The new fund offers franchise businesses reduced one per cent fees, repayment holidays and two years’ free banking.
The franchise sector has remained remarkably buoyant throughout the downturn. Statistics from the British Franchise Association (BFA) show that nine out of ten franchises remained profitable throughout the recession. RBS and NatWest say the new fund could create up to 1,800 new franchise businesses and 24,000 new jobs.
However, Rik Hellewell, who is the franchisor of Ovenu, the oven-valeting franchise with operations in the UK, Europe and Australia, believes that the substance behind the banks’ fund is not substantial enough to help establish a franchise operation.
“Franchises are an easy target for banks trying to look like they are lending again to business,” comments Hellewell. “Due to the structure, resources and brand created by the franchisor, franchises are a more cost-effective route to a start-up business, therefore relying on less money from the banks.
“This fund is simply an empty gesture from the banks. While £100m sounds like an attractive figure, when you split it between 1,800 franchises it’s not going to go very far. NatWest even states in its annual franchise report that the average franchise investment is around £48,000. £5,500 isn’t going to make much of a dent in that figure.
“There are, of course, franchises, which cost less to invest in, but I wouldn’t be surprised if those businesses receive an even lower percentage of the fund.
“The banks have made setting up in business tougher than ever and this ‘smoke and mirrors’ fund will do very little in helping start new franchises.”
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