Franchises face crisis

Survey reveals staggering fall in revenues

HALF of Australia’s franchise stores recorded a staggering fall in revenue during COVID-19, with the hardest hit including cafes, restaurants, gyms and child-related businesses.

A Pulse Check survey by the Franchise Council of Australia revealed the depth of destruction to businesses during the pandemic, with representatives of 70 franchises covering 12,373 stores painting a difficult picture. About 46 per cent of survey respondents reported revenue was less than half compared to the June 2019 quarter, with the hardest hit including cafes, restaurants, fitness clubs, accommodation and child-related services.

Conversely, 35 per cent recorded increases in revenues, with takeaway food, maintenance, health, freight and baked goods-related franchises benefiting. A total of 86 new stores opened across 32 brands in the June 2020 quarter, predominantly in the retail, food, baked goods and home services industries, while 58 stores across 21 brands permanently closed, mainly cafes.

Gaurav Bansal, the man who brought the Cinnabon and Carl’s Jr brands to Queensland, warns his franchise business won’t survive unless landlord outgoings are reduced. Mr Bansal, one half of the Bansal Group, is calling for lower rent and charges.

“My Carl’s centre outgoings are outrageous,” he said. “One of our centre’s outgoings have gone up from $2200 to $3800 per month.”

The Bansal Group brought Carl’s Jr to Queensland in 2018 and there are now 23 stores across the nation. Mr Bansal claims landlords “don’t know what challenges we face” and said real estate agents were working against tenants.

“They get $25k a year management fees on sending one invoice to tenants for rent and answering one email a month if we have an issue,” he said.

“It’s like mafia rule with these landlords.”

The Franchise Council revealed the greatest challenges in the June quarter were landlord issues (54 per cent), the wellness of franchisees and staff (54 per cent) and franchisee financial performance (52 per cent).