Is franchising the future of local retailing?

For many years it’s been fascias and symbols; now it’s franchises. Following One Stop’s lead, in the very recent past the likes of Sainsbury’s, Co-op and Morrisons have unveiled franchise models that purport to offer local retailers the benefits of being part of a household-name group while retaining (varying degrees) of independence and control over their business.

The franchising trend throws up a lot of very interesting questions, and the development comes at a time when many retailers across Scotland are undoubtedly considering what the future holds and what they should be doing with their businesses to secure some sort of longer-term future in the industry. For many local retailers, the very thought of tying up with a major multiple would have filled them with horror – but the times they are a-changing and One Stop’s slow but steady progress in Scotland is testament to the fact that retailers are increasingly prepared to examine every option.

With One Stop recently granted membership of the SGF, it seems that the assimilation of franchising into the Scottish local retailing scene is all but complete. But will this signal a sea change in the industry with more mults offering a franchise model option, and more retailers prepared to put aside their long standing moral objections to try to secure a future for them and their families? Personally, I don’t think so.

A small but important point is that One Stop’s success in Scotland, such as it is, is at least partly down to the fact that Tesco has managed to put some distance between its master brand and its franchise model brand. I suspect more retailers than customers know that One Stop is a Tesco business, for example. Tesco’s reputation is less on the line, but a fully branded Sainsbury’s franchise store seems to me to be an incredibly difficult thing to bring to life without removing all control of the store from the retailer, in which case the retailer remains ‘independent’ in little more than name.

I find it hard it believe that Sainsbury’s, Morrisons and the Co-op would risk having independent retailers up and down the country tarnish a reputation they have spent many years and countless billions of pounds building. The potential reward is simply outweighed by the risk. But perhaps the multiples have no choice? The last couple of years have been tough on most of them and this is one potential new revenue stream that doesn’t rely on massive capital expenditure investments and all the grief that comes with opening a new superstore.

Conversely, I can easily envisage a lot of local retailers being enticed by the opportunity to have one of those famous names above the door. It’s early days for franchising, but it will be worth watching over the coming months and years.

Antony Begley, Publishing Director