This year we will help launch over 40 brands into franchising in Australasia and we recruit directly for
over 20 brands and indirectly for another 20 brands, and this has given us a unique insight into the
current state of the market.
I recently attended two Franchise Council of Australia events – a Legal symposium and a mid-year
convention and it was at these events that we got to speak to a large number of franchise executives
and get an even greater feel for the market.
We also attended and participated in franchising expos in New York, Singapore and all the Australian
franchise expos meeting with other franchisors and hundreds of potential franchisees.
At each expo I was afforded the opportunity to share my thoughts and insights on franchising and I
chose to focus on the current market and how covid has affected franchising and what both
Franchisors need to be doing and what franchisees should be looking for from a great franchised
business.
There has been some significant change in the market which has forced franchisors to change how
they support franchisees.
Prior to covid independent business success sat at 60% but had plummeted to 52% since covid whilst
franchised businesses have maintained around a 90% success rate and have weathered covid much
better than independent businesses, further reinforcing the benefit of franchising.
This represents the closure of 277,700 businesses last year alone.
This Failure rate can be attributed to 5 Key factors
Significantly lower sales due to lockdown
An inability to pay rent because of closure, lockdowns, and lower sales
Almost a third of employing businesses (31%) are having difficulty finding suitable staff.
Nearly half (46%) of all businesses experienced increases in their operating expenses.
More than two in five businesses (41%) faced supply chain disruptions. This has remained steady
since it peaked in January 2022 (47%).
A good Franchisor needs to be doing the following
- Negotiating with landlords to get rent deals so businesses can continue to trade profitably.
- Created online opportunities and pivoted the business to deal with lockdown conditions.
- A Recruitment Strategy to assist with employing people.
- A plan to deal with the rising cost of goods and other operating expenses attributed to
supply chain issues which may include price reviews and increases - A Supply chain Strategy to deal with product shortages and pricing increases
This may all sound like doom and gloom and yes it has been a tough time to be in business but out of
every recession there has been a boom, I believe out of adversity comes opportunity.
This may all sound like doom and gloom and yes it has been a tough time to be in business but out of
every recession there has been a boom, I believe out of adversity comes opportunity.
In summary Covid impacted business the following ways:
The survival rate of all companies launched in 2017 fell to 52 per cent at the end of the last financial
year, Australian Bureau of Statistics data shows.
This was an Increase of 16% failure rate post pandemic
But the latest data also shows the nation is in the middle of a record business boom. While 277,700
businesses closed over the last year, 365,000 new companies were launched
There has never been a better time to get into Business, as long as it is the right business with the
right plan for the new market conditions. If you’re thinking about franchising or getting into a
franchise, make sure you ask the right questions and that the business has the right answers for the
marketplace.
