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AUSTRALIAN FRANCHISING:
GROWING OR NOT?

by Simon Lord,
last updated 25/07/2017

in this article:

11 October 2016 - Initial results from the Franchising Australia 2016 survey show that sales and employment within franchising are up slightly since 2014 but numbers are static. Is it out-performing the general economy?

click images to enlarge

Total number of business format franchisors in Australia - 2014 to 2016

Total number of business format franchisors in Australia - 2014 to 2016

The 2016 Franchising Australia survey is the 10th in the series, which has been carried out every two years since 1998 by Griffith University’s Asia-Pacific Centre for Franchising Excellence.

An Executive Summary issued by the Centre ahead of the full report says, 'Despite a relatively flat economy and retail environment, Australia’s franchise sector continues to grow in total sales turnover and employment and its franchisors are confident of further growth in the next 12 months.'

The survey finds that the total annual sales revenue for Australia's entire franchise sector is estimated at $146 billion, up from $144 billion in the 2014 survey. However, this rise of 1.4 percent comes against a background of 2.5 percent inflation in y/e 2014 and 1.5 percent inflation in y/e 2015.

The total number of people directly employed in business format franchising in Australia has continued to rise with 472,000 permanent, part-time and casual employees, up 2.4 percent from 461,000 two years ago.

The number of franchise brands operating in Australia has declined by 3.5 percent from 1,160 to 1,120. Professor Lorelle Frazer, Director of the Centre, said this gradual reduction in franchise systems is expected as the sector continues to mature.

'Franchise brands have continued to merge and consolidate to remain sustainable and to grow,' she said. 'Whilst the number of brands has declined, individual franchise systems have grown internally with modest increases in the number of franchise units.'

The 2016 survey shows a total of 79,000 units operating in business format franchises in Australia. The number of franchised units has slightly increased and company-owned units decreased (perhaps as companies re-franchise outlets they re-acquired following the GFC or franchise outlets they opened themselves through a lack of suitable franchisees). There has been no net overall change in the number of franchise units since the 2014 survey.

The survey notes that New Zealand remains the most common destination for Australian franchisors seeking to expand internationally, 'despite its small potential market'.

The proportion of franchisees in dispute with their franchisor across the sector was estimated at 1.8 percent, consistent with previous surveys. Disputes with franchisees involving an external advisor were reported by 25 percent of franchisors with a median of 2 of their franchisees. The most common causes of disputes were those related to franchisee compliance, communication issues and disputes regarding fees.

Bruce Billson, Executive Chairman of the Franchise Council of Australia, said franchising is a robust, vibrant and exciting part of the economy, accounting for approximately 4 percent of all small businesses in Australia.

'The survey results show Australia’s franchising sector has continued to perform strongly, against the backdrop of relatively slow economic growth. The Franchising Australia 2016 survey points to a maturing sector holding its own in a transitioning economy following the end of the mining boom. Total sales turnover for the sector has risen slightly, while employment has steadily risen and created more permanent full-time jobs. Franchisors are also predicting growth in franchise numbers over the next 12 months.'

 

EDITOR'S ADDITION, 25 July 2017 - The 2017 survey of the franchise sector in New Zealand compares results with the full Franchising Australia 2016 report released on 1st January 2017. 

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