Franchise Council of Australia
For people considering getting into business for themselves, especially in the New Year, franchising is one option many will likely investigate. Franchise businesses make a sizeable contribution to Australia’s economy, turning over around $131 billion in revenue annually, according to the Franchise Council of Australia. It says there are around 73,000 franchise businesses in Australia that employ around 400,000 people. General manager Kym De Britt says franchising has grown at a better rate than other small businesses, citing a PricewaterhouseCoopers report that says franchises have seen average annual revenue growth of 10% recently. “That generally comes because when things are tough, franchise systems have better support and marketing systems to help franchisees sustain the difficult times better,” he says. De Britt tells StartupSmart that the main attraction for people getting into franchising is for the support. “Rather than just taking that big step of going into business for themselves, they have a level of support behind them.” Franchisees receive training in how to run the business and have someone to go to if there are problems, De Britt says. “It’s working for yourself but taking on an established system and having support.” But he warns that franchising is not for everyone and that it may not suit people who want to “do it for themselves”. “For those kinds of people, franchising is not the right way to go because at the end of the day you have to follow the model because it’s been proven,” De Britt says. He also recommends anyone considering a franchise to get legal and financial advice and to understand that it can’t be considered a means to semi-retirement. So what types of franchises are most likely to see growth in 2014? De Britt says people can get a sense for what business areas will be successful by looking at the media for trends, but here are his picks for areas to consider: Aged care services Aged care is growing because of Australia’s ageing population, De Britt says. A recent Productivity Commission report says that the number of people aged 75 years and more is expected to rise by 4 million from 2012 to 2060, increasing from about 6.4% of the population to 14.4%. “Demand is going up for services for aged people,” De Britt says. Courier services Growth in online retail spending has also seen growth in demand for services to deliver people’s purchases. According to the National Australia Bank’s Online Retail Sales Index, Australians spent $14.4 billion online in the 12 months to October, equivalent to 6.4% of traditional retail spending. “The boom area there is the courier business,” De Britt says. “They’re all actually struggling to keep up with the demand at the moment.” Health With Australia ranked among the fattest in the world, health services that aim to address the issue will remain popular. De Britt says the fitness industry, and particularly personal trainers, are likely to continue to thrive. A report by market researcher IBISWorld says the personal trainer industry turns over $390 million a year and has seen annual growth of 11% between 2009 and 2014. Work life balance/home services De Britt says as workers seek to develop a better work/life balance, they’re outsourcing tasks such as home cleaning, gardening and pool cleaning. Food retail Food, and particularly fast food, is a mainstay of the franchise industry. “They’re always going to be very popular,” De Britt says. He says two trends that have swept through food franchising are Mexican food outlets and frozen yoghurt. Mexican food is big in the US and Australia generally tends to follow the trends there while yoghurt is seen as a healthy alternative to other snacks, De Britt says. He says he recently attended a conference in Dubai and the “two big kids on the block were yoghurt and Mexican food”.
Australians are readying themselves for spring, with marketers preparing for or already rolling out seasonal campaigns that tap into the coming warmer months. This trend is especially strong in the health, fitness and beauty industries, with many rolling out summer-body campaigns already. The health and fitness industry took out two of the five awards at the Franchise Council of Australia awards for Victoria and Tasmania this week. Angela Williams, franchisee at Fernwood Women’s Health Club St Kilda, took out Franchisee of the Year for two or more staff, while Ty Menzies from ESM Health Club won Franchisee of the Year for business with less than two staff. Menzies told StartupSmart his business has grown since he focused on seasonal marketing. “There was a bit of trial and error for the first year or two, but for the last few years, we’ve really moved forward by implementing this strategy,” he says. He added while the impending summer presented a lot of marketing opportunities for those in the fitness business, all kinds of businesses could tap into the momentum of spring for a marketing business boost. “It’s spring; it’s the new fresh season. There is no one particular thing, it’s an amalgamation of many factors,” Menzies says. “We always get a larger percentage of new members in the spring, but that’s how the warmer months are. People put off all kinds of decisions until they decide it’s time for a new me.” Menzies focuses his marketing efforts in spring and in January and February, when New Year’s resolutions drive many to gyms and new activities. “I find I do those two, spend most of the money then, and for the rest of the year we focus on marketing that is low or no cost,” Menzies says, adding joint ventures with local businesses and schools can be great sources of new trade in the colder months. For seasonal or mood-based marketing, low barriers to access are critical to ensure new clients can easily act on their whim. “We do a very cheap trial offer, such as five week offer for $25, so people realise it’s a great offer and see what it’s about, and then many realise the opportunity and stay.” He says understanding the emotional and social drivers behind why your customers are coming to you is essential for seasonal marketing. “What we tend to find is that by asking them what they’re after and what their goals are, price point isn’t an issue for most people, they want to know how to achieve the goals they’re longing for,” Menzies says. “Most of the time people ask about price first because they don’t know what else to ask about. So take charge of the conversation.”
An Australian franchisee’s satisfaction with their business was likely to be based on how well the franchise’s structures were set up, as new research shows franchisees were more satisfied with lower cost franchises and their systems. Franchise Business Review surveyed over 11,000 franchisees in the US involved in 145 franchise systems. Franchises had to have more than 10 franchisees and cost franchisees less than $US100,000 to launch. The study found low-cost concepts were more satisfying for franchisees with satisfaction based on a variety of factors including financial opportunity, training and support, leadership, operations, core values and franchisees community. Michelle Rowan, president of the US’s Franchise Business Review, says in a statement: “Low-cost franchisees rated their systems higher in every category of our survey, and the overall satisfaction of all low-cost franchisees we surveyed was higher than we see in opportunities costing more than US$100,000.” Kim de Brytt, chief operating officer at the Franchise Council of Australia, told StartupSmart franchise price and franchisor size wasn’t a good indicator of the likelihood of franchisee satisfaction. “The way the franchise system is set up matters. VIP Franchising has in excess of a thousand franchisees, but the feedback I keep hearing is they’re happy because the structures are in place,” de Brytt says. “The other issue is some people go into the franchise without really investigating it enough and knowing exactly what they’re getting into.” The most significant difference pinpointed in the US report was around satisfaction with training and support. The lower-cost franchisees rated their franchise systems 12% higher than franchisees engaged in more expensive systems. The research also revealed the top 100 American franchise systems, according to franchisee satisfaction. Many were in the aged care or home maintenance industries. According to de Brytt, single person franchising was on the rise and likely to continue in Australia. “A lot of small investment franchisees do home maintenance and they’re really satisfied. They love working their own hours and being flexible,” she says. “As society’s needs change, entrepreneurs innovate and supply that need,” says de Brytt, citing the ongoing trend of outsourcing house work and Australia’s ageing population. For aspiring franchisees, de Brytt added the benefit for single person franchise companies is the support from head office, which an independent entrepreneur wouldn’t have; but they needed to be aware as a single person franchise, a day off was a day off their business and making money.
Franchise Council of Australia to celebrate leading franchisees in annual regional and national awards6:43AM | Wednesday, 12 June
The Franchise Council of Australia’s annual awards are back, with the FCA notifying the state finalists of their success this week. Kym De Britt, the chief operating officer at the FCA told StartupSmart the awards were part of their ongoing efforts to encourage and celebrate franchising best practice. “The awards serve not only to recognise entrepreneurial skill and determination, but also as a benchmark for those completing the submissions. The awards are an excellent way to re-evaluate your business against your individual and franchise system standards,” De Britt says. De Britt says franchise operators are facing another year of economic uncertainty and increasing competition, but the Australian franchise community is responding with determination and success. The regional awards ceremonies start next week, with five finalists in the running for each of the six categories per state. There were over 100 entries this year across the country. The six categories offer awards for both franchisors and franchisees. Entries are often a joint effort and usually come from the franchisors. The categories are: multi-unit franchisee of the year; franchisee owner-operator up to one staff member; franchisee owner-operator with two or more staff; franchise woman of the year (either a franchisee or a head office staff member); field manager of the year; and franchisee community service. The applications are judged by a panel of franchising experts who are independent of the FCA. The names and companies of the state finalists are not publically announced. State winners go on to become national finalists. The NSW winners will be announced on June 14, the South Australian winners on June 28, the Queensland winners on July 19, the Western Australian winners on August 9 and the Victorian winners on August 30. The national winners will be announced on October 22.
Franchising in Australia is recovering from a dip caused by the global financial crisis, with thousands of people interested in taking on a business expected to attend an expo in Sydney later this month. “[Franchising is] active and it’s growing,” Franchising Expo exhibition manager Fiona Stacey told StartupSmart. “Many of the guests will be looking to buy a franchise, or invest in a master franchise. Others might just want to learn about how the whole system works.” Stacey says 4000 visitors are expected at the Sydney event. There are over 90 exhibitors booked to attend the event, including popular mainstays of the franchising scene such as Howard’s Storage World, Movenpick and Pool Works. According to Stacey, there are several newer franchise systems attending the expo for the first time this year, such as Crave Yoghurt, beauty spa system Luminiere and bakery system Taste of Europe. “There are a lot of new franchise systems starting up. It’s going through a growth period at the moment, possibly because there are lots of people out there who are keen to get involved,” she says. The expo also features several advisory bodies such as the Australian Competition & Consumer Commission and the Franchising Council of Australia. Franchising is a major force in the Australian economy and small business scene. According to the Franchise Council of Australia, franchises turn over $131 billion each year. There are more than 1180 franchise systems, 73,000 franchisees and 400,000 people employed in franchises across the country. A council report says franchising numbers dipped slightly because of the global financial crisis but are recovering now. The Franchising Expo is being held in Sydney between June 14-16, Brisbane on July 20 and 21 and in Melbourne between August 30 and September 1. You can find out more about the expo here.
The long awaited publication on Friday of the government’s review of the Franchising Code of Conduct has been welcomed by the franchising sector. The Franchise Council of Australia and the Franchise Advisory Centre have both backed the 18 recommendations in the review conducted by franchising expert Alan Wein. The major change pushed by the review is its recommendation to incorporate the common law duty of good faith into the code, rather than devising some new and different definition of good faith. The report also rejected calls for mandatory extension of franchise agreements, and compensation at the end of the franchise term. The review found the Australian franchise sector operates well. Wein wrote that the Franchising Code of Conduct is “a robust model” and “generally operates effectively within a very dynamic and difficult economic environment.” Wein also noted the relatively low levels of complaint and disputation in the sector. Stephen Giles, partner at law firm Norton Rose and deputy chairman of the Franchise Council of Australia, told SmartCompany the Wein Report affirms the health of the franchise sector. “There are good recommendations to improve disclosure and address perceptions about good faith, and also try to reduce potential red tape,” he says. “One of the key things for us is that the Franchising Code of Conduct is a single national framework, not state-based.” Jason Gehrke, director of the Franchise Advisory Centre, is also backing the recommendations. “I think there is something in the recommendations for everyone,” he says. “There are suggested improvements on technical aspects to the code which have been of concern for a while and there are things there which will contribute towards a greater level of best practice of franchising in Australia, which already is world’s best practice anyway.” Gehrke praised the review’s introduction of a good faith provision. “I think a definition of good faith is always problematic, so the solution that good faith is not to be defined in the code but it is to be acknowledged, is the best possible outcome,” he says. The FCA and FAC both believe the changes advocated in the review will not increase red tape in the franchising sector. “As a small business sector we are always conscious that there is a lot of regulation of franchising relative to other areas of business but I think that is just a function of franchising being more identifiable,” Giles says. “The key will be to make sure the actual amendments implement the intent of the review.” Gehrke also says whether or not red tape increases depends on the translation of the recommendations, as “the devil will be in the detail”. “Conceptually the recommendations are understandable. How they translate into the practical day-to-day conduct of a commercial entity might require a lot more detailed thought,” he says. The changes recommended in the review have bipartisan support, so the FCA and FAC both hope they are quickly legislated. “Both the small business minister and shadow small business minister have no great desire to have this as a battle ground for the election,” Giles says. The full report is available here. This story first appeared on SmartCompany
Afterhours childcare franchise Sherpa Kids plans to recruit 100 Australian franchisees in five years and expand into as many as eight countries, after launching in the United Kingdom.
It’s only been a few weeks since Mark Brennan stepped into his role as the inaugural Australian small business commissioner, following the announcement of his appointment in October.
The National Franchisee Coalition has outlined its wish list for the federal government’s review of the Franchising Code of Conduct, including a specific definition of good faith and measures to combat the issue of “churning”.
A franchise has often been compared to a marriage. Franchisor and franchisee have a close working relationship built on trust and mutual respect.
Retail Food Group says it received more than double the number of enquiries this January compared to January 2012, as enquiries throughout franchising experience an upward trend.
The Franchise Council of Australia has flagged a shift in focus following the resignation of executive director Steve Wright, who has been commended for his “tremendous” contribution.
The head of the federal government’s review of the franchising code of conduct says while he comes to the job with no pre-conceived ideas for what should change, topics such as bargaining in good faith, disclosure rules and mediation are all priorities for review.
Almost 70% of prospective franchisees rely on external finance, according to a new report, which shows franchisees continue to gravitate towards stable sectors such as food and beverage.
Franchisees have been warned that they are personally liable for their actions, in the wake of the Brumby’s carbon tax pricing furore.
A newly-launched online portal is offering businesses the opportunity to offer products, trades and services as franchisees, with the aim of developing more than 1,000 franchises nationally.
The Franchise Council of Australia will tomorrow discuss a voluntary code of conduct for retail landlords and tenants, but the Shopping Centre Council is strongly opposed to the idea. The FCA will host a forum in Sydney tomorrow, which will centre around discussions on a range of issues including a proposed retail tenancy code of conduct. Other proposals include a payroll tax freeze, and government assistance for small business and occupation health and safety. “[The event] is not intended to be a wailing wall. Those attending... are looking at ways for small business to be more successful,” FCA executive director Steve Wright says. Retail tenancy code of conduct Last year, the FCA put the focus on retail tenancy. It began working on a draft document and has called for industry support for the concept. Wright says the code is designed to stem conflict between landlords and tenants about rental increases, end-of-term arrangements, fit-out requirements and abuse of market power. But the Shopping Centre Council, which represents big retail landlords, opposes the code. It wants existing state and territory regulations to be aligned under a single set of national laws. While the SCC has stated its opposition to the code, the FCA remains hopeful an agreement can be reached, particularly if it leads to harmonisation of retail tenancy laws across the country. The guidelines are designed to give retailers confidence about security of tenure, and are particularly relevant given poor occupancy rates in North American shopping malls, Wright says. The SCC has been invited to participate in the forum, but has labelled the proposed code as a “media stunt” and has told the FCA it will not discuss the matter. Other issues to be discussed at the forum include: Government assistance The discussion about government assistance will centre on the model adopted by the United States Small Business Administration. Since its founding in 1953, the SBA has delivered about 20 million loans and loan guarantees to small businesses. “The FCA is not intending to ask government to be a lender,” Wright says. “It is asking it to make use of an unused bank wholesale funding guarantee to provide a guarantee to business start-ups which lack a guarantor and who would otherwise get a bank loan if they had a guarantor.” Payroll tax freeze The concept of a payroll tax freeze will also be discussed at the forum. “The FCA is not asking for a reduction of payroll tax. It is asking only for a freeze so that payroll tax bills paid by employers do not get any bigger,” Wright says. “A freeze would remove any ‘threshold creeps’, which can be a disincentive to employ new workers as the new employment may take a business above the threshold.” “[The business would] therefore incur the tax or even be dragged into paying payroll tax simply by granting a pay rise to employees, in order to keep them.”
Shell Australia invited the Franchise Council of Australia to attend a jobs expo for its retrenched workers last week, highlighting the shift to franchising amid mounting job losses.
The problem franchisors face in recruiting quality franchisees isn’t a new one, but only recently have industry players begun to offer bold incentives, such as the reduction or elimination of fees.
The Fair Work Ombudsman has launched a franchise program in a bid to strengthen the sector, teaching franchisors how to best promote compliance with workplace laws.