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Franchising grows to $131 billion sector: research report
The Australian franchise sector is making an impressive recovery from the economic downturn, now contributing $131 billion to the Australian economy, according to research to be released next week.
Professor Frazer said the biennial profiling research showed the franchise sector had endured the recent years of economic instability quite positively.
“Despite turbulent global economic conditions and a relatively subdued national outlook, in terms of contribution to the Australian economy, and in comparison with small business in general, the franchise sector continues to impress,” Professor Frazer said.
Franchising Australia 2012 reveals the number of franchises operating in Australia has increased 15 per cent in the last two years to 1180 franchise businesses.
The number of franchise units has also grown by 4 per cent to 73,000 units, made up of 65,000 franchisee-owned and 8,000 company-owned units.
Professor Frazer said although overall the sector was making an impressive recovery, the net sector growth disguised weakness in some areas.
“Although the majority of franchisors reported increases in product sales and profitability there was a related increase in promotional spend to stimulate business activity, with franchisors reporting more volatility in the sales and profitability of their franchisees.
“The net sector growth also disguises differing degrees of resilience amongst industry groups with the retail sector continuing to struggle with weak consumer outlook, price discounting practices and the challenge of eCommerce.
“Alternatively, the non-retail sector has experienced renewed growth as entrepreneurs continue to find gaps in the market that franchising can service.”
Professor Frazer said the research results also identified opportunities for greater adoption of eCommerce activities in franchising.
“It is clear eCommerce activities are in a stage of infancy in most franchise systems, with online sales facilitated by almost 40 per cent of franchise systems but with fewer than 5 per cent of total sales occurring online,” Professor Frazer said.
Franchising Australia 2012 research highlights summary:
• There are approximately 1180 business format franchisors in Australia in 2012, compared with 1025 in 2010 and 1100 in 2008.
• The decline in the franchise sector that occurred during the Global Financial Crisis (GFC) and subsequent economic downturn in Australia between 2008 and 2010 has shifted into recovery mode with a return to net growth in the sector.
• There are an estimated 73 000 units operating in business format franchises, reflecting an increase of 4 per cent during the recovery phase.
• The net growth in franchising has occurred predominantly in non-retail industries.
• More than 400 000 people are employed directly in franchising.
• Fully 92 per cent of franchise systems were developed in Australia.
• Some 28 per cent of franchisors are currently operating internationally.
• Almost 40 per cent of franchise systems engage in online sales with customers.
• A major challenge constraining franchise system expansion continues to be a shortage of suitable franchisee applicants, prompting franchisors to find creative solutions to stimulate growth.
The full Franchising Australia 2012 report can be downloaded free from the Centre’s website at: http://www.franchise.edu.au/
About Franchising Australia 2012
Franchising Australia 2012 is the eighth biennial Franchising Australia survey, led by Griffith University’s Asia-Pacific Centre for Franchising Excellence Director Professor Lorelle Frazer and sponsored by the Franchise Council of Australia.
Representing the only systematic data collected on the Australian franchise sector, the Franchising Australia 2012 report provides a profile of the sector as well as a source of longitudinal data gathered over the past 14 years.
The 2012 research involved survey responses from more than 120 franchisors, or 11.6 percent of the sector and the research team included Centre Deputy Director Associate Professor Scott Weaven and Centre researcher Dr Kelli Bodey.