Morrisons’ closures reveal a deeper shift in Britain’s franchise economy
News that supermarket giant Morrisons is closing around 100 smaller convenience stores – putting hundreds of jobs at risk – initially looked like another familiar story from Britain’s struggling retail sector. A major retailer trims costs. Underperforming sites disappear. Margins tighten. Jobs go.
But the announcement revealed something more telling about the changing structure of modern British business. While confirming the closure of dozens of directly operated Morrisons Daily stores, many inherited through its 2022 rescue of McColl’s, the supermarket simultaneously reaffirmed that franchise expansion remains central to its long‑term growth strategy.
A spokesman said: “We currently have around 1,700 convenience stores, opening more than 120 new franchise stores last year, and we have a robust plan in place for further expansion in 2026. We continue to see the opportunity to open hundreds more franchise convenience stores in the years ahead.”
The contrast is stark. Directly run stores are becoming harder to sustain economically, yet the convenience model remains attractive — provided the operational burden shifts to franchisees. That tension increasingly defines Britain’s franchise economy.
For decades, franchising has been promoted as one of the safest and most accessible routes into entrepreneurship. Operators buy into recognised brands with established customer bases, centralised marketing and proven systems. Franchisors, meanwhile, expand without carrying the full burden of staffing, rents and day‑to‑day management.
The model helped fuel the rise of fast‑food chains, gyms, convenience stores, home services, automotive repair businesses, education providers and childcare operators. During years of cheap borrowing and stable demand, it worked.
Industry bodies still point to comparatively strong survival rates among franchise businesses. But the economic backdrop has shifted: higher borrowing costs, wage inflation, increased employer National Insurance contributions, elevated energy prices and more cautious consumers. For businesses operating on narrow margins, these pressures are becoming difficult to absorb.
Franchisees also face constraints independent operators do not. Pricing, promotions, store layouts and wider strategy are often tightly controlled to protect brand consistency – but those restrictions can leave operators exposed when local conditions deteriorate.
Vodafone dispute becomes a test case for the sector
Several high‑profile disputes have highlighted the tensions that emerge when franchisors and franchisees diverge, none more so than the ongoing legal battle between Vodafone UK and dozens of its current and former franchise operators.
More than 60 franchisees are pursuing claims reportedly worth around £85m, alleging that changes to commission structures, commercial terms and operational requirements left many businesses financially unviable. Vodafone disputes the allegations and says it will defend the claims vigorously.
The case has drawn attention far beyond telecoms because it raises broader questions about where commercial risk ultimately sits. Franchisees argue they carried the day‑to‑day costs of staffing, property and operations while key decisions affecting profitability remained under the parent company’s control. Vodafone maintains its model was operated appropriately and that the claims are without merit.
The litigation has prompted renewed scrutiny of the UK’s self-regulated franchise sector. Unlike the United States and Australia, which operate with formal disclosure frameworks and clearer dispute‑resolution mechanisms, Britain relies largely on standard contract law and voluntary oversight.
James Sarjantson, commercial and digital partner at Leeds‑based LCF Law, says franchising can still provide a faster route into business ownership than starting from scratch. But he warns that many franchisees underestimate both the legal complexity and financial exposure involved.
“Franchise agreements are notoriously one‑sided,” he says. “They’re written by the franchisor and often leave little or no room for negotiation.”
That imbalance matters far more in tougher economic conditions. During years of ultra‑low interest rates, many operators could absorb restrictive agreements while still generating healthy returns. Today, the economics are less forgiving.
Sarjantson says one of the biggest misconceptions among first‑time franchise buyers is the belief that operating through a limited company shields them from personal financial exposure. In practice, many agreements include personal guarantees. “If the business fails, you can still end up personally liable,” he says.
Upfront investment in premises, equipment, staffing and fit‑outs can be significant, long before stable income is generated. Ongoing royalty payments and mandatory purchasing obligations can add further strain if trading weakens unexpectedly.
The challenge is particularly acute in labour‑intensive sectors such as hospitality, childcare and care, where rising staffing costs collide with persistent recruitment pressures – and where operators may have limited ability to raise prices.
Sarjantson says too many prospective franchisees fail to carry out rigorous due diligence. “Too many people buy into a brand based on marketing material alone,” he says. “You need to understand the support you’ll actually receive, what restrictions apply, and what the options might be if things don’t go to plan, as exiting the arrangement can often be very difficult.”
Leaving a franchise is rarely straightforward. Many agreements contain lengthy contractual terms, restrictive exit clauses and continuing obligations that survive even after operators attempt to leave. Disputes over territory rights, operational support, fee structures and contract renewals often intensify during weaker trading periods.
Supporters of reform argue that franchisees often enter agreements with significantly less bargaining power than the corporations they contract with. Some want stronger disclosure requirements covering litigation histories, failure rates and commercial risks. Others seek clearer protections around renewals, territory changes and termination rights.
But Sarjantson remains cautious. “Ultimately it’s a business decision, and like all business decisions you go into it with your eyes open,” he says. “If you opened a corner shop on your own, there’s no special law to save you from a bad deal. Franchises are no different – these are business‑to‑business deals, and you must go into them with your eyes open.”
He also warns that expanding regulation risks opening broader questions about how far governments should intervene in commercial contracting.
Franchising remains one of the fastest and most cost‑effective methods of national expansion. For large corporations facing mounting cost pressures, transferring operational responsibility to locally invested operators is becoming increasingly attractive.
The franchise sector contributes an estimated £19.1bn a year to the UK economy and supports around 710,000 jobs. There are around 50,000 franchise‑operated business units across roughly 935 brands. Among the best‑performing are McDonald’s, Domino’s Pizza, Costa Coffee and Subway. Domino’s alone generates more than £1.5bn in annual sy
stem sales. Beyond the high street, TaxAssist Accountants, Molly Maid and GoodOaks Homecare score highly in franchisee satisfaction surveys.
However, behind the headline growth figures, many franchisees are asking a simpler question: “Am I actually making more money?”
Royalty fees are typically charged as a percentage of turnover, not profit – meaning franchisors continue to collect royalties even when margins are under pressure. As costs rise, some operators question whether the value they receive still justifies the ongoing fees.
Franchising may still offer big brands a fast, low‑risk route to expansion, but the real test is no longer how many sites open — it’s how many franchisees are actually making money. With costs rising and royalties tied to turnover rather than profit, operators are increasingly questioning whether the value they receive matches the fees they pay. The savviest investors now look past headline growth to a single, harder truth: only networks with profitable, reinvesting franchisees are built to last.
