Resilient franchise sector optimistic, latest survey reveals

By Sarah Stowe | 28 Oct 2020 View comments

A national survey of franchise businesses has shown 64 per cent of respondents are optimistic about business conditions in the next six months following improved trading during the September quarter, compared with the previous three months.

Representatives of 109 Australian franchise systems covering 15,649 franchised units and 2,012 company operated units contributed to the Pulse Check survey, undertaken by FRANdata for the Franchise Council of Australia.

Positive trading experiences in the September quarter continued to be most apparent across the QSR, maintenance, health and pet care related franchise systems. Cafes, restaurants (sit-down), fitness clubs, lodging and child related services proved less resilient.

Darryn McAuliffe, CEO of FRANdata Australia, told Inside Franchise Business Executive “There is a clear correlation between the material reduction in the percentage of franchise networks experiencing revenue falls at the higher end and the improved optimism being reported.”

Ninety five franchised units were permanently closed across 34 franchise systems, predominantly in the retail food (café) category in the September 2020 quarter.

At the same time 174 new units were opened across 45 brands, predominantly in retailing, pet care and home maintenance services.

“Whilst the new unit openings are positive, they are generally in non-food type franchises. The greatest number of permanent closures are occurring in food related businesses which unfortunately are likely to deliver a higher number of job losses,” McAuliffe pointed out.

Across the board franchisees are continuing to benefit from strong and sustained support from franchisors, the report indicates, with 21.5 per cent of franchisors providing either direct or indirect financial support to all cent of their network.

Mary Aldred, CEO of the FCA, said “Franchise businesses have demonstrated incredible resilience throughout the pandemic, and while it is pleasing to see increased optimism as trading conditions improve, the recovery will be a long haul and the survival of thousands of franchisees will depend on sustained support.”

The survey responses show franchisors actions to assist their franchisees focused on:

  • advice around navigating new regulations and restrictions,
  • assistance with accessing government support programs
  • supporting franchisees with landlord negotiations
  • providing royalty reduction and deferral programs, and
  • actions that monitor and support the well-being of franchisees.

Restrictions in Victoria continue to heavily impact the trading performance of many franchised businesses in the state but levels of optimism are expected to rise with the easing of border restrictions and the continuation of central support programs.

The greatest concerns in the September 2020 quarter were the “wellness” of franchisees & support staff (48 per cent), franchisee financial performance (44 per cent), landlord issues (41 per cent), franchisee engagement and satisfaction (36 per cent) and recruitment (34 per cent).

On the subject of franchise reform, McAuliffe told Inside Franchise Business Executive,  “With the exception of the proposal to double penalties, solid overall support was evidenced for the government’s proposals in response to the Fairness in Franchising Report. ”

There was general support for the idea of a public register – however the issue of security featured as a paramount concern.

“While the majority of franchise systems were supportive of consultation for the development of a public register they place great importance on the security and preservation of confidentiality for those providing information,” McAuliffe said.

FRANdata runs the Australian Franchise Registry, and feedback in the survey was positive.

“The survey showed that over 40 per cent of franchise systems were already filing (or happy to file) their documents on the existing and voluntary Australian Franchise Registry,” McAuliffe revealed.