Franchising in the Australian Hospitality Industry

The global hospitality industry is "incredibly diverse and complex," being affected by trends and consumer interests at varying levels depending upon location (Jones). Consideration of the global brand McDonald's, for example, must be given in light of the fact that its 18,000 restaurants are only a small part of the 8 million restaurants worldwide, of which 206,000 are all located in a single country(China (Jones). Likewise, environmental issues are becoming a force to be reckoned with in the hospitality and other industries, with "environmentally friendly hotels and operating procedures...relatively common especially in Europe," and Australia's new Eco Beach in Western Australia and Eco-hotel in Sydney being prominent examples (Jones). Thus, a focus on Australia's hospitality industry must acknowledge the context of the hospitality industry worldwide and the fact that trends that occur may have a higher concentration and impact in some areas of the world than others.

According to trade show organizers Australian Exhibition Services Private Limited, franchising is "a growth industry in Australia today," as the success rate of franchises there is double that of non-franchised businesses ("Franchising & Business Opportunities Expo-Perth"). However, Australia's hospitality industry is still recovering from the "severe hit" dealt the worldwide hotel industry in September 2001, with Australian hoteliers being struck with a double blow(9/11 and the collapse of

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(Hing 177). While franchising offered a potential for expanding the hospitality industry, a franchise scandal in which an alarming number of franchises failed suggests that franchisors are benefiting from such failures while hurting the hospitality industry as a whole ("Franchise Scandal Expose in Australia"). Referred to as "churning," the practice of selling an unprofitable franchise location and then "taking it back for a nominal sum when the unfortunate franchisee fails" has been asserted by 30 of Australia's largest franchisors, among them Lenard's Chicken, Hungry Jacks, and Bakers Delight (Lord). According to Michael Sherlock, former managing director of Brumby's Bakeries, many franchises in recent years have "pursued a policy of 'growth for growth's sake' that ignores basic business fundamentals," an issue compounded by the fact that good franchisees are hard to find (Lord). In the housing sector, aggregate data from ABS shows that most Australian hotels are small, with an average of only 27 letting rooms, and have three or fewer Australian Automobile Association stars (Lee-Ross 177). As with small hospitality enterprises in other countries, Australia's independent hotels "tend to be under-capitalized a

Category: Business - F