Franchising grows to $146bn

Franchised businesses are contributing $146bn of sales revenue to the Australian economy, an increase of $2bn over two years.

The Franchising Australia 2016 survey shows that despite a relatively flat economy and retail environment, Australia’s franchise sector is continuing to grow in total sales turnover and employment and its franchisors are confident of further growth in the next 12 months.

The total number of people directly employed in business format franchising in Australia has reached 472,000 permanent, part-time and casual employees, up from 461,000 two years ago.

These are some of the key findings of the Franchising Australia 2016 survey, undertaken by Griffith University’s Asia-Pacific Centre for Franchising Excellence and supported by the Franchise Council of Australia.

This year’s survey marks the 10th instalment of this definitive benchmarking study of Australian franchising. The survey dates back to 1998 and has been updated every two years since.

The headline findings of the Franchising Australia 2016 survey were released at this week’s Franchise Council of Australia National Franchise Convention in Canberra. The full report will be available in January 2017.

Franchising accounts for about four percent of all small businesses in Australia, said Bruce Billson, executive chairman of the Franchise Council of Australia.

Billson said the survey results show Australia’s franchising sector has continued to perform strongly, against the backdrop of relatively slow economic growth.

“The Franchising Australia 2016 survey points to a maturing sector, holding its own in a transitioning economy following the end of the mining boom.

“Total sales turnover for the sector has risen slightly, while employment has steadily risen and created more permanent full-time jobs. Franchisors are also predicting growth in franchise numbers over the next 12 months,” he said.

According to the Franchising Australia 2016 survey, there are now an estimated total of 1,120 franchise brands operating in Australia, compared with 1,160 in the 2014 survey.

Professor Lorelle Frazer, director of Griffith University’s Asia-Pacific Centre for Franchising Excellence, said this gradual reduction in franchise systems is expected as the sector continues to mature.

“Franchise brands have continued to merge and consolidate to remain sustainable and to grow,” she said. “Whilst the number of brands has declined, individual franchise systems have grown internally with modest increases in the number of franchise units.”

The 2016 survey shows a total of 79,000 units operating in business format franchises in Australia. Whilst the number of franchised units has slightly increased and company-owned units decreased, there has been no net overall change in the number of franchise units since the 2014 survey.

The retail (non-food) industry dominates the Australian franchising sector, with 26 percent of brands operating in this segment. Behind this, 19 percent of franchise brands are found in accommodation and food services, 15 percent in administration and support services, and 10 percent in other services such as personal services, automotive repairs and IT.

Professor Frazer said the franchising sector continues to be impacted by intense competition in retailing, particularly non-food retailing.

“Food retailing has been more resilient with consumers responding well to variety and innovation in food concepts,” she said. “However, we can expect to see plenty more turbulence in the retail sector moving forward.”

A real positive for the Australian franchising sector is its employment growth, which has been on a steady rise since 2012. Significantly, the proportion of people employed on a permanent, full time basis has increased, suggesting a more optimistic outlook ahead.

Snapshot of Australian franchising

  • $146 billion in total sales revenue
  • 1,120 franchise brands
  • 79,000 business units
  • 472,000 people employed

You can access the executive summary of the 2016 Franchising Australia survey here.