The total franchising sector contributes a massive $144 billion to Australia’s economy, and that’s increased in the last two years from $131 billion according to the just-released Franchising Australia 2014 report compiled by the Asia-Pacific Centre for Franchising Excellence at Griffith University and unveiled at the NFC14.

Included in the $144 billion figure is the significant contribution made by fuel retail and motor vehicle retail outlets, $79 billion.

Contraction and growth

There has been an almost negligible dip in the number of business format franchised systems, down to 1160 from the 1180 systems recorded in 2012.

The slight shrinkage in the sector is good news, the report authors suggest. Australia has been highly franchised (per capita) for some years with an inevitability that some of the smaller, less viable models would disappear.

More contraction is likely, but it is qualified by stronger internal growth in the individual franchise systems, says co-author and director of the Asia-Pacific Centre for Franchising Excellence, Lorelle Frazer.

The 79,000 franchise businesses account for almost four percent of all Australian businesses. This figure doesn’t include the estimated 6120 fuel retail and 4598 motor vehicle retail outlets around the country.

In the last two year the number of franchise units has grown by about 6000 or just over eight percent. The report points out this is in contrast to the 2.9 percent decrease in Australian businesses reported by the ABS from 2012 to 2013.

Employment is up from 2012 but down from the heights of 2010; most significant is the increase of casual workers across the sector, an inevitable result of uncertainty in the economy, says Frazer.

Retail revival

Retail has been the surprise performer across the industry. The report indicates retail franchise systems have grown overall more than other franchise models, showing a median of 49 units this year, up from 45 units in 2013.

New entrants into the franchise sector have come predominantly from retail; it has been the service sector that has seen brands move out of the franchise model or cease operations.

Franchisor challenges

The availability of suitable franchisees remains the biggest challenge for franchisors with funding for a franchisee’s initial purchase the second biggest concern.

Other highlights of the report include:

Age of franchise systems

• Two thirds of franchisors have been franchising for more than a decade
• Pilot businesses ran for a median of three years before franchising
• One third of franchisor began franchising within their first year of operation

Franchise system size

• 40% of franchise systems have more than 50 units
• One third of franchises have fewer than 20 units

Franchisee performance

• More than 80 percent of franchisors expect franchisees to achieve increased revenue and profits for 2014/15
• More than two thirds believe franchisees recorded profit growth in the last financial year
• Nearly three quarters report franchisees increased revenue last financial year

New topics were considered in this edition:

Migrant ownership

• 16% actively recruit migrants into their franchise system
• 12% have migrants ownership within their network

Aboriginal or Torres Strait Islander franchisees

• 7% have Aboriginal or Torres Strait Islander franchisees
• 51% would be willing to be involved in educational and training programs to encourage Aboriginal or Torres Strait Islander franchisees and employees

[The bi-annual report authors are Professor Lorelle Frazer, Associate Professor Scott Weaven, and Anthony Grace. Image: Franchising Australia 2014]