The British Franchise Association’s 2024 National Franchise Survey put the sector’s contribution to the UK economy at £19.1 billion across 1,009 systems and 50,421 units. Unlike France or the United States, the UK has no franchise-specific statute. This guide sets out what a franchise actually is, how the agreement usually works, and how it compares with a licence or an independent start-up.
Franchising sits alongside licensing, symbol groups and independent trading as one of several ways to run a UK business under someone else’s brand, and the terms are often used loosely. This article sets out what a franchise actually involves, how the agreement is usually structured, and how it compares with the alternatives, before looking at the different ways a franchise network can be organised and what the sector’s own figures say about its size.
What is a franchise?
A franchise is a commercial arrangement in which a franchisor licenses a franchisee to run a business using its brand, systems and know-how, in exchange for fees and ongoing payments. The franchisee owns and operates a separate legal business, typically trading as a sole trader, a partnership or a private company limited by shares, and carries the trading risk and the day-to-day running of the outlet. The franchisor retains ownership of the brand, the operating system and the underlying intellectual property, and sets the standards the franchisee agrees to follow under the franchise agreement. Business format franchising, where a complete operating system is licensed alongside the brand, is the model most UK franchises use.
How a franchise agreement works
What the agreement typically covers
A franchise agreement is a commercial contract, not a disclosure document, since none exists in the UK. It sets out what the franchisor licenses, what the franchisee pays, and the standards both sides commit to. The terms below recur across most UK franchise agreements, regardless of sector.
- Brand and IP licence : the trademark, name and any proprietary recipes, software or designs the franchisee is authorised to use
- Operating manual : the documented system covering processes, suppliers, layout and customer service standards
- Territory : an exclusive, non-exclusive or development area, since UK agreements frequently grant no exclusivity
- Term, renewal and transfer : how long the agreement runs, on what terms it renews, and what happens on a resale
- Restrictive covenants : post-term clauses restricting what a former franchisee can do once the agreement ends
Fees and ongoing payments
Most franchise agreements combine an upfront cost with a recurring one, covered in more detail in our guide to how much it costs to open a franchise in the UK. The initial franchise fee is a one-off payment for the licence, the training and, where relevant, the territory. The management service fee, also called a royalty, is an ongoing payment, usually calculated as a percentage of the franchisee’s turnover rather than a fixed rent. A separate marketing or advertising levy commonly funds national or regional campaigns and is kept apart from the management service fee.
| Payment | What it usually covers |
|---|---|
| Initial franchise fee | The brand licence, training and set-up support, paid once at the start |
| Management service fee (royalty) | An ongoing payment, usually a percentage of turnover, for continued use of the brand and system |
| Marketing or advertising levy | A separate contribution toward national or regional marketing, kept apart from the management service fee |
Support the franchisor typically provides
The support a franchisor commits to varies by brand, but the BFA’s Code of Ethics for Franchising expects members to have operated at least one pilot unit for a year before recruiting franchisees. Support commonly includes:
- Initial training : on the operating system, before the outlet opens
- Ongoing operational support : field visits and guidance from the franchisor’s team
- Supplier arrangements : access to negotiated purchasing agreements
- Marketing : national or regional brand campaigns, funded partly by the levy
Good to know
There is no franchise law anywhere in the UK. Unlike France or the United States, none of the UK’s three legal jurisdictions, England and Wales, Scotland, or Northern Ireland, has a franchise-specific statute, a mandatory disclosure document or a general cooling-off period for signing a franchise agreement. What governs the relationship is ordinary contract law (which differs in some respects between Scotland’s distinct legal system and the common law used in England, Wales and Northern Ireland), competition law under the Competition Act 1998, which applies uniformly across the UK, and the terms of the agreement itself.
Franchise vs licensing vs independent business
Franchise vs licence
A licence and a franchise both grant the right to use someone else’s intellectual property for a fee, but the similarity mostly ends there. A licensee typically operates independently, choosing how to run the business day to day, with the licence covering a brand, a design or a piece of technology rather than a complete operating system. A franchisee follows the franchisor’s manual, uses its suppliers and reports into its systems, in exchange for more comprehensive support.
| Franchise | Licence | Independent business | |
|---|---|---|---|
| Brand ownership | Held by the franchisor, licensed to the franchisee | Held by the licensor, licensed for a specific use | Owned by the business itself |
| Operating system | A complete, documented system the franchisee follows | Not usually supplied; the licensee runs its own operation | Designed entirely by the owner |
| Ongoing fees | Initial fee plus a management service fee, usually a share of turnover | A licence fee or royalty, often lower than a franchise fee | None to a third party |
| Day-to-day control | Franchisor sets standards; franchisee manages daily operations | Licensee generally operates with more independence | Full control rests with the owner |
Franchise vs starting independently
Franchising and starting an independent business both put the trading risk on the owner, but the similarity stops at ownership of the brand and the system. An independent owner designs every process from scratch. A franchisee buys into a tested system and an established brand, and in return accepts constraints an independent owner would not have. The following typically distinguish a franchised outlet from an independent start-up:
- Brand ownership : the trademark is licensed, not owned, by the person running the outlet
- Set processes : suppliers, pricing and store layout are frequently set or approved by the franchisor
- Ongoing payments : management service fees and marketing levies apply for the life of the agreement
- Due diligence : rests on the franchisor’s own published figures and Companies House filings, since no disclosure document exists in the UK
Types of franchise models
Business format and product franchises
Business format franchising, where the franchisor licenses a complete operating system alongside the brand, covers the majority of UK franchises, from coffee shops, to full-service restaurants, to home and care services. Product franchising is narrower: the franchisor supplies a distinctive product range and the franchisee acts largely as its distributor and the public face of the brand, with less of the operational system attached. Some forecourt and convenience formats follow this second pattern.
Franchise structures by scale
UK franchise networks scale in more than one way, and the label covers more than a single operator running one outlet.
Single-unit franchisees
A single-unit franchisee operates one outlet under the agreement, the usual starting point for a first-time franchisee in the UK.
Multi-unit, master franchise and area development
A multi-unit franchisee operates several outlets, under one agreement or several. A master franchisee takes on the right to sub-franchise within a defined territory, effectively acting as a regional franchisor. An area development agreement commits an operator to open a set number of outlets within a territory over an agreed period.
Pret works with regional territory partners on this kind of development role, and Greggs franchises more than 600 shops to operators who already control roadside, forecourt, transport and campus sites, such as Motor Fuel Group, Moto and SSP, an illustration of how multi-unit and area arrangements typically depend on existing site access rather than a single new entrant.
Good to know
The British Franchise Association (BFA) is a voluntary trade association, not a regulator. Membership carries no statutory basis, and a brand outside its membership list is not, for that reason alone, less legitimate. The BFA’s Code of Ethics binds only its own members.
The size of the UK franchise sector
No official UK statistic breaks out franchised businesses from the wider economy, since no SIC code corresponds to franchising and neither Companies House nor the Department for Business and Trade records the distinction. The only sector-wide figures in circulation come from the British Franchise Association’s own membership survey, most recently its 2024 National Franchise Survey, published in October 2024 and sponsored by NIC Services Group.
| 2024 figure | |
|---|---|
| Contribution to the UK economy | £19.1 billion |
| Franchise systems (brands) | 1,009 |
| Franchise units | 50,421 |
| Average turnover per unit | £400,000 |
| Units reported profitable | 89% |
The bottom line
A franchise licenses a brand, a system and ongoing support in exchange for an initial fee and a recurring management service fee, structured through a commercial contract rather than a disclosure document, since the UK has no franchise-specific statute. That single fact separates it from franchising in France or the United States, and it puts the weight of due diligence on the franchisor’s own published figures rather than a filed document. Whether a particular network suits a particular operator depends on the agreement itself, the territory on offer and the brand’s own track record, not on the franchise label alone.
Frequently asked questions about franchising in the UK
The franchisor owns the brand, the operating system and the intellectual property, and licenses them to others. The franchisee is the independent business owner who pays for that licence, runs the outlet day to day, and follows the franchisor’s operating manual and standards.
A franchise licenses a complete operating system alongside the brand, with the franchisor setting standards for suppliers, layout and processes. A licence typically covers narrower intellectual property, such as a trademark or a design, and the licensee usually runs its own operation with less day-to-day oversight.
No. The UK has no franchise-specific statute, no mandatory disclosure document and no general cooling-off period. Franchise agreements are governed by general contract law, and the competition side falls under the Competition Act 1998. The British Franchise Association’s Code of Ethics applies only to its own members.
A single-unit franchisee operates one outlet under the agreement. A multi-unit franchisee operates several, under one agreement or several, and a master franchisee goes further, taking on the right to sub-franchise within a defined territory.
