News & Comment
28 August 2020 - Muffin Break UK
Muffin Break UK franchise holder sold in pre-pack administration: Foodco UK, the UK franchise holder of the cafe brand Muffin Break, has been sold out of administration, saving almost 700 jobs. The deal sees 59 of the sites remain open.
Michael Arbuckle, director at Foodco UK Franchising, said: “The Muffin Break brand has seen substantial investment from the individual franchisees and, importantly, this deal ensures the continuity of their businesses. The past few months have created challenges that no one in the leisure and hospitality industry could have foreseen at the beginning of this year and we are very grateful for the support and understanding of our landlords and other key stakeholders during what has been a very testing time. We actively engaged with these groups early on and their support of this sale ensures we’re now on a stronger footing and confident about the future opportunities for Muffin Break. More importantly, this sale also means more than 50 franchisees will continue to play a part in their local communities.”
11 June 2020 - Does Private Equity have a role in Franchising?
There’s a pervading view that Private Equity (PE) companies are only interested in short term results – but I’m not sure that it’s justified.
I’ve been fortunate enough to work with a number of PE companies who have invested in Franchise system. In particular, I assisted with investments into 'Pirtek' and 'Bluebird Care'. In both cases the PE company concerned was in and out again in three years. In contrast, I worked with EPIC Private Equity in 2011 to review the international franchise performance of Whittard of Chelsea just after their acquisition out of administration and eight years later they’re still 100% owners of the business which is now making profits!
So how does a PE investment impact on the franchise business and is it good for the Brand? Let’s have a look at an example.
PE house, Rutland Partners, invested in Pizza Hut Restaurants in 2012 supporting the management team to buy the UK franchise from Yum Brands! with a view to turning round the loss-making dine-in aspect of the business. The management team had spent a lot of time trying to stabilise the ailing business and test new ideas. However, they lacked the money needed to implement the new, bold, strategy. This is where Rutland Partners came in.
With significant investment from Rutland, the dine-in business separated from the Pizza Hut delivery business, established an independent supply chain, refurbished the entire restaurant estate and introduced a completely new menu! Returning the brand to its American heritage and introducing itself to a new, younger audience. As a result, sales growth was restored and average spend levels per customer increased! The business went from loss making to making over £20m EBITDA, creating a large number of new jobs throughout the UK in the process.
Rutland Partners subsequently "exited", selling their stake in the business to the Management Team in 2018.
Was that short-termism? Six years isn’t a long time in business terms; just over one franchise term (for a lot of franchise systems), but the turnaround was substantial.
As with selecting your franchisees, perhaps the secret is to choose the right PE partner who understands franchising!
28 May 2020 - Franchising - Who holds the power?
In the last three months I've noticed several interesting stories in the press which, in my view, demonstrate the growing strength of franchisees.
In March 2019, Edinburgh-based franchisor Cash Generator, where customers buy and sell second hand goods, was bought out by its franchise network. Over fifty franchisees came together to buy the business which the new owners have said has resulted in the business going back to its roots of being a cash-generative and profitable business, well-positioned to enter its next phase of growth.
In April, LK Bennett was bought out of administration by its Chinese franchise partner, Rebecca Feng. A new company called Byland, backed by Feng bought the UK business, which has about 40 stores and employs 500 people. Feng apparently now has plans to secure LK Bennett’s stores in Europe and the US going forward.
In May, Jamie's Italian restaurant closed all but a handful of locations in the UK but this hasn’t affected their international franchise network. Their Irish franchisee, Gerry Fitzpatrick told The Irish Times that the Irish business would be expanding in the coming months. He plans to open a new restaurant in Dublin city centre “before Christmas”.
So, what can we learn from these headlines about the strength of franchisees?
Certainly in the case of LK Bennet and Jamie's Italian this is a sign that, whilst the UK Retail and F&B sectors may be struggling, there's still plenty of growth overseas for franchisors looking to expand. One of the many advantages of franchising is diversifying the geographic spread of a business, allowing booms in some countries to compensate for busts in others.
Meanwhile, the example of Cash Generator shows us that, whilst one franchisee may be weak, a group of franchisees with a common goal can exert extraordinary influence over their franchisor.
What do you think? Any other recent examples that I might have missed?
25 March 2020 - Master Franchising doesn't work
An interesting article was published on Restaurant Business online this week. It confirms what many in the franchising industry suspected; Master Franchising is spectacularly un-successful. Mizuho analyst Jeremy Scott focused on an analysis of 360 master franchising or whole-country development agreements signed by US brands between 1999 and 2016.
The Mizuho analysis found that only 6% of such deals are ultimately fully satisfied. And 40% of these deals fail entirely. Overall, Scott wrote, operating partners opened less than half of their committed stores in 80% of the agreements studied. Of the 27,000 units committed under development agreements, only 8,400 were ultimately built.
Success comes through understanding how international brands grow. Quality lasts; quantity doesn't! The whole article can be found at: www.restaurantbusinessonline.com/financing/international-growth-master-franchising-usually-fails
14 September 2018 - Scottish International Business Week
Next week sees the start of the Scottish International week with events across Scotland focussing on going International. I'm speaking at one of the round table events at Harper Macleod in Glasgow on Franchising and Licensing internationally. If you're interested in growing overseas come along and get some tips!
27 February 2018 - Multi-Unit Franchise Conference
I’m delighted to be chairing the panel session at London’s first multi-unit franchise conference at Olympia on 9 March 2018, delivering crucial insights into the lucrative world of multi-unit franchising.
Franchising is recognised as offering many advantages to those pursuing business ownership. The support of an established brand, the tried-and-tested route to launch, operation and revenue, all create a formula for success.
Whether the success of one franchise has prompted investment in more units, or sights are set on investing in multiple ventures from the outset, the Multi-unit Franchise Conference serves those entrepreneurs looking to harness the potential of franchising across several operations.
Sponsored by HSBC, the conference brings together senior industry experts with successful multi-unit and multi-brand franchisees to deliver highly targeted and valuable advice on pursuing expansion through multi-unit ownership.
Franchise Resources
There is a wealth of information about franchising available on the internet and navigating it can be a nightmare. We have put this section together to help you pinpoint exactly what you need.
Useful Websites:
The BFA - The governing body of franchising in the UK. The British Franchise Association (bfa) is the voluntary self regulating governing body for franchising. The UK market encompasses many franchise opportunities. Some of these are members of the bfa, others are not. All members of the bfa chosen to be vetted against a strict code of business practice – they endeavour to be good franchisors that can deliver the success that franchisees want.
Whichfranchise.com - the UK's leading website for franchise information and advice, and franchise opportunities. As the official online partner of the British Franchise Association (bfa), all franchises for sale on whichfranchise are bfa members.
The European Franchise Federation – The collection of all the European national franchising bodies.