Franchised operators have faced strong competition from other industries that offer the same range of products and services
Melbourne, Australia (PRWEB) August 27, 2012
Franchising began in Australia in the 1970s with the introduction of franchised fast-food outlets from the United States. Since then, the Franchising industry has evolved and gained prominence across the business world. Prospective entrants have been drawn to the industry due to the large range of businesses to choose from, the ability to become part of an established brand and the associated benefits of belonging to a franchising model. According to IBISWorld industry analyst, Claudia Burgio-Ficca, “industry revenue is expected to post weak annualised growth of just 1.1% over the five years through 2012-13, influenced to a large extent by the downturn across the Australian economy following the global financial crisis of 2008 and the economic uncertainty that prevailed over the following two years”. Revenue growth across the industry has also been influenced by trends in real household disposable income and consumer sentiment. Franchised operators have faced strong competition from other industries that offer the same range of products and services. Industry sales are forecast to increase by 5.7% to $180 billion over 2012-13.
The Franchising industry has been subject to increasing concentration over the past five years. Fuelled by growth in mergers and acquisitions, consolidation activity has stemmed from increasing competition for a greater share of the franchising dollar. Burgio-Ficca adds, “merger and acquisition activity has also been affected by a lack of organic growth through franchisee recruitment, tight margins across retail-related franchises and a decline in the number of small operators keen to continue in the industry”. However, it has also been suggested that the main reason behind the consolidation activity is simply because Australia has too many franchises. Market share concentration is still at a low level overall, and major players include McDonald's Australia Holdings Limited, Yum! Restaurants Australia Pty Limited, Retail Food Group Limited and Competitive Foods Australia Pty Ltd.
Franchising operators are expected to post solid growth over the next five years. According to franchising specialist firm DC Strategy, growth services will include aged care, childcare and home services. Growth will also be driven by the industry's capacity for change and innovation, the existence of a proven and replicable business model, extensive operational and marketing support, and branding, marketing and buying power. Another growth area over the next five years will be online retailing, which has largely been shunned by the industry in preference of a wait-and-see approach.
For more information, visit IBISWorld’s Franchising report in Australia industry page.
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IBISWorld industry Report Key Topics
Franchising is a method of growing a business whereby a franchise owner (franchisee) is granted for a fee, the right to offer, sell or distribute goods or services under a business system determined by the business founder (franchisor). The franchisor supports that franchised business group by providing leadership, guidance, training and assistance, for which they receive ongoing service fees.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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