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Franchising in Australia, Australian franchise facts

Despite Australia today claiming to be one of the major players in the world of franchising, as a concept it was virtually unknown in Australia until the early 1970’s. An influx of successful US fast food franchise systems, such as KFC, Pizza Hut and McDonald’s into the local marketplace, led to the rise in popularity of franchising as a format for creating and expanding businesses in Australia.

Franchising is fast becoming a mature sector of the Australian economy, with franchise systems now present in most Australian industries e.g. b2b, real estate, catering, children’s services, vending, recruitment, leisure industry, cleaning, home improvements, pet services, hotels, to name just a few. No longer is franchising limited to fast food and coffee chains!

Franchising may have initially provided a means for Australians to benefit from foreign products and systems, but it now is the chosen format for many Australian entrepreneurs looking to expand and develop their business throughout Australia and also internationally.

The Stats…Franchising in Australia

The results of the Franchising Australia 2008 survey, sponsored by the FCA, identified the following:

Some 1110 business formats are operating in Australia. An increase of 14.6% on previous years.

A total of 28 franchisor systems appeared in the 2008 BRW List of Top 500 Private companies in Australia.

Australia is the most franchised nation per head of population in the world; nearly 3 times as many franchise systems as per head of population as in the US

63,500 business format franchised units operating together with 7900 company-owned units, producing a total of 71,400 units. Many of these are classified as small enterprises, thus representing some 3.7% of all small businesses in Australia. The growth rate in franchised units from 2006 to 2008 was 15.4%.

The total sales turnover of the entire Australian franchising sector was estimated at $130 billion in 2007.

The total number of persons employed in business format franchise systems is estimated to be 413,500.

The majority of franchising takes place in the retail trade (28% of franchisors and 17% of franchise units). Accommodation and food service (including "fast food", "Food retail" and "coffee shops") franchises represents 16% of franchisors and 23% of franchise units. Administration and support services account for 15% of franchisors but only 5% of franchise units. In general, franchise systems in the service sector are smaller than retail.

Australia is the most franchised nation per head of population in the world; nearly 3 times as many franchise systems as per head of population as in the US.

The large majority of franchise systems now operating in Australia are home grown, 91%. An increasing number of franchisors, more than a quarter, also successfully expanding their systems overseas as master franchise opportunities. Franchisors continue to target New Zealand, the United Kingdom and Canada. Despite Australia's geographical proximity to South-East Asia, franchisors were targeting English speaking destinations for their expansion.

Australian franchising sector trends

Part-time franchising - slightly less than half the franchisors reported they had appointed franchisees who work in a part-time capacity of less than 40 hours a week. The Australian franchising sector is thus catering or franchisees who require more flexibility in operations.

Specific growth strategies - the Australian franchise section is moving away the owner-operator, single franchise concept in an effort to stimulate system expansion in a limited market. Master franchising was utilised by just over 1/4 of franchisors to overcome agency problems associated with geographically disparate operations and to provide local level support for franchisees. Exclusive territories were offered by 43% of franchisors and multiple unit ownership is permitted in almost a third of franchise systems.

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As franchising in Australia matures, a growing number of Australian franchisees are looking to sell their franchise business. Read more about franchise resales

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