Global Franchise got the opportunity to speak with Mary Aldred, CEO of the Franchise Council of Australia (FCA), about how the Australian franchise industry is being impacted by COVID-19, and what businesses can do to appeal to the average Aussie consumer.
Interview by Kieran McLoone, deputy editor for Global Franchise.
KM: As the CEO of the Franchise Council of Australia, could you give me an idea of how you provide support for both international and domestic franchisors?
MA: The FCA is committed to supporting both international and domestic franchise brands operating in the Australian marketplace to have the best possible chance of success.
“The FCA has been absolutely focused on providing practical support for all our members throughout this period”
Given the unprecedented challenges for business as a result of the COVID-19 pandemic, the FCA has been absolutely focused on providing practical support for all our members through this period. The leading priority has been to proactively engage with government and advocating on the key concerns and issues affecting our members by:
- Participating as a member of the Federal Department of Treasury’s Coronavirus Business Liaison Unit, which was formed to engage with peak business groups on systemic issues relating to Coronavirus
- Advocating for immediate cash relief and assistance for small businesses and retailers in commercial leasing arrangements
The FCA is also providing practical resources and ongoing advisory support to members by:
- Working closely with our expert partners to guide members on best practice on a range of issues in response to COVID-19, from workplace management and staff deployment to tax, accounting, and leasing
- Delivering regular updates including best practice advice and resources to assist members on a day-to-day operational and business system issues
KM: What kind of impact is COVID-19 having on the Australian franchise industry, and how well supported do you believe the industry is by the government in these challenging times?
MA: The unprecedented business restrictions and social distancing measures implemented to combat the spread of COVID-19 have left many businesses unable to trade or needing to make a significant change to their business model to survive.
Those businesses who are still able to operate are in many, many cases confronted with a severe drop in revenue which makes the daily review of staffing, stock levels, and cash flow an imperative for survival.
“The FCA has welcomed government initiatives to support businesses, but has called on commercial landlords and delivery platforms to share the financial burden”
The FCA has welcomed government initiatives to support businesses but has called on commercial landlords and delivery platforms to share the financial burden, especially in the hard-hit food retail and hospitality sector.
KM: Outside of extenuating circumstances such as now, what kinds of concepts or industries perform particularly well within Australia, and are there any regional adaptations that incoming franchisors from overseas would need to be mindful of when positioning their marketing or offering?
MA: Australia has a long history of proving to be a successful marketplace for franchise brands looking to expand internationally across a wide range of sectors including quick-service restaurants, gyms and couriers and logistics services to name a few.
However, any franchisor looking to expand to Australia, like any other country, would be well advised to conduct their market research before making the decision to commence operations.
“Franchisors need to understand the regulatory landscape in Australia and adjust their business models accordingly”
Similarly, franchisors need to understand the regulatory landscape in Australia and adjust their business models accordingly to ensure compliance across a wide range of areas, including Australia’s mandatory Franchising Code of Conduct, various employment laws and more.
KM: How friendly is the Australian landscape for franchising as a business model, and do any regulations hamper or help business development?
MA: Franchising has been a very successful model of conducting business in Australia over the long term. Indeed, prior to COVID-19, franchising has been a $184bn business segment, which includes 1,344 networks, with more than 98,000 individual franchised outlets, employing more than 598,000 people.
As mentioned, franchising in Australia is governed by the mandatory Franchising Code of Conduct, which regulates the conduct of franchisors and franchisees towards each other and includes matters such as disclosure requirements, good faith obligations, and a dispute resolution mechanism.
A parliamentary report into the Franchising Code of Conduct was released in early 2019. The FCA has been actively engaging with the government on the report’s recommendations to ensure any changes made to the Code as a result of these recommendations do not adversely impact the franchising business model in Australia.
KM: Are Australian consumers receptive to international concepts, or is there a sense of national pride that supersedes incoming brands?
MA: While the majority of franchises operating in Australia are homegrown, if an international concept delivers a quality product or service and fills a market need, Australians are generally open to embracing it.
Brands also need to be willing to adapt their offering to Australian consumers. The flipside of this is that it’s not uncommon for international brands who set up their operations in Australia to develop innovations here that are rolled out across the wider network (famously, for example, McDonald’s McCafe was developed and launched in Australia).
KM: What shifts do you predict will happen within the next few years of Australian franchising, either as a result of COVID-19, or in a more general trend sense?
MA: COVID-19 has created an extraordinary set of circumstances for businesses, and many are facing exceptional hardship and will require sustained support to survive beyond this pandemic.
“COVID-19 has created an extraordinary set of circumstances for businesses”
What we are also seeing, is businesses innovating and pivoting their operations to continue to serve their customers in the current environment. There are physiotherapy businesses offering their consulting services online, handyman businesses diversifying to meet new business needs created by COVID-19, and fast food outlets selling grocery items through contactless drive-throughs.
The one thing I think is true as we look beyond COVID-19, is that there will be changes to the way businesses operate across the medium to long term and that businesses who can find ways to innovate will give themselves the best chance of success.
