Advertisement
Advertisement
Advertisement
Australian franchises turn over $128 billion dollars a year, contributing a massive 14 per cent to the nation’s GDP.
InvestorTV spoke to John O’Brien, chairman of the Franchise Council of Australia and co-chairman of the World Franchise Council, as well as founder and CEO of the celebrated international franchise business PoolWerx. We asked him about the growth of this booming industry sector.
“Australian franchising has experienced phenomenal growth and it’s one of the two or three fastest growing franchise nations in the world,” Mr O’Brien says.
“It’s constantly been running at between eight and 12 per cent year on year. So it now actually occupies 14 per cent of Australian GDP, which is larger than mining and larger than tourism in terms of contributing to the Australian economy.”
Franchising is often perceived as the domain of small businesses but increasingly big business is getting in on the act. Bendigo Bank, ANZ and Bank of Queensland are just a few of the big-name financial institutions who have used franchising as a way to expand.
John O’Brien explains why franchising works so well for so many different businesses.
“People get all caught up in what franchising is. It’s simply the modern way of distributing and marketing,” Mr O’Brien says. “The facts are that a franchised outlet will always do 20-30 per cent more sales than a managed outlet. So franchisees will always grow your business better than an employed manager.”
However Mr O’Brien says that while franchising is a proven business model in Australia, franchisors must look beyond home shores if they want a truly dominant brand.
“Today the advice that I give, with only 20 million people in Australia, and a finite number of shopping centres, is that most franchise systems can only develop – certainly retail - to about 250 or 300 outlets,” Mr O’Brien says. “That’s the maximum number of shopping centres there are in the country.
“Now, at that level, you’ve got a very good business but it’s not a ground breaking brand. You really need to have thousands of franchising units if you’re going to be a global franchising system.”
However, for many franchisors the biggest worry today is not whether they can expand their business overseas, but whether they can find the staff to expand their business domestically. John O’Brien says that a lack of available employees in Australia has severely affected the franchise sector in recent years.
“The skills shortage has impacted franchising enormously as it has most industries in Australia,’ Mr O’Brien says.
“We’re at an all-time low in terms of franchising enquiries in the sector [because] people are being well looked after in their jobs, and they’re not making that sea-change; that jump into business for themselves like they used to. Franchise enquiries are down about a third across Australia.
“Perhaps what’s a bit more worrying though,” Mr O’Brien continues, “is that successful franchising is expanding rapidly, but it’s finding it’s hampered by the ability to pull in good staff. However, franchising is more apt to tackle that than small business generally.”
For the everyday shopper it may seem that the high street is now over-run with same-brand franchises jostling for position and custom. But Mr O’Brien says that market saturation is not necessarily a bad thing.
“There was a time when franchisees and some franchisors thought that was a dangerous way to go, because it would cannibalise business from the neighbouring business,” says Mr O’Brien.
“What’s proven in fact, is that over time [co-location] increases brand exposure, keeps competitors out of that market place, and in fact if you were a non-franchise business you would be putting a store wherever there was market demand; wherever customers needed you to be; and franchising can’t be any different to that.”
And for the franchisees themselves, John O’Brien says that buying into a franchise is a comparatively low risk way to own a business.
“Generally franchising is so successful because it provides the small business person with a level of support that they never normally get,” Mr O’Brien says. “In fact four out of five businesses go broke in the first five years; four out of five franchises succeed in the first five years.
“But franchising is not for everyone,” he warns. “If you’re too entrepreneurial then you’ll buck the system and you won’t get value for your bucks, and you won’t have a very happy experience.”
InvestorTV spoke to John O’Brien, chairman of the Franchise Council of Australia and co-chairman of the World Franchise Council, as well as founder and CEO of the celebrated international franchise business PoolWerx. We asked him about the growth of this booming industry sector.
“Australian franchising has experienced phenomenal growth and it’s one of the two or three fastest growing franchise nations in the world,” Mr O’Brien says.
“It’s constantly been running at between eight and 12 per cent year on year. So it now actually occupies 14 per cent of Australian GDP, which is larger than mining and larger than tourism in terms of contributing to the Australian economy.”
Franchising is often perceived as the domain of small businesses but increasingly big business is getting in on the act. Bendigo Bank, ANZ and Bank of Queensland are just a few of the big-name financial institutions who have used franchising as a way to expand.
John O’Brien explains why franchising works so well for so many different businesses.
“People get all caught up in what franchising is. It’s simply the modern way of distributing and marketing,” Mr O’Brien says. “The facts are that a franchised outlet will always do 20-30 per cent more sales than a managed outlet. So franchisees will always grow your business better than an employed manager.”
However Mr O’Brien says that while franchising is a proven business model in Australia, franchisors must look beyond home shores if they want a truly dominant brand.
“Today the advice that I give, with only 20 million people in Australia, and a finite number of shopping centres, is that most franchise systems can only develop – certainly retail - to about 250 or 300 outlets,” Mr O’Brien says. “That’s the maximum number of shopping centres there are in the country.
“Now, at that level, you’ve got a very good business but it’s not a ground breaking brand. You really need to have thousands of franchising units if you’re going to be a global franchising system.”
However, for many franchisors the biggest worry today is not whether they can expand their business overseas, but whether they can find the staff to expand their business domestically. John O’Brien says that a lack of available employees in Australia has severely affected the franchise sector in recent years.
“The skills shortage has impacted franchising enormously as it has most industries in Australia,’ Mr O’Brien says.
“We’re at an all-time low in terms of franchising enquiries in the sector [because] people are being well looked after in their jobs, and they’re not making that sea-change; that jump into business for themselves like they used to. Franchise enquiries are down about a third across Australia.
“Perhaps what’s a bit more worrying though,” Mr O’Brien continues, “is that successful franchising is expanding rapidly, but it’s finding it’s hampered by the ability to pull in good staff. However, franchising is more apt to tackle that than small business generally.”
For the everyday shopper it may seem that the high street is now over-run with same-brand franchises jostling for position and custom. But Mr O’Brien says that market saturation is not necessarily a bad thing.
“There was a time when franchisees and some franchisors thought that was a dangerous way to go, because it would cannibalise business from the neighbouring business,” says Mr O’Brien.
“What’s proven in fact, is that over time [co-location] increases brand exposure, keeps competitors out of that market place, and in fact if you were a non-franchise business you would be putting a store wherever there was market demand; wherever customers needed you to be; and franchising can’t be any different to that.”
And for the franchisees themselves, John O’Brien says that buying into a franchise is a comparatively low risk way to own a business.
“Generally franchising is so successful because it provides the small business person with a level of support that they never normally get,” Mr O’Brien says. “In fact four out of five businesses go broke in the first five years; four out of five franchises succeed in the first five years.
“But franchising is not for everyone,” he warns. “If you’re too entrepreneurial then you’ll buck the system and you won’t get value for your bucks, and you won’t have a very happy experience.”
