Sector continues strong growth
8 Dec 2008

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Continued strong growth in the franchising sector over the past two years is the key finding of the 'Franchising Australia 2008' survey. A picture of the franchising industry from 2006-2008, the report provides an important overview of the sector including growth, turnover, employment, confidence, trends, expansion and number of disputes.

"It's really important for the sector to gather consistent, reliable data," says Professor Lorelle Frazer of Griffith University, which was commissioned to undertake the survey on behalf of the Franchise Council of Australia (FCA). "A lot of countries don't have that kind of information".

The report, which gives a broad overview of the sector, was based on data collected at the beginning of 2008, so does not reflect the changed financial climate of the latter part of this year. "The next survey will be conducted in 2010, so our report might tell a different story then," Professor Frazer says.

Although the survey data was collected in the first half of the year, the survey report notes that franchisors were already becoming more conservative in their outlook for the economic landscape. Although the majority were optimistic that their sales and profitability would be the same over the next 12 months, they also predicted that employment would remain static or decline within that timeframe. In brief, franchisors were trending towards negative perception of the economy over the next 12 months.

Despite this uncertain outlook for the future, Professor Michael Powell, Pro-Vice Chancellor (Business), Griffith Business School, says: "The continued growth and maturation of Austalian franchising is impressive, particularly considering the current economic outlook, a recent change of government and a franchising sector that has faced close government scrutiny."

FCA executive director Steve Wright adds: "Another pleasing feature of the survey is that the statistics show a decline in disputation - a result, we believe of greater awareness of the obligations for all participants in the sector - franchisors, franchisees and advisers".

The Franchising Australia 2008 survey is not the only study of the sector to have been completed this year. Specialist franchise consulting firm DC Strategy has just completed a two-year study of every franchise system in Australia and its report suggests that about 200 of these account for the majority of growth and franchisee resales in the industry. As reported on www.smartcompany.com.au, company representative Adrian McFedries predicts that an economic turndown will highlight the inherent problems in poor performers. "This [economic] cycle will sort out the companies that make good decisions."

A recent report by the Franchise Relationships Institute (FRI) focused on consumer sales performance and optimism in the franchise sector and found that despite the econmic downturn the industry is generally optimistic.

The reports author, FRI managing director Greg Nathan, writes: "Franchisors rate themselves as very optimistic about the furture, with an average optimism rating of 3.9 out of 5; while they rated their franchisees as just moderately optimistic, with an average rating of 3.1."

Nathan's interviews with senior managers from 50 franchise networks concluded that "franchise networks that are up in sales are focusing on going back to basics while those experiencing downward sales are focusing more on improving systems and new product development".

Professor Frazer says that the results of the Franchising Australia 2008 survey gives the sector important signals. "Our research throws up a lot of interesting questions, but it doesn't neccessarily give you the answers," he says. "It's a great starting place for further research."

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