Australian franchise companies are expanding overseas before the domestic market has been saturated a new study has found.
Conducted by Griffith Business School (GBS) Dean of Learning & Teaching Professor Lorelle Frazer and GBS Department of Marketing Head Professor Bill Merrilees, the study explored the timing of international expansion and built a profile of franchising in Australia.
Professor Frazer said while there was some understanding of the magnitude of franchising exports in Australia, little was known about how franchisors plan their expansion.
“Close to 95 percent of franchise businesses in Australia are home-grown, with just over one quarter franchising internationally,” Professor Frazer said.
“With the dramatic growth in global franchising, there is an increasing need to understand the capabilities required to expand internationally as well as the preferred timing.”
Data was collected by surveying franchisors in Australia, followed by a series of case studies with a number of businesses that had experienced international success.
“The results show most franchisors are expanding their operations internationally relatively early – in terms of both size and age – with most holding fewer than 30 units prior to expansion,” Professor Frazer said.
“So it’s possible that international expansion is being used as a growth strategy to overcome Australia’s small population as well as the shortage of suitable franchisee investors.”
Another finding showed many franchisors were reacting to approaches made by overseas investors rather than proactively developing international expansion strategies according to Professor Frazer.
“Approximately half of the franchisors indicated they entered overseas markets in response to requests by international investors, suggesting their strategies are reactive,” Professor Frazer said.
“The results show international expansion is not something which is planned from the beginning and all franchisors that did expand internationally experienced huge learning curves.”
Professor Frazer said the research results will be available to assist future franchising operations.
“Growth in franchising via international expansion is healthy for the sector and the economy and thus needs to be encouraged,” Professor Frazer said.