In discussion and debate around UK businesses, it is rare to see the thoughts and concerns of franchisees feature, but, increasingly, they are one of the UK’s economy’s biggest success stories.
According to the British Franchise Association, the franchise sector contributes over £19.1 billion to the UK economy annually, with over 50,000 franchised business units operating across the country, employing over 770,000 people.
Currently, 89% of all franchise units are profitable, with an average turnover of more than £400,000 per unit. And, while Britain’s entrepreneurs are improving, and, according to PwC, 2024 marked the first time that the average proportional percentage of startup insolvencies rates fell below 50%, for franchisees, it is just 1%.
But, in a consumer spending climate where belts are being tightened, could franchises be a victim of those choices? In Barclays’ recently published 10 Years of Spend report, 22% of consumers said that they now value local and independent businesses more than they did pre-pandemic, and consumers consistently champion the importance of emotional connection and locality. Will franchisees, who are dependent on the power and scale of a wider, often international, brand, find themselves squeezed?
In new Barclays’ Business Prosperity Research, which surveys over 1,000 UK business leaders, few franchisees are expecting a downturn, the opposite in fact…
Plenty of positive feeling in the sector
When asked in early May of 2025 about their prospects for the remainder of the year, the franchisees surveyed delivered a briefcase full of sunshine. 73% are reporting a strong business pipeline, with only those in the technology and telecom sectors feeling stronger, while a full 96% are expecting their business will be more profitable in the next quarter.
There is confidence and long-term confidence
Looking ahead for the rest of 2025, 90% of leaders in franchise businesses have said they’ve got confidence in their future prosperity in the UK. That is 4% higher than the wider average of 86%.
Looking even further ahead, 92% said they feel confident about the next three years, and only marginally fewer at 89% said they felt confident about the next five years. Again, this is a touch higher than the wider averages, which are 86% for the next three years and 84% for the next five.
Reflecting on this, Kevin Holt, UK Head of Franchise at Barclays, said: “As Head of Franchise at Barclays, my team and I speak to franchisees daily, and the overwhelming sentiment right now is one of measured optimism. Despite facing into a complex economic backdrop, many are navigating the landscape with remarkable agility and purpose. Franchisees are telling us they feel cautiously positive. With inflationary pressures easing and financing conditions stabilising, there a real sense that opportunities are emerging - particularly in sectors like quick service restaurants, education, and health and wellness where demand remains strong.”
AI and cyber resilience are on franchisees’ minds
Posed with the question “If your business received additional funding equivalent to 10% of annual profit, in which areas would you choose to invest?”, franchisees are thinking defence first.
Perhaps with the recent cybersecurity troubles of a number of high street businesses, a quarter (25%) named cybersecurity and data protection as a key target for investment, while 23% named the adoption of artificial intelligence, using technology they could buy in. 16% also want to develop their own in-house AI practises, and 20% would use extra income to enhance their supply chains.
Franchisees are also looking to AI to cut costs, with 40% naming its implementation and technology integration as how they plan to offset the cost of rising goods and services. When asked about cost-cutting, 23% are looking to shrink headcount, and 38% are targeting outsourcing some key functions in the months ahead.
On this, Holt added: “Many franchisees are investing in digital innovation, embracing sustainability, and building future-fit teams. Their relationships with franchisors have ever been more collaborative, which is proving to be a strong foundation in uncertain times. When you look at the data – and we do – it is clear why franchise businesses remain so resilient, with failure rates significantly lower than those of independent start-ups. It comes down to proven models, brand strength, peer networks, and ongoing franchisor support – all of which offer a study springboard for growth.”
Thinking resillience
Asked, If your business received additional funding equivalent to 10% of annual profit, in which areas would you choose to invest?”, 25% said cybersecurity and data protection
23% named the adoption of artificial intelligence
20% would use extra income to enhance their supply chains
Looking to government for innovation and digitisation
Posed the question, “What are the top three ways government could help you to grow your business?,” a reduction in business taxes was named by 26% of franchisees. In comparison to business leaders from construction, hospitality, and real estate, where the overwhelming ask of government is to cut business taxes, opinion among franchisees is far more diverse.
25% of franchisees are looking to government to invest in infrastructure, with the same number wanting the provision of better support and resources for digitisation and adopting new technologies.
Inflation is franchise businesses’ biggest barrier to growth
The role of inflation is by far the biggest worry in the mind of franchisees as we approach the second half of 2025.
39% of leaders named it as their biggest barrier to growth, putting it 13% higher than any other concern given. The role of AI is there too, despite many looking to its rollout to make savings, 28% named competition from AI as a barrier to growth, putting it ahead of rising material costs, rising wages and the wider economy.
On this, Holt added: “Labour shortages, rising input costs, and the ongoing balancing act between maintaining brand integrity and meeting local customer demands remain core challenges. The regulatory environment continues to evolve too, demanding more attention and adaptability from business owners. Franchising continues to evolve, but its core strengths remain unchanged. If anything, the challenges of recent years have only reinforced just how robust and adaptable this model really is.”
To support business to invest for growth, Barclays £22bn Business Prosperity Fund is available for new and existing Business Banking customers and UK Corporate Banking clients across the UK to apply for lending and refinancing on existing projects. Businesses can find out more and read further business insights at: home.barclays/businessprosperity.
More from our UK unlocked series
Our expert insights on the economic and business issues most critical to the UK's companies and policy leaders.
