Home' Border Enterprise : Spring Summer 2010-2011 Contents enterprise
Vol 3. Summer/Autumn
• Container handling and storage
• Access to main Melb/Syd rail line
• Easy access to Hume Fwy & CBD's of
Albury and Wodonga
• Warehouse sites available.
Call 02 6025 0133 or
THERE'S no doubting the success
of franchising. More than 80,000
franchised outlets had a whopping
$130 billion in sales and employed
413,000 people, the 2008 Franchising
Council of Australia survey showed. Those
figures should be much higher when the next
report is released later this year.
The franchising sector is clearly doing
something right. Even in a weak retail sales
environment, franchise experts tip growth in
franchise sales and new outlets to reach 7 per
cent. This is down from double-digit growth
rates in 2009, but still a strong result in a difficult
The franchising sector's many cheerleaders
have much to scream about.
The growth raises some important questions:
Is Australia becoming too franchised? Will
the prospect of buying a franchising become
less attractive as the market becomes more
saturated with franchise outlets? Will consumers
tire of so many standardised franchised
products and services?
Such questions probably sound like heresy to
franchise systems and franchisee devotees.
But Australia is already the most franchised
nation in the world on a per capital basis, with
three times as many franchises per capita
compared with the United States, IBISWorld
Most of this mushroom-like growth has
come since the 1900s, showing the franchising
boom's extraordinary strength.
At current growth rates, Australia will have well
over 100,000 franchised outlets before long.
By my count, that's one franchise for every 224
Australians. Do we really need that many?
Do we want almost every store in large
shopping centres to be part of a franchise
system or big company? Do we want more
franchises nudging out independently owned
stores in our suburbs?
Do we want to become McAustralia?
To be fair, the franchising sector has boomed
by giving consumers what they want: better
value and more standardised concepts that
benefit from being part of larger buying groups.
The best franchise systems do a terrific job
replicating popular retail products and services.
Some have exciting concepts and are incredibly
innovative. It's no surprise that more Australian
franchises are succeeding overseas.
Certainly, the failure rate of franchised outlets
is much lower than independently owned
small enterprises. And the number of franchise
disputes is arguably small for a multi-billion-
But all booms end. A continuing tight
labour market will see fewer retrenched
middle-managers buying franchises. Higher
interest rates next year will make it harder for
some franchisees to get finance. Ever higher
shopping-centre rents will hurt profits for many
My hunch is the franchise boom will continue
for some time, albeit in a slightly different form.
Expect more growth in services franchising
and big companies outsourcing traditional
functions to new franchised outlets. More
growth in franchise exports is also likely, as is
more franchises owning multiple outlets -- a
trend much stronger in the US than Australia.
Yes, there are many positives. But I still think
the franchising boom will eventually turn to
bust for more franchises who buy a franchised
outlet near the top of the market in a previously
popular system that has become stale.
The message: take care paying big prices for
a franchise. Do plenty of due diligence on the
franchise system and the contract. Educate
yourself through some excellent courses
available. And search for value.
Buying a franchise in a proven franchise
system can be an excellent investment. Like any
investment, it all depends on the price. Paying
top prices well into a boom is rarely a good idea.
Is Australia too
Links Archive Winter-Spring 2010 Autumn-Winter 2011 Navigation Previous Page Next Page