2008 will be the Year of the Rat, according to the Chinese zodiac, and while rats may not be appealing little creatures in Western society, the Chinese zodiac accords them with the characteristics of wit, spirit, alertness, delicacy, flexibility and vitality. Furthermore, people born in the Year of the Rat are usually smart and willing to accumulate wealth and be successful, as well as live harmoniously with others.

These Chinese star sign characteristics could equally be applied as desirable characteristics of both franchisors and franchisees, and with uncertain times ahead for the sector in 2008, are probably more relevant than ever.

Historically no times can every really be claimed to be certain, but there are some unique factors present as we enter 2008 that did not exist at the start of this year.

First, we have a new federal government, with a new Small Business Minister and a new approach to franchising which in itself, does not mean instant change, but rather, contributes to the environment in which change may occur.

Second, the affects of the sub-prime mortgage meltdown in the United States is still working its way through the economies of the US, Australia and other nations. Already in Australia we have witnessed the effective fall of RAMS Home Loans (since acquired by Westpac for a fraction of its original price), and now the share crash of major shopping centre landlord Centro whose assets may be scooped up by another shopping centre group and thereby further concentrate the market power of shopping centre landlords in Australia.

Third, there is the Productivity Commission’s Retail Leasing inquiry, which has indicated that there need be no additional regulation for shopping centre leases (albeit this recommendation was made prior to Centro’s woes), but does support the idea of nationally consistent laws and greater transparency in leasing arrangements. The Commission’s final report is to be presented to the federal government early next year.

Fourth, there are the ongoing inquiries into franchising of two states, Western Australia and South Australia, which could potentially result in additional compliance obligations on franchisors operating in those states beyond the existing national Franchising Code of Conduct. Increased interest in franchising from Victoria’s Small Business Commissioner may be an indication that other states are yet to more closely examine the operation of the sector within their borders.

Fifth, sub-prime meltdown or not, Australia’s own economic bubble is likely to deflate (if not burst) with interest rates set for their seventh consecutive increase in the new year, property prices skyrocketing out of proportion with the population’s ability to pay, a predicted increase in unemployment  and the dismantling of the Howard Government’s AWA’s.

Under these circumstances, the traditionally robust business methodology of franchising will sail new and uncharted seas, and this is why the Chinese zodiac’s characteristics for the Year of the Rat will be so important. Those participants in the franchise sector – both franchisees and franchisors alike – who display alertness, flexibility and vitality, and who continue to strive toward wealth and success while living harmoniously with others, will enjoy ongoing prosperity. Those who are unable to adopt the characteristics of the Rat will struggle in 2008.

By Jason Gehrke, Director, Franchise Advisory Centre

This article first published December 20, 2007. It cannot be reproduced in whole or in part without the author's express written permission.

Copyright, 2007.