Franchise sector defies the gloom

The Australian operations of Asian tea franchise Chatime grew 44 per cent in the past financial year to record revenue of $8.5 million in 2011-12. The chain has further growth ambitions and is embarking on a marketing campaign to ensure its Asian origins and products don’t put off a mainstream audience . After just three years in Australia, Chatime outpaced growth for the rest of the franchising sector.

The latest franchise sector indicator from PwC shows that revenue and profit for large franchise chains grew by an average of 10 per cent, year on year. Non-retailers outperformed their retail counterparts 14 per cent to 9 per cent, PwC national lead partner for franchising Greg Hodson says.

“That surprised us,” Hodson says. “Typically non-retail has a fair amount of discretionary spend in it. Maybe nice-to-haves have become must-haves.”

The firm surveyed 101 franchise systems with 20 or more outlets – about 30 per cent of this larger end of the sector, according to PwC.

Hodson says double-digit growth in revenue and profit is “a stand-out” result. PwC recently surveyed 1000 private business clients that recorded average annual revenue growth of 6 per cent.

The proportion of franchisees nominating access to funding as a challenge has decreased to 55 per cent from 73 per cent two years ago.

Hodson says banks may have become more lenient over the past 12 months and says some chains have taken their own action. For example, Quest Serviced Apartments is offering vendor finance arrangements for some prospective franchisees. Meanwhile, 7-Eleven has been encouraging family members of franchisees to buy into the chain. Hodson says this strategy may alleviate some funding accessibility problems if family members are backing each other.

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