Home' Forge : Vol 1 No 1 Contents 44 // FEATURE
‘Franchises are increasingly
using technology to enable their
businesses. This is a trend we’ve
seen accelerate over the past 12
months. They are using technology
at the front and back end to deliver
products and services.’
He says many are also increasingly
using technology to produce data
analytics. ‘Franchising really lends
itself to this, as systems are made
up of multiple units that allow
you to compare like for like, and
benchmark individual units against
the system average.
‘But a lot of franchises haven’t had
the right systems to do this in a timely
fashion, based on accurate data. This
is changing, and technology is the
enabler, which is a trend we’re likely
to see increase this year.’
Brodie also acknowledges that the
downturn in the retail sector is
making it tough for some franchises,
but that some retail franchises are
still doing well.
‘It all comes down to the quality of
your product or service, and how
the franchise differentiates itself from
others in the same part of the market.’
Another influencing factor in the
franchising sector is last year ’s
release of a new code of conduct.
‘We were heavily involved in this,
and we think the government has
done a great job,’ says de Britt.
‘We expect it to create a more even
playing field in the sector. Essentially,
it will reduce a substantial amount
of red tape within franchising
documents. There won’t be a lot of
change for systems that are already
well organised. But it’s also important
to understand that there will be heavy
fines for franchises that don’t comply
with the new code,’ de Britt explains.
De Britt points out that the
Australian Competition and
Consumer Commission (ACCC),
the department that is responsible
for enforcing the code, has
traditionally come down hard on
franchises that have not met its
requirements, and he expects this
approach to continue under the new
code. ‘Those that make mistakes
will be treated accordingly,’ he says.
Another change is the availability of
debt funding to finance the set-up
of a franchise. ‘Fifteen years ago, if
you had wanted funds to invest in a
franchise, bank people would have
laughed at you,’ says Blain.
However, he says finance is
generally only available if the
franchisee is prepared to back
up the loan with hard assets,
such as the family home. ‘Until a
franchise is proven – some banks
say this equates to 50 units – it is
exceedingly difficult to gain any
But Blain says this is not
necessarily a bad thing. ‘The heady
days of the ’80s saw banks giving
out money like water, and many
folk borrowed far more than they
really should have; eventually
resulting in financial heartbreak.’
A common concern among
franchisees is rental prices,
although subdued conditions in
retailing are putting a lid on steep
increases. ‘With more vacancies
than we are used to seeing, our
anecdotal experience is that
rents have stabilised somewhat;
however, the rent to takings ratio
should always be examined and
understood before signing any
lease,’ says Blain.
As for what franchisors are
looking for when signing on new
franchisees, Blain says the right
attitude is paramount.
‘A good franchisor wants their
franchisees to be energetic
and enthusiastic. Everything
else comes second to those
requirements. If the applicant
doesn’t have sufficient funds,
there may be some vendor finance
available for the select few. Many
franchisors prefer to appoint
franchisees who have no industry
experience so they can teach them
their way of business, but in other
systems, industry experience may
be a prerequisite.’
Blain expects positive conditions to
continue in the franchising sector in
2015. ‘Business in general is flat, and
franchising continues to lead the way.
This year will be no different. I expect
the emergence of a tattoo removal
franchise before too long.’
There are 79,000 individual franchises in Australia.
Individual franchise units have increased by 8.2 per cent, or
6000 units, since 2012.
There are 1160 franchise systems.
The sales turnover of the franchise sector is $144 billion.
The sector employs 460,000 people.
86 per cent of franchise systems originated in Australia.
30 per cent of franchisors have entered international markets.
45 per cent of franchises have online sales.
*Source: Franchising Australia 2014, Griffith University
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