Industry revenue growth over the next five years is likely to stem from increased demand for service-based franchises such as health, nutrition and wellbeing services.
Melbourne, Australia (PRWEB) April 26, 2015
The Franchising industry is expected to post weak annualised growth of 1.2% over the five years through 2014-15. The industry's performance over the first half of the five-year period was influenced by the flow-on effects of the global financial crisis, which led to a slowdown across the domestic market and mounting uncertainty regarding the stability of the economy. A recovery in economic conditions over the second half of the five-year period returned the industry to growth and enabled operators to recuperate some of the ground lost in earlier years. According to IBISWorld industry analyst Claudia Burgio-Ficca, “The industry's performance over the past five years has also been affected by trends in real household disposable income, the average weekly hours worked by all employees and interest rates.” Despite fluctuations in trading conditions, industry profitability is expected to grow modestly over the five years through 2014-15, primarily due to the proven operating model established by franchisors. Industry revenue is forecast to post steady growth over 2014-15, rising by 2.7% to $168.7 billion. Declines in industry revenue over the early part of the past five years have been mitigated by growth in disposable incomes, which has boosted the spending power of consumers. However, volatility in consumer sentiment has hindered demand for franchised goods and services, as individuals have become concerned about their ability to repay household debt.
“Revenue growth over the next five years is likely to stem from increased demand for service-based franchises such as health, nutrition and wellbeing services,” says Burgio-Ficca. Growth may 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. Online retailing is another area that is projected to grow over the next five years. The mature life cycle status of the industry is expected to result in a consolidation of enterprises during this period. Despite this, individual franchise systems are forecast to grow internally, leading to an increase in establishments and continued demand for staff.
The Franchising industry has a low level of concentration. The industry supports a number of large and well-established organisations. However, its size and a diverse and extensive range of products and services have limited the market share held by players. Barriers to entry are low and do not hinder new players from operating in the industry. Furthermore, overall capital requirements are low, but vary depending on the type of franchise segment operators are planning to enter.
For more information, visit IBISWorld’s Franchising industry in Australia report page.
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 the franchised business group by providing leadership, guidance, training and assistance, in return for ongoing service fees.
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IBISWorld industry Report Key Topics
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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