Australia’s Franchising System Bounces Back, Yet Faces Updated Challenges
MELBOURNE AUSTRALIA (Photo credit: LachieB1)
In terms of rankings on the global economic scene, Australia’s business franchising system has always scored highly. However, over the past few years, which saw the European Union plummet ever further into the recession, the world’s top economy slow down its growth and the United States making ever-so slow comeback attempts at economic stability, the system of franchising business ventures came into question. Numerous analysts and experts wondered if franchises are still sustainable, in a business environment that thrives on one-off start-up ideas, and that poses numerous challenges, which were unheard of some four years ago. Recent research, revealed by Griffith University, indicates that the franchising sector Down Under has successfully managed to bounce back after the global financial crisis. However, many challenges still lie ahead, and the same report does an efficient job of outlining them.
According to the Franchising Australia report, which Griffith University releases once every two years, the franchise sector in Australia is worth an impressive $131 billion. What’s more, the report adds, this apparently prosperous sector of the economy comprises no fewer than 1,180 different types of systems for franchising. To the great comfort of the more nationalist observers of the Australian economy, a vast majority of those systems (i.e., 92 per cent) are owned by Australian citizens. The current standings represent a major improvement to the situation reported in 2010 – during the full-fledged crash of the recession, there were only 1,025 such systems in Australia. This, in its turn, had represented a significant fall from the 1,100 franchise systems reported in 2008, namely right before the global crisis hit.
Even more encouragingly, the various sectors that make up the economy are approaching the question of franchising through different methods, yet all those approaches are adding up to growth: there are now 73,000 franchises in Australia, up from the 69,900 reported in 2010. In 2008, there were 71,400 franchises active down under. For the most part, this improvement can be chalked up to the non-retail segments of the economy. As the recession and its effects have started to wane, investors in fields other than retail are finding renewed opportunities on the market, which allow them to franchise.
The retail sector, however, is facing its own particular revolution, and it’s a rather unwilling one at that. An increasing number of major retailers are struggling against the emergence and prevalence of eCommerce, as well as trying to appease the maintained low levels of consumer confidence. Meanwhile, new entries on the retail market are finding it easier to build up a profit and a reputation for themselves by adopting modern strategies for doing business. According to Regus.com.au, serviced offices are a viable option for companies that are managed and manned remotely or through outsourcing. Such practices render the franchising alternative obsolete, as a franchise is still understood as a business venture that requires a physical headquarters.
This current conception, however, might come to be challenged to the point where current trends amend it. Franchises are still a profitable system for doing business, yet they need to take into account that there is a lot more money spent online nowadays than four years ago. Franchisers are saying that their advertising budgets average out at $20,000, double the amount they were spending in 2010. All that money is strictly going toward luring in the appropriate franchising candidates. However, in the day and age of mobile and online technologic advancement, it is worth wondering how the Internet will come to affect the future of franchises, franchising and franchisees. Especially since 49 per cent of franchising systems investigated within the report indicate that franchisees are having a hard time accessing the type of funding they need.
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Category: Business
