Why getting your hands dirty could be your franchise future
It's true. Transforming a home or business to its sparkling best could be the path to business ownership.
That’s according to IBISworld which predicts the services segment will take over from the food retailers as the driver of the franchising sector.
“The franchising industry has endured a difficult operating environment over the past few years, with instability and financial markets challenging operators,” IBISWorld senior industry analyst Bao Vuong told Inside Franchise Business.
The resulting slow down has led to negative consumer confidence in turn putting the brakes on spending on franchise goods and services as consumers remain concerned about their ability to pay household bills, he said. .
The franchising industry is forecast to grow at an annualised 1.3 per cent over the five years through 2018-19, to be worth $179.4 billion.
But Vuong, expects steady trading conditions over the next five years, with revenue projected to increase by the slightest margin to an annualised 1.7% over the five years through 2023-24, That will put the sector’s value at $195.4 billion.
“This growth is likely to stem from increased demand for service-based franchises such as those that provide health, nutrition and wellbeing services and household services. A stronger domestic economy is forecast to contribute to growth in disposable incomes, driving demand for franchised products and services.
“Rising incomes are likely to bode well for service-based franchises, particularly for those that serve time-poor consumers with high incomes. These consumers can pay for domestic services, such as gardening and house cleaning services, reducing the number of tasks consumers must carry out themselves,” said Vuong.
The expansion of incumbent food retail operators has helped the segment’s growth over the past five years. But there’s also been a shift towards helathy eating, and increased demand has led to smaller operators entering the franchise arena.
“Several other aspects of the industry may also drive growth, including capacity for change and innovation, a proven and replicable business model, extensive operational and marketing support, branding, marketing and buying power,” said Vuong.
An example of change in the franchising industry is online retailing. Online retailing is currently being used by 36.7 per cent of franchise systems, with a further 32.7 per cent stating that they plan to participate in online sales in the future.
“Numerous franchised systems, such as finance and travel consultants, are likely to implement online models for their businesses. Online retailing will enable franchisees to access new selling regions, such as rural towns, that have no physical stores,” said Vuong.