Key findings from the survey show that the franchise sector is in better shape than two years ago, despite the economy operating below full capacity.
- The number of franchise systems has declined by 1.7 per cent from 2012 to 2014, to 1,160. Australia held one of the highest levels of franchisors per capita in the world for several years but many franchise systems have been too small to remain viable. As the sector matures, (two-thirds of franchise systems have been franchising for more than 10 years) expect to see the number of franchisors contract whilst individual franchise systems grow internally.
- There are an estimated 70,000 business format franchised units and 9000 company-owned units, producing a total of 79,000 units operating in business format franchise systems in Australia. This number represents almost 4 per cent of Australian businesses.
- During the period 2012 to 2014 the franchise sector grew by an estimated 6,000 franchise units, representing a net increase of 8.2 per cent. This is in contrast to the 2.9 per cent decrease in Australian businesses reported by the ABS over the 2012 to 2013 financial year. Whereas Australia’s economic growth has been below trend over the past two years, the franchise sector has demonstrated strong growth.
- The total sales turnover of business format franchise units was estimated at $65 billion in 2014 (compared with $62 billion in 2011). Together with estimated motor vehicle sales of $38 billion and fuel retail of $41 billion, the total sales turnover for the entire franchising sector was estimated to be $144 billion (compared with $131 billion in the 2012 survey).
- Consistent with the growth in franchise units, employment in the sector has increased since 2012. Whilst permanent full-time and part-time employment has remained fairly consistent, the employment of casual labour has increased significantly. This trend reflects that of the broader economy where a leaning towards greater employment in part-time jobs has been observed. It is estimated that more than 460,000 people are employed directly in franchise organisations.
- The retail (non food) industry continues to dominate franchising with 27 per cent of franchisors involved in this sector. A further 18 per cent of franchisors comprise the accommodation and food service industry (which includes fast food).
- Franchise systems grew internally from a median of 31 to 34 total units from 2013 to 2014. In contrast to the 2012 survey, most of the growth has occurred in retail franchise systems.
- Both franchisors and franchisees were reported to be experiencing increases in revenue and profits. Franchisor revenue (from royalties, rebates and other ongoing fees) increased by 9 per cent in the 2013-2014 financial year, with their profits increasing by 7 per cent over the same period. Franchisors reported that the majority of their franchisees also experienced a 9 per cent increase in revenue and a 5 per cent increase in profits.
- 16 per cent of franchisors actively recruit migrants as franchisees and a further 12 per cent intend to do so in the future. Only 7 per cent of franchisors indicated that they have recruited Aboriginal or Torres Strait Islander franchisees. Over half the franchisor respondents (51 per cent) indicated that they were interested in a program that would transition Aboriginal or Torres Strait Islander employees into franchisee ownership.
- Substantial disputes (those referred to an external advisor for action) were reported by 21 per cent of franchisors, who were in dispute with an average of two franchisees. Across the sector the proportion of franchisees in dispute with their franchisor was estimated at 1.5 per cent. These findings have remained relatively consistent over the past decad
- Expansion into international markets has remained relatively stable over the past few years. Some 30 per cent of franchisors are currently operating internationally with New Zealand remaining the most common destination.
The Asia-Pacific Centre for Franchising Excellence conclude that despite ongoing fiscal restraint in the Australian economy, the franchise sector has performed strongly and both franchisors and franchisees have experienced increased revenue streams and profits over the past twelve months. The Franchising Australia 2014 survey provides evidence of strong performance in the franchise sector across all segments, but particularly in retailing.
Download the Franchising Australia 2014 survey here.