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Franchisees emerge in buoyant mood

23 September 2013 | Added by Paul Crabtree

Professor Lorelle Frazer from Griffith University in Brisbane.

AUSTRALIA'S $131 billion franchising sector has bounced back from the global financial crisis with more systems and more franchisees but the same challenges.

Griffith University's biennial Franchising Australia report, released today, reports there are 1180 different franchise systems, 92 per cent of which are Australian.

This is a stark return to form for the sector, which reported 1025 systems in 2010 from 1100 two years prior.

The number of franchises has also returned to form, bucking the 2010 fall from 71,400 units to 69,900 units and reporting almost 73,000 franchises operating around the country.

"The overall increase in units disguises industry specific trends," the report by the Asia-Pacific Centre for Franchising Excellence says.

"The retail sector continues to struggle with weak consumer outlook, price discounting practices and the challenge of eCommerce.

"Conversely, the non-retail sector has experienced renewed growth as entrepreneurs continue to find gaps in the market that franchising can service.

"That divide is clear with non-retail systems supporting a median 17 units (up from 15 two years ago), while retail systems have dropped from a median of 32 businesses in 2010 to 28 in the 2012 survey.

The report, authored by Professor Lorelle Frazer, Associate Professor Scott Weaven and Dr Kelli Bodey, also points to the ability to recruit and finance new franchisees as a key challenge.

About 77 per cent nominated franchisee recruitment as a challenge and 49 per cent pointed to financing difficulties for franchisees.

Franchisors report spending an average of $20,000 on advertising to attract candidates double that reported two years ago.

But the survey says there is evidence that franchisees are sticking around longer.

"The average length of time that a franchisee remains in the system is seven years, with the majority of franchisees spending between six and 10 years in their franchise system," the report says.

"Given that the average term for franchise agreements is five years, there is clear evidence that franchisees are renewing their franchise agreement at least on one occasion."

 

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