The land Down Under is a thriving franchising hotspot  | Global Franchise
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The land Down Under is a thriving franchising hotspot 

Insight

The land Down Under is a thriving franchising hotspot 

The far-flung continent of Australasia is one that is bustling with business activity. Australia and New Zealand are both advanced economies, home to English-speaking populations who are already culturally attuned to both western and eastern franchise brands

The Australasian region mainly comprises Australia, New Zealand and surrounding neighbor islands. The islands are still on their path to development, but Australia and New Zealand represent two sophisticated, advanced economies with similarly sophisticated populations. 

Australia boasts a GDP of around $1.331tr, while New Zealand, a significantly smaller country and more sparsely populated, has a GDP of $212bn. Both countries have a vibrant franchising scene, but Australia has created a handful of highly successful international brands with the likes of Boost Juice, F45 Training and more. 

As brands come to a saturation point in their home market, the most adventurous international brands may look to Australasia as a new hotspot for growth. 

How does the scene look today? 

The Australian franchising scene is one of the most vibrant in the world, with strong domination of the market with domestic brands, and some international brands who’ve made the journey and laid foundations.  

“Significant revenue growth is anticipated for service-based franchises, such as those that provide health, nutrition, wellbeing or professional services” 

The country is home to over 1,100 franchisors, 65,000 franchise units, and 8,000 company-owned units. The size of the country means that larger brands have always performed better than smaller ones. 

“The larger food retailing systems, especially QSR, are traditionally the predominant franchise entries into the Australian market,” said Mary Aldred, CEO of the Franchise Council of Australia

“Larger franchised businesses continue to perform better than smaller operators due to their economies of scale and scope and buying power. 

“The stronger advertising, brand awareness and market penetration achieved by having a network of outlets also contributes to higher profitability among larger franchises.” 

Australia has more franchising outlets per capita than anywhere in the world bar one country: New Zealand.  

The small nation of 5.1 million is served by around 590 brands, and 32,500 units, making up around seven per cent of all small businesses in the country. Over 70 per cent of those brands are domestic, but New Zealand is welcoming of foreign brands. The government policy on business has been to try and create a level playing field for all companies, which means that there is no franchise-specific legislation.  

“New Zealand is one of, if not the most franchised countries per capita in the world. It has an extremely strong entrepreneurial spirit and franchising sits very well with this,” said Nathan Bonney, founder and director of Iridium Partners, a New Zealand-based franchise consultancy. 

While it’s easy to imagine QSR as the dominant category in Australasian franchising, it wouldn’t be correct. QSR is widely visible, but a lot of the growth sectors in franchising lie in non-food retail, which accounts for over 25 per cent of Australia’s franchise systems. 

Disposable income growth has supported demand for a range of franchised goods and services 

“Demand for franchised personal services has benefited from a fall in average weekly hours worked over the past five years. This trend has provided consumers with more time to allocate towards leisure and recreational activities, boosting the growth of franchises in those sectors,” said Aldred. 

“Additionally, increased health consciousness has supported demand for 24-hour gyms, niche health food businesses and allied health services. 

“Sectors such as home-building, carpet cleaning, waste management and more have been popular recently.” 

New Zealand has had vibrant franchising scene up to now, but it should become even stronger. Fitness brands have been popular over the past few years, but F&B brands still hold an important place in the franchising landscape. 

“Over the past few immediate years, health and fitness-related brands have flourished and longer term, food and beverage imports remain a favorite,” said Bonney. 

“The latter is often driven by consumer trends and market opportunity.” 

What kind of brands are doing well today, and will do in the future? 

Australia is home to an ageing population that has changing tastes and attitudes. Following international trends, it is expected that older Australians will favor independent living arrangements. Shifts in population flows out of the cities will also create new opportunities. 

“New outlet openings and further planned expansion is the hallmark of franchised businesses in Australia in 2022,” said Aldred. 

“In particular, an outflow of population from major cities to regional Australia has created new opportunities for expansion into regional cities and towns to fill the service and retail gaps.” 

F&B is an irrepressible category, but the pandemic has provided opportunities for different sectors to stake their claim across New Zealand. 

“COVID-19 has generally slowed the food and beverage category over the past couple of years but provided opportunities for cleaning franchises, servicing both domestic and commercial, to flourish,” said Bonney. 

“Equally, durable retail franchises and home services have done well in terms of sales levels as consumer spend “on home” versus travelling.” 

What’s not to like? 

The Australasian market isn’t given the due consideration it deserves. These are two large markets of well-educated, well-off and culturally attuned consumers. While taking an American brand to Taiwan may require some significant modification of operations or marketing, it can take a lighter touch in Australia and New Zealand.  

“Franchise system revenue is projected to benefit from rising disposable incomes over the next five years, which will boost the spending power of consumers. Projected growth in consumer sentiment is also forecast to bode well for increased consumer spending over the period,” said Aldred. 

“Significant revenue growth is anticipated for service-based franchises, such as those that provide health, nutrition, wellbeing or professional services. 

“Strong growth in online shopping has boosted demand for courier services over the period and that pattern is likely to continue.” 

But it’s important to treat them as separate markets and not to hyphenate the two countries to ensure success, and avoid an embarrassing exit. 

“What works in one market may not work in the other, so there is not a one size fits all approach. Brands would be well advised to have specific plans appropriate to each market, to have researched and resourced each market separately,” said Bonney. 

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