The phenomenal success of franchising

Franchising has been phenomenally successful throughout the world. It was described as “the single most successful marketing technique ever”, while it has been commented that the success of business format franchising was “without question the most important news in business”.

In Australia, the franchise sector has enjoyed exponential growth over the past 15 years. It now boasts an annual turnover of more than $80 billion, and employs more than 650,000 people. There are around 750 different franchise systems, more than 90 per cent of which are home grown Australian systems, and around 50,000 franchised outlets. The sector generates more than $290 million in annual export income for Australia.

Franchising was originally used primarily as a distribution method for manufacturers and suppliers. It was used extensively by motor vehicle manufacturers, soft drink companies and oil companies, and remains the dominant business method in these industries. However, these days people are more likely to associate fast food franchises, speciality retail franchises or home services franchises.

In fact, franchising techniques are now used in most industries where goods or services are sold to consumers via a network. Whilst it has often been acknowledged that franchising enables small business to compete effectively with large chains, it is now clear that franchising can also deliver competitive advantage to large corporations seeking more effective and efficient distribution.