Is the United Kingdom franchise-friendly ?

The United Kingdom is the 5th largest European “country” when it comes to global franchise networks. Its model of entrepreneurship is well developed, especially in the fast food, catering and services sectors. However, we must know the administrative aspects of franchising in the UK. It just does not have the same legal codes as other countries in the franchise sector.

Franchise legislation in the UK

There is no specific legislation on franchising. The contract between franchisor and franchisee is based on common commercial law. However the BFA (British franchise association) has enacted rules of conduct that are not mandatory but strongly recommended for the successful completion of the partnership. For example:

  • The creation of a British-style DIP where the franchisor provides the candidate with detailed information about the franchise before signing.
  • The establishment of a written contract
  • The franchisor’s control and monitoring rules on the franchisee.

There are 3 legal and financial structures in the United Kingdom:

  • The sole proprietorship (55% of the franchisees)
  • The “Limited Company” which corresponds to the LLC
  • The “Partnership” which is similar to a joint venture

Franchisee recruitment in the UK

Franchisee recruitment 87% on the Internet! As for the franchisees they are more than half to use this means of search via specialized sites. Franchisors, however, have trouble recruiting…Candidates often lack the minimum knowledge of management or management to hold a franchise. That’s why the director of BFA launched a promotional campaign on the franchise. In this country that flirts with the 2 million unemployed, it hopes to attract young entrepreneurs and future graduates or experienced graduates. Indeed, she notes that the development of the franchise is hampered by lack of quality candidates.

The financing of franchises in the UK

The average cost was estimated at 71,209 euros for an amount borrowed by the franchisee of 70,000 euros. This leaves an important security reserve. Banks lend easily for the opening of a franchise much more than for a solo creation elsewhere for that matter. The risks are lower because the model has shown its effectiveness. Some banks have even created services entirely dedicated to franchising (HSBC, Lloyds, TSB,…) Today, the United Kingdom may be an opportunity for International  companies wishing to export their concept: rents are down to 30% depending on the area, the weakness of the pound is favorable to investment in euros. It remains to be seen whether these enterprises can adapt well to the legal regulations.

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