Franchising is a star in the Australian economy according to the latest survey from PricewaterhouseCoopers, with franchisees and franchisors both showing good growth in profit and revenue. Franchisor profits rose an exceptional 19 percent, while franchisees showed growth about twice the rate of the Consumer Price Index.

And the current franchisee profit levels of about six percent are set for a huge jump to just under 46 percent over the next three years, the report indicates.

Incoming franchisees should be confident with their choice of sector, Greg Hodson, national lead partner, franchising, at PwC, told Franchising magazine.

“Franchising has been achieving double digit growth and forecasting compound profit growth. It’s extremely impressive by any standards. The sector is well placed to take advantage of opportunities in front of them, from strong performances this year.”

Much of the growth has come from the retail sector, but services also performed well enough to record double-digit growth.

The report showed franchisor investment in the franchise network over the last 12 months included extra marketing funds for group marketing, a step taken by 41 percent of franchisors. Field support was viewed as highly effective by 79 percent of franchisors.

Over the next few years franchisors will be focusing primarily on organic growth, with expansion into new domestic markets, products and services, overseas expansion and acquisition other key methods of growth. While 37 percent of franchisors are planning on acquisitions over the next three years, 23 percent of franchisors intend to sell their business within two years, the vast majority in medium-sized franchise systems.

However the sector does face challenges, not least the funding of franchisees who are unable to get the appropriate finance from banks, an issue 73 percent of franchisors cite as a major hurdle. In response to this, many franchisors are providing their own funding or setting up joint-venture arrangements with franchisees.

Franchisors also need to address the issue of attracting younger recruits, the Generation Y who will soon be reaching the ideal franchisee age band of 30 to 44. This highlights the need for a re-branding of the sector to emphasise its strengths and take it to the next level, Hodson said.

“One of the things we’re suggesting is the franchising stakeholders get their heads together to set about lifting the profile of the sector. You look at the results, and the research is showing how well franchising has performed.”

Hodson said the message needs to be that franchising is a diverse and rewarding career, with the potential to build highly profitable, multi-unit businesses.

* The PwC Franchise Sector Indicator is based on an independent survey of 106 franchise systems with 20 or more individual franchise units.