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(Last updated: 13 Jul 2007)
Trends and opportunities
The market
The USA is the birthplace of franchising – franchising is the dominant model for marketing and distribution, with more than US$900 billion in annual sales made through an estimated 5000 franchise outlets.
US franchise outlets employ up to 10 million nationally and represent approximately 53 per cent of the retail sector. During the last five years, franchising sectors have grown at a rate faster than the US economy.
In recent years, Australian franchises have demonstrated a strong ability to grow in the US. Several have become major US players with units that well exceed their presence in Australia. These include:
- Aussie Pet Mobile - a dog-grooming service with 205 units throughout the USA
- Computer Troubleshooters - the world’s largest computer repair franchise with more than 140 US units
- Bark Busters - a dog-training system that guarantees quick results without punishment or treats has more than 60 US franchisees
- Cartridge World - a cartridge ink replacement service that launched in the USA in 2003 and already has more than 50 US units
With more than 700 concepts and a vibrant and extensive franchise culture, Australia is the most franchised economy in the world on a per capita basis. Growing up in this environment, Australian franchises are solid models that are easily translated for the US market. Key trends in Australian franchising mirror those in the USA. The increasing dominance of services sectors and the creativity of Australian services franchises have underpinned much of Australia’s recent success in the USA. |
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Tariffs, regulations and customs
Industry standards
The USA is one of the world’s most sophisticated franchise markets from both a regulatory and commercial perspective. Regulation of franchise offerings occurs at both the state and federal level.
The Federal Trade Commission (FTC) regulates trade practices and establishes the FTC Rule, which requires that an offering circular must be provided to all prospective franchisees. The FTC Rule outlines specific disclosure items and timelines for disclosure. It affords a minimum national level of protection to prospective franchisees.
At the state level, the regulation of franchising is more established (federal regulation dates back to only 1979, states first began regulating franchise offerings in the 1950s) and is often more comprehensive. Certain states require additional registration or disclosure. These are known as Registration States and each uses its own statutory version of the Uniform Franchise Offering Circulars. Registration States are most commonly the most populated states – California, Illinois and New York – those that have a longer history of franchise development. The federal FTC Rule covers prospective franchisees in states that don't themselves require disclosure.
The maturity of franchising as a model for marketing and distribution sees complex relationships and negotiations between franchisee and franchisor. Moreover, the large number of new and existing franchises offered in the market leads to intensive competition between franchisors.
An individual franchisee is expected to consider up to 20 alternative franchise systems. Franchisees are increasingly major corporate entities, as opposed to small and/or family operated business. Larger franchises often demand input and/or board positions for major decisions taken by the franchisor. Regulation remains a key factor in developing a franchise offering and the FTC has been increasingly active in pursuing franchisors that are not defining themselves as such and/or not meeting their disclosure requirements to franchisees.
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Marketing your products and services
Market entry
Key factors in marketing your products and services include the following:
- Australian franchises that have become major players in the US have introduced established franchise systems that have been marketable and successful in Australia (or other markets) before entering the US.
- Successful Australian franchises have also typically prepared detailed market entry strategies focusing on their optimal approach to the US market from both regulatory and commercial perspectives.
- Australian (and other foreign) franchises that have achieved significant growth in the US have begun their US market development through establishing and operating an initial unit in the US before marketing the franchise.
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Contact details
The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.
Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.
Austrade:
- Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
- Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
- Administers the Export Market Development Grants scheme.
- Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
- Provides advice to the Australian Government on its trade and investment development activities.
- Delivers consular, passport and other government services in designated overseas locations.
A list of Austrade offices (in alphabetical order of country) is available.
More information
For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au |
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