Franchising on the rise in Australia

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Franchising is a robust, vibrant and exciting part of the economy, accounting for approximately 4% of all small businesses in Australia, with total annual sales revenues of $146 billion and an optimistic outlook.

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.

According to the biennial survey of franchising in Australia, total annual sales revenue for the country’s entire franchise sector is estimated at $146 billion, up from $144 billion in a previous survey in 2014.

The total number of people directly employed in business-format franchising in Australia also continues to rise now reaching 472,000 permanent, part-time and casual employees, up from 461,000 two years ago.

The Franchising Australia 2016 survey, undertaken by Griffith University’s Asia-Pacific Centre for Franchising Excellence and supported by the Franchise Council of Australia, marks the 10th installment of this definitive benchmarking study of Australian franchising. The survey dates back to 1998 and has been updated every two years since.

The headline findings of the Franchising Australia 2016 survey are being released at this week’s Franchise Council of Australia National Franchise Convention in Canberra. The full report will be available in January 2017.

Mr 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% of all small businesses in Australia. He said 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,” he said. “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,” Billson added.

According to the Franchising Australia 2016 survey, there are now an estimated total of 1120 franchise brands operating in Australia, compared with 1160 in the 2014 survey.

Professor Lorelle Frazer, Director of Griffith University’s Asia-Pacific Centre for Franchising Excellence, 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. “While 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. There has been, however, no net overall change in the number of franchise units since the 2014 survey.

The retail (non-food) industry dominates the Australian franchising sector, with 26% of brands operating in this segment. Behind this, 19% of franchise brands are found in accommodation and food services, 15% in administration and support services, and 10% in other services such as personal services, automotive repairs and IT.

Professor Frazer said the franchising sector continues to be impacted by intense competition in retailing, particularly non-food retailing.

“Food retailing has been more resilient with consumers responding well to variety and innovation in food concepts,” she said. “However, we can expect to see plenty more turbulence in the retail sector moving forward.”

A real positive for the Australian franchising sector is its employment growth, which has been on a steady rise since 2012. Significantly, the proportion of people employed on a permanent, full time basis has increased, suggesting a more optimistic outlook ahead.

Inside Small Business