Franchising has once again been in the media spotlight in the past few weeks, and not for the many positive things happening in the sector. If you were to believe much of what has been published in the press, you’d be led to believe the viability of the entire franchise model of enterprise is in question.
It is evident that much of the current public commentary reflects a prejudiced and intentionally selective focus on specific elements of individual enterprise activity, which is then used to project a sensationalist and superficial view critical of the broader franchise business model and community.
Franchising is a model of entrepreneurship that produces far higher rates of small business survival and faster paths to profitability, compared to standalone start-up businesses. But as with all businesses, there is no guarantee of success for a franchise business.
Facing the challenges of franchising
With the challenge of business ownership and management, cost and margin pressures in many segments, dynamism in the market and the need to constantly revitalise and refresh the offer in the face of stiff competition, new concepts and changing consumer expectations, good franchising relationships see the franchisee and franchisor combine their strengths to collaborate for success.
Not all businesses face and can overcome these challenges well, to sustain an advantage, remain competitive and continue to delight customers without performance improvement or innovation.
No-one in the franchise community wants to see a franchise business fail, and there are many factors well outside the control of regulators, law-makers and industry associations.
The Franchise Council of Australia (FCA) is as keen as any party to identify, understand and see addressed any specific shortcomings in individual business conduct that may have contributed to the failure of a franchise business beyond the challenges and rivalries of a highly competitive market. We need more entrepreneurs in Australia not fewer, and a poor experience can certainly harm the preparedness of business-minded people to invest in and commit to their own enterprise.
It is not constructive, fair or helpful for commentary to simply amplify grievances and unjustifiably undermine confidence in the franchise model of entrepreneurship to the detriment of small businesses and family enterprises that deploy the franchise model to create considerable wealth, opportunity and employment in local communities across our nation.
The FCA understands the sadness and disappointment felt by those who have had a franchise business experience that was not what they had hoped for and any resulting hardship needs to be acknowledged. The FCA continues to urge regulators to act decisively where parties have misled another or failed to uphold their legal obligations and contractual duties.
However, to falsely frame individual business factors and circumstances as the premise for proclaiming the entire franchise model of entrepreneurship is ‘broken’ as some commentators are choosing to do, is harming credible and well-run franchise businesses, their employees, stakeholders and the Australian economy.
Franchising’s contribution to the economy
The franchise model of enterprise has and continues to make a very significant contribution to the Australian economy, employment opportunities and to the success of women and men with ambitions of owning and running their own business.
Australia is a very ‘franchised’ economy with the business model driving $1 in every $11 of GDP. This scale of activity, supported by comprehensive regulatory framework enables 1100 franchise brands to support 80,000 customer-facing franchise businesses employing 460,000 Australians.
This comprehensive regulatory framework provided by the Franchising Code of Conduct is supported by additional economy-wide safeguards, like unfair contract terms protections, overseen by the ACCC.
This framework aims to ensure fully informed decision-making about the choice to invest is a franchise business, accurate disclosure of the commercial proposition, mandated processes for key aspects of the franchisee-franchisor relationship, an obligation for ‘good faith’ dealings between the parties, measures to address any power imbalances and mediation mechanisms.
Good franchising relationships – and these abound within the sector – see the franchisee and franchisor combine their strengths to collaborate for success.
The importance of the franchise relationship cannot be over-emphasised. The FCA is active in encouraging franchisees to make an objective and well-researched decision to enter into a franchise agreement, and to engage the experts in this decision-making process, so they are an informed and knowledgeable business owner and brand collaborator.
Equally, the FCA is committed to ensuring franchisors are equipped with the knowledge and tools to best support their franchisees to achieve their business goals, and to fully met and preferably exceed regulatory obligations.
For the many, many thousands of livelihoods that depend on it, it is imperative that the franchise model of entrepreneurship be held in high esteem, and that the reported shortcomings in select franchise systems are not viewed as representative of the sector as a whole.
Australia rightfully holds a reputation as a leading economy in which to develop and deploy the franchise model of entrepreneurship to the benefit franchisees, franchisors, stakeholders, consumers and the broader community.
Franchise success stories
The small business and family enterprise people of the franchise community deserve that some of the many success stories of the franchise business model also be heard.
That why new industry-led initiatives, which were devised and endorsed over the summer by the FCA Board, aim to support franchising and drive economic and entrepreneurial success for franchisors, franchisees, suppliers and the vast number of Australians that rely on franchising for their livelihoods. These well considered initiatives build from the undeniable premise and guiding belief that ‘successful franchisees are the foundation of a healthy franchise sector‘.
My hope is that the broader franchise community can support this FCA leadership by ensuring we get right the ‘must haves’ of regulatory requirements and share the insights and stories of positive franchising journeys.
Together, we can showcase why franchising is the best model of entrepreneurship, that continues to drive economic and employment opportunities, enable tens of thousands of business-minded people to get into their own business with better prospects for success and supports half a million Australian livelihoods.
We are leading the bold next steps for an even brighter future for franchising.