Australia's Franchise sector needs a shake up

Quest Apartment Hotels Founder and Chairman, Paul Constantinou believes that Australian franchisors must back independent reporting of their business to restore trust in the sector. 

With thirty years’ experience leading one of Australia’s largest franchise businesses, Mr Constantinou suggests that transparency between franchisors and franchisees is fundamental. 

“Advice from franchisors, lenders, accountants, lawyers, marketers and families are all considered by the potential franchisee before the final decision to purchase is made. 

“Without an objective rating system to compare the performance of different companies, franchisees are less likely to understand the business model they’re buying into, causing confusion that can affect business performance down the track,” Mr Constantinou said.

The Federal Government’s Banking Royal Commission revealed the need to help franchisees make informed decisions before entering into a franchise agreement. In the United States, market research company FRANData has filled this gap for more than 30 years by producing an annual rating scale for the country’s top franchise systems.

Released in Australia for the first time earlier this year, FRANData’s Australian Franchise Rating Scale measures the performance of business franchise systems across seven performance standards, providing a consistent evaluation for lenders and franchisees.  

With more than 10 years’ experience financing and evaluating franchise systems in Australia, CEO at FRANData Australia, Darryn McAuliffe said that an independent assessment of franchise businesses is long overdue.

“Independent rating systems are nothing new, even in franchising. However, they are new to Australian companies that have previously relied on their own metrics.”

“FRANData’s rating system recognises that strengthening confidence in the sector requires a focus on performance and transparency. The ratings system will be quickly embraced by franchisors seeking to differentiate themselves in the market,” Mr McAuliffe said.

The Franchise Rating Scale is underpinned by seven performance standards including systems performance; franchisee financial performance; franchisee engagement and satisfaction; franchisor training and support; franchisor financial performance; lender relations; compliance and assurance. 

Quest Apartment Hotels was recently awarded five stars on the Australian Franchise Rating Scale, the first Australian franchise brand to receive the score. The review highlighted the quality of Quest’s evaluation and communication of franchise performance and its business support services to franchisees.

The methodology has been used by business magazine Forbes to compile its annual best and worst franchise list. FRANData has also created a three tiered recognition system for  US Vetfran, a programme that connects franchisors with military veterans and the Franchise Underwriting (FUND) score model relied on by the US franchise lending community. 

For more information on FRANData’s Franchise Rating System go to