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The changing face of franchising

For any budding business owners pondering a franchise purchase, the opportunities in a handful of growing sectors are increasingly being offset by a lack of cash and skills.

According to Natalie Forte, a senior manager at business advisory firm WHK, the forecast for the industry is mixed.

According to Forte, strong sectors in the franchise industry continue to include those in the food industry, such as fast food and coffee.

Service industries, such as gyms or fitness groups, cleaning providers and pet professionals, are also exhibiting high levels of enquiries.

However, Forte says many challenges continue to plague both franchisees and franchisors.

“Franchisees continue to require access to funding and a deeper understanding of the franchise system,” she says.

“For a franchisor, it is finding the right franchisee and having the ability to benchmark through comparative reporting on performance or potential across their organisation.”

A recent survey, conducted by the Asia-Pacific Centre for Franchising Excellence, shows the total number of franchise systems operating in Australia has decreased slightly, from 1,100 in 2008 to 1,025 in 2010.

Jason Gehrke, director of the Franchise Advisory Centre, says: “Given the steady growth in system numbers up to 2008, the decrease in 2010 could well be attributed to the flow-on effects of the GFC.”

Given the uncertainty surrounding the sector, Gehrke says it is imperative for entrepreneurs to do plenty of research before deciding to become a franchisee.

Where is the growth?

Rod Young, founder and executive director of franchising specialist firm DC Strategy, says that certain sectors are performing better than others.

“We are seeing growth in service and food businesses, and year-on-year comparative sales are quite positive, with many DC Strategy clients seeing average unit sales increase by about 6% in the last quarter,” he says.

Simon McNamara, co-founder of franchise investment fund Inkuberra, is also a founding shareholder in healthy burger chain Grill’d and former chief executive of Boost Juice.

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