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Franchising an economy

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By Jason Oxenbridge
Aug, 2007

Industry pours mega bucks into Australia's GDP

MORE than 600,000 Australians are employed by a booming franchise sector, driving a myriad of budding Gold Coast entrepreneurs to duplicate the trend.

Iconic brands Baskin Robbins, Donut King, Brumby's Bakeries, Cookie Man, Hydro Dog and Zarraffas Coffee were hatched as single entities on the Gold Coast before they were 'echoed' to the world with structured management systems and brand consistent marketing.

Franchising in Australia represents a dynamic small business sector contributing around 14 per cent of the country's national GDP. It comprises franchisors and franchisees and has generated its own $80 billion economy.

South-east Queensland is now a major contributor to the industry, equating to
28 per cent of Australia's franchise system. On the Gold Coast, new service franchisors are arriving on the scene almost as quickly as it takes Zarraffa's Coffee to blend the perfect cappuccino.

Buying a franchise is a major decision and as the experts will attest, commitment in capital and borrowings can be significant. A new entry into the sector needs to consider the process carefully. Franchising is not a guarantee of success; rather it is an opportunity to establish a rewarding business with the support of a network focused on success. The old adage is true in franchising, where the sum of the whole is greater than the individual.

Chairman of the Franchise Council of Australia and CEO of international franchise giant PoolWerx, John 'O'Brien, says the industry is well regulated, well educated and highly developed to enable those entering the sector to do so with confidence.

"Franchising is a new economy," beams O'Brien, whose PoolWerx franchise is now the largest mobile pool service company in the world.

"It's (franchising) not rooted in Melbourne's industrialisation or Sydney's commercialism. It's brand orientated and you can run it from anywhere. Queensland and the Gold Coast in particular are wide open markets for franchising and are seeing an increase in the number of service-based franchises,in particular.

"Franchises organise disorganised industries with systems, structure and branding. The industry hasn't reached its zenith and there's still a lot of growth potential. Service franchising is the big growth sector. Around 60 per cent of all successful franchises in Australia are service-based. People think this is confined to 'Jims'

or 'VIP', but it goes way beyond that to incorporate financial institutions, banking and book keeping."

O'Brien is an industry aficionado. A previous 'franchisor of the year', the 50-year-old is an uncannily accurate visionary, bold innovator and one of the few people in franchising who has experienced first hand the roles of franchisee, master franchisee, and franchisor.

Stepping into the industry shortly after completing his university degree, he became an early corporate star when Cadbury Schweppes tasked him with converting hundreds of soft drink home-delivery drivers into franchisees. He soon took the ACT master licence for himself, followed by Western Australia and Queensland. It was to be the genesis of a career, which 25 years on, has positioned him as one of the most respected identities in the industry.

In 1996, O'Brien took one year off work to travel the globe in a quest to discover a new franchise idea. Not long after, PoolWerx was swimming laps around its competitors. The company recently expanded its operations into New Zealand, the US and Europe. It boasts 300 vans, 42 retail outlets and 200 franchises Australia-wide. O'Brien plans to open an extra 30 stores in 2008. The after-market pool sector is now a $1.5 billion industry - well worth tapping into. Gold Coast businessman Terry Morris became a shareholder of the company in 2000.

"You've got to find an industry that's either fairly strong or on the way up. There's no point in trying to pioneer an industry. An established sector where there may not be any franchise players is the place to look," says O'Brien.

"In 1996, we kicked off PoolWerx as a franchise organisation and put systems in place right from the start. This allowed rapid growth, funded by new franchises, because we had the right systems. We set up PoolWerx to be a global franchise company and stuck to our guns. We recently exhibited in Paris and received 80 enquiries for (franchising) systems across Europe. My focus is spearheading the brand into further markets overseas."

O'Brien says acquisition and brand amalgamation is positive for the industry as it diversifies to stay competitive. Major franchisors such as Allied Brands, the Australian franchisor of Baskin Robbins, recently paid $5.8 million for Kenny's Cardiology, acquiring 32 stores in the process. The company also owns the Cookie Man franchise.

"It's a good move to have three to five brands under the one roof," he says

"The Gold Coast is beautifully set up for that. It's perfectly positioned to capture a good share of the industry in Australia."

Southport-based Retail Food Group (RFG) is another Gold Coast success story, recently securing the Brumby's Bakeries bread chain.

Former managing director at Brumby's, Michael Sherlock, and non executive director Markus Barlow have resigned from their positions, alongside chairman Terry O'Dwyer and non-executive director Mark Foley. The positions have been filled by RFG executives John Cowley (chairman) to non executive chairman and chief executive Tony Alford, who is the new Brumby's CEO. RFG's Colin Archer and Nigel Nixon have also been appointed to the board. Brumby's has 321 franchised stores in Australia and New Zealand, while RFG has 288 Donut Kings and 71 bb's outlets.

Alford says there are no plans to reinvent the wheel with the Brumby brand - an iconic business model that has delivered to its shareholders.

"Although RFG will now have 680 franchised outlets under its stewardship. Brumby's will retain its unique and distinct branding and identity. The Brumby's franchise system has significant scale and is a well developed and successful system which has delivered consistent earnings to its shareholders," he says.

Specialist franchise lawyer at McLaughlin's Solicitors, Ivan Poole, says the Gold Coast is staking a claim to become the franchise hub of Australia. Poole has spent the past 20 years in a full-time franchising capacity, launching six new franchisors each year in the past four years to the market.

"Franchising is the fastest way to expand a business without using your own capital," says Poole.

"Ninety nine per cent of franchisors are hands on, which gives them a great understanding of how to run the business."

PoolWerx king O'Brien created the first 'career path' in franchising by enabling franchisees to start small and mobile and grow a 'hub and spoke' empire. He says successful franchise companies have become the target of cashed-up private equity firms with the US leading the charge.

"More and more companies have been listing on the ASX, but expansion via private equity is very common now," he says.

"Franchising is the flavour of the month. Private equity in the US is targeting the franchise industry. It's starting to happen in Australia, too, with the recent Eagle
Boys acquisition."

Branded by the Gold Coast:

Autobarn

Autoleaders

Bartercard

Baskin-Robbins

bb's cafe

Brumby's Bakeries

BCT Airport Transfers

Chocolate Graphics International

Crown & Gleeson Business Finance

Donut King

Essential Coffee

FormalWear Express

FutureVision

Go Sushi Kiosk

Hydrodog

Hitman Pest Control

Humitech Holdings

Kleenmaid

Mannings AV

Pepi Ds

PRD Colliers

Saint Cinnamon

Teamwork Finance

The Crepe Cafe

The Touch Up Guys

VIP Lighting

Zaraffa's Coffee


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