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For people considering getting into business for themselves, especially in the New Year, franchising is one option many will likely investigate.
Franchise businesses make a sizeable contribution to Australia’s economy, turning over around $131 billion in revenue annually, according to the Franchise Council of Australia.
It says there are around 73,000 franchise businesses in Australia that employ around 400,000 people.
General manager Kym De Britt says franchising has grown at a better rate than other small businesses, citing a PricewaterhouseCoopers report that says franchises have seen average annual revenue growth of 10% recently.
“That generally comes because when things are tough, franchise systems have better support and marketing systems to help franchisees sustain the difficult times better,” he says.
De Britt tells StartupSmart that the main attraction for people getting into franchising is for the support.
“Rather than just taking that big step of going into business for themselves, they have a level of support behind them.”
Franchisees receive training in how to run the business and have someone to go to if there are problems, De Britt says.
“It’s working for yourself but taking on an established system and having support.”
But he warns that franchising is not for everyone and that it may not suit people who want to “do it for themselves”.
“For those kinds of people, franchising is not the right way to go because at the end of the day you have to follow the model because it’s been proven,” De Britt says.
He also recommends anyone considering a franchise to get legal and financial advice and to understand that it can’t be considered a means to semi-retirement.
So what types of franchises are most likely to see growth in 2014?
De Britt says people can get a sense for what business areas will be successful by looking at the media for trends, but here are his picks for areas to consider:
<h3>Aged care services</h3>
Aged care is growing because of Australia’s ageing population, De Britt says.
A recent Productivity Commission report says that the number of people aged 75 years and more is expected to rise by 4 million from 2012 to 2060, increasing from about 6.4% of the population to 14.4%.
“Demand is going up for services for aged people,” De Britt says.
<h3>Courier services</h3>
Growth in online retail spending has also seen growth in demand for services to deliver people’s purchases.
According to the National Australia Bank’s Online Retail Sales Index, Australians spent $14.4 billion online in the 12 months to October, equivalent to 6.4% of traditional retail spending.
“The boom area there is the courier business,” De Britt says.
“They’re all actually struggling to keep up with the demand at the moment.”
<h3>Health</h3>
With Australia ranked among the fattest in the world, health services that aim to address the issue will remain popular.
De Britt says the fitness industry, and particularly personal trainers, are likely to continue to thrive.
A report by market researcher IBISWorld says the personal trainer industry turns over $390 million a year and has seen annual growth of 11% between 2009 and 2014.
Work life balance/home services
De Britt says as workers seek to develop a better work/life balance, they’re outsourcing tasks such as home cleaning, gardening and pool cleaning.
<h3>Food retail</h3>
Food, and particularly fast food, is a mainstay of the franchise industry.
“They’re always going to be very popular,” De Britt says.
He says two trends that have swept through food franchising are Mexican food outlets and frozen yoghurt.
Mexican food is big in the US and Australia generally tends to follow the trends there while yoghurt is seen as a healthy alternative to other snacks, De Britt says.
He says he recently attended a conference in Dubai and the “two big kids on the block were yoghurt and Mexican food”.
 
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This article originally appeared on <a target="_blank" href="https://www.startupsmart.com.au">Startup Smart</a>.
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The top franchise trends in Australia for 2014

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Corporate businesses occupying their properties should consider sale and leaseback transactions in the current financial and economic climate.
The greatest benefit of a sale and leaseback transaction, which is typically a commercial real estate transaction in which one party sells its corporate real estate assets to another party and then leases the property back, generally for a period of seven to 10 years, is the ability for the owner-occupier to increase their financial flexibility.
By becoming both the lessee and the seller, the owner-occupier negotiates from a position of strength to ensure they maintain uninterrupted control of the facilities and perhaps more importantly, they liberate capital to invest in their core business.
Depending on the quality of the property being sold, investment yields are currently between 8 and 10%, and freeing up equity at these rates presents opportunities for companies to redeploy this capital into core business activities with higher rates of return, or to reduce higher cost borrowings.
In the context of easing returns from cash and uncertainty surrounding the performance of equity markets, steady and long-term yields make this type of transaction an investment just right for the times.
Another big benefit of a lease and leaseback transaction is that it can provide an alternative to conventional financing, which is particularly useful now, in a climate where it can be difficult to obtain financing from banks. The feasibility of this, however, will depend on where commercial property investment yields currently sit in relation to the weighted cost of internal capital and external sources of finance.
Now is a great time for corporates to be considering sale and leaseback transactions, with market demand for this type of investment product also running high. There is a lack of prime-grade investment stock in the market, particularly in the industrial sector.
When we say prime-grade investment stock, we mean product that is of high quality and with a strong covenant, with long-term leases in place. There is limited supply of this type of product on the market, but with investor demand for it currently being very strong, owner-occupiers willing to sell their assets can be in a position of strength to secure strong prices and negotiate attractive leaseback terms.
 
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Especially in the industrial sector, there is a lot of demand from both overseas and locally for good-quality assets, with funds such as Goodman, Charter Hall, Growthpoint, GPT, GIC, Aviva and Dexus looking to secure quality investments, so when they do come to the market there is competition amongst buyers and consequently prime-grade product yields are tightening.
With share market volatility persisting, investors are seeking more stable investments in the current economic climate, and sale and leasebacks offered that stability. Direct property investments with strong covenants can offer secure and stable long-term financial returns. Investors can lock in their returns over a known, lengthy period with built-in annual reviews. Depreciation benefits are also available for investors, which in the case of a new building, may be a significant financial consideration.
Owner-occupiers can also take advantage of market movements to benefit from the arbitrage between interest rates and investment yields. For instance, selling property and leasing back when investment yields fall below interest rates is essentially a cheaper means of financing, depending on that company’s internal cost of capital at that time.
However, it needs to be noted that when yields are lower than interest rates, investor demand is likely to decrease as more equity needs to be injected in order to obtain a positive return from the property.
Indeed a number of corporate businesses are already doing sale and leasebacks, including OneSteel, Amcor, PMP Printing, Linfox and Toll. These major corporates are selling their real estate to put the money back into their operating business and we think this trend is going to continue.
Gavin Bishop is national director of industrial at <a href="https://www.colliers.com.au/" target="_blank">Colliers International.</a>
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Gavin Bishop

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