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Trends in Australian franchising

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Australia is a multicultural society. Australia is willing to experiment with new products and cuisine when it is delivered in a professional and high-quality manner.

Australia proudly states to the world that 14% of the gross domestic product (GDP) is represented by the revenue generated from the franchise sector. Many overseas countries would be envious of such a high percentage of the economy arising from the franchise sector. This does not mean that franchising has no room to expand within Australia.

10 years ago few would have predicted the number of additional coffee concepts that would have emerged and now be successful within Australia and recognised over the world. The sector selling pizza has also changed through the economic cycles that have influenced Australia over the past 10 years.

In Australia quality and service are recognised by the consumer and allow for a new rethink of many existing products and food retail services. Franchise systems that are able to capture quality and service are able to therefore not compete just on price.

Franchise systems are able to investigate new ideas and new technologies which provide the public with better quality and service within a particular industry sector. Franchise systems that do this will gain economy of scale advantages which reduce their delivery costs, increase profits to franchisees, increase royalty payments to franchise laws and further perpetuate the increase of franchise revenue within Australia.

Within the food sector these concepts are best recognised by the gourmet pizza, gourmet hamburger and expensive coffee that the general public are now willing to purchase on a regular basis at a premium price. Consumers are also keen to adopt a rethink of an existing concept. This can be seen within the real estate industry where fixed price real estate agent contracts for the sale of houses have become a new way of doing business in that sector. The new hairdressing formats which either provide prompt and efficient ladies haircuts or new trendy barbershops with added value or blow dry only options for both sexes rather than gimmicks insure loyalty and sustained customers to that sector.

Franchise systems can also create their own product or service sector and establish and industry and a demand for their product or service that may have never existed before. Many have seen Apple and the work of Steve Jobs who showed the world that people needed iPods, iPad and iPhones when only years beforehand they did not realise that these were even products that they could acquire. The recent establishment of Blow Dry Bar is a further example of Australian ingenuity. This franchise system was established to provide people with a prompt and highly skilled blowdry of hair and not a haircut. The system does not require trained hairdressers. The business is rapidly expanding and rating demand within a specialist area that did not exist a short time ago.

As Australian businesses perfect their franchise systems, many realise that there are opportunities to expand into overseas countries. The high standards required both due to the Franchising Code of Conduct and the expectations of customers’ means that when a franchise system enters an overseas country it is well received. Franchisors from Australia should not become overconfident as there are still strong competitive forces in overseas countries. However with good prior research and the backing of skilled advisors the exporting of a franchise system can be very profitable.

Many franchisors travel widely and see the opportunity to bring an overseas franchise system into the Australian market. On the basis that a franchisor is already successful, that franchisor will understand which franchise systems from overseas would be successful in Australia. At present many overseas countries are either in a recession or are only just emerging from difficult financial times. Those franchise systems are looking for further growth. In Australia the high Australian dollar also provides the opportunity for franchisors in Australia to acquire the rights of an overseas system at a relatively low cost.

Introducing a franchise system into Australia does require careful analysis, review of the difficulties in conversion of that system to meet local cultural, health, legal issues and costing constraints. Once this has been reviewed carefully using either a franchise format, joint-venture, Master franchise, area developer or hybrid format, an Australian franchisor is well on the way to becoming a multi-franchise format. Multi-franchise formats (MFF) can have significant advantages.

To assist Australian franchisors in exploring these challenges, the Australian government has established the EMDG scheme. EMDG scheme provides incentives to Australian business people which enable them to be reimbursed valid expenses incurred seeking to develop overseas business.