Franchise sector continues to flourish

Posted by Daniel Palmer on 22nd October 2008

The franchising sector has continued its strong growth in the past two years according to the results of the Franchise Australia 2008 Survey revealed at the sectors leading annual conference – the National Franchise Convention. The resultsdiscovered a continued growth rate in franchise systems of 14.6% from 2006 to mid-2008.

“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,” FCA (Franchise Council of Australia) Executive Director, Steve Wright, said. “These statistics illustrate business confidence in the franchising sector and the robust nature of the franchising model, which has a history of performing relatively well compared to the broader small business sector even when economic indicators are pointing down.”

Other notable findings of the survey included:

* Business format franchised units represent some 3.7 percent of all small businesses in Australia
* Growth rate of franchise units is 15.4 percent, up again from the 14.6% reported between 2004 to 2006
* Total sales turnover for the franchising sector was estimated to be $130 billion
* Total number of people employed in business format franchise systems is estimated to be 413,500
* Disputes in the franchise sector have declined with franchisees in dispute estimated at only 2% – these disputes tend to be in larger, older and more complex systems
* There is evidence of stability in the sector with 93% of franchising units remaining under the same ownership

“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 advisors,” Mr Wright commented.

“The continued growth and maturation of Australian franchising is impressive, particularly considering the current economic outlook, a recent change of government, and a franchising sector that has faced close government scrutiny” said Professor Michael Powell, Pro-Vice Chancellor (Business) at Griffith Business School.

Mr Wright said it was 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. This is reinforced in recent statements by the sector regulator, the ACCC, which has noted a downward trend in complaints.”The recent ACCC submission into the Franchising Enquiry supports the findings of the Franchising Australia 2008 Survey with the ACCC asserting that there is no widespread misconduct, complaint numbers are falling, alleged misconduct is not substantiated and there is no evidence of endemic or system failure.

The ACCC noted the strength of the sector, indicating in its submission that few franchise systems receive complaints from more than one or two franchisees. The FCA believes this suggests that there is no widespread misconduct regarding the Code or the Act by most franchisors. The number of franchising-related complaints and inquiries received by the ACCC has generally declined since 2004.

Mr Wright contends that the Griffith survey results support the conclusion that franchising was in a healthy condition across the nation. “There is always room for improvement – and we are working on the question of what improvements can be made in the context of the current Federal Corporations Committee inquiry into franchising,” he said. “But what the Griffith survey results tell us is that there is no need for wholesale changes to the legislative or regulatory settings.”

The Franchise Council of Australia is the premier body representing the dynamic franchise sector in Australia and is a representative voice to Government. The Griffith University study is a national independent study of the sector and the cost of its work is sponsored by the FCA.