Australian Super rugby franchises on the horizon with advent of Super 15

By Brett Harris
May 27, 2009 The Super 15 expansion team is set to become the first Australian rugby franchise to be run along the same lines as McDonald's or Starbucks.

ARU chief executive John O'Neill has already flagged that Australia's fifth Super rugby team will be operated under a different ownership model to the existing sides - the Brumbies, Western Force, Queensland Reds and New South Wales Waratahs, which are run by the traditional owners, the state and territory unions.

The expansion team is likely to be the first Australian Super rugby franchise in the true sense of the word, operated by private enterprise in the same way that a small businessman runs a Bakers Delight outlet.

If it is successful, it has the potential to change completely the Australian Super rugby landscape.

Franchising is one of the only ways to access investment capital without giving up control of the business.

The ARU will demand a multi-million-dollar licence fee and also receive royalty payments from the private owners who will run the team.

In this way the ARU will be able to control the expansion team's business practices and philosophy and profit from its success.

For a former banker such as O'Neill, this is indeed rugby heaven. It is pretty much the same model O'Neill and his lieutenant Matt Carroll used when they set up the A-League for Football Federation Australia, but it is a revolutionary concept for rugby union.

There is a significant difference between the franchising idea and the decision a year ago to open the Super rugby teams to private investment.

Under plans unveiled by O'Neill in April last year, the Super rugby teams could receive an injection of capital from the private sector under tightly controlled conditions. This was interpreted at the time to mean the states and territory would remain the majority stakeholders in the teams.

The ARU was meant to produce a prospectus on private equity by last September, but it never materialised.

When no private investors showed any real interest in the idea it was put on the backburner.

The feeling in the business community was that private equity in a Super rugby team under this arrangement would be akin to benevolence.

If the expansion franchise is successful financially, it will place pressure on the other four Australian Super rugby organisations to follow suit, a possibility which surely has not escaped the attention of the traditional owners.

How a Super rugby franchise would co-exist with the traditional ownership model of the other four teams is not entirely clear.

It would certainly create an anomaly in the system and place the ARU in an interesting position to say the least.

The ARU would be the franchisor of one team and the parent body of the other four.

The existing four Super teams would be determined to ensure there was no potential for conflict of interest, as would the ARU itself.

Obviously, the franchise model cannot work without significant private capital. Where is the money going to come from, particularly in the current economic climate?
There are three main contenders for the fifth Australian licence - the Gold Coast, Melbourne and western Sydney.

A consortium of businessmen, including former ARU director Terry Jackman, has already been formed on the Gold Coast to bid for the licence.

There is speculation that the Gold Coast consortium is being supported by Japanese money.

Another group of businessmen is behind the western Sydney bid, while the Victorian Rugby Union is bidding on behalf of Melbourne, although a separate company would be formed to run the team.

Businesses for which franchising works best have a good track record of profitability.

Whether Australia's Super 14 teams fall into this category is debatable as they all seem to experience fluctuating fortunes.

But the history of private ownership in Australian sport is a sobering thought for prospective Super rugby franchisees.

At present, the potential bidders and existing teams seem to be in the dark about the details of the new ownership structure.

Perhaps, this is because SANZAR has not officially made a decision on whether the expansion team will be located in Australia or South Africa.

But the ARU needs to produce a prospectus on private equity sooner rather than later.

O'Neill has stated that he expects a decision to be made on the location of the new team by Christmas.

If the franchise concept is accepted, it will be affect Australia rugby forever.

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http://www.foxsports.com.au/story/0,...002381,00.html

Looking at the 3 bids, would I be right in assuming that a private ownership model would only apply to the Gold Coast and West Sydney bids?

If so, that's another reason for me to support Melbourne and the VRU.

"Would you like fries with that??"

And he dives over for a McTry

It's model that is fraught with dangers. I hope they manage it better than the SRU did in Scotland.

And in the case of a few of the A-League clubs the owners of the licences have pulled out for whatever reasons and Football Federation Australia has has to take them over. So what happens then, is the licence taken over by the ARU or handed back to the state union should the Gold Coast or Western Sydney win the bid?

I have to say that I am surprised Rugby has so much money they can afford third parties to take out investment level returns for effectively lending start-up money. My suggestion would be that, if franchise management practices would make more money available, look at adopting those practices but put the money back into rugby!