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Business View Australia - June 2015 105
Lorelle F. Director
, Franchising Cen-
tre, Griffith University has this to say
about the franchising sector based
on a survey conducted recently, “The
Franchising Australia 2014 survey
has revealed some interesting facts
about franchising in this country. Aus-
tralia is often called the ‘franchise
capital of the world’ because we have
one of the highest number of fran-
chisors per capita in the world....”.
Commenting on the drop in number
of franchisors from 1180 in 2012 to
1160 in 2014 and an increase in fran-
chise units from 73,000 to 79,000 in
the same period she goes on to say, “So
the franchise sector is expanding but
the number of franchise brands is con-
solidating. Believe it or not, this is actu-
ally a perfect outcome for Australia as
we need fewer, but stronger, franchise
brands. Brands that achieve economies
of scale and therefore brands that are
more sustainable in the long run.”
Franchisors and franchisees have
successfully collaborated and evolved
a mutually beneficial relationship
which enables the franchisor to ex-
pand its business while minimising
capital outlays and permits individ-
uals with an entrepreneurial bent to
start a relatively risk-free business.
Different business mod-
els in franchising
Franchising, as a way of conducting
business, can have several variations.
While the nature of the franchise
agreement would be chiefly depen-
dent upon the requirements of the
franchisor and to a lesser extent that
of the franchisee, the main criteria
which determines the type of arrange-
ment is the product being sold.
If a car manufacturer appoints a deal-
er to sell cars, the franchise agreement
would be between the manufacturer
and the retailer, and would be classified
as a product or trade name franchise.
A situation where the franchisee man-
ufactures goods under license and dis-
tributes them to consumers or retailers
would require a manufacturer-whole-
saler type of franchise arrangement.
This arrangement is also classified as
a product or trade name franchise.
A retailer-retailer or business for-
mat franchise arrangement is one
where a franchisor markets a prod-
uct through multiple outlets which
have a specific design and ambience
and which operate according to a
very strict set of common rules.
The business format franchise is the
most common and fastest growing
segment of the franchise industry. To
a layman a reference to a franchise
arrangement refers to this particular
business model. It is the most com-
mon type by far and has contributed
in a very significant fashion to the
growth of the retail sector in Australia.
The nature of the business format
franchise agreement dictates that the
FRANCHISING