Australian Franchisees, Take a Bow

Stephen Giles, Chairman, Franchise Council of Australia

Amid gloom and pessimism, here and abroad, Australia’s 70,000 franchisees are turning adversity into opportunity.

They are maintaining or growing revenues while others are contracting or closing. They are providing employment opportunities for about 700,000 people, when others are laying off workers.

Of course, this is not a perfectly universal picture. All small businesses are feeling the pressure of global uncertainty, weakened consumer confidence and increased competition. Some have failed in these tough times.

Yet, in franchising, what we have found in the past few years since the GFC is that the majority of franchisees have either held their ground, or improved their turnover or profit and in some cases both.

Franchises are leading the pack in just about any retail or service industry you care to name.

Think food, bakery, pharmacy and convenience stores; real estate, petrol, motor vehicle, bedding, homewares, beauty, pool servicing and home services. There is a group of franchise companies at the head of each category.

Now try to imagine the stand-alone businesses successfully competing with these franchise groups. They are a lot more difficult to identify.

Franchises are on the street corners and highways of our capital cities and almost all of our regional towns as well. And they are playing an active, positive role in the local community, raising money for the charities and sporting and social groups which are the glue for our communities.

All of this is great for the economic good of the nation and the good health of local communities.

The good news for the franchise owners is that it is working to their benefit as well. They are batting on a better wicket.

On average, franchise owners are 30 per cent quicker to become cashflow positive than owners of stand-alone small businesses. In addition, they have much greater prospects for longevity.

Bureau of Statistics figures show that 45 per cent of small businesses cease operating in the first two years. That percentage grows to 70 per cent after five years.

By comparison, the average term of a franchise agreement is about 6.5 years, and 95 per cent of franchisees go on to a second agreement. Even more impressively, 99 per cent of those who want to go into a subsequent term are able to do so.

Franchising also provides universal opportunities. Some areas of employment remain largely inaccessible to people from a non-English speaking background, but franchising is trulymulti-cultural.

Without any government assistance, franchisors provide access to training, support and opportunity that is far more targeted and relevant than any government assistance program. And those franchisees engage as employees people from their own communities, extending the positive reach of franchising. You only have to look at some of the wonderful success stories on the FCA Franchisee Success Club website to see the wonderful impact franchising has had on many lives. (

So with all this economic gloom, what is the outlook for Australian franchise owners for 2013 and beyond?

Spirits are high, according to a recent study of the top franchise systems by PriceWaterhouse Coopers. Average turnover is expected to rise by nine per cent a year for the next three years. And with an ongoing focus on managing costs and improving efficiency, profit is expected to rise by ten per cent a year.

The study, titled “Franchising holding strong in tough times’, also noted some very encouraging customer trends for franchise businesses.

Despite historically weak consumer confidence, 77 per cent of franchise systems had recorded stable or increased percustomer spend in 2012. On rate of customer inquiries, 68 per cent recorded stable or increased levels of inquiry.

Above all, franchise owners are realists. They know nothing can be taken for granted. Those who think they can sit back and ride on the success of the brand will lose out. What the stats above show is that most understand this and they are working hard to maximize their brand value and their profitability.

As we approach the busy end of year period, franchise owners probably won’t take time out to pat themselves on the back. Maybe, as a consumer this festive season, you might take a moment to compliment your local franchisees on their hard work and support for the local community.