Business View Australia

Business View Australia - April 2015 25

world’ because we have one of the highest number

of franchisors per capita in the world....”.

Commenting on the drop in number of franchi-

sors from 1180 in 2012 to 1160 in 2014 and an

increase in franchise units from 73,000 to 79,000

in the same period she goes on to say, “So the fran-

chise sector is expanding but the number of fran-

chise brands is consolidating. Believe it or not, this is

actually 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 re-

lationship which enables the franchisor to expand

its business while minimising capital outlays and

permits individuals with an entrepreneurial bent to

start a relatively risk-free business.

Different business models in

franchising

Franchising, as a way of conducting business, can

have several variations. While the nature of the fran-

chise agreement would be chiefly dependent upon

the requirements of the franchisor and to a lesser

extent that of the franchisee, the main criteria which

determines the type of arrangement is the product

being sold.

If a car manufacturer appoints a dealer 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 manufactures

goods under license and distributes them to consum-

ers 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 format franchise

arrangement is one where a franchisor markets a

product through multiple outlets which have a spe-

cific design and ambience and which operate ac-

cording to a very strict set of common rules.

The business format franchise is the most com-

mon and fastest growing segment of the franchise

industry. To a layman a reference to a franchise ar-

rangement refers to this particular business model.

It is the most common type by far and has contrib-

uted 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 fran-

chisee will abide by a very strict set of rules. In fact