Australian franchises expand overseas

Australian franchise companies are expanding overseas before the domestic market has been saturated, attendees at the National Franchise and Small Business Convention in Melbourne (October 10 -13) will hear.

Griffith Business School (GBS) Dean of Learning and Teaching Professor Lorelle Frazer will discuss research by herself and Professor of Marketing, Bill Merrilees, into the timing of international expansion of franchise systems.

Professor Frazer said the results showed it was likely international expansion was being used to overcome Australia’s small size.

“Our 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 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, said 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.

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.

“Close to 95 percent of franchise businesses in Australia are home-grown, with just over one quarter franchising internationally,” 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.

“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.”

Professor Frazer said the research results will be available to assist further franchising operations expand internationally.

“Growth in franchising via international expansion is healthy for the sector and the economy and thus needs to be encouraged,” Professor Frazer said.