Boost Juice founder and Shark Tank investor Janine Allis has dismissed concerns around the health of the franchising sector in Australia, saying business owners are more likely to be successful when starting a franchise, compared to an independent business, and Boost Juice franchise inquiries are ‘stronger than ever’.
Speaking to SmartCompany in the wake of Shark Tank’s season four finale, Allis said aspiring business owners and entrepreneurs should consider franchises as their first port of call, provided they choose a brand with a strong reputation.
“There’s no question — you’re three times more likely to be successful with a franchise than you are going to be on your own. But, just like with everything, there are businesses who don’t do the right thing by franchisees, and they’re businesses you shouldn’t get involved in,” she says.
“If you want to be successful in business, getting a franchise is the way to go.”
Allis’ claims about the success rate of franchises are akin to a similar statistic that 90% of franchises are successful, compared to a much lower rate of success (40 to 45%) for a typical independent small business. However, this statistic has been criticised as widely reported but rarely proven, and a study from the US Small Business Association in 2012 found the success rate of the two were the same.
However, the chief executive of the National Retail Association (NRA) Dominique Lamb has previously backed a similar success rate figure for franchises, telling Money Mag in 2017 that franchises have a 20% failure rate — or 80% success rate.
Allis acknowledges that buying a franchise isn’t “a ticket to success”, but she believes the success of a franchised business is determined more by the actions of franchisees, rather than potentially unscrupulous actions by franchisors.
“Franchising is a business, and what you do in that business dictates your success more than what a franchisor does,” she said.
“Even with all the positives that come with it, you still have to pick your franchise carefully.”
But in the case of Allis’ Boost Juice, growth is the name of the game. The juice franchise counts 270 outlets in Australia in its network, another another 197 in other countries. And Allis says franchise inquiries in 2018 are “stronger than they’ve ever been”.
Australia’s franchising sector has taken a battering in recent times due to a number of high-profile restaurants and fast food chains coming under fire over allegations of worker underpayments, unfair contracts, a lack of power for franchisees, unprofitability, and regular dodgy operators.
The ongoing issues finally reached boiling point in late March, with the government backing a formal Senate inquiry into the sector. The inquiry is still ongoing and will deliver its final report by September 30.
Submissions to the inquiry have revealed widespread issues at some of Australia’s biggest franchises, including from a number of franchisees at fast food chicken chain Red Rooster, who claimed they were “on the verge of bankruptcy”.
Widespread allegations of franchisee mistreatment at Retail Food Group also arose from a series of Fairfax investigations, with Allis noting the listed company “hasn’t got the reputation it once did”.
The roil has led to Australia’s competition watchdog calling for multi-million dollar penalties for dodgy franchisors, and legal and business experts pushing for Australia’s own franchising court.
Allis welcomes the inquiry; she says there’s “no question” the franchising sector “can always do better”, and there should be increased scrutiny around franchisors.
“There are a lot of regulations for people wanting to become franchisees, but there aren’t as many for someone to become a franchisor, but maybe that will change at the end of this Senate inquiry,” she says.
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