The franchising sector is a significant part of the Australian economy
Franchising in Australia has grown exponentially over the last half century to achieve the position of being one of the most important sectors of the economy. Starting off in the early 1970s with American chains such as KFC, Pizza Hut and McDonald’s, the franchise industry grew by leaps and bounds and Australia today has the second largest number (just behind New Zealand) of franchise outlets per capita in the world.
The number of franchise systems grew from 693 in 1998 to 1160 in 2014, while the total number of franchisees increased from 43,800 to 79,000 in the same period. The number includes 70,000 business format franchised units and an additional 9000 company owned units. Additionally, there are 6120 fuel retail units and 4598 motor vehicle retail outlets. Given these figures it is not surprising that the number of franchise outlets per capita in Australia is thrice that in the United States.
The sales turnover of business format franchising units grew to $65 billion in 2014, up from $62 billion in 2011. In addition to this figure motor vehicle sales were at $38 billion and fuel retail stood at $41 billion, making for a franchising sector of $144 billion which accounts for almost 10% of the GDP of the country. The franchising industry employed 461,000 people in 2014, 155,000 of whom were permanent full-time employees, 125,000 permanent part-time and 181,000 casual employees.
Success of franchising in Australia
Chairman of the Franchise Council of Australia, Warren Wilmot, has this to say regarding the success of franchising in the country, “Geographically, Australia is the world’s sixth largest country so solid business networks are required to service the market effectively. Franchising makes an important contribution not just in capital cities but in regional centres and rural Australia. Strong systems and compliance and substantial charitable and community involvement make the franchise business excellent corporate citizens at federal, state and local community levels. It is these attributes that make brands with a national footprint attractive to investors who may otherwise not have the opportunity to work for themselves”.
The core of the franchise concept is the idea of the brand. This is the face which is presented to the customer and it evokes trust, confidence and comfort. The brand is represented by a symbol or a logo but ultimately it is intangible and stands for the consistency, standardisation and familiarity which represents the attraction for the customer.
A business format franchised unit has a complete plan for managing and operating the establishment, furnished by the franchisor. There is very little scope for deviation from the prescribed formula and the success of the outlet is greatly influenced by the franchisee’s ability to adhere to the rules and the franchisor’s capacity to implement them.
The reason for the consistent success of the franchise model of business in Australia is the self-sufficient and entrepreneurial spirit of its citizens. The government has played its part and implemented a robust framework for this sector which ensures that both the franchisor and the franchisee have to perform their respective roles in a fair manner.
Article re-published from BusinessViewOceania Website.