The changing face of franchising

The franchising sector may be made up of small to medium enterprises, but collectively it is big business.

Australia is the second most franchised country in the world per capita, behind New Zealand, with an estimated 1,100 franchise groups generating an annual turnover of $130 billion, equivalent to 12 per cent of Australia’s gross domestic product.

Half a million people are employed within Australia’s franchising sector across 53,000 franchise outlets.

And along with its expanding numbers of franchises, the sector has also developed beyond being a model exclusively for fast food outlets.

In fact, of the top 20 franchises in WA Business News Book of Lists (see page 20), only eight are food retailers and five of those fast food.

Melbourne-based Bakers Delight has grown to the fourth largest franchise in WA, with 69 outlets with close competitor and fellow Melbourne originate Brumby’s now in sixth spot with 52 outlets.

It is clear the franchising model has been adopted by a myriad of industries, with two cleaning franchises in the top three – Jani-King (210 franchises) and CleanTastic (94 franchises) – and retail outlet Retravision (44 franchises), hardware store Mitre 10 (44 WA franchises), WA owned independent petrol outlet Gull (35 franchises) and real estate agent LJ Hooker (35 franchises) all in the top 20 largest franchises in WA.

Jim’s Group is again the number one franchise in WA with 285 franchises – expanding to 33 divisions including well-known Jim’s Mowing and less prominent Jim’s finance professionals.

Franchise Alliance principal director Geoff Langham told WA Business News he has seen an increase in the diversity of businesses using the franchise model.

“In Australia fast food is the most common, but we deal with a huge range from building companies to manufacturing companies. We even have a colonic irrigation business that is looking at franchising,” he said.

“Most services and businesses can be looked at from a franchise perspective. There are very few businesses that couldn’t be made to work in a franchise model.”

CleanTastic WA master franchisor Tony Kearney moved the business, which originated in Melbourne, to Perth in 2004.

Mr Kearney has added 23 franchises to CleanTastic’s book in the last year and expects 30 more franchisees to sign up in the next 12 months.

The changing face of franchising lies in its structure: none of the CleanTastic franchises are company owned, a structure uncommon in the companies on the franchise list.

More often than not, franchisors keep an outlet as a test dummy and a training ground for new franchisees, but Mr Kearney said for CleanTastic the model works well and allows them to focus on running the business, while franchisees can focus solely on cleaning.

“We are here to sell to sell franchises, not cleaning. We are here to make sure everything is maintained … the franchisee system works very well for them and for us,” he said.

Others operate on a different model and Mr Langham said this is dependent on many factors.

“Every system we design is different, there is no standard franchise system, it can be dependent on the industry they are in, but often it depends on what the franchisor is looking for.

“They may have had a number of outlets operating as corporate stores before they decided to franchise and they have made the decision to hang on to those.”

He recommends franchisors to have at least one company owned outlet.

“When we are designing a system, we always recommend the franchisor retains at least one outlet to try different ideas in, to make sure they have hands on at the coal face and to provide a place to train other franchisees in,” Mr Langham said.

Perth-based Chooks Fresh and Tasty franchise owner Steve Hansen said he still owns one company outlet but is considering franchising it.

“The main reason behind having a company store is for training and testing of product … as a strict franchisor a company store is not something you want,” he said.

“Our culture is that we are a franchisor in a strict sense and our role is to provide leadership, a vision and encouragement for our group, our focus needs to be on that, not on company stores.”