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Non-retail franchisors lead the charge in revenue growth: Report

Monday, 10 September 2012 | By Michelle Hammond

First-time franchisees are being encouraged to consider non-retail franchises such as home and personal services, after a report revealed retail operations are lagging behind other sorts of franchises.


The latest Franchise Sector Indicator, from PricewaterhouseCoopers, surveyed the owners and key executives of 101 franchise systems with 20 or more individual units.


For the first time, non-retail franchisors, including home and personal services, mortgage brokers and business to business franchises, outperformed the retail sector.


Non-retail franchisors recorded an average revenue growth rate of 14%, compared to 9% for retail franchisors.


“Typically, the non-retail side of things is probably attracting more people just securing themselves a job. It has a lower entry point,” PwC partner Greg Hodson told StartupSmart.


“I think that will continue along the way that it has been travelling… This area has grown quicker than retail, suggesting perhaps it is going to hold up well over the next few years.”


“What we’ve seen is some more personal services franchises have done well… There’s a lot of personal grooming-type services – day spas and that type of thing.”


“The other thing that falls into that category is the health and fitness sector as well. The 24-hour gym concept has done really well over the last 12 months.”


However, Hodson says there is still “great growth” among retail franchisors, highlighting food retail as a particular standout.


“Not just cafés but quick service restaurants and fast food are still doing quite well,” he says.


Finding suitable franchisees remains the number one challenge for franchisors, according to the survey, with more than two-thirds (68%) identifying it as their biggest short-term hurdle.


Economic conditions were also cited as a challenge, along with funding. According to Hodson, it’s more important than ever for franchisors to protect their brand by remaining innovative.


“I think what’s becoming clearer and clearer is the importance of strategic planning and leadership shown by the franchisor,” he says.


“Certainly, the survey results show a key standout is good strategy… The ability of a franchisor to continually address strategy, know what its customers need and want, and adjusting its offering and services, is critical.”


“The days of having one idea and going to market with that, and franchising that, are certainly over.”


“Good franchisors continually adjust their business models and their offerings to meet customers’ needs.”


Hodson says franchisors also need to support their franchisees as much as possible. If they don’t provide adequate support, it could hinder their ability to recruit new franchisees.


“All franchisees say they provide support but how real is that support? If you’re buying into a franchise, contact other franchisees and find out how happy they are,” he says.


“That’s more important than ever.”