Australians excel at the franchise model, whether it’s franchisees buying up international brands for our own backyard or Australian franchises going global. A look at successful franchising and how you can conquer both domestic and international markets.
With more than 1,000 franchise outlets, Australia boasts the highest number, per capita, in the world. Franchises contribute about 15 percent to our gross domestic product and are considered stable small businesses, with statistics showing that franchised businesses are twice as likely to succeed than non-franchised businesses.
The majority of franchises in Australia are homegrown, with just nine percent of foreign-owned chains operating here: most originate in New Zealand, the United State and Europe.
Australian franchisees tend to look for well-known brands, a different approach or niche that can be used to satisfy a latent need in Australia, and a commitment to be around for the long term, says Steve Wright, executive director at the Franchise Council of Australia.
“The well-known brands do well due to their brand awareness, as well as systems that offer a different or unique product or service,” he says. “They may not all take on, but the ones that do can become quite successful as they can provide a unique offering to the Australian market.”
Understandably, franchisees are cautious even about big brands considering Starbucks’ recent stumble in the Australian market. Wright believes the company-owned chain did not do enough research on the cultural differences between the Australian and US market. “Although not a franchise, Starbucks is an example of an international success that could not be replicated in Australia due to a fundamental lack of understanding of Australian markets,” he says.
“They appeared to misunderstand the demand dynamics, especially the strength of competition from brands which were smaller scale in an international sense, but which had established strong customer loyalty because of reliable quality product and service.”
Choosing a foreign franchise should therefore involve meeting with the master franchiser to see how much they understand the Australian operating environment. “Understanding the business, cultural and community differences can be a critical determinant of success,” agrees Wright.
When purchasing a foreign-owned franchise, potential franchisees should be absolutely clear about what’s involved. “Just be aware that translation of systems, procedures, products or services can be crucial to the success of the business in Australia, so make sure you understand the details of the agreement and consult a lawyer of consultant with experience in these matters,” Wright advises.
Worldwide chain
There are plenty of reasons why Australian franchises should think about taking their brand global. Australia is a limited market by population and the franchise model allows overseas franchisees to buy into a business that creates jobs in their area but delivers revenue to Australia as well.
Brands like Gloria Jean’s Coffees and Boost Juice have been successful in far-flung countries like the United Arab Emirates, while service franchises Just Cuts and EcoWash have entered large markets like India and the USA respectively.
One franchise just starting its global journey is Café 2U, a mobile coffee delivery business. The model is based around a modified Mercedes van delivering coffee to what managing director Andy Simpkin says are “non-traditional locations” like industrial estates and office parks, with options to operate outside business hours such as at weekend sport or special events.
The franchise recently expanded to the UK and is currently looking at the US market. Illustrating the potential of going global, Simpkin points out that while its modelling shows there are about 300 territories in Australia, it estimate there are 1,200 in the UK and another 1,200 in California alone.
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