Business Franchise Guide 13th Edition

AUSTRALIAN AND NEW ZEALAND BUSINESS

See inside for essential information required for buying, owning and running a franchise authored by industry experts.

Welcome to

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The Franchise Guide 2020 is published by CGB Publishing Pty Ltd PO Box 968 Mt Eliza VIC 3930 Australia Phone: 03 9787 8077 Fax: 03 9787 8499 *** The information and contents in this publication are believed by the publisher to be true, correct and accurate but no independent investigation has been undertaken. Accordingly, the publisher does not represent or warrant that the information and contents are true, correct or accurate and recommends that each reader seek appropriate professional advice, guidance and direction before acting or relying on all information contained herein. Opinions expressed in the articles contained in this publication are not necessarily those of the publisher.

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ISBN 978-0-6487795-1-3

Contents Preface. ............................................................................................................................................................................................................1 Chapter 1: Supporting Successful Franchising........................................................................3

Mary Aldred, Franchise Council of Australia Chapter 2 Franchisees’ Risks and Responsibilities. .............................................................9

Dr Sudha Mani, Monash University Chapter 3 Expert Tips on What to Look for in a Franchise Opportunity. ............................................................................................................ 13

Robin La Pere, No Ordinary Businesses and Franchises Chapter 4 Franchising in Australia and New Zealand. ............................................ 19

Rostom Manookian, DC Strategy Lawyers Chapter 5 Is it About Price or Value When Choosing a Franchise?........... 25

FC Business Solutions Chapter 6 Three Essential Steps in Franchise Research......................................... 29

Mick Keogh, Australian Competition and Consumer Commission Chapter 7

What to do Before Becoming a Franchisee................................................. 33 Dominique Lamb, National Retail Association

Chapter 8 Franchising in New Zealand – Issues to be Aware Of....................................................................................................................................................... 39

Stewart Germann, Stewart Germann Law Office Chapter 9 Franchise Law 101........................................................................................................................... 47

Raynia Theodore, MST Lawyers Chapter 10 Why Non-Bank Finance is Leading the Way in

Small Business Funding......................................................................................................... 57

James Scurr, Franchise Finance Australia Chapter 11 Ensure the Success of Your Business................................................................ 61

John Ford, Australian Taxation Office Chapter 12 Five Tips to Effective Territory Planning....................................................... 67

Peter Buckingham, Spectrum Analysis Australia Pty Ltd Franchise Listings:................................................................................................................................................................. 71 Professional Services Listings:........................................................................................................................... 85 Helpful Organisations:.................................................................................................................................................... 92 INDEX. ........................................................................................................................................................................................................... 96

Preface Hayley Drew | Editor CGB Publishing Pty Ltd

T

hank you for choosing the 2020 Australian and New Zealand Business Franchise Guide. Chances are you are thinking about embarking on a significant investment decision and lifestyle change by starting your franchising journey.

The Business Franchise Guide is your introduction and manual to the world of franchising. An industry expert authors each chapter in the book.

Inside, readers will find helpful articles from a range of franchising experts including,

Mary Aldred – CEO of the Franchise Council of Australia, Mick Keogh, Deputy Chair at the Australian Competition and Consumer Commission, Dr Sudha Mani a Senior

Lecturer at Monash University and franchisor-franchisee relations expert, and many more.

This comprehensive guide will lead you through all the steps necessary to fulfil your dreams of owning your own franchise business. The Business Franchise Guide can be utilised as a hand reference on specific topics or can be read straight through to give

you a sound knowledge base regarding what is involved in buying, owning and running a franchise business.

Becoming a franchisee comes with certain benefits that you otherwise don’t have access to if you start a business from scratch. Franchises offer the independence of

small business ownership supported by the benefits of a big business network, and you don’t necessarily need business experience to run a franchise.

The franchise industry offers first-time business buyers a wide variety of options across Australia and New Zealand. Not only are there thousands of franchise categories and

companies to choose from, but there are a variety of franchise opportunities in different price ranges.

No matter where you are on your franchising journey, the team at the 2020 Australian and New Zealand Business Franchise Guide wish you best the of luck on your franchising journey.

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Chapter 1

Supporting Successful Franchising Mary Aldred | CEO Franchise Council of Australia

About the Author Mary Aldred commenced as the Chief Executive Officer of the Franchise Council of Australia in April 2018. Mary brings to the role extensive experience across government, industry and the corporate sectors as well as a very strong focus on membership engagement, stakeholder collaboration and effective advocacy.

The Franchise Council of Australia (FCA) is the nation’s peak body for franchising, representing franchisees, franchisors and service providers to the sector. The FCA provides a strong voice for franchising and is focused on raising the awareness of the benefits of franchising and educating governments, regulators and key decision makers, as well as the broader community, on the important economic and social contribution that franchising makes within Australia. Membership of the FCA is voluntary, and open to any organisation or individual involved in the franchise sector, including franchisors, franchisees, and suppliers to the sector. The FCA strives to add value to the businesses of its members by advocating on their behalf, and by providing education, information and networking services and opportunities that support a prosperous and growing franchise sector.

Franchising is a popular business model in Australia and makes a significant contribution to the national economy. There are approximately 1,344 franchise brands in Australia, providing employment for more than 598,000 people and contributing more than $184 billion annually to the national economy.

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upporting members, many of whom are small businesses, and to further underpin franchising as the preferred model for small business success is a priority for the Franchise Council of Australia.

The role of the FCA The Franchise Council of Australia (FCA) is the peak body for the franchise sector in Australia and covers a range of organisations and individuals, including franchisors, franchisees, professional advisers and suppliers.

The FCA is committed to building a strong franchising culture that upholds standards and looks to meeting compliance obligations as a minimum standard – always striving for best practice in the franchise relationship and business conduct.

Delivering value for FCA members The challenges facing small business and, in particular, franchising as 2020 gets underway are familiar ones.

In the economic briefings and forecasts I’ve attended, the message has been consistent.

The economy remains weak, and while Reserve Bank governor Philip Lowe has stated there may be a “gentle turning point” in the economy later this year, businesses are understandably cautious.

For any business, this caution must be balanced with the need to continue to innovate and develop products and services that resonate with consumers and meet their fastchanging needs.

Finding value for money is the key here. It’s easy to say that in the current marketplace, your franchise can’t afford to invest in innovation, training or new initiatives. I would argue that it’s these very circumstances that mean you can’t afford not to.

Perhaps this can be enabled by finding savings that don’t compromise your brand’s value proposition or that of your franchisees.

One of the ways the FCA is working to facilitate this is through our partnership with EnergyAustralia. At last year’s National Franchise Convention, I mentioned how this new partnership would provide FCA members with benefits including access to free energy assessments and follow up recommendations on off-peak usage, solar panels and battery storage.

This program is now underway, with the FCA and EnergyAustralia working together to roll out the assessment and audit program to a select group of members. We look forward to sharing the topline results over the coming months, and to offer this service more broadly across the FCA membership.

It might be that your business can find smarter ways to access training and professional development. The FCA can help here too.

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Supporting Successful Franchising

You may have noticed the FCA has launched its new website at www.franchise.org.au.

This is designed to be a streamlined platform delivering fact-based data, business advice and assistance for members, as well as useful information for the broader sector.

Here you will find resources like the FCA’s Franchisee Guide, aimed at assisting prospective franchisees and existing franchisees with a toolbox of information from due diligence, to understanding franchise regulations and more. We encourage you to share this, and other useful information from our website across your networks of current and prospective franchisees.

Across 2020, we will also be working to deliver member-only exclusive information through this platform, as we seek to provide members with the edge in growing sustainable franchise businesses.

As the FCA looks to support members in delivering their ongoing education and training needs, we are also excited to partner with leading online learning and education platform, GO1.

This education partnership is designed to support the compliance, skills and development needs of FCA members through the provision of training and resources on an accessible online portal.

We’re looking forward to sharing more details about the learning pathways and course content that will be available through the GO1 platform with members as the year progresses.

Value can also be gained by the connections that we form - franchise professionals who are facing the same challenges as you but may already have solutions.

For CEOs of member franchise companies, membership of your local Chief Executive Syndicate is an investment being part of an invaluable peer-to-peer network of franchise executives unlike any other.

FCA members continue to derive value from the wide range of educational events provided by the FCA and its dedicated state chapter committees. These events are designed to address key business challenges and provide education on topics that are affecting small business and more specifically, franchising.

This year’s National Franchise Convention, to be held in Melbourne from 18-20 October, is yet another opportunity for members to collaborate and learn.

At last year’s NFC, I also said that while it’s been a tough time over the last 12 months, this presents all of us with a transformational opportunity to shape the future that we want for franchising.

This year’s NFC theme of “Shaping the Future” builds on this and reflects the need for franchised businesses to ensure they are well resourced to control their own destinies, even as market forces exert their pressures on the business environment.

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Following the success of the FCA’s inaugural Multi-Unit Summit in 2019, this event will again in 2020 bring together current and aspiring multi-unit franchisees and the franchise executives that support them to learn strategies to grow profitable multi-unit businesses and maximise the opportunities for the talented franchisees that are the backbone of every great franchise network.

Delivering on its commitment to better support franchisees to run profitable, sustainable and compliant businesses, the FCA has partnered with the Franchising & Business Opportunities Expo to launch the Franchisee Success Summit in Sydney this March.

Providing franchisees with practical advice about how to grow a profitable franchise business and achieve their business potential, through showcasing the examples and experience of franchisees who are already doing so, has been a key focus of this program.

The FCA’s annual Excellence in Franchising Awards continues to showcase the dedicated and passionate people who make this sector so great, including franchisees, franchisors and support staff.

The outstanding effort by the franchisees who took out the MYOB FCA Excellence in Franchising Awards in 2019, and their contribution as successful small to medium business operators, shows the positive impact franchising can have on employment, the economy and community.

The FCA is continuing its proactive, fact-based policy and advocacy platform. The issue of wage and superannuation payments, which last year disproportionately focussed on franchising, is now being viewed as an economy wide challenge, with big brands across a number of industries, including the ABC, Woolworths and state government departments being caught up. There is a current senate inquiry, and I expect there will be a section of the hearing focussed on franchising, which the FCA is preparing for.

The franchising taskforce, announced by the Federal Government last year, has been delayed in its reporting to the Minister due to the immediate focus of the department and the Government on bushfire recovery and affected small business support. The Government will announce its proposed regulatory changes in the coming months, and the FCA is continuing to engage closely with our members and the Government on this.

Looking ahead I cannot overstate the importance the FCA places on ensuring that franchising remains a strong business model and that your individual businesses are in the best position they can be for ongoing success.

We are innovating and providing partnerships that give members better business support. And we’re resetting the franchise brand in Australia to ensure families see our sector as an employer of choice and an obvious business model to invest in.

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Supporting Successful Franchising

The FCA is committed to continuing to work with, and on behalf of the franchising community to sustain and strengthen franchising in the year ahead.

Franchise Council of Australia 1300 669 030 info@franchise.org.au www.franchise.org.au

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Chapter 2

Franchisees’ Risks and Responsibilities Dr Sudha Mani | Senior Lecturer Monash University

About the Author Dr Sudha Mani is a Senior Lecturer at Monash University. Her expertise is in the area of governance of franchisor-franchisee relations and their performance implications.

Dr Mani applies advanced econometric methods to work with big data. Her research has appeared in highly prestigious Financial Times top 50 journals. She has contributed to the Australian Parliamentary Inquiry Committee’s report on the Franchising Code of Conduct and was a keynote speaker at the National Franchise Convention 2019.

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ccording to the Australian Bureau of Statistics, there are 2.1 million small businesses in Australia. There are about 150,000 franchisee-owned businesses.

Franchise Australia 2016 reports retail trade, accommodation and food services, and administration and support services as three the dominant industries in franchising and constitute about 60 per cent of all franchised businesses.

Entrepreneurs can start their independent business or become a franchisee.

Starting an independent business is both exciting and challenging. There are various decisions entrepreneurs have to make. They have to decide on the nature of the business.

They should set financial and non-financial goals and develop a plan to achieve them.

They should consider the cost of setting up the business and the time and resources needed to manage suppliers and employees. Entrepreneurs should carefully consider how they would attract customers and build the brand. An independent entrepreneur may not have the time and the full range of expertise needed to set up a successful business.

When the business risks of going alone are high, then joining a franchise becomes a viable option on the table.

Entrepreneurs often look to franchising as a viable alternative to managing an independent business. Entrepreneurs considering franchising can rely on a tried and tested business model. They can depend on the brand to bring in customers. The franchisors can also help manage the leases, suppliers, and employees. Franchisors can provide the necessary training to get things rolling and provide continued support.

So, the first question is, should you go it alone as an independent business or be a franchisee?

Personal Goals - As an entrepreneur, start by identifying your personal goals. This would include both financial and non-financial SMART goals. The financial goals can be on sales, profits, growth, or customer satisfaction. The goals should also include personal goals, such as sending kids to college or retirement planning.

Write down the goals and then carefully consider whether going independently or working with a franchisor will help you achieve these goals. Don’t forget to include information on how long you are willing to wait to achieve those goals.

Investment Budget: Entrepreneurs should plan the budget needed to invest in the

business. How much can you afford to invest in the business? How will you pay your personal and business bills while the business takes off? Thinking about the financial implications of the business decision will help you take a medium-term perspective on the decision. Do you have the investment capital (yours or borrowed) to invest in the business? What’s the extent of risk you are willing to take?

It’s a business, and there is no guarantee of success. Have you considered the downside risk of your investment? Should you budget for both time and money to do the necessary due diligence on more than one franchise brand?

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Franchisees’ Risks and Responsibilities

Working with franchisors: Entrepreneurs considering franchising should consider

whether they are willing to work within the ‘rules’ of the franchise. Franchisees get the advantages of the brand, but they also cede control over some of the business decisions.

Are you ready to work with the rules of the franchise system and be a team player? Do you trust the franchisor to cede control of the business?

Once you decide that franchising is right for you then finding the right franchisor is critical.

Entrepreneurs can potentially reduce the business risk of managing an independent business by working with a franchisor, for example, better access to the market (consumers) and business processes. However, they are introducing franchise risk.

Franchise risk is the risk of working with a franchisor.

The Australian Parliamentary Committee in 2019 completed a review of franchising in Australia (see Fairness in Franchising report https://www.aph.gov.au/Parliamentary_ Business/Committees/Joint/Corporations_and_Financial_Services/Franchising/ Report). One of the most critical lessons from the inquiry is that not all franchises are the same. Prospective franchisees should invest the time and resources to identify the right franchisor.

What should you look for to reduce franchise risk?

Talk to a handful of franchise brands to understand the business model and to understand your own priorities. How does the franchisor select new franchisees?

Fit with franchisor: Do you think you can work with the people involved with the franchise brand? What are the franchisors’ priorities? Can you achieve your personal and financial goals working with the franchisor? Is there goal alignment between your priorities and that of the franchisor?

Company-owned outlets: Does the franchise brand have company-owned outlets to show their skin in the game? What proportion of their store are company-owned outlets? What is the franchisors’ growth strategy? How are they planning to grow both locally and nationally? What’s the general growth trend in the last few years? Are they relying on company-owned or franchisee-owned outlets for growth? How often and how many company-owned outlets have changed to franchisee-owned outlets and viceversa in the last three years?

Royalty rate and other fees: The royalty is the amount you are going to be paying

the franchisor on a weekly/monthly basis for the brand and other services of the franchisor. Do you know the royalty rate? Is it due on a monthly or weekly basis? Is it a per cent of sales or a fixed amount? What kind of accounting practices are in place for the royalty payments? What are other fees associated with the franchise? Typically, how long does it take for the franchisee to break-even? What kind of costs would you include to consider break-even?

Bankruptcies and insolvencies: Has the franchisor, directors, or if any of the franchisees filed for either bankruptcy or insolvency? In my research published in a Financial Times ranked marketing journal, my co-authors and I find that failure of - 11 -

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franchisors and franchisees have a significant impact on the chances of other franchisees going bust.

Franchisee association: once you start the business, it is crucial to be aware of how you’ll manage the business on an ongoing basis. Is there a franchisee association? Can you talk to other franchisees and share ideas and learn about best practices?

Incentives: If the franchise is a success, then do you have an option to grow with the

brand? Incentives such as the preference to open new outlets in the area or lower fees to open additional outlets have shown to reduce the risk of franchisee insolvency. These incentives are rewards for successful franchisees with an ambition to grow. Even if you are not planning to add additional outlets, knowing that the franchisor supports existing franchisees is essential.

Training: Does the franchisor provide adequate training? Who handles the training?

Who pays for the training? Where and when is the training delivered? What kind of ongoing support does the franchisor provide? Are you comfortable with the level of support?

Franchise system changes: Any franchise system will require changes. How does the system handle changes? Who bears the cost of the changes? Does the franchisee or a franchisee committee have a say on the viability of changes?

Exit and transition arrangements: How long is the contract between you and the franchisee? What happens at the end of the contract? What are your options if things go south?

Seek expert advice Last but not least, once you’ve talked to a few franchisors, it is time to start a more formal process. Do get expert legal and financial advice.

The franchisor is required to provide disclosure documents to prospective franchisees.

These are complex documents and need the experts to scrutinize them. Trying to save some money now could cost you significantly more later on.

A franchise business is not free from risk. But, can you find the right franchisor to reduce the franchise risk?

Ask questions and then vet the franchise disclosure documents. Getting the answers from the franchisor and then vetting the franchise system using legal and accounting experts is a way to reduce the franchise risk associated with the business.

Dr Sudha Mani Sudha.mani@monash.edu https://research.monash.edu/en/persons/sudha-mani https://www.linkedin.com/in/sudha-mani-2648666

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Chapter 3

Expert Tips on What to Look for in a Franchise Opportunity Robin La Pere | Franchise Consultant No Ordinary Businesses and Franchises

About the Author Robin La Pere is a franchise consultant with more than 20 years’ experience as a franchise manager, CEO and owner as well as a consultant, coach and speaker on franchising.

Based in Auckland, New Zealand, he works with clients throughout Australasia and internationally. He is a specialist in business model development, strategic planning, process improvement and franchise recruitment marketing.

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f you’re keen to run your own business but lack experience or don’t want to go it alone, then a franchise could be for you. But which one? There are plenty of articles on the subject, and some even include lists of up to 250 questions for prospective franchisees to ask - but in my experience as a franchise manager, franchisor and franchise consultant, many miss the mark. Unfortunately most miss the most crucial questions or ask the wrong questions altogether.

Here’s an example. An article I read in Forbes magazine recommended that once you find a franchise opportunity you like the look of, you read their entire Disclosure Document and consider hiring professional help.

On the face of it, both those recommendations make perfect sense. A Disclosure Document, which must under Australian law be provided to every prospective franchisee before a Franchise Agreement may be signed, contains the information necessary for making an informed decision about buying a franchise. But a study* by Uri Benoliel and Australian researcher Jenny Buchan found that prospects tend to avoid reading Disclosure Documents (DDs).

The reasons? Benoliel and Buchan found that many franchisees have what they called “optimism bias” – they are over-optimistic about their prospects and abilities when buying a franchise, so don’t see the need to read the DD. The latest Parliamentary Inquiry into Franchising also found that one in five franchisees felt that DDs were too complicated.

There’s not much that can be done about optimism bias – except to remind you that all businesses, even franchised ones, have risks and must be thoroughly checked out – but the complexity of DDs is something that can be solved.

Get professional advice. And not just any advice. Specialist franchise advice.

Several franchisee submissions to the Parliamentary Inquiry made the recommendation that there should be a mandatory due diligence process, including the requirement to seek advice from accredited franchise professionals. The only problem with this is that there is currently no regulated accreditation system specifically for franchise consultants, accountants and lawyers as there is for financial advisors and business brokers.

Given that you’re new to franchising and have probably don’t know one end of a Franchise Disclosure Document from the other, how do you get franchise advice you can trust?

First of all, make sure that the franchise consultant, accountant or lawyer that you contact is, in fact, a specialist in franchising and not just your own or a general accountant or lawyer who tells you that they understand franchising. If they are not a specialist, they won’t understand franchising.

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Expert Tips on What to Look for in a Franchise Opportunity

Second, make sure they are not associated in any way with the franchise you are interested in purchasing. Most franchise consultants, accountants and lawyers make their money from franchisors, not franchisees.

Third, recognise that no matter how sound the advice you get is, it’s up to you to make the final decision. You have to feel comfortable with your chosen franchise. You must do your homework and ask the right questions.

Doing your homework means taking the time and effort to find out what makes a franchise tick, including why customers would buy from you, how franchisees feel about being part of the franchise, and what the franchise offers you in terms of marketing, systems and training and support. This means not only talking with the franchisor, but also a range of franchisees, both those who have been in the franchise for a while and those who are relatively new. I strongly recommend that you write down a list of questions for both parties. Questions you may want to ask franchisees include: • Has being in the franchise met your expectations in terms of the support you have received from the franchisor?

• What’s your relationship with your franchisor like?

• Has your business done as well as you thought you would?

• What has surprised you?

I also recommend that you do online research about the franchise, in particular checking out reviews to assess customer ratings and satisfaction. Too many prospective franchisees forget it is the customer who will pay them, not the franchisor. I would even suggest you talk to some of the franchise’s customers if possible to gain an insight about how they feel about the business, and assess competitors to see if they seem to be doing anything better than the franchise you’re interested in.

And, what about working in a franchised business for a week or two, to give you a feel for what it’s like? Some franchises allow you to do this. Some, such as McDonald’s, even insist on it.

I mentioned earlier that there are questions that absolutely, positively must be asked before you decide to buy any franchise. They are questions you must ask yourself.

They are: • Am I right for franchising?

• Where do I see myself in five years?

Am I right for franchising?

The first question may seem to be the wrong way round. Surely you should be asking “Is franchising right for me?” not “Am I right for franchising?” The difference is subtle but essential. Franchising is a two-way street. John F Kennedy said, “Ask not what my

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country can do for me, but what I can do for my country.” The same principle applies to franchising. Are you prepared to contribute to the common good of the franchise rather than purely your self-interest? Are you a team player? Are you willing to fit into a franchise’s collective culture, follow the systems and not just go your own way?

Franchising is not a guarantee of success.

Why would you consider buying a franchise rather than buying or starting a stand-alone business? The most common reason is that the “stand-alone” part of an independent business is a bit too daunting for newbies to business. Franchising, by contrast, offers the security of training and support from the franchisor, as well as a proven business model.

But, what too many franchisees don’t realise is that in franchising as in any business there are no guarantees of success. Not all franchises are a good bet, and even in those who are, there may be failures. In my experience, there are in even the most successful franchise business a percentage of franchisees who under-perform other franchisees.

Why? Sometimes it’s because franchisees who under-perform lack the skillsets necessary for success. Sometimes it’s because they fail to understand the need to follow the franchise’s systems. And sometimes it’s only because not everybody is cut out to run their own business. Statistics prove this. In almost all countries, no more than one in seven (and more often one in 10) of the working-age population own their own business. It’s just not that easy to walk away from a regular, predictable income, no matter how much you hate “working for the man”. No one said building a business is easy. And if you think building a franchised business is going to be much easier, my advice is to stick with your day job.

Where do you see yourself in five years?

My second ‘crucial’ question may seem as odd as the first. But as Stephen Covey said, it always pays to “begin with the end in mind.” Most franchisees don’t. Nobody goes into franchising expecting the worst, so they don’t tend to think about the consequences if being in business doesn’t turn out as they believe it will and they want out. But neither do they tend to think about the implications if the business is thriving and they want out.

Before buying a franchise, you should ideally spend almost as much time thinking about how you can get out as you do about why you should get in.

What if you find that for whatever reason your business doesn’t perform and you lose money? What if your landlord won’t renew your lease or bumps up the rent? What assistance and options would be available to you from the franchisor?

On the other side of the coin, what if the business is successful and you want to a)

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Expert Tips on What to Look for in a Franchise Opportunity

grow it b) run it under management so you can take time off or c) sell it? Might other franchise territories be made available for you to buy so you can grow? Does the franchise agreement allow you not to be hands-on in the business? Would the franchisor automatically have the first option to buy if you decide to sell and under what circumstances could they decline to accept a potential buyer? What share of the sale price would the franchisor be entitled to?

Here’s another ‘what if’ that more and more franchisees wish they had considered in advance. What if new business models or more innovative products and services threaten your market? This is happening all the time in today’s fast-paced and continually evolving business environment. The cliché that franchising is all about a ‘proven business model’ no longer applies. What is the franchisor doing to keep ahead of the game? What involvement would franchisees have in innovation and change management? What assistance would be available from the franchisor if costly changes needed to be made?

My final word is about franchise rating schemes. In Australia, US-based FRANdata uses a set of standards to independently evaluate Australian franchise systems across what they call ‘critical areas of a franchise system’. These are: • System Performance • Franchisee Financial Performance • Franchisee Engagement and Satisfaction • Franchisor Training and Support • Franchisor Financial Performance • Lender Relations • Compliance and Assurance While this kind of rating system can be useful, it doesn’t answer the two crucial questions above. So it should complement not be a substitute for your own due diligence and appropriate professional advice.

And if all this homework sounds too much like hard work? Stick to your day job. *Franchisees’ Optimism Bias and the Inefficiency of the FTC Franchise Rule by Uri Benoliel

Robin La Pere | Franchise Consultant No Ordinary Businesses and Franchises www.noordinary.co.nz

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Chapter 4

Franchising in Australia and New Zealand Rostom Manookian | Legal Practice Director DC Strategy Lawyers

About the Author Rostom is an experienced lawyer with in-depth knowledge and experience in many industries including, hospitality, restaurant and liquor licensing, franchising, and business and commercial property transactional work.

Before joining DC Strategy Lawyers as the firm’s Legal Practice Director, Rostom operated his own legal practice and in September 2018, merged his practice with DC Strategy Lawyers to take advantage of the synergies between the two firms.

Rostom is committed to delivering consistent quality and value to his clients and aims to establish and maintain reliable, trustworthy, responsive relationship with clients to ensure continued delivery of quality service that his clients have come to expect from him as their trusted advisor.

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Franchising is a dynamic and progressive business sector When you take a deeper look into the world of franchising in Australia and New Zealand, you will recognise several brands dominating the industry.

Home to almost 25 million people, Australia is no stranger to a scalable and profitable business system that franchising provides! There are around 1314 franchised businesses currently operating down under, with new franchise brands and networks expected to disrupt the sector and contribute to its annual growth in the coming years.

Similarly, franchising is a well-developed concept in New Zealand. In contrast, New Zealand has a population of nearly 4.8 million and is one of the most deregulated countries in the world for conducting business.

Many international franchise brands, such as McDonald’s, KFC and Subway, have all chosen Australia and New Zealand as part of their expansion strategy. Many Australian franchise systems have crossed the Tasman to establish their brands and systems in New Zealand because of the ease of doing business in New Zealand.

Australian franchising has also been the catalyst toward global growth for many of the ‘Australian-made’ franchise brands such as F45, The Coffee Club and Poolwerx.

Franchise systems are found across a range of sectors, and the industry has evolved enormously since its inception in the early 1970s when US fast-food giants ventured across the Pacific to set up operations and influence the Aussie locals. Most of those brands can still be seen today, while new players in the market have created a rivalry and competition like no other. Many of these brands used Australia to venture their way into New Zealand to expand their brands because of the similarities of doing business between both countries. Recently, DC Strategy was instrumental in assisting Ben & Jerry’s expand into the New Zealand marketplace. Although there are similarities, the two countries are different in many ways and have their own intricacies of doing business, including legal requirements and operating methods. What may work in Australia may not necessarily work in New Zealand.

Franchising in Australia While the Australian franchising industry has experienced both positive and negative media attention in the past year, there’s also no sign of the industry slowing down.

According to the Franchise Council of Australia, known as the FCA, “Franchising in Australia may have initially provided a means for Australians to benefit from foreign products and systems, but it now is the chosen format for many Australian entrepreneurs to expand and develop their business. The great majority of franchise systems operating in Australia are homegrown, and increasing numbers of Australian franchise systems are successfully taking their systems overseas.”

With Australia’s growing international franchise presence, it gives other international

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Franchising in Australia and New Zealand

brands the key to success and opens the door for new brands to take on the current competition. There are a number of different points to consider when thinking about entering into the Australian and New Zealand franchise markets, which are outlined below.

Elements of franchising in Australia Direct Franchising Direct franchising from an overseas franchisor to an Australian single-unit franchise hasn’t been a common method of expansion in the past, as the distance and inability to support an individual franchise becomes very costly. By direct franchising, the franchisor is taking direct responsibility for recruiting, training and supporting a franchise network, through long-distance control from the headquarters, a subsidiary office in the target country or an appointed agent. In most cases, master franchising and area development are the most common vehicles used for international expansion of a franchise system into Australia. However, there appears to be a changing trend, and more franchisors are investing in direct franchising into Australia where they can retain the control of the roll-out of the system. This, in my opinion, is a better format to adopt as the franchisor will be in control at every stage of the development of the brand and system in the host country.

Master Franchise Agreement Under a master franchise agreement, a franchisor grants a “master franchisee” a territory within which to sub-franchise to third parties. This structure might result in a certain loss of control for a franchisor and an additional party with whom profits and royalties must be shared. However, it is beneficial to a franchisor because the master franchisee can act like a local, self-sufficient party who organises franchise recruitment, site selection, construction, deal with procedural matters and conducts operational support.

Area Development Agreement Under an area development agreement, a franchisor grants a franchisee the right to roll out multiple corporate stores but not sub-franchise without the franchisor’s express approval. Many franchisors adopt this model in Australia, as it reduces the management and training time for the franchisor, but allows the rapid roll-out of the concept in Australia. The difficulty of this arrangement is selecting the right area developer with the capital and infrastructure to achieve the development schedule without resorting to sub-franchising. A further difficulty for the franchisor is ensuring consistency of standards where multiple area developers are appointed within a State or region of Australia, given that Australia has a very large geographical area.

Franchisor/Franchisee Relationships in Australia The Franchise Relationship: The Franchising Code of Conduct (the “Code”) In Australia, the franchise relationship is a contractual one where the agreement between the parties determines their rights and obligations. In addition, the Code

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applies to all franchise agreements operating in Australia regardless of whether the agreement refers back to the law of the franchisor territory. The Code is the regulatory Code that governs the operation of franchising in Australia. This is a national code. The legislation dictates what is considered to qualify as a franchise relationship. Based on the expansive definition of a “franchise” under the Code, there are likely to be many existing relationships that fall within the definition of a franchise. So, while “dealers,” “distributors,” and various “licensees” may not consider themselves franchises, under the Code, they may very well be.

Unlike some other countries, the Code does not require “registration” of the franchisor or the franchise disclosure document. There are, however, significant financial penalties for breaches of the Code, if the disclosure requirements are not met.

Some laws are specific to Australia, which international franchisors should be aware of, for example, taxation; consumer laws; employment, particularly in light of fair work laws; occupational health and safety; data collection; and privacy. Additionally, there may be other specific regulations that apply to certain industries, which you should research and review before finalising your marketing entry strategy. While these issues may not necessarily have to be incorporated into your legal documents, having a general understanding of your responsibilities under these different laws will help guide your operation of the franchise network.

Franchising in New Zealand Like the Australian market, the New Zealand franchise market is also well-developed and expanding with many opportunities for franchisors. Many new overseas franchisors have entered New Zealand in recent times, including Chemist Warehouse, as well as international brands such as Zara and H&M. Similar to Australia, there are laws in New Zealand that franchisors need to understand and be aware of, for example: taxation, consumer laws, companies act, cartel legislation, consumer guarantee laws, health and safety laws, privacy laws, trade-marks, employment relations, among other inter-related legislation that will impact franchisors when doing business in New Zealand.

Elements of franchising in New Zealand Direct franchising is a common way for international franchisors entering the New Zealand market. They will usually issue a unit franchise agreement directly from the country of origin. If a franchisor is in Australia, they can choose to issue a franchise agreement from Australia to a local New Zealand franchisee. Alternatively, an overseas franchisor may form a New Zealand company in compliance with local New Zealand laws to enter into franchise agreements in New Zealand. Whichever approach a franchisor may determine to adopt, it is important to get the right advice and consider the market conditions on the type of entry plan best suitable for the franchisor. DC Strategy has assisted hundreds of businesses with the planning and market entry research for franchisors – having provided support and assistance for businesses such as Lollipop’s Playland & Café, Refresh Renovations, Sherpa Kids and Poolwerx.

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Franchising in Australia and New Zealand

Like Australia, master franchise agreements and area development agreements are also alternative options available to franchisors considering entering into the New Zealand market.

Franchisor/Franchisee Relationships in New Zealand Unlike in Australia, there is no specific franchising code operating in New Zealand that regulates franchising. The Franchise Association of New Zealand (FANZ) imposes a Code of Practice and Code of Ethics on its members who must comply with both Codes.

This Code will apply to those franchisors that are members of the FANZ. There is no obligation on franchisors in New Zealand to become members; however, membership reinforced the credibility of the franchisor. Those that belong to the FANZ must comply with the Code of Practice, whereby each member of the FANZ will (https://www. franchiseassociation.org.nz/rules-and-codes/): • Operate according to the Rules and Code of Practice of the Association in all its requirements and according to all relevant laws • Uphold the Code of Ethics for all Members • Promote membership of the Franchise Association of New Zealand Incorporated and adherence to the Code of Practice • Adopt the highest standards of competency, practice and integrity in all matters pertaining to franchising • Respect the confidentiality of all information, know-how and business IP concerning a franchised business with which it is involved • Act in an honourable and fair manner in all its business dealings, and in such a way as to uphold and bring credit to the good name of the FANZ. Similar to Australia, a franchisor in New Zealand must provide to each prospective franchisee, a disclosure document at least 14 days prior to signing a franchise agreement and the disclosure statement must be updated annually. The regulatory requirements between both countries are similar, including legal and business practices. However, although both countries have many similarities, this does not mean that consumer habits are the same and prospective franchisors need to carefully consider and research market entry conditions.

Conclusion The 2019 IbisWorld franchising report highlighted how consumer trends have directly impacted the franchising industry, showing that Australian’s disposable income has supported consumer demand for franchised goods and services. This increase has enabled consumers to spend more on goods and services provided by franchised operators, such as food, footwear and clothing. Furthermore, solid growth in online shopping and retail shifts has fuelled demand for courier and delivery services that are supplied by franchise businesses and brands. Similar trends are apparent in New Zealand.

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Now is the perfect time to start planning and researching your market entry strategy into Australia or New Zealand. You could quite possibly find your international brand (big or small) influencing the Australian or New Zealand franchising industry sooner than you think!

If you intend to expand your franchise network internationally, whether into Australia or New Zealand or any other country, DC Strategy’s full-service and dedicated franchising team can assist with your expansion plans and legal compliance requirements.

DC Strategy - The Franchise Experts - www.dcstrategy.com DC Strategy was founded by Rod Young in 1983. It is an Australian end-to-end consulting, legal, recruitment and brand and marketing firm created to assist entrepreneurs from start-ups and SMEs to NGOs, government bodies and large corporations to develop sustainable franchise networks. DC Strategy is focused on building valuable and sustainable franchise networks, which create profitable outcomes for clients and their franchisees.

DC STRATEGY 1300 682 657 www.dcstrategy.com

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Chapter 5

Is it about price or value when choosing a Franchise?

FC Business Solutions

About the Author FC Business Solutions is the only integrated consultancy focused exclusively on the franchise community. Our team of professionals has been providing specialised and expert services to Franchisors & Franchisees for many years.

The FC Business Solutions team are actively involved members of the Franchise Council of Australia regularly attending events, participating in committees and assisting in raising the profile of franchising in Australia.

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F

ranchising is a business in a box. It’s a brand, a product, a process, systems, and advice bundled up with a price tag (cost of buying franchise and ongoing franchise fees). The trick is to work out the value proposition. Both in terms of what you get but also in terms of what you want.

What do you want?

Are you buying a job or a business? If it’s a business, with a goal of genuine wealth creation, then you need to be very honest with yourself about what is involved.

• What are you prepared to risk in terms of money?

• What time are you prepared to invest?

• Are you ready for the (hopefully) short term impact on your personal life?

• Do you have the mental resilience to not get overwhelmed by your mistakes but to learn from them?

Buying a franchise in your area of expertise or passion is a great start. Passion is the secret ingredient to any business success and expertise is a great shortcut. This is not to say that you can’t build a business in an area that is new to you, but having good knowledge of your product or service reduces many hours of research and learning.

What should you pay? What’s the right price for your franchise investment?

There’s no correct answer to this question except to say that in broad terms the more you pay, the more respected and well recognised the brand should be and the greater the support offered. The brands that are top of mind when it comes to franchising are often in the food industry and they are examples of where you are paying top dollar for a complete system. Everything is cookie-cutter from the look of the shopfront to the menus, to the ingredients. All your systems and procedures are set in stone and with great support for the uncontrollable element – your staff. For a significant outlay you receive an above average chance of business success.

Further down the scale the franchised market is filled with brands offering varying packages and prices. Franchising has infiltrated many varied business sectors from teaching people to drive, to looking after pools, so finding a product you can be passionate about may be relatively easy. In fact in 2018-19 there were 1,314 different franchised enterprises with 98,650 outlets producing a revenue of $181.8 billion (IbisWorld Pty Ltd.)

Ascertaining value This is the labour intensive, but absolutely critical part of your decision making. Having decided on which sector you want to operate in, you can then assess all the brands playing in that marketplace. Meet with their franchise development managers. Find out

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Is it about price or value when choosing a Franchise?

what their joining fee is, what that ongoing franchise fees are and what additional costs you are likely to have. Find out details of their support – systems, processes, product, workplace safety compliance, human resources, marketing, social media, technology, training, business mentoring. Plug it all into a spreadsheet. After discounting those brands that you can’t afford, or don’t have a territory that suits, become a detective.

• Speak to past franchisees about their experience – why did they leave?

• Speak to current franchisees – is there innovation, is there great franchisor support?

What are the downsides of the brand or the local market?

• Look at the gaps between what the franchises you can’t afford promised, and those you are considering. What will those gaps cost you in time, materials and money?

• Visit a range of locations, observe the culture and without becoming too stalkerish, chat to staff about how they like working there.

• Visit stores in locations similar to where you want to operate with similar levels of competition. Is there a distinct advantage displayed by the brand you are considering?

• Investigate the sustainability of the brand. Is it growing, stagnant or is it slowing?

Additional costs and their value While a franchise will offer you what seems to be a complete “out of the box” system, there may be a few things missing that you need to allow for, such as: • Working capital above the franchise fee. Business will be slow initially, but you still have to pay for your trading expenses including rent, product and wages.

• Insurances. These are not negotiable. A good franchisor will have done the homework and be able to offer you providers that have policies that suit at a group discount.

• HR support and guidance. This is an area of real danger if you don’t do it right.

Apart from the legal compliance, a toxic workplace will cost you money.

• Goal plan. If your franchisor doesn’t offer it, engage the services of someone to work with you on a realistic (but ambitious) strategy or goal plan. Visit it regularly and update frequently.

• Local engagement and marketing. Good local marketing and engaging social media will help build your brand. Share your story, personalise your business. Hit the pavements, the local schools and sporting clubs. Get to know your potential customers wherever they may frequent.

• Training. Your franchisor should provide you with training, but you also need to be doing supplementary training, learning from interesting and motivational speakers outside the normal training calendar. This will help grow the expertise of your team and help them stay with you.

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Get an expert sanity check Your lawyer and accountant will be invaluable in helping you work out whether this is a good move or otherwise, what you can afford, what is a good investment and where the value is. For example: • How much are you really investing, the total amount for the first three, six, nine and 12 months • Is the investment going to take time to give you a return?

• When will it start paying itself off?

• When will you be able to take an income out of the business?

• Will you be able to reinvest?

• Ongoing, what does reinvestment look like?

• What if it starts slow, what’s the back- up plan? How do you pay the bills?

• What are you prepared to give up in your lifestyle for this business? Should you have to?

The magic equation At the end of the day you are looking for this mix of price versus money: • A product or service that you are passionate about (value) • A franchise set up fee and ongoing costs that you can afford (price) • A brand that will give you a kick-start to your business with its highly respected proposition (price/value) • Top level support from the Franchisor (value) • A lesser fee but you provide your own support elements (price) • Continual innovation in product (value, at a price) • Technology that will improve the experience of you, your team and your customers (value, at a price) Franchising systems can take the guesswork out of becoming small business owners.

Do your homework, listen to experts and evaluate your passion. It is up to you to squeeze the value out of what you pay.

FC Business Solutions (03) 9533 0028 hello@fcbs.com.au www.fcbs.com.au

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Chapter 6

Three Essential Steps in Franchise Research Mick Keogh | Deputy Chair Australian Competition and Consumer Commission

About the Author Mick Keogh was appointed to the ACCC in February 2016, and then as Deputy Chair of the ACCC in 2018, with responsibility for Small Business and Agriculture.

Mick has a long and diverse history of involvement with the small business and agriculture sector, including periods of employment as a business consultant, and in advocacy and advisory roles to policymakers and governments. He has also chaired a number of Commonwealth Government inquiries and Ministerial advisory boards, and is currently a member of the Commonwealth Government’s Emission Reduction Assurance Council, and a Boardmember of the Food Agility Co-operative Research centre.

From 2003 to 2018, he was Executive Director of the Australian Farm Institute, an independent policy research institute that conducted research into strategic policy issues of importance to Australian agriculture and regional Australia. Mick continued in that role until his appointment as Deputy Chair of the ACCC in June 2018.

Mick was awarded the Order of Australia Medal in 2015. He holds bachelor’s and master’s degrees in science, both obtained at the University of New South Wales.

Mick’s role at the ACCC includes involvement in a range of committees, as well as oversight of the small business, franchising and agriculture units of the ACCC. - 29 -

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I

f you are considering franchising as a business venture, you’ll be off to a good start if you do the following key things:

• Take your time to understand whether a particular franchise or franchising, in general, is suited to you; • Speak to former and current franchisees of the system you are interested in; • Get independent professional advice. Don’t just rely on legal advice.

Franchising has the potential for both franchisors and franchisees to build their businesses into well-functioning operations that are rewarding for both parties. This requires both sides of the relationship to go in with their eyes open.

As Australia’s competition and consumer regulator, the ACCC enforces the Competition and Consumer Act (2010). This includes the Australian Consumer Law and the Franchising Code of Conduct (the Franchising Code).

Franchisees mainly contact us when things are not going well with their franchise.

Sometimes problems arise because of bad practices by franchisors, and scammers have used the Franchising Code as a cover for fraudulent schemes. But problems can also emerge because a franchisee did not understand what they were entering into.

Here are three essential steps in researching a franchise.

1. Think about whether franchising is for you

Franchise systems that operate profitably for franchisees often started as a small business venture, and have grown into a franchise. If you buy a franchise, you’ll be following someone else’s system. This can have benefits if you’re moving into a new industry and don’t have experience. However, there are restrictions in franchising you should be aware of. These may include the franchisor deciding where you can buy the supplies for your business. Or the franchisor deciding how the marketing for the franchise system is done, and what your marketing money is spent on. It would be best if you thought about whether this will work for you.

2. Speak to those who’ve been there before

As part of every franchise sales process, you must be given something called a ‘disclosure document’ at least 14 days before you sign a franchise agreement. This document contains information about the franchise system and contact details of current and former franchisees. It is essential to make contact with a number of former and existing franchisees to get a realistic idea about the franchise. If you can’t easily get in touch with them (especially former franchisees), this should be a red-light warning, and you should not proceed to invest in that franchise system.

3. Get independent expert advice

Most people are optimistic that their business venture will succeed. You’ll be no

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different. Getting independent expert advice (legal, accounting and business advice) will help you be realistic about the financial commitment you are about to make. The money you spend on advice should be proportionate to the cost (including debt) and the risk you are taking on.

As well as the three steps above there will be lots of other measures, you’ll need to take before you can confidently sign a franchise agreement.

Remember - it’s your money, so don’t be rushed.

Know your rights Franchising is different from other business systems. It’s important to know what rights you have if you decide to buy a franchise.

A large part of the ACCC’s role is to help franchisees and franchisors understand their rights and responsibilities under the Franchising Code. We support a free online franchising education program provided by FranchiseED. This is a great starting point for prospective franchisees to learn about what’s involved with running a franchise business.

The ACCC has information available for franchisees, including details on the Franchising Code, FAQs, a manual for franchisees and factsheets, available on the ACCC website: www.accc.gov.au/franchisingcode To keep up to date with events, court cases, changes to the law in the franchising sector you can sign up to the ACCC’s Franchising Information Network at www.accc.gov.au/fin Anyone can contact the ACCC for further information about their rights under the Franchising Code.

What help can I get if things aren’t going well?

Franchise businesses are not guaranteed to succeed and can underperform and sometimes fail, for a wide variety of reasons. Any business is at risk from changes in customer tastes, for example.

But if the franchisee is struggling because of poor practices by the franchisor that might be in breach of the Franchising Code or the Australia Consumer Law, you should seek help.

The first step is to try and resolve the issue with your franchisor. Under the Franchising Code, all franchise agreements must have a dispute resolution process, and franchisees can use this process. If this does not resolve the issue with the franchisor, a franchisee can then contact the Australian Small Business and Family Enterprise Ombudsman.

The Ombudsman can provide information on the dispute resolution processes under the Franchising Code, options to resolve disputes and access to mediation services to franchisees and franchisors.

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If the dispute can’t be resolved through mediation, the franchisee can consider getting legal advice and taking private legal action against the franchisor.

The ACCC does not get involved in individual commercial disputes. But if you think the issue in dispute is systematic and affects many franchisees in a particular franchise system, you should report it to the ACCC. The ACCC does not take action on every issue reported, due to limits on resources.

In deciding whether enforcement action is warranted, the ACCC is guided by its Compliance and Enforcement Policy and focuses on those circumstances that will, or have the potential to, impact vulnerable consumers, harm the competitive process or result in widespread consumer or small business detriment.

More information There are existing resources available for someone thinking about buying a franchise, including: • A free online franchising education course www.accc.gov.au/about-us/tools-resources/cca-education-programs • Some short videos about key steps before buying a franchise, and key franchising concepts www.accc.gov.au/update/buying-a-franchise-know-the-risks The information in this article is for general guidance only. It does not constitute legal or other professional advice, and should not be relied on as a statement of the law in any jurisdiction. As it is intended only as a general guide, it may contain generalisations.

You should obtain professional advice if you have any specific concern.

Mick Keogh | Deputy Chair Australian Competition and Consumer Commission www.accc.gov.au

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Chapter 7

What to do Before Becoming a Franchisee Dominique Lamb | CEO National Retail Association

Abouth the author Dominique Lamb is the CEO of the National Retail Association and has extensive experience providing industrial relations and employment law advice to a range of small, medium and large businesses across a range of industries. In 2011, she was awarded the Australian Institute of Management’s Young Gun of the Year Award, and in 2016 Dominique was a finalist in the Brisbane Women in Business Awards.

The National Retail Association The National Retail Association (NRA) is Australia’s largest and most diverse industry association. As a not-for-profit organisation its members range from small, family-owned and operated businesses to leading national brands and span nearly every retail category including fashion, groceries, department stores, household goods, hardware, fast food, cafes and services. The NRA is the only retail industry association to deliver practical legal advice through its wholly owned and incorporated legal practice, NRA Legal. Its mission is to support, inform, protect and represent the interests of retailers and fast food businesses, providing advice on issues such as employment law, industrial relations, training information, workplace health and safety issues, event details, advocacy and policy updates, HR advice and migration and visa issues.

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D

eciding you want to enter the world of being your own boss while also trading under the name of an established brand is one thing, but picking the right franchise business is easier said than done.

Since big American chains such as McDonalds, KFC and Pizza Hut arrived on Australia’s shores in the 1970s, franchising has expanded to all parts of the retail sector.

According to the Franchise Council of Australia, there are now almost 1,300 franchise business formats in Australia ranging from small to large multi-nationals.

At its inception in Australia, franchising mostly provided a means for foreign brands to extend into the Australian market. However, it has since been embraced by myriad local retailers, who have gone from being a successful small business to an established brand that covers numerous geographical locations.

But as with any investment, it’s crucial that you make sure you’re aware of the game you are getting into and carefully weigh up the pros and cons.

Don’t dive in headfirst, do your research Before you do anything, you should conduct some thorough research of not only prospective franchises, but franchising in general. There’s a lot more to it than simply getting the keys to the store of a well-known retail brand and then watching the money roll in.

For each individual franchise, you consider, research their history and gain an understanding of how they have evolved as a business. Some basic information about a franchise can be easy to access, and you should look for the following: • Has the franchise steadily expanded over several decades or have they exploded overnight?

• Has their number of individual stores been higher at a previous point in time?

• Are they located across the country, or are they concentrated in specific areas?

• Do they cater to a broad consumer base, or are they tailored to a niche market?

There isn’t necessarily a right or wrong answer to some of the above questions. But it’s essential to have a firm grasp of the business beyond simply having been a casual customer in the past. Informing yourself also enables you to conduct a rigorous enquiry with the business in question, which will help you decide on whether their brand is the one for you. For instance, if the franchise has had scaled back its operations, it’s a good idea to learn why.

It’s also highly recommended that you reach out to some existing franchisees. Personally contact between three to five owners from the franchise in question and take the time to pick their brain on their experience. By talking to a reasonable sample size, you’ll be able to identify any consistent themes (positive or negative), and it will provide you with a gauge on what sort of relationship you can expect with the franchisor.

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Do the sums Buying into a business is possibly the biggest investment you will ever make. Hence, getting the right price is hardly a trivial matter. Take careful stock of your financial position and tally up the value of your existing assets and liabilities. Consult with a bookkeeper or accountant to ensure you have the full picture of your financial situation.

It’s important to note that the major expenses do not end with the upfront fee. There’s also the initial costs associated with obtaining a lease, staff recruitment and training, fit-out expenses and other startup costs. As a guide, the Franchise Council of Australia cites the average upfront fee for a retail franchise sits at $31,500.

If the numbers don’t stack up, don’t turn a blind eye. Either look to invest in an alternative franchise that is within your price range or reconsider your intentions altogether.

Don’t listen to anecdotal stories It’s important to note that ‘research’ does not refer simply to a basic google search or relying solely on a few anecdotes you’ve heard. The internet is flooded with plenty of cases where things have not gone swimmingly between a franchisor and a franchisee/s.

While there have no doubt been instances within the sector where things have gone wrong, be mindful that media is seldom going to report all the franchising success stories. A story where a franchisee has reportedly been dudded by a franchisor is going to generate more interesting headlines, than a case where a franchisee has built a successful business off the back of a productive relationship with the franchisor.

Understand what assistance the franchisor provides By its very nature, any relationship with a franchisor sees them provide certain services and resources that you otherwise wouldn’t get by starting your own business from scratch. In the first instance, they will obviously be granting you the ability to operate under their brand name, but that should just be the tip of the iceberg when it comes to what a franchisor should provide a franchisee.

Services that a supportive franchisor should offer you include things such as: • A brand with a high degree of name recognition, at least amongst its target market; • A track record of sustained success over an extended period of time; • Highly effective operational processes; • Strong provision of training services; • Clear guidelines on how the relationship is to function; and • A proven ability to adapt their services and products to changes in consumer demand.

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Understand your own strengths & weaknesses Are you looking to invest in a food or drink franchise without having ever worked in hospitality? Or are you a qualified chef who has never run your own business? Or are you looking to open a franchise under a brand name that you’ve never once shopped at?

We could go on, but the above hypotheticals all go to the same central point – be conscious of knowing what you don’t know. No one who opens a franchise is a master of every single facet to running the business. Indeed, if you’ve opted for a franchise model, it would, at least in part, be because you like the security of not being completely ‘on your own’.

However, having a firm understanding of your gaps is the first step towards bringing yourself up to pace with the things you don’t have experience in. Running a business is more than simply putting in long hours on the shop floor, it also involves tasks such as rostering, managing staff, ensuring full compliance with legal obligations, and having a sufficient level of financial literacy.

The first step to bringing yourself up to speed with anything in life is being able to identify what that blind spot is, so ensure that you’re conscious of the skills you need to master to run the business well.

Leasing arrangements Your lease is arguably your most valuable asset, or your largest liability depending on factors such as location and the terms and conditions. The lease can be held under either the franchisee’s name or that of the franchisor. In any event, it is critically important that you carefully interrogate the Lease Agreement and Lessor Disclosure Statement to acquire a full and accurate understanding of your obligations.

If you negotiate your own lease, the franchisor can still assist in negotiating with the lessor regarding aspects like rent or control of the site location. Under this arrangement, the franchisor does bare some risk that the franchisee – having established the business and built a loyal clientele – exits the franchise business and rebrands under another banner. It’s for this reason that many franchisors insert a clause in the contract that the lease ends upon the termination of a franchising agreement.

The rental payments contained under the lease should be closely linked with the location. If you end up in a spot that won’t see a large degree of foot traffic, you need to make sure what you’re being charged for rent is reflected by that. If you’re paying too much in rent, you’re in trouble from the very onset.

A poorly-negotiated lease can have a detrimental effect on any business. The importance of getting independent, specialist advice cannot be overstated. This relatively small expense will pay for itself if it’s the difference in obtaining affordable rent.

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Engage an expert before you sign anything Even if you’re satisfied that you have enough money in the bank and that your due diligence has led you to conclude that a certain brand is for you, it still pays to engage an expert before you put pen to paper. A bookkeeper is great at telling you the financial situation but, with all due respect to bookkeepers, they’re not in a position to provide expert advice on legal matters.

A legal professional who specialises in Industrial Relations Law will safeguard you from signing on the dotted line without an accurate and thorough understanding of your obligations. Indeed, many of the cases where a significant dispute has arisen between a franchisee and franchisor has occurred when a contract has been signed without a full understanding of the terms of the agreement.

If you’re purchasing an existing franchise business, you, in particular, need to be aware of the transfer of business obligations imposed under the Fair Work Act 2009 (Cth).

Failure to get this component of the contract right can result in severe consequences. A transfer of business can impact you in the following regard: • If existing employees are deemed to be ‘transferring employees’ once you take the keys to the business; • If the length of service already performed by transferring employees under the previous employer needs to be accounted for; and • Are you liable for entitlements accrued by transferring employees such as annual leave, personal leave, long service leave, and redundancy pay?

What research a franchisor should do on you?

Proper due diligence should not be confined to you as a prospective franchisee. The franchisor should have a stringent and rigorous vetting process in place to ensure you tick all the necessary boxes. Although this may seem burdensome, any franchise worth its salt should be ensuring that all store owners operating under their model meets the highest possible standards.

There’s the obvious need to manage financial risk by not awarding a contract to a franchisee who doesn’t have the necessary financial clout. But it’s also imperative that store owners fit the culture of the business and won’t drag the brand name down by being a poor owner. Some franchisees try to take some license with the business, falsely thinking they have carte blanch to run it how they see fit. Every successful franchise provides uniformity of standards across the chain. The ingredients for menu items at a fast food chain doesn’t change from store to store, nor do the services offered by accessory franchises.

A franchisor, therefore, should be paying close attention to whether you meet their standards. Rather than taking it personally, you should be reassured by this as you can be guaranteed that the same vetting occurs for other franchisees. And this dedication to

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highly reputable franchisees means that your business is unlikely to suffer due to a drop in reputation for the brand from other poorly run stores.

Roll up the sleeves & get ready for hard work Like any business, running a franchise is no walk in the park. Long hours, significant responsibilities, navigating the ups and downs of the market, and the day-to-day challenges of running a small business are all there, however, if you do your homework and make the right investment it can be incredibly rewarding – both financially and emotionally.

Don’t be reluctant about engaging experts to help ascertain your financial position and to obtain the most appropriate lease possible. As the old saying goes ‘it pays to get things right the first time’, and that adage could not apply more aptly than to becoming a franchisee.

Dominique Lamb | CEO National Retail Association 1800 738 245

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Chapter 8

Franchising in New Zealand – Issues to be Aware Of Stewart Germann | Franchising Lawyer Auckland, New Zealand

About the Author Stewart Germann is acknowledged as New Zealand’s leading franchising and licensing lawyer. Stewart is a Barrister and Solicitor of the High Court of New Zealand and also a Notary Public, and he has a BCom in accounting and an LLB from the University of Auckland.

He is the principal of Stewart Germann Law Office (SGL), a boutique franchising and licensing firm in Auckland, New Zealand. The firm is New Zealand’s longest-established specialist franchising firm and the winner of multiple awards.

Stewart was Chairman of the Franchise Association of New Zealand (FANZ) from 1997 to 1999 and he has been involved in franchising and licensing law for over 35 years. Stewart specialises in franchising, licensing and the sale and purchase of businesses, although SGL also undertakes a wide variety of other work. Stewart, who is included in Who’s Who Legal: Franchise 2019, is also a qualified mediator.

Stewart has spoken at international franchising conferences and he has extensive franchising contacts worldwide and locally. In 2014, Stewart was made a life member of the FANZ in recognition of his significant contribution. Stewart is passionate about franchising and licensing and welcomes enquiries from overseas.

Stewart graduated as a Certified Franchise Executive (CFE) in 2019 and was presented with his CFE certificate at the FCA conference at Gold Coast in October 2019 and the IFA convention at Orlando, USA, in February 2020. He is the first person in New Zealand to gain CFE certification.

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ew Zealand is one of the most deregulated countries in the world to conduct small to medium-sized business. There is no specific legislation controlling the operation of franchising in New Zealand, and other countries like New Zealand include Singapore and the United Kingdom.

Prospective franchisees who are looking at buying into a franchise must tread carefully and do their homework. New Zealand is an exciting and fast-developing market which contains over 600 franchise systems.

Legal Position Although there are no specific franchising laws, there are existing laws which protect franchisees; and the three main laws which provide such protection are the Fair Trading Act 1986, the Commerce Act 1986 and the Contract and Commercial Law Act 2017.

Those Acts focus in particular on misrepresentations and restrictive trade practices which include anti-competitive behaviour.

Once a franchisee has chosen a particular brand and franchise system and wishes to progress further with enquiries, the first question to ask is whether the franchisor belongs to the Franchise Association of New Zealand (FANZ). The FANZ was formed in 1996 and published the Code of Practice and the Code of Ethics which all members must comply with. Many franchisors belong to the FANZ, but some have chosen not to join yet still comply with the Codes. Others may choose not to join and do not comply with the Codes, and they should be described as renegade franchisors, in my opinion.

The Code of Practice has four main aims which are as follows: 1. To encourage best practice throughout franchising.

2. To provide reassurance to those entering franchising that any member displaying the logo of the FANZ is serious and has undertaken to practise in a fair and reasonable manner.

3. To provide the basis of self-regulation for franchising.

4. To demonstrate to everyone the positive will within franchising to regulate itself.

The Code applies to all members including franchisors, franchisees or affiliates such as accountants, lawyers and consultants and all prospective new members of the FANZ must agree to be bound by the Code before they can be considered for membership.

What does the Code cover?

1. Compliance - all members must certify that they will comply with the Code, and members must renew their certificate of compliance on an annual basis.

2. Disclosure - a disclosure document must be provided to all prospective franchisees at least 14 days prior to signing a franchise agreement. This disclosure document must be updated at least annually and it must provide information including a company profile, details of the officers of the company, an outline of the franchise, full disclosure of any payment or commission made by a franchisor to any adviser

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or consultant in connection with a sale, listing of all components making up the franchise purchase, references and projections of turnover and possible profitability of the business.

3. Certification - the Code requires franchisors to give franchisees a copy of the Code, and the franchisee must then certify that he or she has had legal advice before signing the franchise agreement.

4. Cooling Off Period - all franchise agreements must contain a minimum seven day period from the date of the agreement during which a franchisee may change its mind and terminate the purchase. This is very important and the cooling-off period does not apply to renewals of term or re-sales by franchisees.

5. Dispute Resolution - the Code sets out a dispute resolution procedure which can be used by both franchisor and franchisee to seek a more amicable and costeffective solution. The Code requires all members to try to settle disputes by mutual negotiation in the first instance. However, this process does not affect the legal rights of both parties to resort to litigation.

6. Advisers - all advisers must provide clients with written details of their relevant qualifications and experience, and they must respect confidentiality of all information received.

7. Code of Ethics - all members must subscribe to the Code of Ethics which sets out the spirit in which the Code of Practice will be interpreted.

All franchisor members of the FANZ must have a franchise agreement which contains a dispute resolution clause and a cooling-off provision. In order to resolve disputes, mediation is the favoured method, and it has a high success rate in relation to franchising disputes. However, if mediation does not work then there is always litigation which is certainly at the divorce stage of the relationship.

What is a franchise?

It is helpful and essential to understand the definition of the franchise. The term “franchise” is defined in the Rules of the FANZ as follows: “Franchise” means the method of conducting business under which the right to engage in the offering, selling or distributing of goods or services within New Zealand includes or is subject to at least the following features: • the grant by a franchisor to a franchisee of the right to the use of a mark, in such a manner that the business carried on by the franchisee is or is capable of being identified by the public as being substantially associated with a Mark identifying, commonly connected with or controlled by the franchisor; and • the requirement that the franchisee conducts the business or that part of the business subject to the Franchise Agreement, in accordance with the marketing, business or technical plan or system specified by the franchisor; and • the provision by the franchisor of ongoing marketing, business or technical assistance

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during the term of the Franchise Agreement.”

Consideration should also be given to the definition of a franchise agreement which “means a contract, agreement or arrangement, whether express or implied, whether written or oral, between two or more persons by which one party to the agreement (“the franchisor”) grants, authorises or permits the other party to the agreement (“the franchisee”) the right to operate a franchise. Any contract, agreement or arrangement which purports to be a franchise agreement shall be deemed to be a franchise agreement for the purpose of this definition, notwithstanding that it may lack any or all of the requirements or attributes referred to in the definition of ‘franchise’”.

Code of Practice Prospective franchisees will usually be given a disclosure document and franchise agreement by a franchisor. The Code of Practice states that franchisors must provide the disclosure document to prospective franchisees at least 14 days prior to the signing of the franchise agreement. The disclosure document must provide certain information, including the following: • Details of the franchisor and its directors including experience and a viability statement with key financial information of the franchisor; • Details of any bankruptcies, receiverships, liquidations or materially relevant debt recovery; • Criminal, civil or administrative proceedings within the past five years; • A summary of the main particulars and features of the franchise; • A list of components making up the franchise purchase; • Details of any financial requirements by the franchisor of the franchisee; and • Other information as listed in the Code.

Franchising in New Zealand covers goods and services in many areas including general retail, leisure and education, business and commercial, food and beverage, health and fitness, computer and technology, home and building services.

Survey of Franchising In 2017 a survey of New Zealand franchising was conducted by Massey University (Auckland) and Griffith University (Queensland, Australia) and some highlights from that survey are as follows: • The number of business format franchise systems operating in New Zealand has increased with 631 business format franchise systems operating in New Zealand, compared with 446 in 2012.

• The number of units operating with business format franchise systems has also increased with an estimated 37,000 units compared with 23,600 in 2012.

• It is estimated that franchised business contributes around $27.6 billion to the New Zealand economy.

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• Seventy-two per cent of franchises are NZ-founded.

• There are an estimated 124,200 employees of New Zealand business format franchise systems, up from 80,400 in 2012, with approximately 60% of employees estimated to be in permanent full-time employment.

• Franchising covers a wide range of industry categories and sub-sectors. Predominant sectors included “retail trade” (23 per cent), “other services” (20 per cent), “accommodation and food retail” (18%) and “administration and support services” (8 per cent).

• The median total start-up cost for a franchise was $308,500 for retail and $87,550 for non-retail.

• The median initial franchise fee was $35,000.

• The overall level of disputation per franchise unit was low (1.9 per cent). Only 22 per cent of franchisors experienced a substantial dispute with a franchisee within the last 12 months. The most common action was mediation (49 per cent), followed by correspondence via a solicitor (41 per cent). There was little incidence of litigation (10 per cent) where substantial disputes occurred.

• Most business format franchisors operate in retail trade, followed closely by service industries.

In 2020 there will be a new survey of franchising conducted, and the results should be available before June 2020.

Competition Law The Commerce (Cartels and Other Matters) Amendment Act 2017 came into force on 14 August 2017. The most significant change made by the Act was the replacement of the previous prohibition on price-fixing between competitors with an expanded prohibition on cartel provisions, which extends to market allocations and output restrictions, as well as to price-fixing, by competitors. The New Zealand cartel prohibition is very wide and will have quite an impact on franchise networks. Some additional clauses must be inserted into franchise agreements, and there must be explanations, in plain language, as to why certain clauses are necessary. Consideration must be given to cartel clauses in franchise agreements; for example, clauses that set or influence prices, restrict output or allocate markets will be caught. The possibility that alternative arrangements might achieve the same or a similar commercial outcome as a cartel clause should also be considered. Another consideration is whether the collaborative activity exemption or the vertical activity exemption would apply. Expert legal advice should be obtained in relation to this Act. There will not be a cartel arrangement in place where parties are not in competition with each other. In most franchise systems the franchisor will not compete with its own franchisees, but that is not always the case. For example, a franchisor that owns its own outlet might be found to be in competition with franchisees. Similarly, where a franchisor sells online direct to the end consumer, yet at the same time has franchisees

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who sell to those consumers, it may also compete with its franchisees. There may also be instances where the franchisees compete with each other. Where a franchisor is in competition with a franchisee or where franchisees are found to compete with each other, there will be a competitive relationship, so the franchisor needs to be cognisant that there may be provisions in its franchise agreements that amount to cartel provisions.

Note that before the Amendment Act was passed, an original proposal to criminalise cartel conduct was dropped by the government. Accordingly, the enforcement of such conduct remains as it previously was and the maximum penalties involved are similar to those that apply in Australia. However, on 8 April 2019 the Commerce (Criminalisation of Cartels) Amendment Act 2019 became law. The Act introduces a new criminal offence for cartel conduct, and the proposed new criminal sanctions reflect the covert nature of cartels and the harm they cause to consumers and the economy.

The Commerce Act 1986 provides a number of statutory exceptions that would not constitute a cartel arrangement and may be pro-competitive. These exceptions relate to collaborative activities (for example, joint ventures or franchise arrangements), joint buying, vertical supply contracts and specified liner shipping arrangements as stated earlier in this paper. There are no defences for mistakes of fact relating to the elements of joint buying and promotion and vertical supply contracts. Therefore, it would be possible in the future for a director of a franchisor company to be criminally liable under the Act for a cartel offence. For an individual who commits an offence the penalty on conviction could be imprisonment for a term not exceeding seven years or a fine not exceeding $500,000, or both. For a company which commits an offence the penalty could be up to $10 million so great care must be taken. The new Act does not apply until April 2021.

Restrictive Covenants The New Zealand courts have recognised that it is reasonable for a person in the position of a franchisor to impose a contractual restraint upon competitive conduct by a franchisee or an ex‑franchisee, but such restraints must not exceed the boundaries of the court’s notion of reasonableness. The first principle is that it is reasonable for a person to stipulate that if he or she is willing to disclose all secrets of how to establish a particular business enterprise, then the recipient of the information cannot immediately terminate the contract and set up a competitive business using the information received during the course of the relationship. If the courts did not protect franchisors against conduct like this, there would be no incentive for the owners of established businesses to share their secrets with others and enhance their business skills. The second principle is that it is important for the well-being of the community that every individual should, in general, be free to advance his or her skills and earning capacity.

The Contract and Commercial Law Act 2017 in New Zealand gives the courts authority to rewrite a restrictive covenant and to allow an excessive covenant to be enforced at a lesser level. Section 83 of the Act states as follows:

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“83 Restraints of trade (1) The court may if a provision of a contract constitutes an unreasonable restraint of trade – (a) delete the provision and give effect to the contract as so amended; or (b) modify the provision so that, at the time the contract was entered into, the provision as modified would have been reasonable, and give effect to the contract as so modified; or (c) decline to enforce the contract if the deletion or modification of the provision would so alter the bargain between the parties that it would be unreasonable to allow the contract to stand.

(2) The court may modify a provision even if the modification cannot be effected by deleting words from the provision.”

The ability of the courts to modify excessive restraints is constrained by the principle that terms that could never have been considered reasonable will not be modified, as to do so would be contrary to the public interest. This is the doctrine of restraints that are in terrorem, which translates into ‘contracts that terrorise a contracting party’.

If a franchisor could only ever have reasonably sought a two-year restraint within a five-kilometre radius of the business in which the person established goodwill, then a nationwide restraint for 10 years could never be regarded as reasonable; and in that case the courts would refuse to rewrite the clause to determine that the period of 10 years should be two years and the area of the restraint should be 5 kilometres rather than the entire country. What then is a reasonable restraint? There are two factors – area and time. So the message is clear in New Zealand – for a restraint to be enforceable, it must be reasonable.

There have been a number of restraint of trade cases in the franchising sector both in Australia and in New Zealand in recent years. Some New Zealand franchising cases include the following: Dorn Investments Ltd v Hoover (2016); Mike Pero (New Zealand) Ltd v Krishna and Mortgage Suite Ltd (2016); Mad Butcher Holdings Ltd v Standard 730 Ltd and Wightman (2019); and Mainland Digital Marketing Ltd v Willetts and Meyers (2019).

Non-compete and other restrictive covenants need to be included in the relevant franchise agreement to be enforced during the term of the agreement. The type of clause that I often include is as follows: “The franchisee covenants that it shall not during the term except with the prior written approval of the franchisor carry on or be directly or indirectly engaged or concerned or interested whether as principal, agent, partner, shareholder, investor, financier, lender, director, employee, consultant, independent contractor or otherwise howsoever in any business conducted in competition with the [particular franchise business], the franchisor or any of its other franchisees.”

In other words, a franchisor and a franchisee have a relationship for the term of the

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franchise agreement. During that period the franchisee must not compete with the particular franchise system and must not divulge confidential information to any third party outside the system without the consent of the franchisor. A breach of these covenants will usually give rise to an event of termination allowing a franchisor to terminate the franchise agreement with the particular franchisee plus it will allow the franchisor to enforce the personal covenants given by the directors and shareholders of the franchisee in relation to the restraint.

Independent Legal Advice It is essential for prospective franchisees to obtain independent legal advice from a lawyer experienced in franchising as well as independent accounting and taxation advice. A franchisee should have a number of meetings with the franchisor and its representatives, and all questions and answers should be written down and carefully kept for future use if required. Prospective franchisees should be able to rely upon everything they are told but be wary of financial projections provided by the franchisor.

That is a dangerous area and in my opinion franchisors should not provide financial projections at all but should provide actual financial results with the direction that the franchisee must go to an independent accountant.

Attractive Market New Zealand is very attractive for franchising, and many overseas systems have entered the market including from Australia, USA, Canada and the United Kingdom.

International franchising is thriving worldwide as it is such an excellent way to expand the brand and the system. The FANZ has been very successful in promoting self-regulation and high standards in franchising, and its Code of Practice is widely understood and accepted by many franchisors in New Zealand. At the end of the day, it is for a franchisee or master franchisee to decide whether or not to proceed with the purchase of a franchise or master franchise. Careful due diligence should always be undertaken so that franchisees are fully informed before signing any documentation.

Stewart Germann Franchising Lawyer - Auckland, New Zealand stewart@germann.co.nz www.germann.co.nz

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Chapter 9

FRANCHISE LAW 101 Raynia Theodore | Principal, Corporate Advisory & Franchising Team MST Lawyers

About the Author Raynia is a Principal in the Corporate Advisory and Franchising Team at MST Lawyers and has extensive experience in commercial law, franchising law and leasing law. Raynia acts for many well known domestic retail chains and franchise brands in a variety of industries.

Raynia’s expertise also extends to international franchisors who export to Australia or are considering expanding their operations into Australia. Raynia has been listed as an expert in Franchise Law in International publication Who’s Who Legal since 2015 and in Best Lawyers since 2019.

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W

ading through stodgy, unfamiliar legal documents for the purchase of a franchise business can be daunting. In this article, we focus on the key legal questions you should consider when investing in a franchise business and reviewing the franchise documentation.

1. What Homework Should I Do Before Buying A Franchise Business?

Conducting adequate due diligence is an essential step before entering into a franchise agreement to ensure that you are fully informed and aware of the risks.

As part of proper due diligence, you should: (a) conduct a basic google search of the franchisor and the particular franchise system which can unearth useful information about the franchisor and the franchisor’s reputation in the market place; (b) visit the website of the Australian Competition & Consumer Commission (the ACCC). The ACCC is the national regulator of the Franchising Code of Conduct and makes available on its website a number of resources including: (i) the Franchisee Manual at https://www.accc.gov.au/publications/thefranchisee-manual (ii) Franchising: What You Need To Know at https://www.accc.gov.au/ publications/franchising-what-you-need-to-know (iii) Videos on the risks of franchising at https://www.accc.gov.au/update/ buying-a-franchise-know-the-risks (iv) Quick Guide to a Franchise Disclosure Document at https://www.accc.gov. au/publications/quick-guide-to-a-franchise-disclosure-document (c) read the Franchising Code of Conduct (the Code), which is a mandatory code governing franchising at https://www.legislation.gov.au/Details/F2017C00182 (d) analyse the proposed location and/or territory of the franchise business. For example, does the franchisor have a site selection policy and did the franchisor conduct demographic and traffic flow analysis of the site? Is the franchisor planning on expanding within or around the territory, and what rights will you have to purchase any adjacent or competing? Are there any competing businesses within the area? What are the occupancy costs, such as rent and outgoings of the premises and are there any refurbishment works required by the owner of the premises. (e) Read the franchisor’s disclosure document. This document provides important information about the franchisor and the system, including details of the key people involved in operating the system, any current legal proceedings, the estimated costs of setting up and running the franchise business, the contact details of existing and certain former franchisees and details of what will happen at the end of the franchise agreement;

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(f) approach existing and former franchisees of the franchise system in which you intend to operate and ask them questions to glean first-hand information about the franchisor, how the system operates, the training and ongoing support the franchisor provides and the actual (rather than estimated) costs of running the franchise business. The details of former and current franchisees should be in the franchisor’s disclosure document. The inquiries that should be made should include inquiries in relation to: (i) how the actual set up costs compared to any estimates provided by the franchisor (ii) whether any estimates or projections provided in any financial information or profit and loss statements provided by the franchisor proved to be accurate (iii) the level of support offered by the franchisor, especially to franchisees that are located outside the state from which the franchisor’s head office operates (iv) whether the franchisor is accessible, organised, responsive to queries as well as suggestions (v) what is the relationship between franchisees within the franchise system and (vi) where a franchisee has left the system, the reasons for the franchisee leaving the system. (g) request financial data or earnings information from the franchisor (or seller), especially if you are buying an existing franchise business. However, a franchisor may be reluctant to provide such information to avoid the risk that it may subsequently be found to be misleading or deceptive; (h) if you are buying an existing franchise business from the franchisor or one of the franchisor’s franchisees, request a copy of the contract of sale of business, the existing lease and disclosure statement in respect of the premises (if relevant).

In some states of Australia, a vendor of a small business is required to provide a vendor’s statement to the purchaser containing financial and operating information about the franchise business. Even if the vendor is not legally obliged to provide a vendor’s statement, you should nevertheless ask to see the financial statements of the franchise business for at least the last three years; (i) request a copy of the franchisor’s operations manual to enable you to consider the precise details and procedures governing the day-to-day operation of the franchise business. Given the manual contains confidential information about the system, the franchisor may be reluctant to provide a copy or allow you access to the manual before the franchise documents are signed. As an alternative, you can request that you be allowed to inspect the manual at the franchisor’s head office. (j) attend franchising exhibitions or conventions;

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(k) obtain advice from an independent legal advisor in respect of: (i) the franchise business and sale documents that you will be required to sign; (ii) any lease and disclosure statements provided by the landlord in relation to the premises from you will conduct the franchise business. You will have different rights and obligations under such documents depending on whether you or the franchisor, is to be the tenant under the lease. If the latter, you will likely be required to enter into a separate licence agreement with the franchisor; and (iii) your employee obligations under the Fair Work Act 2009 (Cth); (l) obtain advice from an independent accountant and/or business adviser on the most appropriate and cost and tax effective business structure you should adopt to run the franchise business. Your adviser will be able to advise you as to the best structure to minimise tax and personal risk and protect your assets, such as the family home. The common structures include: (i) Sole trader; (ii) Company; (iii) Partnership; (iv) Trust; (v) Corporate Trust.

You will need to make this decision well prior to entering into the franchise agreement so that you and your advisers have sufficient time to prepare the necessary documentation. Some franchisors have policies in relation to business structures that franchisees may adopt accordingly, before spending time and money establishing such structures you should seek the franchisor’s approval of your chosen structure.

2. What Documentation Will I Have To Sign Before Buying A Franchise Business?

The number and length of documents that will be provided to you can be overwhelming. Such documentation will likely include (a) the franchisor’s “Confidentiality Agreement” which you will be required to sign before you are provided with access to any of the franchisor’s confidential documents; (b) the franchisor’s disclosure document; (c) the franchisor’s franchise agreement; (d) the Information Statement that is contained within the Code; (e) the lease or occupancy licence agreement and disclosure statement in respect of the premises from which the franchise business will be conducted (where relevant); and

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(f) “ancillary” documents such as legal advice certificates, acknowledgement forms, representations statements and authority forms.

The law stipulates that you must be given a 14 day “disclosure period” to read, understand and seek advice on the franchisor’s disclosure document, franchise agreement and the Code before entering into the franchise agreement. If, after reading the documents, you do not understand them, you should raise your queries with your legal advisor and/or the franchisor.

You should take comprehensive notes in each meeting or discussion with the franchisor and/or its representatives both prior to and post entering into a franchise agreement. Any representations or promises made by the franchisor before you enter into the franchise agreement should be confirmed in writing, and any special arrangements agreed to with the franchisor should be reflected in special conditions in the franchise agreement. Your legal adviser can assist you with this.

You should not sign any documents without first having sought legal and financial advice. The Code requires that, before entering into a franchise agreement, a franchisor must obtain from a franchisee a signed statement that the franchisee either obtained legal and accounting advice or chose not to do so.

3. What Fees Will I Have To Pay? Understanding the financial investment required to operate a franchise business is a key aspect of the proper due diligence and budgeting. As you will discover, there are many one-off and ongoing payments that you will likely incur before purchasing the franchise business, while operating the franchise business and even upon exiting the franchise business. The typical costs include: (a) an initial up-front franchise fee for the grant of the right to operate the franchise business and use the franchisor’s branding, trade marks and systems. The franchisor may also request that you pay a refundable deposit as evidence of your intent to purchase the franchise business; (b) equipment costs and if the franchise business operates from fixed premises fitout costs; (c) initial stock costs; (d) security deposits or bank guarantees required to be provided to the landlord of the premises and any other occupancy costs (where the franchise business operates from fixed premises); (e) ongoing royalties, franchise fees or service fees. These payments are typically periodic and are either a fixed sum or calculated as a percentage of the sales of the franchise business; (f) ongoing marketing or advertising contributions or levies. These fees, either a fixed fee or a percentage of the sales of the franchise business, are typically held by the franchisor in a marketing fund to pay for promotional activities on

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behalf of the entire franchise network and system. The Code strictly regulates the use of marketing fund contributions and the financial statements of the fund that must be given to you. However, despite this franchise agreements usually provide a franchisor broad discretion as to the use to which the fund can be put and negate any liability of the franchisor to spend any part of the fund on particular franchisees or their territories; (g) local area marketing costs: In addition to paying the general marketing fund contributions, under the franchise agreement you may also be required to spend a certain amount of money on your marketing initiatives within your local territory and provide evidence of such spending to the franchisor; (h) software or technology fees: You may be required to make use of the franchisor’s designated software, hardware and point of sale systems and pay the associated costs. Such costs may also encompass website maintenance and information technology support. Technology fees may also be fixed or calculated as a percentage of your sales; (i) training fees: These may comprise initial training programs provided by the franchisor prior to the start of the franchise business plus additional training required during the term of the franchise agreement, including refresher training or new product training. (j) travel costs: Moreover, you will likely be required to bear any travel and accommodation costs associated with training and staff wage costs if your employees are also required to attend training. Franchisors may include the initial training fee within the initial franchise purchase fee. You will need to clarify this with the franchisor; (k) renewal or further term fees: If you have an option to renew the franchise business for a further term after the initial term expires, you may be required to pay an additional franchise fee to the franchisor for the right to operate the franchise business for the further term; (l) sale, transfer or assignment fees: If you wish to sell or transfer your franchise business to another person during the term of the franchise agreement, you will typically be obliged to pay to the franchisor either a fixed fee or a percentage of the sale price, in addition to the franchisor’s costs of approving the sale and the new franchisee. Some franchise agreements specify a transfer fee which is calculated according to the year in which the franchise business is sold, with a higher fee payable the earlier the franchise business is sold. It is prudent to bear the transfer fee in mind in negotiating the sale price of the franchise business; (m) upgrade or renovations costs: if the franchise business operates from fixed premises, the franchisor or the landlord of the premises may require the premises to be renovated or refurbished at your cost. You will need to budget for this from the outset. (n) legal costs: Franchisors usually require franchisees to pay their legal and

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administrative costs incurred in drafting, preparing, negotiating and executing the franchise documentation, including the franchise agreement, disclosure document, lease or occupancy licence and any ancillary documents; and (o) default costs: Most franchise agreements include a clause requiring you to pay any costs and damages incurred by the franchisor as a result of a breach of the agreement by the franchisee and any enforcement of the franchisor’s rights.

4. Can I Sell My Franchise Business?

You will need to obtain the franchisor’s consent to any sale, transfer or assignment of the franchise business. A franchisor cannot unreasonably withhold its consent to a transfer or sale of the franchise business. However, a franchisor may reasonably withhold its consent to a sale if: (a) you have failed to pay an amount owing to the franchisor; (b) you are in breach of the franchise agreement; (c) the purchaser is unlikely to be able to meet the financial obligations under the franchise agreement; (d) the purchaser fails to meet a reasonable requirement of the franchise agreement; (e) the purchaser does not meet the franchisor’s selection criteria; or (f) the purchaser does not agree, in writing, to comply with the obligations under the franchise agreement.

You must also take note of the various costs that may be payable by you upon a sale, such as the transfer fee mentioned above, the franchisor’s legal costs incurred in reviewing the sale documents, the franchisor’s costs incurred in approving the purchaser as a franchisee, and your own legal and accounting costs associated with the sale.

5. When Can I Terminate The Franchise Agreement?

Unless the franchise arises from a transfer, renewal or extension of an existing franchise agreement, under the Code, you are entitled to a seven day “cooling off period” after you have signed the franchise agreement or made any payment under the franchise agreement. During this period, you may give notice to the franchisor that you wish to terminate the franchise agreement. If this occurs, the franchisor must repay all payments you have made under the franchise agreement (less the franchisor’s reasonable expenses). Otherwise, you may only terminate the franchise agreement if the franchise agreement allows you to do so or the franchisor consents to the termination.

It is not common for a franchise agreement to give you any other right to terminate the franchise agreement. Accordingly, if you wish to do so, you will need to seek legal advice to determine whether you have the right to terminate under the general law of contract or under another law. This may be the case if, for example, the

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franchisor is in breach of an essential term of the franchise agreement or you entered into the franchise agreement as a result of the franchisor’s misleading or deceptive conduct or false representations. Relatedly, if the franchisor engages in misleading or deceptive practices, you may be entitled to seek a remedy, such as compensation, under the Australian Consumer Law and/or make a complaint to the ACCC.

6. When Can The Franchisor Terminate The Franchise Agreement?

Generally, a franchisor is given more extensive rights to terminate a franchise agreement. For example, a franchisor may terminate a franchise agreement immediately (and without serving prior notice on you) in the following circumstances: (a) if you breach the franchise agreement and do not remedy the breach within a reasonable time after being given a breach notice by the franchisor to remedy the breach. The franchisor must allow you a reasonable time to remedy a breach. However, this does not have to exceed 30 days; (b) if you no longer hold a licence that you must hold to carry on the franchise business; (c) if you become bankrupt or insolvent; (d) if the franchisee is a corporation and it is deregistered by the Australian Securities and Investments Commission; (e) if you are convicted of a serious offence; (f) if you voluntarily abandon the franchise business or the franchise relationship; (g) if you operate the franchise business in a way that endangers public health or safety; (h) if you are fraudulent in connection with the operation of the franchise business; or (i) if you agree to the termination of the franchise agreement.

A franchisor may also be entitled to terminate a franchise agreement even if you have not breached the franchise agreement if the franchise agreement allows for such early termination, but subject to the franchisor giving you reasonable written notice of the proposed termination and the reasons for it.

7. Can I Operate another Business after the Franchise Agreement Ends?

Most franchise agreements provide for a “restraint of trade” or “non-competition” period after the expiry or termination of the agreement. This means that you are restrained, or prevented, from being involved in a competing business or business which supplies similar products or services, within a specified area and for a specified time frame.

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If you are concerned about how you will be able to earn a living after you cease to operate the franchise business, you should seek legal advice as to whether the restraints in the franchise agreement are enforceable or otherwise try to negotiate a more relaxed restraint with the franchisor.

8. When Can I Renew My Franchise Agreement?

A franchisor does not have to renew or extend your franchise agreement upon its expiry unless you have a contractual right of renewal under the franchise agreement.

Therefore, it is important that you try to negotiate an option to renew the franchise agreement for a further term before you sign the franchise agreement.

Despite this, even if you have an option to renew, the franchisor may refuse to renew the franchise agreement if the conditions for the renewal as set out in the franchise agreement have not been satisfied. These conditions typically include:

(a) you are failing to provide the franchisor with the proper notice exercising the option within the timeframes required by the franchise agreement; (b) you being in breach of the franchise agreement;

(c) you are failing to sign the renewal franchise documents within the timeframe required by the franchise agreement; (d) if there is a lease of the premises for the operation of the franchise business, the lease is not renewed by the landlord;

(e) you are failing to refurbish or upgrade the premises from which the franchise business is conducted in accordance with the franchisor’s current corporate image and brand; or (f) you are failing to pay any money owing to the franchisor.

The above explanations aim to give you some preliminary assistance in navigating the legal documents which you will be provided with on the purchase of a franchise business. Although the disclosure document follows a standard format and franchise agreements contain common provisions such as those discussed earlier there is no substitute for conducting your own due diligence, reading the franchise documents thoroughly and obtaining professional advice. Disclosure documents and franchise agreements are complex, lengthy documents and buying a franchise business is a serious undertaking. It is one of the most significant decisions you may make in your lifetime. It is therefore essential that you obtain both financial and legal advice from an accountant and a lawyer who each have significant expertise in franchising. However, it is no substitute for and seeking independent legal and financial advice.

Raynia Theodore Principal, Corporate Advisory & Franchising Team | MST Lawyers 03 8540 0242 raynia.theodore@mst.com.au www.mst.com.au - 55 -

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Chapter 10

Why Non-Bank Finance is Leading the Way in Small Business Funding James Scurr | Founder and Managing Director franchise finance australia

About the Author James Scurr is the Founder and Managing Director of Cashflow It Group, a specialist equipment finance company servicing Australia’s franchise, accommodation, fitness and pharmacy sectors. He has almost 20 years’ experience in the franchise industry having spent time as a successful multi-unit franchisee for companies, including Boost Juice Bars.

James has extensive franchising and small business experience and has an acute understanding of franchisees’ requirements.

James holds a Bachelor of Business, majoring in Management and Accounting from Queensland University of Technology.

He is also a member of the Franchise Council of Australia, a Certified Franchise Executive and a Registered Franchise Lending Specialist.

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I

n 2016 it as reported that by 2020 Australia’s alternative lending sector would be mainstream. Today in 2020, it is fair to say that this prediction has come to fruition with Australian SMEs more likely to use non-bank financiers to funds their business growth.

This reflects the significant change that Australia’s lending landscape has undertaken over the past few years. However, the rise of alternative finance as a mainstream option doesn’t stop here. An overwhelming 83% of small business owners surveyed stated that they planned on using their own funds to fuel revenue growth. This aligns with research that found many business owners don’t fully understand the process and benefits of non-bank funding, suggesting there is more work to be done in educating consumers about their options.

Change a long time in the making The banks have long held a prominent position within Australia’s lending landscape, with the big four raking in a profit pool of $30 billion annually. Competing with these legacy brands is tough, but over the past 5 years Australians have begun to broaden their financial horizons.

Whilst the recent Banking Royal Commission may seem like a trigger for this shift away from traditional lenders. FAST Group CEO Brendan Wright notes that this trend was well underway prior to the Commission, beginning 4-5 years earlier.

There is no doubt that finance is still a major thorn in the side of aspiring small business owners, with 60 per cent stating that access to money has stifled their plans of small business ownership, according to the Australian Banking Association. What has changed in the way in which consumers are going about solving this problem.

In 2019 the total loan value of Australia’s major banks declined 12.5 per cent. This isn’t due to a drop in the amount of finance being sought however, as non-bank lenders total loan value jumped an outstanding 42.4 per cent. This suggests that alternative lenders 11 per cent slice of the market will continue to grow, potentially giving the banks a run for their money.

The appeal of alternative lending Banks step back When we look at the reasoning behind this shift away from traditional lenders and towards non-bank options, there are a wealth of factors at play. However one reason is becoming increasingly common, people’s desire to avoid putting their property up as security.

Interesting, 21.3 per cent of SMEs stated that this was the reason that they looked elsewhere for their finance, which is more than in 2018 survey results. This suggests that the security requirements of traditional lenders are a growing problem. Additionally, other notable reasons included reduced compliance paperwork which was mentioned by 19.8 per cent of applications, and short applications times at 17.1 per cent.

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Whilst the flexibility in security requirements and simplified application processes are major selling points for non-bank lenders, there is more than just ‘pull’ forces driving this change in consumers behaviour. The banks disclosures during the Banking Royal Commission and reduced credit appetite are significant ‘push’ factors driving consumers to look elsewhere according to survey results.

One in every four SMEs have their finance applications rejected by the bank, and once this happens business owners are unlikely to return. An AltFi report actually found that the time take to access finance with traditional lenders had a negative effect on 29% of SMES, even if they were eventually successful. For those who weren’t able to secure funds, the number is higher at 65 per cent of applicants.

Experience is key In addition to the tightening of lending conditions among the big banks, the overall customer experience is a major consideration for many small business owners. Whilst in the past consumers displayed enduring brand loyalty towards their banks, the diversification of the market has highlighted to many that they have options. As a result consumers are taking liberty to explore the range of lenders available to them, and many are finding that the customer experience at the banks doesn’t stack up.

An outstanding 90 per cent of SMEs surveyed by Banjo stated they preferred their experience with alternative lenders to that of banks. This can largely be attributed to a shift away from relationship-based lending among Australia’s traditional finance institutions. Significant downsizing and restructuring efforts meant that efforts to maintain long-term relationships with small business owners were somewhat left behind.

It is not just the end consumer that is making the move towards alternative finance, with Australia’s broker network beginning to favour non-bank lenders. Sentiment among brokers is that the investment by alternative providers in technology has made the application process smoother, whilst assists in managing large workloads. Further, non-bank lenders have received praise for their ability to handle unique cases that don’t fit into the cookie cutter approach of the big four, tackling variables such as seasonal income.

What’s next Overcoming new chanllenges Non-bank lenders have always played an important role in bridging the gap between the offerings of traditional finance institutions and the unique needs of small business owners. However there is a growing barrier to finance among Australian SMEs, the volatile property market.

The Australian Bureau of Statistics found that 1 in 3 Australians don’t own a home, and for those that do tumultuous market conditions are impacting property prices. This means that applicants have less equity to source when trying to secure finance, and

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the banks insistency on SMEs offering property as security is becoming increasingly unrealistic and restricting.

This is creating a challenge for the 60 per cent of small business owners who are seeking funds in order to take advantage of their strong growth projections. So much so that according to the SME Growth Index, 91 per cent said they would be willing to compromise on a higher interest rate to avoid using their home as security. Many nonbank lenders are embracing the trends towards securing against business assets rather than personal property assets, which many banks are resisting.

Awareness and education Despite the number of non-bank lenders available in the Australian market, the concept is still faced with apprehension by many small business owners. Awareness and understanding are major barriers to growth in the use of non-bank lenders. This is simply because Australia’s finance industry has been dominated by the big four, leaving little room for smaller independent lenders to build the same comfort and trust levels that the banks holds.

Despite the fact only 2 in 10 SMEs that apply for bank funding are successful, according to Banjo, research shows that only 6 per cent of rejected applications turn to non-bank lenders. This suggests that there is a need for further education within the sector about alternative finance in order to remove pre-conceptions or stigmas.

James Scurr Founder and Managing Director | Cashflow It Group www.cashflowit.com.au www.franchisefinanceaustralia.com.au

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Chapter 11

Ensure the Success of Your Business John Ford | Assistant Commissioner Australian Taxation Office

About the Author Assistant Commissioner John Ford is the Program Lead for the ATO’s Risk and Strategy – Employer Obligations portfolio. He is responsible for leading the ATO’s approach to supporting employers to meet their Superannuation Guarantee, Fringe Benefits Tax and Pay as You Go Withholding obligations.

John has been with the ATO for 21 years and has held Assistant Commissioner roles in Integrated Compliance and Superannuation & Employer Obligations.

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A

mongst the plethora of information to consider when setting up or buying a franchise, knowing and meeting your tax and super obligations for your workers is an essential factor to ensure the success of your business. Depending on whether your workers are employees or contractors, there are a number of obligations that you as their employer need to meet.

These employer obligations include helping your employees meet their end-of-year tax liabilities by collecting pay as you go (PAYG) withholding amounts from payments you make to them, reporting and paying superannuation guarantee (SG) for eligible employees and also reporting on and paying fringe benefits tax (FBT).

Are you hiring employees or contractors?

Your tax and super obligations will vary depending on whether your worker is an employee or contractor. At a high level, an employee works in your business and is a part of your business, whereas a contractor is running their own business.

The Australian Taxation Office (ATO) outlines six factors that, taken together, will help you determine whether a worker is an employee or contractor for tax and super purposes. There isn’t one factor that makes a difference on determination on its own which is why you need to consider the whole working arrangement 1. Ability to subcontract/delegate

An employee can’t subcontract/delegate the work – meaning they cannot pay someone else to do the work in their place where a contractor can subcontract/ delegate the work – meaning they can pay someone else to do the work in their place.

2. Basis of payment

An employee is paid either: for the time worked, a price per item or activity or by commission where a contractor is paid for a result achieved based on the quote they provided.

3. Equipment, tools and other assets

An employee is either provided with all or most of the equipment, tools and other assets required to complete the work or the business grants the employee allowances or reimbursement for the cost of equipment, tools and other assets. A contractor will provide all or most of the equipment, tools and other assets required with no allowance or reimbursement for the cost of these.

4. Commercial risks

An employee takes no commercial risks; your business is legally responsible for the work and liable for the cost of rectifying any defect in the work. A contractor takes a commercial risk; they are legally accountable for their work and liable for the cost of rectifying any defect in their work.

5. Control over the work

The way in which an employee works is directed by your business, whereas a

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contractor has the freedom to decide how the work is done, subject to the specific terms in any contract or agreement.

6. Independence

An employee is working within and is considered part of your business where a contractor is operating their own business independently. Contractors perform services as specified in their contract or agreement and are free to accept or refuse additional work.

If you hire employees, you will need to: • Withhold tax (PAYG Withholding) from their wages and report and pay the withheld amounts to the ATO • Pay super, at least quarterly, for eligible employees • Report and pay FBT if you provide your employee with fringe benefits.

If you hire a contractor: • They generally look after their own tax obligations, so you are not required to withhold from payments to them unless they don’t quote their Australian Business Number (ABN) to you, or you have a voluntary agreement with them to withhold tax from their payments.

• You may still have to pay super for individual contractors if the contract is principally for their labour • You don’t have FBT obligations.

It should be noted that it is against the law to treat an employee as a contractor wrongly, so you need to check that you’ve got it right. The ATO has developed a tool you can use to help you get this right; it’s called the Employee/Contractor decision tool and can be found on the ATO website. If you’re unsure about your circumstances, you should seek independent advice or request a private ruling.

PAYG withholding Once you’re an employer and have determined the correct classification of your workers, you have a role to play in helping your employees to meet their tax obligations.

You do this by collecting PAYG withholding (PAYGW) amounts from payments you make to your employees, other workers – such as contractors that you have voluntary agreements with, and businesses that don’t quote their ABN. In order for you to know the correct amount to withhold, your employees must complete a Tax file number declaration.

You must register for PAYG withholding before you are first required to withhold an amount from a payment. You can register (or cancel) your PAYG withholding business account: - online through our Business Portal - through your registered tax agent or BAS agent

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- using your Standard Business Reporting compatible software - by phoning our business line if you’re an authorised business contact – 13 28 66.

If you cease to be an employer, you should cancel your PAYG withholding registration When it comes to tax time, you do not need to provide your employees with payment summaries for information you report and finalise through Single Touch Payroll. This information will be made available to your employees through ATO online services via myGov. You need to make a finalisation declaration by 14 July each year. When you have made the finalisation declaration, your employee’s information will display as ‘Tax ready’ in ATO online services via myGov. If you do not report using Single Touch Payroll, you still need to provide payment summaries.

It’s important to remember PAYG withholding is different from payroll tax as payroll tax is a state tax.

Superannuation Guarantee Now that you’ve set your employees up for the end of the financial year, it’s time to think about the vital role employers play in providing for their employees’ retirement.

Superannuation Guarantee (SG) refers to the minimum you must pay towards your worker’s retirement; currently standing at 9.5% of an employee’s ordinary time earnings, and is paid in addition to the salary and wages you pay your employees.

Any employee you pay $450 or more (before tax) in a calendar month, regardless of whether you employ them on a full-time, part-time or casual basis, is eligible for super.

Employees under the age of 18 or working in a domestic or private nature (e.g. a nanny) will also need to work for more than 30 hours per week to qualify for super.

Importantly you also need to consider whether your contractors, company directors and temporary residents are eligible. This is generally the case where they are engaged by you principally or wholly for their labour.

Remembering when and where you have to pay super is just as important as paying the right amount. At a minimum, you must pay SG on a quarterly basis by 28 October, 28 January, 28 April and 28 July. All businesses must pay SG using SuperStream, which allows you to pay by electronic funds transfer or BPAY® to super funds. Contributions are considered paid when the fund receives them, so you need to take into account processing time to ensure you meet these quarterly due dates.

Making SG payments on time means you can claim those amounts as a tax deduction.

This also includes additional contributions you have paid on behalf of your employee under a salary sacrifice arrangement. These deductions can only be claimed for payments the fund received during the relevant financial year.

If you underpay, do not pay, or pay your super obligations late, you must lodge a super guarantee charge (SGC) statement and pay the superannuation guarantee charge to the ATO by the quarterly due date – one month after the SG due date. Unfortunately, as you

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have not met your full obligations on time, you will have to pay extra interest (which is then paid by us to your employee). You will also have to pay an administration fee per employee of $20, per quarter, and you will need to calculate and pay the SGC based on your employee’s total salary and wages and not ordinary time earnings – which is generally a higher amount.

In 2019 we released a new SG employer obligations online course to help employers better understand their super requirements. We recommend all employers take the time to take the course to make sure they are on track with the SG obligations. If an employer is identified as not paying the correct amount of SG, we can direct them to complete the course. You don’t have to do the whole course in one sitting – you can make a start now and continue later.

Fringe benefits tax As an employer, you may want to provide your employer’s benefits on top of their agreed salary and wages. These can be in the form of salary sacrifice arrangements, allowing employees to use a work car for private purposes, giving employees a discounted loan or entertainment such as free tickets to events and Christmas parties. These are known as fringe benefits and are subject to fringe benefits tax (FBT).

FBT is separate to income tax and is calculated on the taxable value of the fringe benefit.

If you are providing your employees something worth money, then it is usually subject to FBT. As an employer, you must self-assess your FBT liability for the FBT year (1 April to 31 March) and lodge an FBT return. As an employer, you can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT you pay. You can also generally claim GST credits for items provided as fringe benefits.

An important FBT exemption to keep in mind is when you, as an employer, are providing your employees help in emergencies. In emergency situations like natural disasters, providing immediate relief to employees who are impacted (or potentially impacted) is exempt from FBT where the assistance is for: • first aid or emergency health care • emergency meals, food supplies, clothing, accommodation, transport or use of household goods • temporary repairs.

If you or your business are affected by a disaster, we understand tax will be the last thing on your mind. We have a hotline you can call for assistance in getting your tax back on track once the emergency has passed – 1800 806 218.

We have an FBT guide for employers available on our website and can be downloaded as a PDF. It contains comprehensive information on all things FBT.

Single Touch Payroll So how do you report all of these obligations? Single Touch Payroll (STP), is a new way of reporting tax and superannuation information to us.

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Previously, only large employers with 20 or more employees were required to be reporting through STP, but as of 1 July 2019, all employers are required to be reporting through STP enabled software.

If you are a micro employer with one to four employees, there are a range of options for you to report through STP including no-cost and low-cost STP solutions such as simple payroll software, mobile applications and portals.

You also have the option to get your registered tax or BAS agent to report on your behalf.

They can do this quarterly, rather than each time you run your payroll. This option will be available until 30 June 2021. You’re registered agent had until 28 February to apply for this concession, if they have missed the cut-off, they can still apply on your behalf, and the ATO will consider your application.

Small employers with Closely Held payees such as family members of a family business, Directors, shareholders or Trust Beneficiaries, will need to start reporting these payees from 1 July 2020. There will be an option to communicate these payees on payday or every quarter, the ATO will be providing more information on this over the coming months.

STP enables you to report your tax and super information to the ATO every payday. You can continue to pay your employees weekly, fortnightly or monthly while your STP software sends us the information we need from you, such as: • salaries and wages • pay as you go (PAYG) withholding • super liability information Super funds also report to the ATO when you make your super contributions to your employees’ chosen or default fund. The introduction of STP allows the information reported through STP to be matched to the ATO’s employer and employee records. This system enables the ATO to ensure that employees are paid their correct entitlements.

Where to get help We recommend speaking with your trusted advisor about your tax and super obligations, but we are also here to help. You can engage with us online using our virtual assistant on ato.gov.au, join our online forum ATO Community to ask questions and share information, or call our business line on 13 28 66.

John Ford | Assistant Commissioner Australian Taxation Office ato.gov.au/business ato.gov.au/franchise

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Chapter 12

Using Consultants to Improve Your Franchise Peter Buckingham | Managing Director Spectrum Analysis Australia Pty Ltd

About the Author Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, the leading Melbourne based mapping, demographics and analytical consultancy.

Peter was a Federal Director and Vic / Tas Chapter President of the Institute of Management Consultants. Spectrum specialises in assisting clients with decisions relating to strategic decisions around territories and site location using various scientific and statistical techniques.

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C

onsultants need to have a defined purpose if they are to benefit you. They should be an investment in your business to improve it and generate a few times their costs. If you think of using a consultant as an expense, you have the wrong approach.

Think of it as an investment to generate a good return for your dollar, and then you are heading in the right direction.

Many of the big names of the franchise industry, in their semi-retirement, hang out the shingle to offer their services to anyone who believes their story and also become a ‘consultant’. Interesting how their views on consultants can change!

Whether you are a franchisor or a franchisee, the offer of a ‘let me make it right for you’ solution can be either an effective fix or an expensive exercise for your business.

There are many different varieties of consultants in this industry, including: • General franchising consultants • Site selection consultants • Franchisee sourcing and selection consultants • Marketing consultants • Brand consultants • Demographic consultants • Security consultants And professions that are, in my view, consultants as well: • Accountants • Lawyers • Banking advisors

How do you pick a consultant to assist you? How do you work with them to achieve what you are looking for?

The first thing I say is that you are not hiring a consultant by the hour, but rather for the years of experience they bring to the issues you need assistance with. Most good consultants come with the necessary expertise and reasonable academic qualifications.

There are also qualifications issued by groups such as the FCA (Franchise Council of Australia), the AIM (Australian Institute of Management) and the IMC (Institute of Management Consultants).

When you go to a doctor, a lawyer, an accountant or a surgeon, you know they have achieved a professional level to be allowed to work in their profession. Unfortunately, there is no such requirement of consultants across Australia, and the right to ‘hang out a shingle’ is one anyone can do, whether they have the experience, qualifications, or have just run a hot dog stand!

Good consultants, like lawyers, should be both qualified and keeping up to date with their area of expertise. The FCA runs programs aimed at professional development for

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the ‘suppliers’ to the industry and offers qualifications to recognise this – including the CFE. A qualification issued by the IMC (worldwide) is called the Certified Management Consultant (CMC) and held in similar esteem to the CFE in franchising. It is only granted to experienced consultants who demonstrate the correct process in the projects they undertake.

How do you choose a consultant?

You want to engage a consultant who has the qualifications, expertise and experience to solve your issues. Value is the key to hiring a consultant, both in what they can deliver to you in terms of benefits, compared to the costs they incur to you. Think in terms of dollar benefit compared to the price. If all you are concerned about is the cost side of the equation, then remember you get monkeys if you pay peanuts. If you wish to ask for a quote, just make sure you are comparing like to like. It is very easy for someone to hang up a shingle and claim they are a consultant (at a low cost) and can do everything!

I also suggest you think of your lawyers and accountants as consultants. It amazes me how we will be talking to a client, and when asked about their lawyers, we hear they are using their local suburban lawyer - this to me would be similar to asking a divorce lawyer to handle your commercial franchise agreement. In my past life in Caltex as a property manager, it always annoyed me when a lessor would use his suburban lawyer to try and re-write the lease document or the franchise agreement, that was the standard from the Law Institute or stipulated by Government decree.

Specialist franchising lawyers and franchising accountants are there to handle franchise issues.

Another area you may want to ask a consultant about is, do they have suitable Professional Indemnity Insurance and Public Liability Insurance? If there is a problem based on advice or actions you have taken following a consultant’s recommendations that have cost you a large amount of money, you may want to seek legal recourse.

How do you brief a consultant?

My suggestion is to have a list of what you wish to achieve. That may be broad things like: • Find me suitable locations to open new stores • New marketing image • Develop our strategic plan • Establish our territory planning correctly • Improve revenue • Improve our website • Implement a process for site selection

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• Reduce risk from legal issues • Develop an online operations manual These may come from your business plan, a strengths, weaknesses, opportunities and threats (SWOT) analysis, or just areas that you see are causing problems in your business Once you know the areas you need assistance in, construct a simple brief, possibly with some measurable achievements: • Implement a local marketing campaign where we expect five per cent coupon returns • Improve revenue by 20 per cent average within 12 months • Achieve 10 per cent improvement in mystery shopper score for my site.

This is often a process more about educating yourself on what you want to achieve, rather than just saying to a consultant “fix everything”.

How do you engage a consultant?

Once you have it clearly in your mind what you wish to achieve, then it is the consultant’s job to convince you that they can do it, and meet your expectations in a timely, and costeffective manner.

This may involve replying to your brief, forwarding a proposal which may include references and relevant experience in similar jobs, and who will be engaged on your project, and their experience and qualifications.

Once you are satisfied that this will achieve your aims, then you engage the consultant to undertake the specified work that has been agreed on.

Summary Engaging a consultant is a balance between benefits they can achieve for your business, and cost or risk reduction for your business. Having a clear idea in what you want to achieve, you can brief the consultant, and measure their performance for your business.

Don’t be misled by low costs, under qualified and inexperienced consultants.

The consultant you engage must be of value to your business, so select well, as they can generate good money for your business, and in some cases, turn your business completely around for the better.

Peter Buckingham Managing Director | Spectrum Analysis Australia Pty Ltd (03) 98300077 0r 0411604921. peterb@spectrumanalysis.com.au

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What is a Franchise?

Franchise Listings categories: Automotive Products & Services:................................................................................... 72 Business Services:............................................................................................................................ 73 Courier Services:. .............................................................................................................................. 75 Food:................................................................................................................................................................. 76 printing & copying:. ......................................................................................................................... 79 Retail:.............................................................................................................................................................. 80

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Automotive Products & services

Snap-on Tools PO Box 677, Seven Hills Nsw 2148 Phone: (AUS) 1800 762 766 Email: sota.franchise@snapon.com| Web: www.snaponfranchise.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Snap-on Tools is a mobile franchise operation putting high quality tools and equipment into the hands of mechanics, engineers and other professional tool users across the country.

Date of first franchise: 1988

Snap-on Tools is a subsidiary of Snap-on Incorporated, a manufacturer of tools, diagnostics and equipment solutions for professional technicians, with an established network of franchise operations across the globe.

After 30 years in the Australian market, Snap-on continues to perform, providing robust financial results for its network of over 175 franchisees.

Membership: FCA, FANZ Training provided: Extensive training and ongoing support is provided – no previous experience required.

Territories available: Territories available across Australia and New Zealand

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 175+

FINANCIAL DETAILS: Initial franchise fee: $20,000 +GST Minimum investment: Start up cost from $42,000 Financial assistance: Snap-on offers and exclusive finance package to assist new franchisees

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What is a Franchise?

Business Services

InXpress Australia & New Zealand 3/14 Burke Crescent, North Lakes, QLD Contact: Geoff Hargreaves | Phone: 1300 097 857 Email: sales.au@inxpress.com | Web: inxpressfranchises.com

BUSINESS DESCRIPTION: InXpress is a multi-award-winning global logistics consulting company. InXpress has established strong relationships with trusted courier partners globally, with access to highly competitive rates for SME customers.

This gives you the opportunity to build your own successful business with the security of the world’s largest franchisor of global courier services.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 380+ world-wide 46 in Australia & New Zealand FINANCIAL DETAILS: Initial franchise fee: $64,950 in Australia Royalty fee: % Advertising/marketing fee: N/A

COMPANY DETAILS: Date of first franchise: Established in 1999 Membership: FCA Training provided: Yes Territories available: Non-geographical

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Business FranchiSe Guide

Business Services

IWG PLC Lvl 23, 52 Martin Place, Sydney NSW 2000 Contact: Mark Bhardwaj | Phone: +61 438 455 035 Email: mark.bhardwaj@iwgplc.com | Franchise.AU@iwgplc.com Web: www.iwgplc.com | franchise.iwgplc.com BUSINESS DESCRIPTION:

COMPANY DETAILS:

Join the leaders of the fast-growing workspace & coworking market.

Date of first franchise: Regus was established in 1989, and pioneered flexible workspace. IWG plc was created in 2016 as the holding group for Regus, Spaces, HQ and Signature by Regus.

IWG is leading the workspace and coworking revolution. Their multiple brands, such as Regus and Spaces help more than 2.5 million people and businesses to work more productively - with an emphasis on flexibility and efficiency. They do this by providing a choice of professional, inspiring and collaborative workspaces, communities and services. Digitalisation and new technologies are transforming the world of work and people want the personal productivity benefits of living and working how and where they want. Businesses want the financial and strategic benefits - that’s how the International Workplace Group lead the way!

Membership: FCA Training provided: Yes Territories available: Australia-wide FINANCIAL DETAILS: Initial franchise fee: $50,000 Minimum investment: $1M Length of agreement: 10 + 5 + 5 years

Change your working world!

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Courier Services

Aramex (Formerly Fastway Couriers) Level 9, 491 Kent Street Sydney NSW 2000 Australia Shed 5, Lever Street, Ahuriri, Napier 4112 Phone: 1300 3278 929 (AUS) | 0508 692 726 (NZ) Email: fso@fastway.com.au | recruitment@fastway.co.nz Web: www.aramex.com.au| www.aramex.co.nz

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Aramex has been operating internationally for almost 40 years. In New Zealand and Australia, we began as Fastway Couriers over 35 years ago, joining the Aramex family in 2016.

Date of first franchise: 1984 (NZ) 1994 (AUS)

The Aramex network across New Zealand and Australia now includes 40 regional franchises and over 1200 franchise partners. We offer our franchise partners an award-winning system, world-class technology, training and support to help them to run their own rewarding business in their local communities.

Territories available: Territories available across Australia and New Zealand

Training provided: Extensive training and ongoing support is provided – no previous business experience required.

REGIONAL FRANCHISES AUSTRALIA: Current: 29 REGIONAL FRANCHISES NEW ZEALAND: Current: 18

FINANCIAL DETAILS: Initial franchise fee: Available upon application Minimum investment: Dependent on territory. Please visit our website to see current opportunities.

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food

Boost Juice Chadstone Shopping Centre - Level 1, Tower 2, Chadstone Place, 1341 Dandenong Road, Chadstone VIC 3148 Contact: Ali Kurtdereli | Phone: 03 8593 4546 Email: boostinfo@retailzoo.com.au | Web: https://www.boostjuice.com.au/franchising/

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: Boost Juice is one of the world’s most famous and loved smoothie and juice brands. With its winning combination of fresh fruit and love life ethos, Boost Juice offers a healthy alternative to fast food and strives to have customers leave feeling just that little bit better. For further information regarding franchising with Boost, get in touch with Boost franchising today!

Current: 580

FINANCIAL DETAILS: Initial franchise fee: $41,000 Minimum investment: $220-350,000 + GST Royalty fee: 8% Financial assistance: N/A

COMPANY DETAILS:

Advertising/marketing fee: 3%

Date of first franchise: 2000 Membership: FCA Training provided: Yes, at a cost of $14,000 +GST Territories available: Yes

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food

HOG’S AUSTRALIA’S STEAKHOUSE Level 1, 152 Shore Street, Cleveland QLD 4163 Contact: Greg Miller | Phone: 07 3488 6900 Email: bosshog@hbca.com.au | Web: www.hogsbreath.com.au

Territories available: Metropolitan and Regional states throughout Australia

BUSINESS DESCRIPTION: Hog’s Australia Steakhouse is home to the famous 18 – hour slow cooked prime rib steak and curly fries. A much loved family restaurant, Hog’s recently celebrated 30 years of operation and boasts 60 restaurants across Australia.

FRANCHISE OUTLETS AUSTRALIA: Current: 60

FINANCIAL DETAILS: Initial franchise fee: $50,000 AUD (excluding GST)*

COMPANY DETAILS: Date of first franchise: Established in Airlie Beach in 1989, first franchise store in 1990. Hogs recently celebrated 30 years of operation.

Minimum investment: Dependent on location and size or resale, From $250k Royalty fee: 5% of Net Sales* Advertising/marketing fee: 2.5% of Net Sales*

Membership: FCA Training provided: Hog’s eight week Franchise Training Program covers: Management procedures, Front of house and back of house procedures, account management, introduction to the support office team, and in-depth theoretical and practical instruction. We also provide comprehensive operations, kitchen and staff training manuals. There’s and additional 3 weeks of in-store training for new restaurant opening’s. Dedicated Business Coach visitation and on call for franchisees.

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food

theobroma 3A Kia Court, Preston VIC 3072 Contact: Ben | Phone: (AUS) +61 431 727 004 Email: Ben@theobroma.com.au | Web: www.theobroma.com.au

A professional team backs the franchise at Theobroma with extensive franchising, marketing and retail experience.

BUSINESS DESCRIPTION: Theobroma is a Total Food and Beverage Concept offering consumers high quality chocolate and chocolate beverages with the added enhancement of a full food menu, with some stores even offering a licensed venue.

From handcrafted artisan chocolate jewels using real Belgian Coverture chocolate to hot and cold chocolate beverages, desserts, melted chocolate dips and retail products, there is something for everyone and for every occasion.

COMPANY DETAILS: Date of first franchise: 2007 Training provided: 3 weeks and ongoing support Territories available: Australia, New Zealand and International

Our coffee is roasted locally using a signature 5 bean blend of 100% arabica beans for that perfect taste.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 5 stores in Melbourne 4 stores in New Zealand 1 Store in the UK.

FINANCIAL DETAILS:

All this enhances the commercial viability and strength of the business model. The brand has 4 concepts - Lounges, Lounge Bars, Pavilions, Pavilion Bars.

What the Franchise Offers • Innovative and unique concept that includes all of life’s pleasures. Chocolate, Coffee, Food, Alcohol and Retail.

• Highest quality chocolate products.

• Professional team with a range of skills to assist you.

• Easy to manage and full training provided.

• Site selection, fit-out expertise and property leasing experience.

Initial franchise fee: $40,000 Minimum investment: $150,000 to $500,000 Royalty fee: 6% Financial assistance: referral available Marketing fee: 3%

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printing & copying

Snap Print & Design (Snap Franchising Limited) Ground Floor, Building D, 12-24 Talavera Road, North Ryde NSW 2113 Contact: Matt Sandford | Phone: 02 8870 5100 Email: franchiseenquiries@snap.com.au | Web: https://www.snap.com.au/

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: Boasting a 120-year history in the print industry and with 40 years in franchising, SNAP is 100% Australian owned and operated. We have 140 Snap Centres locally and we’re internationally franchised in Ireland and New Zealand. SNAP is one of the most recognised brands in Australia with a reputation for fast, personalised service and high-quality print and design solutions. SNAP caters to all business print needs, from marketing materials and business stationary through to signage.

Current: 150+ (Australia and New Zealand) FINANCIAL DETAILS: Initial franchise fee: POA Minimum investment: $50,000 Royalty fee: 8% Financial assistance: No Advertising/marketing fee: 2%

COMPANY DETAILS: Date of first franchise: 1979 Membership: FCA (Franchise Council of Australia) Training provided: Full training provided & ongoing support Territories available: Australia and New Zealand

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retail

7-ELEVEN STORES PTY LTD Building 2, 658 Church St, Richmond Vic 3121 Phone: (AUS) 03 9550 0600 - VIC, (AUS) 02 9798 1200 - NSW, (AUS) 07 3291 9400 - QLD Web: www.7elevenfranchise.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

7-Eleven is a global success story with more than 59,000 stores world-wide.

7-Eleven Australia is growing rapidly and you can be a part of the growth opportunities by becoming a 7-Eleven Franchisee.

Date of first franchise: 1977 Membership: FCA, AACS Training provided: Our extensive training program includes classroom, in-store hands on training and also support in your store during your first four days of trading.

As a 7-Eleven Franchisee you will benefit from our position as market leader. Our business is committed to being the best in Australia in convenience retailing, we will work with you to deliver our market leading customer offer. We are continually investing in innovation, delivering compelling customer marketing and promotional campaigns, and evolving our offer to meet customer needs.

Territories available: VIC, NSW, QLD, ACT, WA FRANCHISE OUTLETS AUSTRALIA: Current: 700+

FINANCIAL DETAILS: Initial franchise fee: Site specific Minimum investment:

You will be backed by our comprehensive support system. Our system gives you a complete turn-key set up including industry leading POS systems and extensive training and operational support services.

$400,000 - $1,000,000 (site dependent) Royalty fee: Gross profit split, determined progressively.

Other income stream profits, such as commissions, are also shared.

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automotive products & services retail

Amber Group Aust P/L Po Box 783, Kings Langley NSW 2147 Contact: Greg Lynch | Phone: 02 9621 0400 Email: glynch@ambertiles.com.au | Web: www.ambertiles.com.au

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA:

Established in 1973, Amber is Australia’s largest network of paving and tile retail franchises. Amber has over 46 years’ experience in providing hard flooring advice, service and solutions to customers in the core business areas of floor tiles, wall tiles, natural stone, pavers, retaining walls and associated products. Strong brand and strap line – Amber has the answer…

Current: Current 22 Franchise Stores – 8 Company Owned – Group 30 FINANCIAL DETAILS: Initial franchise fee: Nil Minimum investment: $150k - $350k plus stock (Dependent on store).

Royalty fee: Average 3.75% Advertising/marketing fee: 3.25% Metro + 1% Local

COMPANY DETAILS: Date of first franchise: 1996 Membership: FCA Training provided: Initial and & ongoing training and support in business & product.

Territories available: NSW, ACT & QLD

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retail

Beaumont Tiles National Office: 225 Marion Rd, Marleston SA Contact: Greg Stock (SA & VIC) 0498 005 785| Marcus Allchin (NSW & QLD) 0418 791 088 Email: franchiseenquiry@tile.com.au | Web: www.beaumont-tiles.com.au

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA:

Beaumont Tiles are Australia’s largest tile group bringing the best and latest to our Australian customers - we supply more tiles to Australian homes and builders than any other tile retailer. We are proudly unique in what we do and how we do it and each and every person is valued for their contribution and input.

Current: 91 franchise stores as part of our 117 strong store network.

FINANCIAL DETAILS: Initial franchise fee: $45,000 + gst which includes opening promotion and advertising costs.

Minimum investment: Indicative Range $265,000 - $335,000 + gst

COMPANY DETAILS:

Royalty fee: 4%

Date of first franchise: 1990 (very first), & new franchise system 2004

Advertising/marketing fee: Group advertising and marketing levy 5%

Membership: FCA (Franchise Council of Australia) Training provided: Extensive in house training program provided Territories available: NSW, VIC, QLD and SA

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retail

TSG PO Box 4296, Ringwood VIC 3134 Contact: Head Office | Phone: 03 8873 7900 Email: enquire@tsgfranchise.com.au | Web: www.tobaccosg.com

BUSINESS DESCRIPTION:

COMPANY DETAILS:

The TSG story began over 20 years ago as a single store and it was from this moment that we made a commitment to our customers and our franchisees to be best in class within retail.

Date of first franchise: 1996 Membership: FCA Training provided: Yes Territories available: All

With instant brand recognition and an elite level of professional operational excellence unlike any other, TSG lead the way in providing innovative franchise solutions and best practice franchise management for our franchisees. Some key differentiators are our bright vibrant design, clear brand vision, unique retail experience and our ability to offer franchisees an innovative retail strategy.

FRANCHISE OUTLETS AUSTRALIA: Current: > 470 FINANCIAL DETAILS: Initial franchise fee: $6000 Minimum investment: $150K - $200K Royalty fee: Annual fixed fees ($4620) Franchise + $360 IT Support) Financial assistance: No Advertising/marketing fee: N/A

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Professional Services categories: Financial Institutions. ................................................................................................................ 86 insurance................................................................................................................................................... 87 Lawyers........................................................................................................................................................ 88 Support Services & Consultants..................................................................................... 91

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Financial Institutions

Franchise Finance Australia Level 1, 349 Coronation Drive, Milton QLD 4064 Contact: Dan Toms | Phone: 1300 869 196 Email: info@franchisefinanceaustralia.com.au Web: www.franchisefinanceaustralia.com.au BUSINESS DESCRIPTION: About Us Franchise Finance Australia is a specialist funder to the franchise sector. We have unrivalled knowledge of franchisees funding requirements as well as direct relationships with the franchise networks operating in Australia. Founded in 2014 by directors with a background in franchising, we have remained committed to offering flexible funding solutions that allow franchisees to start a new business or improve their existing business.

Why Choose Franchise Finance Australia?

• Competitive Rates • 24/7 Customer Service • Preserve Precious Capital • Fast Online Application Process • Terms Start From Just 12 Months • Flexible End Of Term Options • Repayments Can Be 100% Tax Deductible

What Can We Fund?

Franchise Finance Australia can finance new & used equipment, fitouts and refurbishments including: • New Store Fitouts • Store Refurbishments • Business Re-sales • New Equipment Purchases • Used Equipment Purchases • Vehicles, Trailers & Vehicle Fitouts • Change of Ownership & Re-Sale requirements • Refinancing Existing Finance Contracts - 86 -

insurance

NATIONAL FRANCHISE INSURANCE BROKERS (NFIB) 10 William St , Perth , WA 6000 Contact: Darryl Morris | Phone: (AUS) 1800 776 747 Email: info@mynfib.com.au | Web: www.mynfib.com.au

BUSINESS DESCRIPTION: NFIB meets the Australian demand for a dedicated online provider of insurance cover for franchisees, franchisors and franchised businesses.

How NFIB can help?

Franchisors are always looking to provide a value adding facility for their franchisees.

Many “blue chip� franchise systems have taken advantage of the NFIB on-line insurance solution to provide this to their franchisees.

When Managed Program franchisees visit our site, they will arrive at a dedicated online area with access to a compliant insurance program created specifically for their franchise business.

All information about that franchise will be pre-populated.

To make things even simpler, all Managed Program insurance policies have common due dates.

This creates a win/win situation with NFIB assisting franchisees to save on their insurance costs and you, as the Franchisor, have one less headache when it comes to confirming that each franchisee has insurance which complies with the franchise agreement.

In Business Since: Established in 2010

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lawyers

MADGWICKS LAWYERS Level 6, 140 William Street, Melbourne, VIC 3000 Contact: Chris Verebes | Phone: (AUS) 03 9242 4744 Email: chris.verebes@madgwicks.com.au | Web: www.madgwicks.com.au

BUSINESS DESCRIPTION: Franchising in Australia is a regulated environment. When considering establishing a franchise system, entering into a franchise agreement or navigating a dispute with a franchisee or franchisor, it is important that you use a law firm with extensive knowledge of the franchising business model and the Australian legal landscape.

Madgwicks is a full service business law firm.

Our team of experienced lawyers regularly advise franchisors, franchisees and franchise industry service providers.

Our lawyers also have extensive experience advising groups that operate under similar business structures, including cooperatives and strategic alliances.

We regularly advise on: Franchise system establishment | Franchise due diligence | Franchising Code of Conduct compliance | Franchise agreements and disclosure documents | Business structures appropriate for franchise systems | Supplier and terms of trade agreements | Commercial and retail leasing, as well as general property advice

| Trade practices advice, including ACCC notification/authorisations | Acquisition, disposal, joint venture and partnership advice | Employment and workplace relations | Tax, duty and GST advice | Branding, intellectual property and trade marks | Litigation and dispute resolution Madgwicks’ Franchising team is an active member of the Franchise Council of Australia and has an established network of accountants, business advisors and brokers to assist our clients when required.

Madgwicks also provides clients with the benefit of our international affiliation with Meritas, connecting them with member firms across Australia and globally, providing expertise wherever they need it.

In Business Since: 1973

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lawyers

Marsh & Maher richmond bennison Lawyers Level 2, 100 Wellington Parade, East Melbourne VIC 3002 Contact: Robert Toth | Phone: 03 9604 9400 Email: robert@mmrb.com.au | Web: www.marshmaher.com.au BUSINESS DESCRIPTION: Wow, what a year in franchising it was in 2019 and 2020 looks just as dynamic!

Our franchise group have been extremely busy advising new Franchisees, establishing new Franchise Systems and advising Overseas Franchisor’s and Companies, as well as Dispute Resolution and Mediation.

Our Franchise, Licence and Distribution Group has over 30 years industry knowledge and experience. Members of the Franchise Council of Australia (FCA), the International Franchise Lawyers Association (IFLA) and the US Commercial Service.

We can assist clients with: • Development and Advice on establishing innovative new models; • Company Structures; • Master Franchising; • Advising International franchisors; • Franchise Code Compliance; • IP and Trade Mark advice; • Leasing; • Dispute Resolution and Mediation We provide clients with fixed fees based on the scope of services and offer a long-term supportive role.

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lawyers

Stewart Germann Law Office Ground Floor, 2 Princes Street, Auckland PO Box 1542, Auckland 1140, New Zealand Contact: Stewart Germann | Phone: (NZ) +64 9 308 9925 Email: stewart@germann.co.nz | Web: www.germann.co.nz BUSINESS DESCRIPTION: Stewart Germann is acknowledged as New Zealand’s leading franchising lawyer and has over 35 years’ experience in this area.

Stewart Germann Law Office (SGL) is New Zealand’s longest established specialist franchising law firm and has won multiple awards in franchise law both nationally and internationally.

Stewart is a recognised national and international guest speaker at franchise conferences (New Zealand, Australia, USA) and he is listed in the International Who’s Who of Franchise Lawyers 2018. SGL’s clients include many of New Zealand’s best known national and international franchise brands and the firm has extensive franchising contacts worldwide and locally.

SGL was the winner of the Boutique Licensing Firm of the Year in New Zealand in the 2018 Corporate INTL Global Awards and has been selected by Best Lawyers in New Zealand in the area of Franchise Law for 2018. The firm has also been the winner of Lawyer International – Legal 100 – Law Firm of the Year – Franchise – NZ for 2018, winner of 2018 Global Law Experts Awards – Boutique Franchising Law Firm of the Year in New Zealand, winner of Corporate Livewire Legal Awards 2017/2018 – Franchise Lawyer of the Year – New Zealand, winner of Corporate USA Today Annual Awards 2017 – Law Firm of the Year – Franchise – New Zealand, and selected as Asia IP Experts – Licensing and Franchising 2016.

SGL belongs to the Franchise Association of New Zealand, the Franchise Council of Australia and the International Franchise Association (USA).

Stewart was instrumental in the formation of the Franchise Association of New Zealand in 1996 and he wrote the original rules, as well as being a Past Chairman and a current member.

Stewart was awarded Life Membership of the Franchise Association of New Zealand in 2014 in recognition of his significant contribution. He was also a board member of the supplier forum of the International Franchise Association (IFA) from 2001 to 2007. He is actively involved in international franchising and has published articles in the International Journal of Franchising Law. In 2018 the Franchise Council of Australia acknowledged Stewart for his “Outstanding Contribution to Franchising” in recognition of his longstanding legal service to franchising.

Stewart is a Notary Public and can witness documents for use in overseas jurisdictions and he is also a qualified mediator. Stewart regularly advises international clients on legal issues relating to franchising in New Zealand and welcomes enquiries from overseas.

In Business Since: 1993

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Support Services & Consultants

FC Business Solutions Contact: Corina Vucic | Phone: (AUS) 03 9533 0028 Email: hello@fcbs.com.au | Web: www.fcbs.com.au

BUSINESS DESCRIPTION:

MARKETING

We understand that in today’s complex, dynamic and evolving world, businesses require a variety of skills to navigate their goals and be successful.

• Branding & Experience

FC has the technical skills and the proven experience to help you. Performance, results and action is what drives our purpose. We are well-equipped to work with you to deliver results.

Our team are a performance house possessing the competencies to meet your needs.

• Design & Print • Marketing & Strategy • Digital Marketing • Website & Development • Analytics and Reporting • Conferences & Events OPERATIONS • Audits • Financial Modelling • Franchise System Modelling • Franchise Operations Manual • Online Manuals • Operations Support and Consulting • Strategic Growth Planning PEOPLE & CULTURE • Payroll Audits • HR Help Desk • HR Tools • Training and events • Executive Recruitment

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Helpful organisations APRA (Superannuation)

FAIR WORK OMBUDSMAN

GPO Box 9836 Canberra ACT 2601 Phone: (AUS) 1300 55 88 49 Website: www.apra.gov.au

GPO Box 9887 Your capital city Phone: 13 13 94 Website: www.fairwork.gov.au

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

FRANCHISE ASSOCIATION OF NEW ZEALAND

GPO Box 3131 Canberra ACT 2601 Phone: (AUS) 1300 302 502 or + 61 2 6243 1305 Website: www.accc.gov.au

Level 4, 51 Hurstmere Rd, (PO Box 33-676, Takapuna 0740), Takapuna, New Zealand, 0622 Phone: +64 9 274 2901 Fax: +64 9 274 2903 Website: www.franchiseassociation.org.nz

AUSTRALIAN FOOD AND GROCERY COUNCIL Locked Bag 1 Kingston ACT 2604 Phone: +61 2 6273 1466 Fax: +61 2 6273 1477 Email: info@afgc.org.au Website: www.afgc.org.au

AUSTRALIAN RETAILERS ASSOCIATION Level 1, 112 Wellington Parade, East Melbourne VIC 3002 Phone: (AUS) 1300 368 041 Fax: +61 3 8660 3399 Email: info@retail.org.au Website: www.retail.org.au

FRANCHISE COUNCIL OF AUSTRALIA Level 19, 567 Collins St Melbourne VIC Australia 3000 Phone: +61 3 9508 0888 Fax: +61 3 9508 0899 Email: info@franchise.org.au Website: www.franchise.org.au

OFFICE OF THE FRANCHISING MEDIATION ADVISER Suite 205, Level 2, 370 Pitt Street Sydney NSW 2000 Phone: 1800 472 375 Email: adviser@franchisingcode.com.au Website: www.franchisingcode.com.au

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SMALL BUSINESS ASSOCIATION OF AUSTRALIA PO Box 4936 GCMC QLD 9726 Phone: 1300 413 915

REAL ESTATE INSTITUTE OF AUSTRALIA www.reia.asn.au

VICTORIAN CHAMBER OF COMMERCE & INDUSTRY Level 3/150 Collins Street Melbourne VIC 3000 Phone: 03 8662 5333 Website: www.victorianchamber.com.au

WORKPLACE SAFETY AUSTRALIA Westfield Tower, Suite 1303, Tower 2, 101 Grafton Street Bondi Junction NSW 2022 Phone: +61 2 9387 1248 Fax: +61 2 9387 1488 Email: info@worksafe.com.au Website: www.worksafe.com.au

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Notes

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automotive products & services

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Index of franchises & services 7 Eleven................................................................................................................................................................................................................80 Amber Group.....................................................................................................................................................................................................81 Aramex (Formerly Fastway Couriers).................................................................................................................................. IFC, 75 Beaumont Tiles. ..............................................................................................................................................................................................82 Boost. .....................................................................................................................................................................................................................76 FC Business Solutions................................................................................................................................................................................91 Franchise Finance Australia...................................................................................................................................................................86 Hogs Breath.......................................................................................................................................................................................................77 Inxpress................................................................................................................................................................................................................73 Madgwicks. .......................................................................................................................................................................................................88 Marsh and Maher..........................................................................................................................................................................................89 National Franchise Insurance Brokers. ...........................................................................................................................................87 Regus (IWG)......................................................................................................................................................................................................74 Snap on Tools...................................................................................................................................................................................................72 Snap Print & Design.....................................................................................................................................................................................79 Stewart Germann Law Office................................................................................................................................................................90 Theobroma..........................................................................................................................................................................................................78 Tobacco Station Group - TSG................................................................................................................................................................83

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Tired of working for someone else?

Ready to be your own boss?

Worried about going it alone? this guide is your key to financial independence through franchising Franchising offers you the opportunity to buy a business with a proven system, business model and brand that people already know and trust.

This comprehensive guide will help you on your franchising path to success, utilising decades of experience from experts in the sector, featuring insightful chapters such as:

Supporting Successful Franchising

by Mary Aldred, CEO of the Franchise Council of Australia.

The Franchise Council of Australia (FCA) is the peak body for the nation’s $184 billion franchise sector. Mary has led the FCA in developing and delivering strategic priorities to strengthen the FCA’s role as an effective peak business organisation and advocate for a compliant, sustainable and profitable franchise sector.

Three Essential Steps in Franchise Research

by Mick Keogh, Deputy Chair of the ACCC. If you’re thinking about buying a franchise, it’s important that you understand whether it’s right for you before making a final decision or signing a franchise agreement. As Australia’s competition and consumer regulator, the ACCC enforces the Competition and Consumer Act (2010), which includes the Franchising Code of Conduct (the Franchising Code).

Along with: Franchisees’ Risks and Responsibilities, Dr Sudha Mani, Monash University Franchising in Australia and New Zealand, Rostom Manookian, DC Strategy Lawyers Is it About Price or Value When Choosing a Franchise? FC Business Solutions What to do Before Becoming a Franchisee, Dominique Lamb, National Retail Association Ensure the Success of Your Business, John Ford, Australian Taxation Office And many more!

Don’t miss the listings pages Featuring a selection of leading franchise systems available right now!

SUPPLIER FORUM

ISBN 978-0-6487795-1-3

9 780648 779513 >