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Franchises on the Move

Written on the 28 November 2008 by The Australian

Franchises on the Move

Australian, Page: 2
Friday, 28 November 2008
Ref: 44190577

DESPITE the occasional flare-up in the world of franchising between franchisors and disgmntled franchisees that becomes a public brawl in the media, the franchising sector has many success stories worth crowing about.

The Franchise Australia 2008 Survey conducted by Griffith University found there was a 14.6 per cent growth rate in franchise systems from 2006 to mid-2008. Further, franchised units represent some 3.7 per cent of all small businesses in Australia and the growth rate of franchise units is 15.4 per cent And in a trillion-dollar Australian economy, total sales turnover for the franchising sector was estimated to be $130 billion, while about 413,000 people were employed in franchise businesses.

This is the snapshot that the Franchise Council of Australia loves to get out to the public and it is something to beat one's chest about "These statistics illustrate business confidence in the franchising sector and the robust nature of the franchising model, which has a history of perfonning relatively well compared to the broader small business sector even when economic indicators are pointing down," FCA executive director Steve Wright said. The survey findings are a sign of the confidence in the franchising sector at a time when global and domestic economic indicators are in decline." Wright also was happy that disputes had fallen.

"Another pleasing feature is that the statistics show a decline in disputation a result, we believe of greater awareness of the obligations for all participants in the sector franchisors, franchisees and advisers," he said.

The hard facts show that disputes in the franchise sector have declined, with franchisees in dispute estimated at a low 2 per cent The research says these disputes tend to be in the larger, older and more complex systems.

Wright brings realism to the job and indicates to me that he recognises there are some problems in franchising that need to get fixed.

"It is very encouraging to see lower levels of dispute in the sector, particularly at a time when we have had three franchise systems breakdowns and inquiries into franchising in two states, WA and SA," he said.

"This is reinforced in recent statements by the sector regulator, the ACCC, which has noted a downward trend in complaint" The goal for next year has to be to cut the disputes down from 2 per cent and we need the Australian Competition and Consumer Commission to perfonn better. Thankfully, they have recruited well with small business expert Michael Schaper now in the team.

I also believe federal Small Business Minister Craig Emerson is up for making a good franchise system great There will always be disputes in franchising, but a better system will stop innocent franchisees being bullied by unreasonable franchisors and even banks.

The upside is that the dispute resolution process has to expose hopeless franchisees who might have overborrowed, were not prepared for hard work or tough shopping centre management or could have marriage problems.

The outlook for small business is set to be tougher with economic growth to slow and job losses expected. However. recent interest rate cuts will soften the economic blow coming out of the global financial mess.

History says that when people lose their jobs, they can use golden handshakes and even their super to buy franchise businesses. Many of these people are virtually buying themselves a job and it can be a very hard one.

If this is the gamble someone wants to take, they should make sure they go into a franchise system that is virtually recession-proof One last point A cheap franchise could be mowing lawns, but if many once-busy customers now are out of work or getting less overtime, they might have time to cut their own lawns.

The lesson is do your homework before you invest in a franchise.

Peter Switzer is a founding director of Switzer Business Coaching www.switzer.com.au

Caption Text:
Illustration: Paul Newman

Author: The Australian

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