Franchising: Leading the successful small business sector

Michael Paul, Chairman, Franchise Council of Australia

As the peak body that represents franchisors, franchisees and franchise service providers, the Franchise Council of Australia (FCA) is totally committed to developing a strong and financially viable sector. We continually measure our performance to ensure the activities we undertake (education, events, best practice standards, government representation) are continually making a contribution to towards a healthy growing sector.

From that perspective it is pleasing to note that two separate market research reports that were published in 2012 (by PricewaterhouseCoopers and Griffith University) highlighted a franchise sector that continues to show strong growth in challenging economic conditions. These results show that the sector is well managed overall and certainly back up the premise that as a method of doing business - franchising is definitely the optimum small business model.

The strong growth also highlights that leaders of franchise systems have a strong eye on the future. The PricewaterhouseCoopers report identified that a key reason franchise systems achieved strong growth in difficult times was that they had a robust strategy taking into account the impact of an ever-changing business and socioeconomic environment.

However, despite the current impressive growth, there is an underlying concern among FCA members about where the nation is heading with costs, productivity and finance access for small business relative to other markets in the world – and the potential constraints these things will place on future long term small business growth. Further, there is a frustration that political leaders express the importance and commitment to small business growth to our economy, yet tend to focus energies and resources in areas that will have little, zero or even negative impact on growth. This includes for some, a preoccupation in increasing regulation and compliance costs to franchise networks with no empirical evidence to justify such actions. To ensure our ongoing commitment to a strong and financially viable franchise sector, it will be important that the FCA takes a broad, non-sectoral view of the issues facing small business and lead informed national discussion on what are the key issues.

Franchise networks are a major contributor to the economy with a $131 billion turnover, achieving growth rates that outperform the broader small business market. The leaders of Australian franchise systems are highly skilled men and women who generate national wealth, create jobs and through innovation ensure Australia keeps up with rapid, ongoing change. They operate across every business sector in different parts of Australia (capital cities, regional and rural centres) and internationally. All of this gives the FCA a remarkable broad overview of the economic circumstances for small business today and in the future.

The FCA has actively lobbied to government to improve the business environment for small business generally – notably championing the initiatives of the Retail Leasing Code of Conduct (to curb the excesses of major shopping centres) and promoting the introduction of a Small Business Act (to improve small business access to finance and government contracts).

However, it will become even more important for the FCA in the future to work collaboratively with government to influence good policy for small business growth - with our most important message being the need for rigorous and good process in making legislative decisions.

Commitment to regulation by political leaders through media announcements and regulation making in the absence of thorough discussion with stakeholders, analysis and debate is simply not good process. We know only too well that these shortcomings will manifest themselves into poor regulation, with a permanent cost to the small business economy.

In contrast the FCA develops policy positions based on rigorous research, international best practice standards, long term vision and tapping into the vast on-the-ground experience of members who operate across all business sectors throughout the Australian economy.

The franchise sector not only represents franchising, but it represents successful small business. As small business leaders, the use of our knowledge and expertise is very important to ensuring Australian small business has an environment that enables it to thrive in what is becoming a vastly different competitive world.

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