Franchisor revenue to reach $192.6bn by 2021

In the five years through to 2020-21 growth in the franchising sector will be a steady 2.3 percent, reflecting franchisor revenue of $192.6 bn. That’s according to the latest IbisWorld industry report.

The growth is a little down on the pace shown by the sector in the five years up to 2015-16: an expected annualised growth of 2.8 percent.

Looking ahead there is likely to be stronger demand for service-based franchise operations in line with social and demographic trends. Consumers will increasingly look to have some domestic chores outsourced as they are time-poor but with discretionary income.

IbisWorld’s Franchising in Australia Report October 2015, highlights “Industry growth areas include service-based franchises such as health, nutrition and wellbeing, along with aged care services and recreational services.

“These types of franchises require at least 20 to 30 establishments to generate enough revenue to cover marketing and over-head costs” the report reads.

It’s good news for franchise businesses that service time-constrained customers with high disposable incomes.

Perhaps surprisingly the growth from new businesses so far has come from retail-based operators entering the franchise arena.  Food and retail remain the dominant categories within franchising.

Strong competition in well-established industries such as the food sector will continue. It is expected that emerging niche areas like the health and wellbeing services will be less affected by competing brands.

IbisWorld suggests profitability growth can be achieved through greater market penetration, expansion or diversification of the goods or services on offer, and of course by making general cost reductions.

As the Franchising Australia 2014 report from Asia Pacific Centre for Franchising Excellence outlined, online retailing is still be used by less than 50 percent of franchise systems (45 percent). But that should rise to about 65 percent as more franchisors implement their plans to trade online, suggests IbisWorld.

Online retailing will allow franchisees themselves to reach customers in new regions, particularly in rural areas, but handling the allocation of business, particularly when there are local bricks-and-mortar stores, remains a challenge.

When it comes to the staffing of franchised outlets and businesses, while individual franchises will require their complement of full-time, part-time and casual staff, the sector is expected to follow the national trend for increased part-time and casual positions.

Franchising has seen some ups and downs in trading conditions, and as it heads into the next five years consolidation of businesses is expected to create more multiple-brand franchisors. There will be more franchisees across their networks too, and a trend for these franchisees to operate more than one unit or outlet.