The next step for Australian franchises

Australia loves franchising. With around 850 different systems in operation, ours is the most franchised country in the world per head of population. But that level of success brings its own challenges.

For a growing number of home grown brands, a domestic market of 20 million consumers is just too limiting. Competition can be fierce, and there’s an underlying threat of segment saturation. When a brand has been proven in Australia, expanding internationally can appear to be the logical next step.

“While the proportion of exporting companies, which are franchises would be less than one per cent, the percentage of franchisors who export is higher than in the industry overall,” says Cheryl Scott, Senior Export Advisor at the Australian Trade Commission (Austrade ).

“The 2004 Griffith University survey reported that around 30 per cent of our franchise systems are involved in export, which is up from 25 per cent in 2002. At Austrade, we’re also assisting many more franchises into international markets. From our experience, the level of international activity has definitely increased in the last few years.”

Another thing Australian franchisors have in their favour is a positive reputation internationally.

”Australia is a significant exporter of franchises and, as a brand, Australia is respected,” says Richard Evans, CEO of the Franchise Council of Australia .

“Australian franchisors tend to be relationship-driven. Speaking very generally, if you ask how sales are going, American franchisors are more likely to give you the number of franchise units they’ve sold in the last year, whereas Australians are more likely to talk about total sales within the system.”

No hard and fast rules

The most successful franchisors all have a sound system in place before taking on international markets – although, it’s not necessarily the same system. “There’s no one right way to do it,” says Evans. “Michel’s Patisserie , Cartridge World , and Howard’s Storage World are all doing well overseas, yet they all have different ways of doing things.”

Neither are there any strict rules governing the countries you choose. The more traditional, English speaking markets – New Zealand, the United Kingdom and the United States – tend to be popular with first-time exporters but, as Evans points out, a shared first language doesn’t necessarily mean a shared culture. Expectations of similarity may be unrealistically high.

“Success is a relative term,” adds Scott. “It means different things to different people. But, at the end of the day, it does boil down to the bottom line. All businesses need to be profitable to justify the investment of time, money and effort, which has gone into the venture. The success of the franchise relationship also depends on a win-win outcome for both the franchisor and franchisees.”

What about me?

If this is true for franchisees overseas, it is also true for those left at home. Australian franchisees may well worry that their homegrown business will suffer as management may pay more attention to international operations.

“Expanding overseas shows that management is outward looking, and open to competition and new ideas,” says Downey.

“These companies also tend to be better adopters of technology. When you’re exposed to worldwide competition, you have to be innovative. A change made to a product to meet the needs of a new market could help boost sales in Australia. And there’s always the chance that the franchisor will locate new, cheaper and better sources as a result of the expansion,” he claims.

“Generally, a franchise system expanding overseas should be a positive sign to potential franchisees,” agrees Scott. “As long as there are additional resources being dedicated to the international activity, and the domestic operations are still well supported, there shouldn’t be a problem. Companies playing on a global stage tend to adopt best practice standards that, in turn, benefit the domestic business. Developing a global brand also increases the value of the brand and, therefore, the business.”

Franchisees and franchisors should consider reading about buying a franchise and running a franchise.