The Evolution of Franchising: How it's Changed

Contributing an estimated $144 billion to the economy, franchising is well-established as a crucial element of business in Australia.

The benefits of franchising have long been known; the failure rate is lower compared to independent start-ups and there is an attractive tried-and-tested model to operate alongside. Although franchising was virtually non-existent in Australia before 1970, the past few decades have seen the franchise sector undergo rapid growth. Australia is now the most franchised nation in the world on a per capita basis, and the previous decades have seen a drastic shift in franchise industries, regulations and importance. 

1970s:

Franchising was extremely limited in Australia prior to 1970. By the early seventies, fast food chains were quickly growing, while the petroleum and car industries continued to disperse. During this period, there were little regulations surrounding franchising, and an increase in competition between small to medium businesses often resulted in franchises coming up trumps. Franchising began to emerge as the perceived “safe” option for business, which further encouraged its growth. As a relatively new phenomenon, franchise numbers and profits were infrequently monitored.

1980s:

During the late seventies and early eighties, franchise distribution and growth continued on a steep trajectory; attributed mostly to an increasingly wealthy population, lax regulations and an openness to accept foreign business ideas and investment. The Franchisors Association of Australia was established in 1981, which was seen as a positive step to improve regulations. During the early eighties, the focus on franchising appear to remain around the fast food, car, and fuel retails industries, with franchises still in the infancy stage.

1990s:

Having stamped its authority as a crucial element to the Australian economy, franchising throughout the nation became increasingly regulated and studied. The 1981 Franchisors Association of Australia was extended to include franchisees in 1993, becoming known as the Franchise Association of Australia and New Zealand (FAANZ). The inaugural 1998 survey of franchises in Australia generated extensive data on the reach of franchising:

• In 1994, there was an estimated 24 500 franchise outlets nationwide; this had increased to 44,800 by 1998
• 1998 identified a total of 730 franchisors.
• During 1997-1998, franchises injected a total of $36.5 billion into the economy
• No longer limited to fast food industries, franchises now incorporated businesses in retail, property and trade industries. 

2000 onwards:

The past fifteen years has prompted franchises to become increasingly varied in scope, which is evident in the monumental growth of 24 hour fitness centres and cosmetics industries. Marketing and sales techniques have also developed, with the 2014 Franchise survey noting that 45% of franchises offered online sales. Increasingly mature and established, franchises in Australia have continued to grow and adapt to the changing demands of the consumer:

• A total of 460,000 employees
• $65 billion turnover by business format franchises (excluding car and fuel retail)
• 90% of franchises operating on social media (2012 survey)
• 79,000 franchise outlets, excluding a further 6120 fuel outlets and 4598 car franchises
• Retail, accommodation and food, and administration and support make up 27%, 18.1% and 14.7% respectively of the franchises in Australia
• Mexican fast food and frozen yogurt increasingly popular, alongside 24/7 gyms and laser hair removal clinics

Often thought to be the “second great Australian dream,” operating a business has become a highly sought after option for Australians ever since the arrival of McDonald's a few decades ago. This can also be witnessed in the growth of Mortgage Choice, which opened its first franchise in 1993 and now operates 430 franchises while writing over $1 billion in residential home loans each month. In addition, the company runs 30 Mortgage Choice Planning franchises. Ever expanding in both numbers and industries, franchising in Australia is predicted to continue growing while remaining at the forefront of delivering- and adapting to- consumer needs. 

For more information on Mortgage Choice or how you can get involved with franchising, feel free to contact me on 0401 695 019 and I'll be happy to have a shout you a coffee and have a confidential chat.