Australian report queries number of franchises

The report is the first Australian publication from FranData, which was originally founded in the US. FranData says that to date it has ‘only been able to validate the substantive existence of around 900 franchise brands [in Australia], rather than the oft-quoted 1,100. This may call into question the accuracy of assertions as to the number of franchised businesses, industry turnover and employment.’

Franchising Australia, the biennial survey which has been conducted by Griffith University’s Asia-Pacific Centre for Franchising Excellence since 1998, found that there were 1,160 business format franchisors in Australia in 2014, a slight decline from 1,180 in 2012. The last survey in New Zealand, in 2012, found 446 franchisors and approximately 480 franchise brands here.

Privately-owned register

FranData operates the privately-owned Australian Franchise Registry, a voluntary online registry that is based upon compliance and documentation. Franchisors wanting to be listed on the Franchise Registry must pay an initial registration fee of $365, provide both a current disclosure document and current franchise agreement, and confirm that the documents are compliant with the Franchising Code of Conduct, which is a legal requirement in Australia.

Darryn McAuliffe, the former national manager of franchise banking at National Australia Bank who is now CEO of FranData Australia, suggests, ‘Questions will be asked of the franchise sector if the number of confirmed franchise systems does not increase substantially by October 31, 2015, being the deadline for updating franchise disclosure documents [under Australian franchise legislation].’

He further promotes, ‘One would expect that regulators keen to ensure regulatory compliance would focus on franchise systems without “confirmed” status [on the voluntary registry], as that could be due to non-compliance. Given the ease of registration and only nominal cost, there really is no excuse for franchise systems not to register.’

See update Australian report under fire

New Zealand ranked third for franchise contribution to GDP

Internationally, the report looks at a number of areas and measures 20 countries’ franchising output as a share of GDP. Interestingly, New Zealand is ranked 3^rd by this measure, with 11 percent of its GDP generated by franchises - around double that of the US. The top two are France and Australia, at approximately 13 percent; in 4^th place is Venezuela, at 8 percent.

In absolute values, the United States has the largest economic output generated by franchising ($844 billion) followed by France, Australia, Germany and Taiwan. New Zealand ranks 10^th on this list. However, the report notes that the definition of ‘franchise’ differs from country to country, mentioning the inclusion of supermarket chains in France and New Zealand as increasing the economic impact in those areas. In New Zealand, Foodstuffs (Pak’n’Save, New World, Four Square, Liquorland and Gilmours, among others) are co-operative franchises.

Other data

The second part of the report includes statistics and analysis taken from the data provided by 59 franchise brands which have joined the Australian Franchise Registry. This gives information about the rate of unit turnover – change of ownership of franchised outlets – and confirms that, within the 59 featured brands, turnover is within expectations at approximately 11 percent over all types of franchised businesses.

FranData says, ‘The 11 percent turnover rate is relatively consistent with the average franchise agreement term of 10 years, although the 18 percent turnover figure for food concepts is more worrying. This could be caused by a number of factors – challenges of leasing longevity in major shopping centres, long trading hours, businesses being easier to sell, harder working conditions, etc.'

The 48-page report also contains information on franchise royalty methodology, marketing contributions, initial franchise fees, renewal fees and other matters from the 59 brands. It is on sale for A$365 +gst.

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