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Australia’s economic woes are not that bad considering the extraordinary internal influences that have played their part. The slowdown of franchising was predicted and not unusual given the events of recent times.
Predictions of weaker growth are consistent with a slowdown in the broader retail sector, which was hurt by six interest rate rises between October and May and the expiration of government stimulus payments. Tony Featherstone
The Labor government’s quick fix $900 taxpayer reward stimulus had many economic KPIs spike and then flatten where the ill considered spur did nothing to increase productivity or employment.
The lead up to a federal election in less than 3 weeks has seen Australia’s most favoured Prime Minister outed as a delinquent economic saboteur and replaced by his assistant. Markets are somehow surprised that the aftermath of the GFC lingers and in many discretionary spending sectors consumer confidence is still way down.
Franchise growth is not surprisingly down as careful investors are wary of the economy and the potential for a Labor return but the banks are not helping. The Australian government’s $100M a day borrowing has left little for investors. And the banks are for a change, very wary when considering what franchises and franchisees are investment worthy.
The sector's biggest problem is finding enough suitable franchises. Low unemployment means fewer retrenched middle-managers with redundancy payouts who want to buy a business – a prime market for franchise systems.
Even during the economic downturn there was no significant increase in the number or quality of franchise enquiries, the 2009 PricewaterhouseCoopers Franchise Sector Indicator report showed. Some observers expected corporate job losses to lead to higher franchise enquiries.
Throughout the last 18 months in particular there was advice that franchise systems should expect a slowing and franchisors were advised to consolidate their operations following a mad period of chaotic growth. But most did not or could not.
The quality of franchise offerings on the market has not changed where prospective investors need to remember the potential for financial hardship from the recent troubles and consider the security of any investment. There are simply far too many lousy franchise concepts and dangerous franchisors and models in the market.