Franchise sector optimistic about 2021

A new survey reveals that 64 per cent of franchise businesses feel optimistic about business conditions in the next six months as trading improved in the last three months.

The latest Pulse Check survey, undertaken by FRANdata for the Franchise Council of Australia (FCA) – which surveyed the representatives of 109 Australian franchise systems covering 15,649 franchised units and 2012 company-operated units – highlighted positive trading experiences in the September quarter as a factor in the positive sentiment. There was a pick-up in trade in the QSR, maintenance, health, and pet care-related franchise systems, though cafes, sit-down restaurants, fitness clubs, lodging and child-related services have not fared as well.

The survey shows that 174 new units were opened across 45 brands, predominantly in retailing, pet care and home maintenance services during the September quarter. However, 95 franchised units across 34 franchise systems were forced to close, predominantly in the retail food (café) category.

Franchisees acknowledged the assistance given to them by franchisors, such as:

  • advice regarding new regulations and restrictions
  • assistance with accessing government support programs
  • support in landlord negotiations
  • providing royalty reduction and deferral programs
  • support for the well-being of franchisees.

The research also reveals the biggest concerns among franchisees, which include the wellness of franchisees and support staff (48 per cent), franchisee financial performance (44 per cent), landlord issues (41 per cent), franchisee engagement and satisfaction (36 per cent) and recruitment (34 per cent).

“Franchise businesses have demonstrated incredible resilience throughout the pandemic, and while it is pleasing to see increased optimism as trading conditions improve, the recovery will be a long haul and the survival of thousands of franchisees will depend on sustained support,” Mary Aldred, CEO of the FCA, said.

“Those franchise brands which enjoyed the greatest resilience in 2020 are ramping up their new store opening programs,”Darryn McAuliffe, CEO of FranData, added. “Whilst new unit openings are positive, they are generally in non-food type franchises. The greatest number of permanent closures are among food-related businesses which unfortunately are likely to deliver a high number of job losses.

“There is a risk of increased closures across franchise networks if franchisors pull back or cannot sustain their current high levels of support for franchisees,” McAuliffe concluded.

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