There is little doubt the franchise sector continues to thrive and expand despite the number of business insolvencies in various sectors such as hospitality and the building sector as more people look to enter the franchise sector.
We are experiencing a veritable “franchise frenzy”… would you like fries with that ?
Many redundant employees and people with a different view on their working life and careers are seeing franchising as an alternate option with less risk than establishing their own business.
Despite revenue declining overall in the franchise sector over the past five years there is expected growth partly led by business insolvencies, redundancies, the impact of AI in the workplace and the Federal Governments foreign trade agreement that is encouraging Indian and overseas migration.
What are the franchise sectors
Franchising is not just the fast food chains and other systems we all know and see daily but has now expanded into business sectors such as health and beauty, aged care NDIS and home care, fitness, freight and logistics, quick service restaurants, mobile home services, finance , real estate, childcare and early learning and activities.
There is virtually no sector in business that cannot be franchised to expand a business and its footprint provided they have developed a system, and offer proper training and support needed for the franchisee to succeed.
Like AI, franchisors are replicating themselves through a franchise system and franchising remains one of the most successful models for rapid market and brand expansion.
Australia is open for business
Over the past 35 years I have been involved in the franchise sector I have seen the “franchise trends” come and go for example we had the coffee and coffee van era, then it was ice creameries on every corner, pizza franchises galore, coffee and chocolate franchises, burgers and chicken franchises of course and now all sorts of other cuisines such as Vietnamese, Mexican, Thai, and Indian.
We continue to be an attractive market for overseas companies and franchisors looking to expand their brand into overseas markets.
With around 38% of Australian consumers now buying online form overseas business we are also seeing overseas retailers and businesses looking to establish a footprint in the local market.
The Burger wars continue in Australia with US brands Carl’s Jr, Taco B and Five Guys competing with local brands such as Bettys Burgers, Burgertory, and Grill’d with some overseas brands leaving or reducing their footprint.
There are however many overseas franchisors entering the Australian market in other sectors such as home care, the Early Learning sector, child sports, music and development programs.
There are also opportunities in banking and finance accommodation such a Quest, logistics such as Pack & Send and of course beauty and fitness.
All of these sectors are intensely competitive and in some case such as fitness studios oversupplied based on our demographics and population, so franchisees need to do their due diligence and research the market sector they are entering to ensure the brand has longevity.
Once you acquire a franchise there is no easy exit.
What do franchisors need to do to attract franchisees in 2025?
It is a very competitive franchise market in every sector and franchises really have great choice so franchisors do need to be lifting their game and their marketing message to attract franchisees
- provide innovation and advanced data systems
- understand their consumer market.
- provide effective training and ongoing education
- provide solutions to simplify operations, maximise profitability and develop new services and products.
- ensure uniform financial reporting and data analysis to monitor franchisee performance
- have a clear marketing message, attractive brand and creative social media following
- use video and social media channels with the right content
With the “franchise frenzy” we are seeing franchisees being more selective and discerning in selecting the franchise right for them and it becomes more important for franchisors to select the right franchisees to come on board.
Franchisees now want more say and for franchisors to be more open and transparent and inclusive in their approach, something franchisors were not previously good at.
Where the future lies?
More women are in the workforce and in business (we also wish there were more in higher paid executive roles and in parliament to make better decisions !).
They have growing purchasing power, yet franchisors and business are failing to attract them into franchising as an alternate business option particularly in some male-dominated sectors.
Thinking outside the CBD square
With the growth in regional areas and the affordability of housing pushing families and many new migrants to live in outer city regions this has led to the great urban growth corridors.
Where there are supermarkets, medical centres and childcare centres there is need and opportunity for franchisors to offer all of the same services we see in the CBD.
Therefore, great opportunities arise for franchisors to bring on franchisees in these regional areas where rent and occupancy costs are lower.
The franchise and brand can also contribute to the local community for example look at the expansion of the Bendigo Community Bank franchise model which has been extremely successful and revitalised many towns and helped support small business.
Responsible Franchising
Franchisees are expecting more from their franchisees in the areas of technology, marketing and support and they need to be active and interested in their franchisee’s financial performance.
Franchisors can no longer have the attitude that it’s not our business and it is the franchisees problem if the business is not making money. They need to know before things go awry and why and assist the franchisees if their business is not performing and put in place steps to assist the franchisee.
There is no excuse for franchisor not to have the latest CRM, software and accounting systems needed to monitor and manage franchisee performance.
Business succession
There are so many excellent small businesses operating in Australia in all sorts of sectors where the founder is now in their later years (70 plus) looking to wind down.
They need a business retirement or succession plan which may involve selling the business, a management buyout or just closing their doors.
In the meantime, we have a generation of children inheriting incredible wealth with little interest in their family business but who may be open to acquiring these businesses and growing them through a franchise model.
Brands
The notion that big is better has been taking place over many years with the small suburban business being gobbled up by a major opposition brand.
The biggest companies operating in the Franchising market in Australia are Metcash, Eagers Automotive, Harvey Norman, McDonald’s Subway to name a few.
The challenge for all business great and small, will continue to be inflation, labour shortage and data security issues as well as the adoption of automation and AI and the need to be sustainable and environmentally responsible.
Franchisors need to show consumers they are reducing waste and recycling and using eco-friendly packaging.
AI is changing business and can reduce repetitive activities reduce costs and increase data accuracy and also provide excellent customer behaviour analytics for business.
What does all of this tell me ?
That franchising will only continue to be an exciting and dynamic business sector in 2025 and contribute enormously to our economy as it has in the past to help sustain employment and small business.
As I always recommend before committing to any franchise seek Specialist Franchise Legal and financial advice so you can make an informed decision.
Robert (Hound Dog) Toth | Special Counsel | Accredited Commercia Law and Franchise Specialist
Robert Toth is Special Counsel and Franchise Specialist at Sanicki Lawyers, with over 35 years of experience in franchise, licensing and distribution law. Robert is also an Accredited Commercial Law Specialist and regularly publishes articles on line on Franchising and Licensing and acts for Overseas Franchisors and Master franchisees and in disputes mediations.
email: robert@sanickilawyers.com.au | mobile: 0412 67 37 57