American franchise brands are setting their sights on the Australian market with retailer Gap being the latest to announce plans to open a store in Melbourne during the first half of the year.

Ice-creamery Ben and Jerry’s commenced operating in the Australian market in 2009 and in the same year a representative from Hardee’s and Carl’s Junior burger franchises announced plans to expand to Australian shores.

Other franchise brands such as Victoria’s Secret, Maggie Moos, Shoebox New York and 1950s diner chain Johnny Rockets, among others, were reported in Smart Company earlier this year as planning Australian operations.

The influx of American brands heading for Australia raises some interesting points for consideration.

Australian franchise sector strength

Australia’s ability to weather the global financial crisis so well, our strong buying power and the strength of our franchise sector regulation make Australia a low risk destination for American brands.

Research findings (to be released in June) place Australia in the top five destinations for American franchises, based on risk versus opportunity measures.

However it’s still important individual franchise brands conduct their own suitability assessments as market potential varies for different industries and franchises.

Culture shock

Although markets may appear similar there may be some important differences which can make or break a brand, which also reinforces the need for thorough research.

It’s true the Australian market is similar to the United States (US) in terms of taste and culture, however it is important brands remember it is not exactly the same.

The US believing Australia is a mini US, would be like Australian franchises believing the New Zealand market is exactly the same (and both these mistakes have been made).

There are at least subtle differences in many areas which need to be accommodated and tested. Advertising, product offerings and language are all areas which require attention.

Franchises should draw on local knowledge when moving into international markets and adapt their operations accordingly.

Asia-Pacific franchising versus Australia

Despite the cultural similarities which may exist between Australia and the US a number of the franchise brands ‘eyeing-off’ the Australian market are already active in other parts of the Asia-Pacific.

Ben and Jerry’s for example, have operations in India, Hong Kong and China, and Gap is also operating in Asia and planning stores in China this year too.

Although Australia’s economy and franchise sector are strong, the Australian market is relatively small in comparison to the US or India for example, so when planning franchise activities brands need to be realistic about franchise growth.

Is American franchise expansion in Australia positive?

While the introduction of US franchise brands into the Australian market will increase competition in some industries, it also brings increased employment opportunities and greater variety for consumers.

Overall I think the introduction of some US brands will enhance the Australian franchise sector.

What’s your opinion?