BFA), reveal that 64 per cent of the UK's 759 franchise firms have some connection with the West Midlands. Franchising can describe many different forms of business relationships, including licensing, distributor and agency arrangements. But a more popular use of the term has been associated with something called business format franchising. This is when a company (the franchisor) gives permission for an individual (franchisee) to trade under the trade mark or trade name of the company. But franchises offers many other benefits to the franchisee, including training and continual business support.

Around 250 franchised companies will be on hand to show what they have to offer to potential franchisees. And experts from the BFA and the legal profession will lead seminars and give advice on a whole range of issues, ranging from raising finance to legal contracts. The BFA lists a number of advantages to taking on a franchise agreement. They include not having to come up with an original business idea, trading under a strong brand name, and often benefiting from a national advertising campaign. And good franchise companies will offer comprehensive training programmes in a number of business skills, including sales and accounts. But there may be a fee to pay as part of any franchise agreement, and there may be other continual charges, such as a slice of the turnover. Although people have to be careful what type of franchise deal they are going into and the type of business it is. But it is an advantage working under a strong brand name, under a business idea which has already proved successful.

1.2.1   UK

Total sales from business format franchising in the UK reached 5.9 billion in 1995 accounting for 3.7 percent of all UK retail sales. (These numbers are up from 5.5 billion, or 3.6 percent of all retail sales in 1994.) The number of franchise units in the UK in 1995 reached a high of 25,700. These numbers confirm a rebound in the fortunes of UK franchising which ...