South-East Asia’s Appetite for Franchising In Australia

Over the last 10 years there has been a steady increase in participation of Asians in franchising in Australia, primarily as Franchisees, however this is now evolving to include Franchisors or Investors in Franchise Systems across the country.

Franchisee involvement

Many Australian based franchise systems have readily encouraged Asian participation as the people are known for hard work, and in many cases have the necessary capital to operate or establish the franchise. We only need to look at the food industry and many of the lower cost service businesses to see the Asian involvement that has occurred.

There are many reasons for this such as being your own boss, and being able to be well rewarded for working hard. This has been an avenue over the years to establish a life in Australia, and eventually may lead to Australian citizenship. Whilst Australia has what may be considered by some as harsh immigration laws, there has for many years been a path for an economic immigrant, coming into the country with capital and a willingness to operate a business.

The businesses you see being very much dominated by Asian franchisees at this time are the likes of businesses in food courts, coffee shops and cafes, service businesses like hairdressing and nails, and many convenience stores across Australia.

Australia’s growing taste for Asian products

Australia has established a love affair with Asian food over the last 20 – 30 years. When I was young (many years ago), you would take your saucepans over to the local Chinese restaurant (our was called MeiDoi Café as I recall), and buy some chop suey and dim sims.

Now we have an extremely sophisticated Asian food market including signature restaurants from China (many from Hong Kong originally), Japan, Malaysia, Thailand, Vietnam, and almost every Asian country. We have moved from chop suey to Peking Duck, Beggars Chicken, lobster and abalone, as the available ingredients are very high quality and very broad.

Other areas we now have a strong Asian presence is in the Hot Bread market, where Vietnamese bakers, trained in cooking bread in a French style have come into the market as Franchisees in our biggest hot bread franchises such as Brumby’s and Baker’s Delight. There is also some Asian based bread franchises such as Breadtop and Bread Kingdom

The Restaurants in Australia industry report by IBISWorld states: “The industry has benefited from a rising food culture. Consumers are increasingly viewing eating out as a cultural experience. Awareness of fashionable restaurants is strong, with consumers keeping up with new venues via review websites such as Urbanspoon.

“This increased popularity, and the rising prevalence of foodies, has played a significant role in driving demand for fashionable restaurants and new cuisines. This has also supported a trend towards higher quality gourmet food.”

Overall, as Australia is now a multi-racial society, the cultural changes have brought many 2nd, 3rd and 4th generation Australians to loving Asian food (including the author).

Growth of Franchisors and Investors

We are now seeing some franchise systems developed and purchased using Asian funds, and having strong Asian management of the company. Some are predominantly in Asian products such as Chatime Teas and Sushi Sushi. In other cases Asian funds have purchased the total franchise system such as Wendy’s (ice creams), which is now owned by Singapore’s Global Food Retail Group. This company had a high desire to come into Australia, initially entering into due diligence with Gloria Jeans Coffees, in a deal that did not come to fruition.

Whilst Australia is open to this, subject to some investment laws that I will not try to describe, there must be an acknowledgement that any buyer coming into Australia must operate the franchise system using the Australian Code of Conduct for Franchising, and cannot adopt an Asian model instead.

The Code of Conduct is operated by the Australian Competition and Consumer Commission, and has strict guidelines on provision of disclosure about the system, and the content of the Franchise Agreement. Any Franchisor wishing to operate in Australia really needs to be guided by a law firm with a practice in Australia, and in my view specialising in Franchising, as the penalties are quite large for failing to meet your obligations under the Act.

The future for Asian involvement in the franchise industry

I see a huge future for continued growth in Asian involvement in the franchise industry. There are a variety of franchise opportunities, as Franchisee or Franchisor or as a 3rd party investor, and most of these will be successful based on hard work and good service.

Australia is attractive to invest in as we are becoming more and more attached to Asia politically and economically. With a stable political system and a relatively stable economy (still with continual growth over many years), and a strong legal system, Australia should be seen as a very attractive place to invest in.