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Franchisors Hopeful of Surviving a Recession

Written on the 21 October 2008 by The Age

Franchisors Hopeful of Surviving a Recession

Age, Page: 2
Tuesday, 21 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% 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? FCA executive director Steve Wright pointed to figures provided by franchise trading site franchisebusiness.com.au, which claims business was up for the September quarter, although he conceded this did not cover the past few turbulent weeks.

But he said franchising did relatively better in a downturn than other small and medium enterprises, as franchises could 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 said. "There is still optimism that they will be able to get through without any damage to businesses." But franchisors are taking measures. Mr Wright said at the FCA ’s National Franchise Convention in Sydney last week, 7-Eleven senior executives discussed "compressing" costs, mainly by cutting back on backof-house systems.

Until recently, many franchises were complaining they were struggling to find qualified franchisees amid a skills crisis.

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

Author: The Age

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