The UK’s economic landscape in 2025 will continue to be influenced by the aftermath of the COVID-19 pandemic, the challenges posed by Brexit, and the ongoing cost-of-living crisis. Some economic think tanks predict a recission and continued inflation in the year ahead. In times of economic uncertainty, many individuals may seek new career options, and franchising is becoming increasingly popular for those wanting the independence of self-employment while benefitting from the support and resources of an established business model.
The British Franchise Association (BFA) reported in 2024 that franchise businesses in the UK had a higher survival rate than independent start-ups, with fewer than 5% of franchise businesses closing annually due to commercial failure. By comparison, data from Experian revealed that 4% of new businesses fail within their first year and 50% within three years. This disparity highlights the relative stability of franchise models, making them an attractive option for entrepreneurs and a more secure choice for obtaining loans from retail banks.
Before committing to a franchise, prospective franchisees should conduct thorough research, a process referred to as ‘due diligence’ by lawyers. This means independently verifying the information provided by the franchisor and seeking professional advice. Below are key considerations to help ensure you make an informed decision on a franchise opportunity:
- The Franchisor’s Track Record
- How long has the franchisor been trading?
- How many franchisees are currently in their network?
- How many franchisees have exited the network in the past five years, and why?
- Are there any public legal disputes involving the franchisor?
- BFA Membership
Is the franchisor a member of the British Franchise Association? Membership indicates that the franchisor adheres to industry standards and ethical practices. If not, ask why.
- Existing Franchisees
- Request a complete list of the franchisor’s franchisees and contact as many as possible. Be cautious if the franchisor limits who you can speak to, as this could signal underlying issues.
- Ask franchisees about their experiences, including the quality of training and support provided by the franchisor and their financial performance.
- Legal Review of the Franchise Agreement
Engage a lawyer who specialises in franchise law to review the franchise agreement. A specialist can identify any unreasonable or onerous terms.
- Financial Projections
Scrutinise any financial projections or earnings claims provided by the franchisor. These should be based on the performance of existing franchisees and clearly state how the figures were calculated. Ask the franchisor how those figures were prepared. If the data appears overly optimistic or lacks transparency, investigate further.
- Considerations for 2025
- Rising Costs: Inflation, reduced supply chains and higher interest rates have increased the cost of borrowing and living. Ensure you account for these factors in your financial planning and verify if the franchisor’s business model is resilient against such pressures.
- Technological Advances: Franchises that leverage e-commerce and artificial intelligence are better positioned to thrive in 2025’s digital-first economy. Assess the franchisor’s adoption of technology and digital tools where relevant.
- Environmental, Social and Governance (ESG) Policies: As consumers increasingly prioritise environmental and social issues, holding businesses accountable for their transparency and actions in these areas, franchises that incorporate sustainable practices may have a competitive edge.
Conclusion
Investing in a franchise requires significant financial commitment. The average start-up cost for a UK franchise in 2024 was reported by the BFA to be between £50,000 to £60,000, with some models exceeding this range. Thorough due diligence can prevent costly mistakes and increase your chances of success.
By taking the time to research and verify your franchisor’s claims, you position yourself to make a well-informed decision. With proper planning, your franchise venture can become a thriving business in the dynamic and evolving UK economy of 2025.
