FRANCHISING:

BREAKING INTO
EUROPEAN UNION
MARKETS

Jason Stirland
Professor John Stanworth
David Purdy &
Stewart Brodie

INTERNATIONAL FRANCHISE RESEARCH CENTRE

SPECIAL STUDIES SERIES No.12

DECEMBER 1998

PUBLISHED BY THE FUTURE OF WORK RESEARCH GROUP

ISBN 0 9533304 4 3
THE INTERNATIONAL FRANCHISE International Journal (MCB University
Press). Additionally, Franchise Growth And
RESEARCH CENTRE (IFRC) 1993-2007
Failure In The U.S. And The U.K.: A
University of Westminster, London, UK.
Troubled Dreamworld Revisited received the
Best International Paper Award in 1997,
"The International Franchise Research
again from the Society of Franchising. This
Centre (IFRC) is committed to
paper was later published in Franchising
improving the understanding of
Research: An International Journal.
franchising. This is achieved by the
publication of impartial research and
Close links were fostered with universities in
by the encouragement of informed
Rome and Pisa (Italy), Haute Alsace
debate."
(France) and Boston, Minneapolis and
Texas (USA), with a view to research
Franchising operates in a dynamic environ-
collaboration. Professor Pat Kaufmann of
ment, with new issues and challenges
Atlanta, Georgia, addressed our inaugural
emerging, including: globalisation, coping
annual strategy seminar, in 1994. Overseas
with competition, disclosure, industry
speakers in subsequent years included
regulation, managing relations with
Cheryl Babcock, Director of the Franchising
franchisee associations, franchisee
Institute, University of St. Thomas,
recruitment & market saturation.
Minneapolis (1995), Professor Rajiv Dant,
University of Boston (1996), Professor
Against this backdrop, the IFRC was
Francine Lafontaine, University of Michigan
established in 1993 by Professor John
(1997), Professor Claude Nègre, University
Stanworth (Director of the Future of Work
of Haute Alsace (1997), Colin McCosker,
Research Group at the University of
University of Southern Queensland (1998),
Westminster), supported by Brian Smith (ex-
Professor Frank Hoy, University of Texas at
BFA Chairman, franchisee, franchisor and
El Paso (1998), Professor Jack Nevin,
author), and Chair of its Steering Group.
University of Wisconsin-Madison (1999),
Professor Tom Wotruba, San Diego State
FOUNDER MEMBERS
University (1999), Professor Bruce Walker,
University of Missouri, (2000), and,
Founder members and sponsors included:
Professor Wilke English, University of Mary
Barclays Bank, the British Franchise
Hardin-Baylor (2000).
Association (BFA), Dyno-Rod, Franchise
Development Services Ltd., Lloyds Bank
IFRC members were active supporters of the
(now Lloyds Group), Mail Boxes Etc.,
International Society of Franchising, and
Midland Bank (now HSBC), Prontaprint,
hosted the ISoF 2005 conference in London.
Rosemary Conley Diet & Fitness Clubs,
Royal Bank of Scotland, The Swinton Group,
The IFRC ceased its research activities in
and Wragge & Co.
2007, when John Stanworth took retirement.
PUBLICATIONS
Web versions of IFRC Special Studies
Series Papers 1993-2001 (listed overleaf)
Their support enabled the IFRC to publish a
number of reports, including its Special
Many of the earlier papers have been re-set,
Studies Series Papers, journal articles,
to allow a successful conversion to Acrobat,
book chapters and conference papers.
and are now available online.
Two IFRC papers received three awards
John Stanworth, Emeritus Professor,
over a period of 12 months (1996-97). The
University of Westminster
first being Business Format Franchising:
http://www.westminster.ac.uk/schools/
Innovation & Creativity or Replication &
business
Conformity ?, which received the Best
International Paper Award in 1996, from the
David Purdy, Visiting Fellow,
Society of Franchising. This paper also
Kingston University
received the Outstanding Paper of 1996
http://business.kingston.ac.uk/sbrc
award from Franchising Research: An
December 2010

International Franchise Research Centre Special Studies Series Papers 1-16 Web Versions 2010 p.1
LIABILITY DISCLAIMER
The information and analysis in each report
is offered in good faith. However, neither the
publishers, the project sponsors, nor the
author/s, accept any liability for losses or
damages which could arise for those who
choose to act upon the information or
analysis contained herein.
IFRC Special Studies Papers 1993-2001
10 London: A Capital City For Franchisee
Recruitment, (Mills, Stanworth &
Purdy), 1997
11 The Effectiveness of Franchise
Exhibitions in the United Kingdom,
(Chapman, Mills & Stanworth), 1997
12 Franchising: Breaking Into European
Union Markets, (Stirland, Stanworth,
Purdy & Brodie), 1998

Web versions published online December 13 Succeeding As A Franchisor,

2010, via http://www.scribd.com/:
1 The Blenheim/University of
Westminster Franchise Survey:
Spring 1993, (Stanworth & Purdy),
1993
2 Improving Small Business Survival
Rates via Franchising: The Role of the
Banks in Europe, (Stanworth & Stern),
1993
3 Targeting Potential Franchisees:
Industry Sector Backgrounds and
Declared Areas of Interest, (Purdy &
Stanworth), 1994
(Stanworth & Purdy, published jointly
with Business Link London Central),
1998
14 Direct Selling: Its Location in a
Franchise Typology, (Brodie &
Stanworth), 1999
15 Unravelling the Evidence on
Franchise System Survivability,
(Stanworth, Purdy, English &
Willems), 1999
16 Survey: Professional Services For
Franchising In The U.K., (Stanworth &
Purdy), 2001

4 The Impact of Franchising on the

Development Prospects of Small &
Medium-sized Enterprises (SMEs) in
Europe, (Stanworth & Purdy), 1994

5 The Blenheim/University of
Westminster Franchise Survey: A
Comparison of UK and US Data,
(Stanworth, Kaufmann & Purdy), 1995

6 Developing a Diagnostic
Questionnaire as an Aid to Franchisee
Selection, (Stanworth), 1995

7 Franchising as a Source of
Technology-transfer to Developing
Economies, (Stanworth, Price, Porter,
Swabe & Gold), 1995

8 Aspects of Franchisee Recruitment,

(Macmillan), 1996

9 Business Format Franchising:

Innovation & Creativity or Replication
& Conformity ?, (Stanworth, Price,
Purdy, Zafiris & Gandolfo), 1996

International Franchise Research Centre Special Studies Series Papers 1-16 Web Versions 2010 p.2
FOREWORD
With the launch of the European single
currency in January 1999, and the UK
Government's stated intention that Britain will
join the single currency at a future stage,
many UK-based franchisors may now be
considering new expansion opportunities into
the EU.
There has been some useful research into
the European-wide franchise industry in
recent years, but one of the enduring puzzles
to many of us involved in franchising has
been the contrast – particularly in the
industry-norm annual BFA/NatWest surveys
– between those UK franchisors saying they
intend expanding into mainland Europe, as
compared to a retrospective look at just how
many (or, rather, how few) actually do so.
Now, with this latest research from the
International Franchise Research Centre, we
are perhaps moving towards a better
understanding of this dichotomy.
This research project has looked below the
surface, and sought to explore the
contradictions between the aspirations of
many UK franchisors, compared to the
reality of taking their franchise systems
overseas – a not inexpensive exercise in
terms of cost and other resources. In
particular, I hope the experience of those UK
franchisors who have already expanded into
the EU is of value to other franchisors
wishing to follow their lead.
I congratulate John Stanworth and his
colleagues at the University of Westminster
for producing what I believe is a very useful,
and topical, new understanding of some of
these key aspects of EU franchising.
I hope you find this research equally
interesting.
Graham Rose
Head of Franchising
Royal Bank of Scotland
International Franchise Research Centre - Special Studies Series Paper No.12
CONTENTS
Highlights...................................................................p2
EU Map Supplied To Respondents ...........................p3
Introduction ...............................................................p4
Fig 1 Current Development Phase
Of Respondents.........................................p5
Fig 2 Completeness Of Existing UK Networks....p6
Fig 3 Partnership Method Used/Anticipated
For EU Expansion......................................p6
Fig 4 Actual/Anticipated Cost Of
EU Expansion ............................................p7
Fig 5 Number Of UK Franchisees.......................p7
Fig 6 Number Of Irish Outlets: EU 'Aspirants'.....p8
Fig 7 Current Trading In EU Countries:
EU 'Activists' ..............................................p9
Fig 8 New/Early Target Countries.......................p9
Fig 9 Languages Spoken By Staff ....................p10
Fig 10 Sector Of Franchise.................................p11
Fig 11 Did/Will UK Banks Provide
Extra Finance For Expansion ? ...............p12
Fig 12 Intention To Operate Additional Bank
Accounts In Other EU Countries..............p12
Fig 13 Source Of Future EU
Franchisee Finance .................................p13
Fig 14 Transfer Of Main UK Banking To
Elsewhere In EU Following Introduction
Of Single European Currency..................p13
Fig 15 Will UK Banks Provide The Necessary
Services To Support Future EU
Expansion Plans Following
Introduction Of Single Currency ?............p14
Conclusions.............................................................p14
Survey Questionnaires............................................p15
1
HIGHLIGHTS
■ Approximately 14% of indigenous UK-
originated franchise systems are currently
active in the EU beyond the UK and
Ireland (Eire). This figure is within one
percentage point of the comparable BFA/
NatWest estimate for British franchise
system activity in Europe, made in 1991.
Despite a great deal of industry 'hype', it
looks as if little of substance has actually
happened since then.
■ An additional 27% of UK systems claim to
be planning to become active in the EU by
the year 2001.
■ The remaining 59% of indigenous UK
franchise systems have no current plans
for EU entry.
■ The historic gap between the relatively
high numbers intending EU expansion
and the relatively small numbers
achieving it, appears to be based upon an
under-estimation of the true costs and
difficulties involved in finding EU partners.
■ Of indigenous UK systems planning to
become active in the EU beyond the UK
and Ireland by 2001, 34% were predicting
likely expansion costs of less than
£10,000. Only 17% were anticipating
costs amounting to over £50,000
whereas, for firms already active in the
EU, 44% had spent this amount.
2 International Franchise Research Centre - Special Studies Series Paper No.12
■ Ireland, Germany, France, Spain and Italy
(in that order) were the most popular
countries for those systems already active
in the EU. For aspiring EU systems,
Germany, France and Ireland were the
most favoured targets.
■ Franchise systems aspiring to achieve a
presence in the EU had much lower levels
of language competence than those
already in the EU.
■ Over half (57%) of those currently active
in the EU had staged a direct entry. In
stark contrast to this, most aspirants were
hoping to be able to share the work and
risk involved by issuing Master Licences
or establishing Joint Ventures.
■ All indigenous UK franchise systems
active in the EU had continued to service
their UK operations using UK banks. The
overwhelming majority of both actual and
aspirant exporters were convinced that
this situation would continue even after
the introduction of the European Single
Currency.
■ Both actual and aspirant EU franchise
exporters felt that their franchisees in
other countries should seek local finance.
It should be noted that this survey
concentrates upon the member states of the
European Union (EU), as indicated in the
map opposite. Other reports are sometimes
more ambiguous about their definitions of
‘Europe’, and may or may not include
countries outside the EU.
 IFRC STUDY: ‘BREAKING INTO EUROPEAN UNION (EU) MARKETS’
– EU Member States –
European Union (EU) Projected Additional
15 Member States EU Members
1998 2001 - 2003
● Austria ● Italy Cyprus
● Belgium ● Luxembourg Czech Republic
● Denmark ● The Netherlands Estonia
● Finland ● Portugal Hungary
● France ● Spain Poland
Slovenia Sweden
● Germany ● Sweden
● Greece ● United Kingdom
● Ireland
Finland
Russia
Norway

Estonia

Latvia
Denmark
Lithuania
Ireland Russia

Belarus
U.K. Neth.
Poland
Germany
Belgium Ukraine
Czech
Lux. Rep. Slovakia Moldova

Switz. Liech. Austria Hungary

Slovenia Romania
France
Croatia Bos.&
San Herz.
Marino Serbia Bulgaria
Monaco
Italy Mont.
Spain Mace.
Portugal
Alb.
Turkey
Greece

Morocco Algeria Tunisia Malta 0 600 km

0 nautical miles 400

Sources (July 1998): What is the European Union ? (EU ‘Europa’ site: europa.eu.int/en/eu/states.htm)
European Union Timeline (Political Resources for the European Union [PREU]: www.cunliffe.demon.co.uk/Politics/EU.timeline.html)
Magellan Maps (Europe.art)

IFRC, University of Westminster, 35 Marylebone Road, London. NW1 5LS

E&OE EU98_Map.PUB 13/7/98 [Map accompanying survey questionnaires]

International Franchise Research Centre - Special Studies Series Paper No.12 3

INTRODUCTION
The field of franchising in Britain remains
relatively under-researched. One area in
which research effort is now vitally important
is that of expansion into Europe by British
franchise companies. The European Union,
with a population of some 350 million, is the
largest single market in the world yet, to date,
no single research project has ever been
devoted solely to this topic. Thus, the current
study is unique in both its scope and depth.
In 1991, a report published jointly by the
British Franchise Association and the
National Westminster Bank claimed that 15%
of British franchise companies were already
operating in Europe and that, by 1996, the
total would rise to 54%. Thus, it was being
predicted that British franchising stood on the
verge of an era of phenomenal export growth,
whereby export activity would become the
norm rather than a relatively novel activity.
In 1997, a report from the same source
claimed that 26% of franchise companies
operating in the United Kingdom had been
active in Europe during 1996 and that an
additional 23% planned to be so by the year
2000. Another report, published in 1998,
offered estimates of 22% currently active in
Europe and a further 26% planning to be so
by the year 2002.
Had the export growth forecasts published
annually by BFA/NatWest proved accurate,
we should now be looking at literally
hundreds of indigenous UK-initiated
franchise systems exporting in Europe, rather
than just a mere handful. In 1997, a
European Franchise Survey, published by
the European Franchise Federation,
succeeded in identifying only 31 'Out-Bound
UK Originated Franchise Systems' operating
in Europe and, of these, 17 had not in actual
fact expanded beyond the UK and Eire. It
could be argued that the difference between
rhetoric and reality here was simply a
reflection of the gap between attitude and
behaviour.
A careful reading of the above reports
suggests that, after 1991, the figures issued
for franchise companies operating in Europe
may well have been boosted by the inclusion
4 International Franchise Research Centre - Special Studies Series Paper No.12
of all franchise firms operating in the UK,
including US firms operating both in the UK
and mainland Europe.
The intention of the current report was to
mount a realistic assessment of the level
of actual activity by indigenous UK
companies in mainland Europe and also
to explore the reasons why so many
aspirants decide finally to confine their
activities to the UK market. After all, if
such companies are to be encouraged to
overcome the obstacles facing them,
understanding the nature of these
obstacles is essential.
METHODOLOGY
A mailed questionnaire was distributed to
nearly 700 franchise companies in the
Summer of 1998. Our earlier research had
indicted that, of around 700 businesses
which, at any one time, answer to the
description of a franchise companies in the
UK, around 200 are small companies in their
infancy, unlikely to survive the next few
months and thus unlikely it would seem to
become involved in research such as ours. In
addition, although some US companies
active in the UK did reply to our
questionnaire, their replies were not analysed
as part of the current research.
In short, we estimated our relevant population
as being around 450 UK systems, of which
almost exactly one-third replied within a 21-
day period. This appears a common
response rate for franchise research
conducted in the UK and is considered good
by the standards of business research
generally.
On a final point, we suspect that companies
active or interested in European expansion
were more likely than others to answer our
survey questionnaire and that, as a result,
our data is more likely to overstate, rather
than understate, the true level of such activity
and interest. It is therefore possible that the
proportion of ‘active’ (14% of the sample
here) and ‘aspirant’ (27%) systems within the
total UK franchise system population may be
lower than indicated here.
RESULTS
Three Groups
Respondents fell naturally into a three-group
typology as shown in Figure 1. Indigenous
UK-originated franchisors already active in
Europe beyond the UK and Ireland made up
14% of the total - referred to in the figures as
EU 'Activitists'. This is within one percentage
point of the estimate made in the BFA/
NatWest report of 1991 which was the only
time that their estimate was restricted
unambiguously to British companies.
A second group of respondents, made up of
those who had not yet expanded into
mainland Europe but claimed they were
planning to do so within the next 3 years, was
almost exactly twice the size of the first group
at 27% - referred to in the figures as EU
'Aspirants'. A total of 81% of the franchisors
currently active in the EU beyond and the UK
and Ireland had had at least 2 years
experience of trading in the EU. In fact, 68%
had been trading in the EU for more than 36
months.
A third and final group of respondents to our
questionnaire, comprising franchisors with no
Figure 1 - Current Development Phase Of Respondents
Proportion
of Sample
14%
EU 'Activists' - Already active in the EU EU 'Aspirants' - Planning to be active in
(beyond UK/Eire)
International Franchise Research Centre - Special Studies Series Paper No.12
current plans for EU expansion, made up the
final 59%.
Completeness of Existing UK Networks
Figure 2 shows the level to which the key
groups (indigenous UK-originated franchisors
already active in the EU and those planning
to be so in the next 3 years) considered their
UK networks to be complete. The differences
here are quite dramatic with 50% of the firms
already in the EU considering their systems
more than 66% complete, compared with
only 18% of their currently aspiring EU
activists. It is interesting here that
perceptions of 'completeness' varied
depending on the nature of the franchise in
question. On occasions, systems with 200+
outlets saw their systems as less than 33%
complete whilst, by way of contrast, systems
with only a handful of UK outlets sometimes
considered their systems as being more then
66% complete.
Entry Method
As can be seen from Figure 3, there were
distinct differences between the chosen entry
routes of companies already active in the EU
and those intended by franchisors claiming to
59%
27%
No current plans for EU expansion
the EU within 3 years (beyond UK/Eire)
5
 Figure 2 - Completeness Of Existing UK Networks

50%

38% 50%
18% 44% 45%
40%
35%
30% Proportion
20% of
25%
30% Sub-sample
20%
(EU Activity)
More than 66% 15%
10%
5%
33% - 66% 0%

EU 'Aspirants'
Less than 33%

EU 'Activists'

be planning an entry into the EU market This compared with only 26% of aspirants.
within the next 3 years. None of those actually in Europe had used a
'Joint Venture' strategy of entry, compared
For instance, over half (57%) of those with 19% of aspirants. Three-quarters of
already in the EU had staged a direct entry. aspirants intended to involve other parties

Figure 3 - Partnership Method Used/Anticipated For EU Expansion

57%
55%

60%
26%

43% 50%

40%
Proportion
of
30%
Sub-sample
19% 20% (EU Activity)
Direct

10%

Master 0%

0%
EU 'Aspirants'
Joint Venture

EU 'Activists'

6 International Franchise Research Centre - Special Studies Series Paper No.12

 Figure 4 - Actual/Anticipated Cost Of EU Expansion

44%

17%
34%
45%
33%
40%

34% 35%
30%
Proportion
14% 25% of
20% Sub-sample
Over £50,000
(EU Activity)
11% 15%
£20,001 - £50,000 10%
11% 5%
£10,000 - £20,000 0%

Less than £10,000 EU 'Aspirants'

EU 'Activists'

(particularly Master Franchisees) compared relatively large numbers of EU-export

to only 43% of those already in the EU. 'Aspirants' have not resulted in more
'Activists'. Most of the former are inclined
The results here probably go some way towards the perception that any future EU
towards explaining why, over the years, expansion would take the form of some kind

Figure 5 - Number Of UK Franchisees

46%
40%

18% 50%
45%
40%
13% 13% 35%
30% Proportion
51 or more
11% 25%
of
21-50 4% Sub-sample
9% 17% 20% (EU Activity)
11-20 8%
15%
17% 10%
6-10 6%
5%
1-5 Franchisees 0%

None EU 'Aspirants'

EU 'Activists'

International Franchise Research Centre - Special Studies Series Paper No.12 7

 Figure 6 - Number Of Irish Outlets: EU 'Aspirants'
81%
Proportion
of Sub-sample
None
of collaborative exercise involving another
major party.
Perhaps the results of this current research,
which inform us that, for whatever reason/s,
indigenous UK franchisor exporters
eventually find arguments for direct
management more persuasive than those for
'Joint Ventures' or 'Master Licences', might
inform future debate in this area and alert
'Aspirants' that exporting into the EU usually
means direct action.
Costs Involved
In business, new projects seldom turn out to
be less costly than planned and frequently
run over-budget. Figure 4 shows stark
differences in the costs claimed by those
already active in the EU and the cost levels
expected by those aspiring to EU entry within
the next 3 years. For instance, 34% of
aspirants felt that they could stage EU entry
at a cost of less than £10,000 compared to
only 11% of franchisors already active in the
EU.
At the other end of the scale, only 17% of
aspirants were calculating to spend in excess
of £50,000. This compared with a figure of
8 International Franchise Research Centre - Special Studies Series Paper No.12
17%
3%
1-4 Franchisees 5 or more
44% for those already in the EU. Overall,
48% of aspirants were anticipating spending
£20,000 or less, compared with only 22% of
franchisors already in the EU.
Current Size
Figure 5 illustrates the number of UK
franchisees claimed by firstly systems
already operating in the EU and secondly
those intending to launch a presence within
the next 3 years. Interestingly, there were a
number of systems active in the EU that had
no franchised outlets in the UK. Nearly half of
the aspiring systems were bunched in the
21-50 franchisees size group. Perhaps the
most expected statistic is the 40% with 51 or
more franchisees which we see for systems
already active in the EU.
Previous research into franchising indicates
that, for many systems, financial break-even
occurs somewhere along the 21-50 outlets
continuum. A substantially larger proportion
of EU export 'Activists' than 'Aspirants' had
passed that point.
Irish Outlets
Figure 6 shows the results of a decision to
 Figure 7 - Current Trading In EU Countries: EU 'Activists'

Other Countries 70%

Ireland 56%

Germany 52%

France 43%

Spain 34%

Italy 26%
Proportion of Sub-sample

investigate the thesis that systems rest of Europe.

considering expansion into the Mainland EU
may use Ireland (Eire) as a launching pad, in In the event, it turned out that one-in-five
much the same was as US systems often use (20%) of 'Aspirants' were active in Eire,
the UK as a test-bed before moving into the mostly in a fairly modest way. Only 3% had 5

Figure 8 - New/Early Target Countries

71%

66%

47%
80%
39%
70%
42% 63%
21% 60%

50% Proportion
Germany 34%
of
40%
France Sub-sample
30% (EU Activity)
Italy
20%
Spain
17% 10%
Other 0%

Ireland EU 'Aspirants'

EU 'Activists'

International Franchise Research Centre - Special Studies Series Paper No.12 9

 Figure 9 - Languages Spoken Adequately By Staff

61%
50%

43% 70%

24% 60%
35%
50%
37%
13% Proportion
French 40%
of
Spanish 10% Sub-sample
30%
22% (EU Activity)
German
20%
Italian 10%
13% 2%
No foreign language skills 0%

Other European except English EU 'Aspirants'

EU 'Activists'

or more outlets/franchisees. On balance, Language Competence

however, this evidence probably can be
taken as support for the notion of Ireland as a
suitable first bridge out of the United Kingdom
for indigenous franchise systems. This
appears especially true when combined with
the data contained in Figure 7 which shows
Ireland having been chosen as a target by
56% of EU 'Activists'. This was a figure not
exceeded for any other country.
EU Countries Chosen
Ireland, Germany, France, Spain and Italy (in
that order) were the most popular countries
for those systems already active in the EU
(Figure 7). Figure 8 shows that, amongst UK
franchisors aspiring to trade in the EU, once
again, Germany, France and Ireland were
most popular. However, amongst systems
already in the EU, Ireland dropped off in
popularity quite markedly.
Figure 9 shows systems already trading in
the EU as having greater language
competence in each of 5 different language
categories - French, German, Italian, Spanish
plus any other European language but
English. A more in-depth study at some
future date might tell us by what route those
active in the EU had gained their language
competence. For instance, it may have been
that existing staff already had this
competence. Alternatively, they might have
acquired it by means of receiving
professional language instruction. Finally,
they may have purchased this competence
by buying-in staff specially with language
skills.

10 International Franchise Research Centre - Special Studies Series Paper No.12

 35%
Figure 10 - Sector Of Franchise

25%

10%
19%

13% 3%
Specialised Services 6%
Food Franchisors 19%
Health & Beauty 6% 3%
Motoring Services
Home Care Services 35%
10%
Distribution Services 30%
Leisure & Travel Services
0% 6% 25%
Business Services
20% Proportion
Walk-in-Retail 3% of
15% Sub-sample
Cleaning Services
0% 10% (EU Activity)
Property Care Services
5%
Delivery & Haulage
0%
Estate Agents

Fast Print EU
'Aspirants'
EU
'Activists'

Sectors BANKING

Figure 10 illustrates the sectors in which both Role of UK Banks

our samples - EU activists and EU
aspirationalists - are located. Looking at Figures 11, 12 and 13 all relate to banking
those already active in the EU, 25% came arrangements and each show a high degree
from Specialised Services whilst the same of accord between those already trading in
number came from the Food sector. The Europe and those claiming to want to be so in
other most prominent sector was that of 3 years time. Figure 11 demonstrates that
Health and Beauty. most franchise systems wishing to expand
into Europe attempt to fund this expansion
Turning now to systems hoping to be in essentially from their own resources, rather
Europe in the next 3 years, it is seen that than recruit direct bank support. Figure 12
35% were located in Specialised Services, shows that between half and two-thirds of
ranging from Computerised Shop Signs to both groups operate, or intend to operate,
Care Services to the Infirm and Elderly. additional banking accounts in other EU
Nearly 20% were operating in Business countries, whilst Figure 13 shows that, over-
Services, with Food and Walk-in-Retail each ridingly, both actual and aspirational EU
making up 10%. One interesting point to note activity prefer local franchisees to use local
here is the presence of Business Services banks in the country in which they are
amongst aspirants but not amongst those located.
already active in the EU. This raises the
possibility that Business Services franchises
encounter particularly high levels of
competition and do not survive very well.

International Franchise Research Centre - Special Studies Series Paper No.12 11

 Figure 11 - Did/Will UK Banks Provide Extra Finance For Expansion ?

84%
90%
90%
80%
70%
60%
Proportion
50% of
40% Sub-sample
30% (EU Activity)

16% 20%
10%
No 0%
10%

EU 'Aspirants'
Yes

EU 'Activists'

Figure 12 - Intention To Operate Additional Bank Accounts In Other EU

Countries

70%
63%
60%
37%
44% 50%
56% Proportion
40%
of
30% Sub-sample
(EU Activity)
20%

10%

No 0%

EU 'Aspirants'
Yes

EU 'Activists'

12 International Franchise Research Centre - Special Studies Series Paper No.12

 Figure 13 - Source Of Future EU Franchisee Finance

92%
95% 100%
90%
80%
70%
60% Proportion
of
50%
Sub-sample
40%
(EU Activity)
30%
20%
8% 10%
Local banks in franchisees’ own country 0%

5%
EU 'Aspirants'
UK banks

EU 'Activists'

Figure 14 - Transfer Of Main UK Banking To Elsewhere In EU Following

Introduction Of Single European Currency

94%
100%
100%
90%
80%
70%
60% Proportion
of
50%
Sub-sample
40%
(EU Activity)
30%
20%
6% 10%
No 0%

0%
EU 'Aspirants'
Yes

EU 'Activists'

International Franchise Research Centre - Special Studies Series Paper No.12 13

 Figure 15 - Will UK Banks Provide The Necessary Services To Support
Future EU Expansion Plans Following The Introduction Of The Single
Currency ?
97%

95% 100%
90%
80%
70%
60% Proportion
of
50%
Sub-sample
40%
(EU Activity)
30%
20%
10%
3%
Yes 0%

5%
EU 'Aspirants'
No

EU 'Activists'

Single Currency perception is one which the franchise

Figures 14 and 15 both represent a vote of
confidence for UK banks. Figure 14 shows
almost no interest or inclination for UK
franchise systems to move their main
banking arrangements to another EU country
following the introduction of the Single
European Currency.
Figure 15, similarly, shows that franchisors
feel overwhelmingly that UK banks will
continue to provide the necessary backup
and support services given the introduction of
the Single European Currency.
OVERALL CONCLUSIONS
It appears that the notion of future entry into
EU markets is one which excites many
indigenous UK franchisors. However, the
number of 'Aspirants' claiming it as a
medium-term goal (defined as the next 3
years) is, at any one time, almost exactly
double the number of 'Activists' built up over
the years.
industry has historically been keen to
embrace for public relations purposes. This
appears to have almost blinded the industry
to the reality of how few systems actually
manage to plug the gap between attitude and
behaviour. Hopefully, the job of plugging this
gap starts with this current research.
FUTURE RESEARCH
The research reported above establishes a
beach-head into the issue of understanding
the challenges facing would-be UK franchise
exporters. Hopefully, future research will
enable us to build upon this by examining a
series of in-depth case-studies of successful
practice in order to unlock the learning value
which they hold for others.

Judged at face value, then, it always appears

that indigenous UK franchising is on the
verge of phenomenal export growth. This

14 International Franchise Research Centre - Special Studies Series Paper No.12

 YELLOW QUESTIONNAIRE
FOR FRANCHISORS CURRENTLY
ACTIVE IN MAINLAND EUROPE (EU)

At the present time, how complete is your UK Which method/s did you use when expanding
1 Network?
8 into the EU?
< 33%.................................................................
A Direct Franchising ..............................................
A
33-66%...............................................................
B Master Franchisees............................................
B
> 66%.................................................................
C Joint Venture ......................................................
C
In what other European Union (EU) countries Approximately how much did you anticipate
2 are you currently trading?
9 spending on your initial EU expansion plans?
Eire.....................................................................
A < £10,000 ...........................................................
A
France................................................................
B £10,000 - £19,999 ..............................................
B
Germany ............................................................
C £20,000 - £50,000 ..............................................
C
Italy.....................................................................
D > £50,000 ...........................................................
D
Spain..................................................................
E
Other ..................................................................
F 10 Approximately how much did you actually
spend?
Please indicate the number of franchisees < £10,000 ...........................................................
A
3 you currently have operating in each of the £10,000 - £19,999 ..............................................
B
following EU countries: £20,000 - £50,000 ..............................................
C
Eire..................................................................... ____ A > £50,000 ...........................................................
D
France................................................................ ____ B
Germany ............................................................ ____ C Did you obtain the required extra finance
Italy..................................................................... ____ D
11 from your UK bank?
Spain.................................................................. ____ E Yes .....................................................................
A
U.K. .................................................................... ____ F No.......................................................................
B
Other (Total elsewhere in EU)............................ ____ G
a) Following the introduction of the single
What NEW countries are targets for 12
4 expansion within the next 2-3 years?
european currency, do you intend
transferring your main UK banking to a bank
Eire.....................................................................
A in another EU country?
France................................................................
B Yes .....................................................................
A
Germany ............................................................
C No.......................................................................
B
Italy.....................................................................
D
Spain..................................................................
E b) If NO, would you intend operating
Other EU (please state) .....................................
F additional banking accounts in other EU
countries?
For your existing staff, how adequate is their Yes .....................................................................
A
5 foreign language competence for your No.......................................................................
B
existing overseas markets?
Adequate - no training or new staff anticipated..
A 13 Do you anticipate that your present UK bank
Borderline - training/new staff possibly needed .
B will be able to provide the services you will
Inadequate - training or new staff needed..........
C require to support your future EU expansion
plans following the introduction of the single
In which languages are your existing staff currency (eg Euro-designated accounts to
6 skilled to an acceptable level? collect fees)?
French................................................................
A Yes .....................................................................
A
German ..............................................................
B No.......................................................................
B
Italian..................................................................
C
Do you anticipate your future EU franchisees
Spanish ..............................................................
D 14 being financed by:
Other European exc. English (please note) .......
E Local banks in their own country........................
A
How long have you been trading in the EU UK banks............................................................
B
7 (excluding UK and Eire)?
< 12 months .......................................................
A
12-23 months .....................................................
B
International Franchise Research Centre - Special Studies Series Paper
NAMENo.12 15
24-36 months .....................................................
C
RESPONDENT (Franchisor): .............................................................

> 36 months .......................................................
D

 GREEN QUESTIONNAIRE
FOR FRANCHISORS PLANNING TO BE
ACTIVE IN MAINLAND EUROPE (EU)

Within what timescale do you intend to Approximately how much do you anticipate
1 expand your franchise network into the
8 spending on your initial EU expansion plans?
European Union (EU)? < £10,000 ...........................................................
A
By 2001..............................................................
A £10,000 - £19,999 ..............................................
B
After 2001...........................................................
B £20,000 - £50,000 ..............................................
C
> £50,000 ...........................................................
D
At the present time, how complete is your UK
2 Network? Do you intend obtaining this extra finance
< 33%.................................................................
A 9 from your present UK bank?
33-66%...............................................................
B Yes .....................................................................
A
> 66%.................................................................
C No.......................................................................
B

Please indicate the number of franchisees

3 you currently have operating in each of the 10 a) Once you implement your EU expansion
plans, do you intend transferring your main
following countries: UK banking to a bank in another EU country?
Eire..................................................................... ____ A Yes .....................................................................
A
U.K. .................................................................... ____ B No.......................................................................
B
b) If NO, would you intend operating
What are your favoured early target
4 countries?
additional banking accounts in other EU
countries?
Eire.....................................................................
A Yes .....................................................................
A
France................................................................
B No.......................................................................
B
Germany ............................................................
C
Italy.....................................................................
D
Spain..................................................................
E 11 Do you anticipate that your present UK bank
Other EU (please state) .....................................
F will be able to provide the services you will
require to support your future EU expansion
plans (eg Euro-designated accounts to
For your existing staff, how adequate is their collect fees)?
5 foreign language competence for your target Yes .....................................................................
A
overseas markets? No.......................................................................
B
Adequate - no training or new staff anticipated..
A
Borderline - training/new staff possibly needed .
B
Inadequate - training or new staff needed..........
C 12 Do you anticipate your future EU franchisees
being financed by:
Local banks in their own country........................
A
6 In which languages are your existing staff UK banks............................................................
B
skilled to an acceptable level?
French................................................................
A
German ..............................................................
B
Italian..................................................................
C
Spanish ..............................................................
D RESPONDENT NAME (Franchisor): .............................................................
Other European exc. English (please note) .......
E

Which method/s do you plan to use when

7 expanding into the EU?
Direct Franchising ..............................................
A
Master Franchisees ...........................................
B
Joint Venture......................................................
C

16 International Franchise Research Centre - Special Studies Series Paper No.12

AUTHORS
Jason Stirland, a recent graduate with a
‘starred’ first in Fine Art from the Norwich
School of Art, is a research fellow at the
International Franchise Research Centre,
where he will be assisting with the
administration of the 1999 Society of
Franchising conference. He has had ‘front-
line’ experience in franchising, having worked
as a full-time chef at an outlet of Chi-Chi’s
Cantina and Grill.
Professor John Stanworth is director of the
International Franchise Research Centre
and has been engaged in research into
franchising since the mid-1970's. He also
leads the Future of Work Research Group,
based at the University of Westminster,
which has a record of specialist research in
Teleworking, Small Business Development
and Human Resource Management. Studies
have been undertaken for many clients,
including the Department of Trade & Industry,
The Department for Education, The
Economic & Social Research Council and
various commercial organisations.
David Purdy is a researcher supporting the
Future of Work Research Group and its
interest in franchising. He has also
specialised in small business research since
1985, and publications include authorship of
'Risk Capital for Small Firms', commissioned
by the Small Business Research Trust. He
has also co-authored studies investigating
Small Business Management Development
and Teleworking.
Stewart Brodie is a former managing
director of Tupperware and president of Mary
Kay Cosmetics, and a past chairman of the
Direct Selling Association (DSA). He is
studying for a PhD at the University of
Westminster, researching ‘Self-employment
Dynamics of the Independent Contractor in
the Direct Selling Industry’.
International Franchise Research Centre - Special Studies Series Paper No.12
INTERNATIONAL FRANCHISE RESEARCH
CENTRE
The International Franchise Research Centre
(IFRC) is committed to improving the
understanding of franchising. This is
achieved by the publication of impartial
research and by the encouragement of
informed debate. Membership is suitable for
anyone with an interest in franchising and
further details are available from the address
on the rear cover.
ACKNOWLEDGEMENTS
The International Franchise Research Centre
is pleased to acknowledge The Royal Bank of
Scotland in sponsoring the research, analysis
and presentation of this report.
The database of franchise systems used for
questionnaire mailing was obtained from
Franchise Development Services Ltd.,
Norwich, which we understand approximated
to the 14th Edition of the UK Franchise
Directory (c.1998).
Finally, we wish also to acknowledge the
support of the participating firms, without
whom the survey would not have been
possible.
17