Franchising in Australia
Think about where you’ve shopped recently; the chances are you’ve spent money with at least one franchise, probably more.
Franchising is big business in Australia and for many, the only way to buy their own business. Likely contender for the title, Queen of Franchising, Janine Allis says “you are three times more likely to succeed in a franchise business than on your own. You need to choose the right franchise to get into. The positives are the buying power and the brand leverage.”
Franchising is Big Business
Franchising in Australia got underway in the early 1970s, with the arrival of American fast food outlets like Pizza Hut, KFC and McDonalds. Since then, franchising has grown exponentially, with the Franchise Council of Australia saying there are now around 1200 different franchise systems
operating.
That equates to around 800,000 franchised businesses and over 500,000 people. That’s big business! Our cover story this issue is about Jim Penman – one of the greatest names in franchising in Australia. When he started Jim’s over 30 years ago, there was only one other franchisor offering
garden care services.
Jim thought if he could sign up 100 franchisees, he would be doing well; he now has around 4000.
Symbiotic Relationship
Franchising is a symbiotic relationship: the franchisee benefits from having his or her own business, as well as brand name buying power, guidance, training, marketing and more. The franchisor benefits from receiving fees from the franchisee and growing their brand. It’s a win-win for all.
Of course, as Jim Penman points out, there are both good and bad franchises out there, so doing your due diligence is essential.
Franchising in 2019/20 is delivering revenue of over $184 billion, and a profit of $11 billion. The franchising industry in Australia has been growing at around 0.6%, but that growth is expected to increase to 1.6% moving forward.
Growth Areas
This growth is the result of increased demand for service-based franchises, particularly in health, nutrition, wellbeing and professional services. [IBISWorld]
Ecommerce will also be a growth area for the franchising industry and, as more franchises open and grow, there will be a welcome increase in employment opportunities.
Surveys carried out by Franchising Australia show that industry enterprise numbers are expected
to increase over the next five years. Much of this is due to the perception that owning a franchise will give you a far better work-life balance than working for ‘the man’.
According to IBISWorld, “potential growth areas include mobile franchises, which require less investment than a bricks-and-mortar operator, and professional services, such as dentistry, veterinary or legal services”.
The current breakdown of franchising revenue is:
- Personal services: 10%
- Administration and support services: 15.2%
- Accommodation and food services: 18.6%
- Retail trade: 26%
- Other franchised products and services: 30.2%
IBISWorld has identified key success factors for a franchising business:
Loyal customer base
“Franchises that have a loyal customer base are more likely to maintain steady revenue streams”.
Business expertise of operators
“Franchisees can benefit from the expertise, guidance and leadership of their franchisor to help grow the business”.
Establishment of brand names
“Many franchises have established brand names, and individuals buying into a franchise license the particular product or service. Having an established brand name is more likely to attract customer attention as brands guide many shoppers”.
Control stock on hand
“Operators benefit from controlling stock on hand to meet client demand, reduce inventory costs and ensure adequate stock turnover”.
Experienced workforce
“Franchisees need to ensure that employees have sufficient knowledge to provide sound advice and quality customer service”.
Clear market position
“Franchisees must follow the business structure as set out by their franchisor. With a defined market position, the business ensures it projects a clear and consistent image”.
Coast to Coast Australia and Xcllusive Business Sales currently have franchises listed for sale from serious sellers. Our business consultants are experienced in both new and existing franchise sales and can offer information and advice.