Franchise Talk

Franchising Takes A Positive Position

October 24th, 2008 | Author: Jack

The franchising industry is battening down the hatches to withstand the expected downturn in Australian economic fortunes, but remains guardedly optimistic about weathering a recession.

The latest report on the health and size of Australia’s franchising industry paints a glowing picture of the sector, reporting 14.6 per cent growth in the past two years and sales turnover of $130 billion last year.

But the survey, Franchising Australia 2008, carried out by Griffith University on behalf of the Franchise Council of Australia, was conducted before the onset of the global financial crisis.

So is the confidence still warranted?

The council’s executive director, Steve Wright, points to figures provided by the franchise trading site franchisebusiness.com.au, which says business was up for the quarter ending September, although he concedes this still does not cover the past few turbulent weeks.

But Wright says franchising does better in a downturn than other small to medium enterprises, as franchises can rely on superior group buying power, networking advantages and the ability to cut costs.

“That means they are able to maintain their marketing spend, for instance, which is quite often the first thing that stops in a small business – they think ‘I’ll stop advertising’,” he says.

“Franchisors are definitely aware of the need to batten down, but that does not mean we anticipate we have to completely close the shutters. There is still optimism that they will be able to get through without any damage to businesses.”

But franchisors are taking measures. Wright says that at the council’s National Franchise Convention in Sydney last week, 7-Eleven senior executives discussed “compressing” costs, mainly by cutting back on back-of-house systems. Full article.