Nearly half of Australia’s franchise businesses outperformed the broader economy over the last 12 months, according to the results from the annual Franchisor CEO Survey.
The research, which saw DC Strategy survey the country’s top 150 franchised groups, found that franchise businesses are growing by more than 8 per cent, more than double the recorded 3 per cent GDP and are generating a minimum 15 per cent profit.
Whilst happy with their success CEO’s said the biggest challenge over the next 12 months would be franchisee recruitment, despite seeing a higher quality of candidates many of whom are also considering taking on multiple units.
Rod Young, DC Strategy executive director, said the overall results were very promising with many CEO’s being bullish in their outlook and growth opportunities in the Australian market over the next 12 months.
“The results clearly validated the strength of a well developed franchise system. The franchise sector has succeeded in creating stronger performing and more valuable businesses. Well developed, mature and well managed franchise systems fared much better growing very quickly whilst the less mature systems were still growing at a reasonable pace,” he said.
“The top franchise groups are attracting more franchisees and this is likely to lead to further consolidation in the sector which will see, over time, the bigger systems engulf some of the smaller ones.”
Sixty per cent of CEO’s indicated multi-unit franchising was their key growth strategy. More than 70 per cent of respondents also listed organic growth strategies such as brand and product development to be one of their highest priorities in the coming months.
At the same time, international expansion favours highly with 35 per cent indicating they were exploiting global markets and approximately 22 per cent are looking to grow internationally within the next three years.
“Australian businesses face some of the most difficult operating conditions in the world – high rents and ever increasing labour costs which place a great deal of pressure on business models and management expertise,” said Young. “Foreign markets don’t generally present such difficult operating conditions and it’s little wonder a significant proportion of leading franchisors are intending to expand their operations internationally.”
Only a small number of responses mentioned social media as an effective tool for customer engagement and brand awareness.
“We encourage franchisors to consider the rapid and demonstrable effects sites such as Facebook and Twitter as a highly effective marketing tool that is currently under utilised by the majority of franchisors,” Young said.