Home About Us Membership Information Events Media NextGen Education
Who We Are The Academy Certified Franchise Executive Program CFE Appoved Courses
Melbourne Classroom Brisbane Classroom Sydney Classroom Adelaide Classroom Perth Classroom Online Courses Blended Learning
Calendar Knowledge Base Contact
Representation Bookshop Partnership Contact Us

Franchising Takes a Positive Position

Written on the 25 October 2008 by Sydney Morning Herald

Franchising takes a positive position

Sydney Morning Herald, Page: 59
Saturday, 25 October 2008

THE franchising industry is battening down the hatches to withstand the expected downturn in Australian economic fortunes, but remains guardedly optimistic about weathering a recession.

The latest report on the health and size of Australia's franchising industry paints a glowing picture of the sector, reporting 14.6 per cent growth in the past two years and sales turnover of $130 billion last year.

But the survey, Franchising Australia 2008, carried out by Griffith University on behalf of the Franchise Council of Australia, was conducted before the onset of the global financial crisis.

So is the confidence still warranted? The council's executive director, Steve Wright, points to figures provided by the franchise trading site franchisebusiness.com.au, which says business was up for the quarter ending September, although he concedes this still does not cover the past few turbulent weeks.

But Wright says franchising does better in a downturn than other small to medium enterprises, as franchises can rely on superior group buying power, networking advantages and the ability to cut costs.

"That means they are able to maintain their marketing spend, for instance, which is quite often the first thing that stops in a small business they think 'I'll stop advertising'," he says.

"Franchisors are definitely aware of the need to batten down, but that does not mean we anticipate we have to completely close the shutters. There is still optimism that they will be able to get through without any damage to businesses." But franchisors are taking measures.

Wright says that at the council's National Franchise Convention in Sydney last week, 7-Eleven senior executives discussed "compressing" costs, mainly by cutting back on back-of-house systems.

Snap-on Tools recently announced it would allow franchisees to consign its inventory through a payment system instead of insisting on an advance purchase.

Clark Rubber, which undertook a management rescue plan in June to help shops struggling with water restrictions and market conditions, has said it will curtail expansion plans but hopes to get through without any further effect on their retail network.

But can rising unemployment, especially among those leaving the executive ranks with a largish redundancy payment, help franchising? Until recently many franchises were complaining of struggling to find qualified franchisees in the midst of a skills crisis.

"This is the pattern of the past," Wright says, but he stresses that buying a franchise should be a "lifestyle choice, not looking for a last resort".

"There is a big difference between those things. To be successful in business you have to be determined." Nabi Saleh, the executive chairman of Gloria Jean's Coffees, believes franchising in Australia is well run and will remain stable.

But he says it would be foolish for any organisation not to take stock of its franchise partner~ assess the health of its models and reach out to any struggling franchise partners.

Saleh says enquiries for Gloria Jean's franchises, of which there are 500 shops in Australia, remains strong and has bank support. "But they are very cautious with the applicant~ they are scrutinising far more greatly and far Buying a franchise should be a lifestyle choice, not looking for a last resort'.

STEVE WRIGHT, Franchise Council of Australia more closely, especially for the new applications," he says.

Barry Thatcher, National Australia Bank's national manager for franchise banking, says some of that caution has arisen because of the poorer quality of some franchisee applications.

"I think what maybe Nabi is finding frustration with is there is has been a lesser quality in the past, which is probably why some of these applicants have been rejected people with really high gearing who should not really be getting into a franchise." Thatcher says NAB has no plans to change the way it lends to franchisees, offering to finance between 40 per cent to 70 per cent of the cost of a franchise.

But he says one of the main changes is likely to be the exit of fringe lenders, who have lent more aggressively.

Author: Sydney Morning Herald

Latest News

MEDIA RELEASE   MYOB FCA Excellence in Franchising Award Winners Honoured in Canberra Wednesday 12 October 2016 The Franchise ...
MEDIA RELEASE The Franchise Council of Australia (FCA) recognised franchising's best in South Australia at the 2016 SA Excellence i...
  WA Excellence in Franchising Awards showcase outstanding franchising success.   The Franchise Council of Australia (FCA)...

Upcoming Events

Franchise Growth Masterclass

Start Time: 9:00am
Date: Thursday 3rd November 2016

WA Coffee Catch-Up

Start Time: 7:30am
Date: Thursday 3rd November 2016

Women in FranchisingFranchise AcademyFranchise Council of Australia