What will Trump’s election mean for franchising?

Trump’s election promises to ‘make America great again’ through protectionist policies in trade have also brought into question the impact on franchising – for Australian brands abroad and US brands on our soil. 

Award-winning Australian franchise Poolwerx began franchising in the US in 2015.

John O’Brien, CEO of Poolwerx, said Trump’s election comes in the wake of the 7-Eleven non-compliance debacle in Australia and the rise of the “pre-election vote-catching frenzy” from politicians like Malcolm Turnbull – specifically in his calls for co-employer relations between franchisor and franchisee.

“This (co-employer relations) would fundamentally undermine and change the entire fabric and basis of franchising economics,” O’Brien said.

But he does foresee change on the US front.

“In the fast changing and different US world of post-Trump there is breaking news for franchising,” continued O’Brien.

“It is hotly tipped that the key industry bureaucrats who lead employee conditions will be replaced by Republicans friendly to Trump's pro-business stance.

“Most franchise industry leaders see that the co-employer movement is 'dead in the water'”.

In the theme of ‘pro-business’, Rod Young, managing director of DC Strategy, believes that Trump’s push to reduce corporate tax will create more jobs and confidence in domestic and consumer outlets.

Franchising is relatively independent from trade so will withstand the protectionist trade policies prescribed by the new President-elect..

“In franchising, we trade intellectual property,” Young said.

“I think franchisors are confident the election result will have a positive outlook in business.

“We’ve had so many inquiries from US-based businesses to come here because Australia in many ways has been the best market outside of the US for franchising.”

He cited brands like Ben & Jerry’s, Domino’s, Subway and Carl’s Jr that have earned higher average sales in Australia.

“We’re seeing a number of Australian franchisors looking into going to the US,” said Young.

Lower relative operating costs and lower wages  (US average hourly rate $9/hr, Australian hourly rate $19) also add to the appeal.

But O’Brien’s projections are slightly more grim.

“Well, embarrassingly for franchising down under, we will be on our own as the 'most regulated franchise country in the world', even more than the US,” he said.

“And it will put an end to the long tradition of leading US franchise brands joining the Aussie economy.

“This must cause the Turnbull government to rethink their muted anti-franchising legislation.”

What Australian franchisors need to consider

For franchisors considering branching out to the US, Young advises three things.

  • Make sure that your business is operating successfully here in Australia before implementing a support team in the US.

  • Franchisors will need $500,000 – $1m to get into the market for the first 12 months to two years.

  • Don’t underestimate the competitive environment and margins you can make in the US.