5 Major Trends Impacting Franchise Ownership in Australia
Expanding a business via franchising is a popular trend in Australia with more and more people willing to invest in franchises than in independent companies. There is more than enough statistics to support this fact. Data from the Franchise Council of Australia states that the franchise businesses make over $131 billion in revenue annually. The industry is also set to grow by 1.2% of annualized growth over the five years through 014-15.
Franchising works with proven models and offers great support even during difficult times. A support from an established organization is the major attraction of franchising. So if you are someone looking into franchising your business, you might want to know about the current trends impacting the franchise industry in Australia.
The two major benefits of the growing sector of mobile franchises are
- A low initial investment
- Delivery of high demand products and services.
Mobile franchising stands an example to the wide range of concepts available for franchising. More and more mobile franchise concepts are gaining traction nowadays. Some of the mobile concepts like mobile dry cleaners, mobile food stores, mobile furniture repair and many more are an attractive low cost opportunities for franchising.
The mobile nature of these businesses makes it easy to make a full time income at a low capital that does not include the burden of long term leasing of an office space. Your investment gets reduced to only the needed essentials like a van and required equipment. Customers are also finding these mobile centres to be convenient and satisfying due to the lower prices and overhead involved.
- Increasing legislations on the franchise sector
With the number of franchises in Australia growing every year, the Australian government has promptly regulated certain legislations that will have an impact on the franchise ownership. The introduction of the new franchising code of conduct and additional regulations that pertain to the unfair contract legislation will offer a better consumer protection. Small businesses are the major benefiters from these legislations as these protections are aimed at giving access to a level playing field to grow, invest and create jobs. The new franchise code of conduct’s review has recommended for more legislations that would allow a standard-form contracts such as tenancy agreements, franchise agreements, retail lease agreements and finance agreements for small businesses.
These legislations will prove to be silver lining for the franchise owners and are viewed as a support to franchising and not as an impediment.
- Franchising and e- commerce integration
One big challenge faced by franchises in the current scenario is the impact of e-commerce on their distribution networks. But if you are on the optimistic side, even the challenges can be turned into opportunities. Many franchises are beginning to tap in the potential of online retailing. With the changing times where people are more hooked on their mobiles and tablets, it is necessary that franchise businesses are also starting to exploit the benefits of e-commerce sales which hit a total of $1 trillion sales in a very short time.
Many franchises are starting to include an ecommerce facility into their systems and the trend is likely to continue when we look at the immense potential of ecommerce sales.
Multi-unit franchising opens door for franchisees to open more than one unit. The individual units are sold at a reduced price compared to the normal rates when you buy it as a single unit. Multiple unit ownership creates a win-win situation for both the franchisor and the franchisee as the franchisee will have more input with the franchisor and also increases the probability of success for the franchisor. Many experienced franchisors are shifting to this type of ownership due to the lower risk it presents. Though the initial capital required seems to be higher compared to single unit ownership, the long-term benefits weigh down the extra cost involved.
Besides all these advantages listed, the major reason why franchisees opt for a multiple unit ownership is rapid expansion. A franchisee is allowed to have several units located at different parts of the city or even expand it to other states. Though this could mean that a few franchisees are vested with too much power and compromised performance, the trend seems to be continuing as franchisors prefer growth and market dominance at any cost.
Multi-unit franchises have also given rise to the concept of multi-brand franchises that let franchisees to use a second or third brand to continue with their success on their first brand. This lets them improve their cash flow, reduce risk and deal with the changing consumer tastes and shifts in the economy.
When a franchise sells its company-owned stores to franchisees, it is known as refranchising. While the superficial outlook of such a move may indicate a weakness, the reality speaks otherwise. Many high profile global franchises like Burger King, Pizza hut, Taco Bell, Sizzler, Thrifty car rentals and KFC have taken this strategy as an opportunity to increase its economic incentive. Franchisors do not want to run the stores by themselves and are more willing to have a line-up of executives who can work on their products, promotions and overall strategy.
Refranchising also provides an easier way of income for franchisors as collecting royalties is much better than selling the products themselves. Royalty streams are a secure and pure play compared to the unexpected ups and downs one has to deal with store revenue.
Even though the capital market has been loosening up recently this trend is set to continue both locally and globally as companies are looking forward to increased revenue, lower overheads, reduced debts, improved same store performance and increased access to capital for upgrades.