Manufacturing Collapse is a Potential Boom for Franchising
THE FRANCHISE SECTOR COULD BE A BENEFICIARY OF THE COLLAPSE OF MANUFACTURING COMPANIES IN AUSTRALIA
In recent weeks the media has been full of stories about the collapse or imminent shut down of major manufacturers in Australia – Toyota, Ford, GM, SPC Ardmona, Alcoa, the list goes on.
Headlines like “States face jobs crisis” and “up to 50,000 jobs could be lost in the next few years” have raised alarm bells with politicians, economists and employees.
There is no doubt that the manufacturing sector in Australia is now at a critical point and companies and people are having to think about the repercussions of such announcements. However not all repercussions are bad. In fact, it could be the beginning of a cyclical boom for the franchise sector as displaced employees look for new opportunities and more control over their future.
In the recession of 1989-91 we saw unemployment spike but we also witnessed a golden period for growth of Australian franchise systems. Cashed up with retrenchment payouts and motivated to find a meaningful and more controllable work environment, many who lost their jobs purchased franchises. This recession affected both blue and white collar workers so the wave of prospective franchisees spread across most of the franchise sector.
Likewise with the GFC in 2008-10 many workers had their hours cut or lost their jobs. However this time many did not get the big retrenchment payouts and so the spike in franchise enquiries was noticeable but not prolific.
Now, between 2014 and 2017 as various companies wind down their operations in Australia, we should expect to see another spike in franchise enquiries and purchases. How big, we do not yet know because no doubt employers will be hoping that many workers jump before the expiry dates and hence do not collect redundancy payouts. However there will be a large portion that will leave cashed up and wanting to find a secure and enjoyable work alternative.
Many of these people will be aged 30 – 55 and will have trouble finding another PAYG role due to age and competition for jobs. At this stage in their life, considerations about starting their own business or joining a franchise will be explored.
Also, just because many of the job losses will be in manufacturing companies, doesn’t mean we should overlook people coming out of white collar or head office roles. Many of them will also be displaced and therefore looking for the next opportunity.
All of this means that in the next few years there is likely to be a surge in franchise enquiries and sales across blue and white collar industries. Franchisors will have greater choice between prospective Franchisees and the human capital and financial capital that underpins the franchise models will be more abundant.
Existing Franchisors should recognise and position for this next cycle and companies that are thinking of Franchising or Licensing their businesses should be encouraged to take those steps as a key factor in their growth and success – availability of motivated franchisees that can afford to buy – will be stronger than it has been for many years.
Robert Graham is the Managing Director of CEO Consulting, a leading Franchise Specialist in Australia and former Senior Executive with ANZ and Westpac Banks. To contact Robert call 1300 764 484 or email Robert@ceoconsulting.com.au