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Franchisors should do more to accommodate investors from overseas, study recommends


Australian franchises and small businesses are increasingly favoured by overseas investors, especially from China. In fact, 35 percent of all international inquiries into Australian franchises come from China, followed by India and South Africa, according to a recent report released by 10 Thousand Feet, a firm devoted to businesses in distribution channels.

While Chinese capital is already a major player in the mining and agricultural industries, the research suggests that “everyday” Chinese residents are interested in entering the Australian market through franchising opportunities.

Why franchises have international appeal

Ian Krawitz, Head of Intelligence at 10 Thousand Feet, said that it’s a way for migrants, particularly from non-English-speaking backgrounds, to get familiar with a different business environment.

“Franchising provides a great opportunity for overseas residents to fast track their learning curve on the service culture, marketing practices and regulatory requirements of operating a business in Australia,” Mr. Krawitz said.

Ian Singer agrees. As director of Australia Migrate, one of the sponsors of the study, Singer has worked with foreign nationals seeking to enter the country on business visas. He said that franchising provides them with a relatively quick and reliable initiation.

“The problem with starting your own business is that it requires highly documented business plans and can mean a much longer wait in the review process and so a longer time to receive a business visa,” Mr. Singer noted. “Franchise businesses have a proven business model.”

The study welcomes the finding that more franchisors are “going directly to migration services agents” to coordinate the visa process.

Still, not all is rosy for migrants when they arrive on Australian soil. Cultural gaps, not to mention language barriers, still pose problems. According to the report, only 15% of franchisors provide some accommodation or initiation program for overseas investors.

“Unsurprisingly,” said Mr. Krawitz, “many franchisors complain that franchisees from non-English-speaking backgrounds struggle to fit into the Australian business culture.” He noted this was especially true for people from South East Asian countries who are accustomed to different attitudes about customer service than those of Australian businesses.

The firm recommends that more services be put in place to accommodate these potential investors, including cultural induction programs and mult-lingual support managers. They can also help with the transition to the “Australian mentality of friendly customer service.”

It’s about “the benefits of good customer service both for the customer experience as well as the positive impact it will have on their bottom-line profitability,” said Mr. Krawitz. “The element of profitability speaks to business culture in general.”

The Rise of Gen Y?

The study did not just focus on overseas investors, however. Also recommended were strategies for encouraging young Australians to develop entrepreneurial skills.

Australians who were born beginning in 1980, belonging to the so-called Generation Y, have been ignored by franchisors until now. The main reasons cited are inexperience with capital and an unwillingness to commit.

“When you consider that one of the traditional sources of new franchisees who are likely to be hard-working is the 30-34-year-old age group, franchisors and small business owners in general would do well to start changing their mindsets,” said Mr. Krawitz.

While the research suggests mindsets are gradually changing, it is difficult to tell how much of an impact young Aussies will make.

“17% of franchisors have a tailored strategy to recruit Gen-Y, up from 11% a year ago,” the study revealed. “But with less than one in five franchisors being switched on to local emerging markets, capital from China may be looking like an easier option.”

Image by kalleboo [Karl Baron]