The IBISWorld Industry Report on Franchising in Australia (Report) was released at the end of March 2012. The Report notes that in the last five years the Australian franchising industry has continued to post solid growth, and is expected to continue to do so for the next five years.
Some of the highlights from the 34 page Report include the following observations:
- “sales are expected to rise from $209.7 billion in the 2012-2013 period to $238.5 billion by 2016-2017.” This will also be helped along by possible “mature US franchise systems seeking opportunities” in Australia, and general economic growth as we reap the benefits from the mining boom and a strong currency.
- Australia is arguably the most franchised nation in the world, and the Australian market could be approaching saturation point. As a result the franchising industry will see a continued consolidation of franchise systems. The instability in the European and other overseas markets is predicted to make things more difficult for the attempts of smaller franchise systems to entice franchisees into their system.
- Service-based franchises are expected to grow exponentially and challenge retail trade operators’ domination of the franchising industry. It is predicted that there will be an increase in travel, domestic and industrial cleaning (including laundry services) and gardening services-based franchises as well as increases in franchises catering for the older generation, single-parent families and children’s parties.
- International expansion continues to be problematic, with franchise systems remaining locally focused, perhaps due to the uncertainty of international markets and the global financial crisis. New Zealand, the United Kingdom, Europe and the United States of America remain priority destinations, with Australian franchise systems less inclined to access prospective markets in South-East Asia and the Middle East.
- International franchises looking to invest in Australia are also facing their own problems. While there has been an increase in international franchises entering the Australian franchise industry, the Report predicts most are likely to fail because “operators place too much focus on selling the deal, rather than expanding into the new country”, undertake insufficient preparation and have “little regard for [local] market forces”.