Business Franchise July/August 17 Feature: Fixed V Mobile Franchising

VOL 11 ISSUE 05 july/august 2017

The future of Real Estate in Australia on the road again the realities of mobile vs fixed site franchising

Resources at your fingertips!

CURRENT TITLES INCLUDE: Business FRANCHISE Australia and New Zealand magazine The Magazine for Franchisees, Bi-monthly publication The Australian and New Zealand Business FRANCHISOR magazine The Magazine for Franchisors, Quarterly publication Australian and New Zealand Business FRANCHISE DIRECTORY Annual publication The FRANCHISE GUIDE Annual publication CGB’s website also provides an additional advertising and information format and complements our publications.

www.businessfranchiseaustralia.com.au

32 Business Franchise Australia and New Zealand

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Contents On the Cover Image: Property Guys

44

36 Cover story: The Future of Real Estate in Australia

Property Guys

48 Expert Advice: The Realities of Mobile V’s Fixed Site Franchising

Jason Gehrke, Franchise Advisory Centre

56 Expert Advice: On the Road Again

Robert Toth, Marsh & Maher Lawyers

34 What’s New! Feature news

56

38 Feature editorial: Fixed-Site V’s Mobile franchises

Which one’s for you?

42 Profile: Games 2u 44 Expert Advice: Where’s the Money? Know the financial differences

between Mobile & Fixed Site

Kate Groom, The Franchise Accountants Network & Smart Franchise

46 Have Your Say: Hog’s on the Road

Hog’s Australia

52 Showcase: Jim’s Pool Care 54 Expert Advice: Territories for Mobile Franchises… What you need to know

Peter Buckingham, Spectrum Analysis

60

58 Snapshot: Snap-on Tools 60 Expert Advice: Leasing the Franchise Premises: What a Franchisee

needs to know

Emma Heuston, LegalVision

A regular of Business Franchise Magazine, our special supplement in franchising showcases a different industry each issue To share your specific expert industry advice or to feature your franchise in the next issue, please contact: Kathleen Lennox, Sales & Marketing Manager Phone: 03 9787 8077 Email: kathleen@cgbpublishing.com.au

Business Franchise Australia and New Zealand 33

what’snew!

NATIONAL FIRST: Pizza Capers Launch Mobile Food Truck Pizza Capers first opened its doors in 1996 and began setting the bar for innovative, first to market franchise opportunities; they were the first to embrace and promote gourmet pizza options and as of July this year, will be the first national pizza franchisor to launch a gourmet mobile food truck.

Pizza Capers Managing Director Sherrie Halliwell said the mobile food truck is a fully functioning mobile pizza store that will operate in designated territories around Australia, and provides franchise partners with the unique opportunity to work flexible hours, from their own place, and to fit in with their lifestyle.

restrictions of a static traditional store.”

launch activities,” Sherree said.

“Our mobile business model not only taps into a new market of consumer, but also new potential franchise partners,” she said.

Pizza Capers is confident in the success of the exciting new business model and are opening up a limited time offer to entrepreneurial enthusiasts who are interested in starting their own mobile food truck business.

Food service companies are constantly innovating to take advantage of the everevolving trends in the industry, and mobile food trucks have developed into increasingly popular ventures over the past decade.

“With lower operational costs and the freedom to take the truck to numerous locations and events, it offers the ability to provide the Pizza Capers gourmet menu, without the costs and

“Those interested are now able to purchase a franchise for less than $50,000 startup cost inclusive of initial franchise fees, comprehensive training and local marketing

“The food truck movement is a rising trend and we can’t wait to fill the gap and begin catering for the demand that static stores are unable to cater to,” she said.

ACCC Takes Action against Car Wash Franchisor Geowash’s director, Sanam Ali, and National Franchising Manager, Charles Cameron, also purportedly engaged in the conduct. In particular, the ACCC alleges that from at least November 2015 to May 2016, Geowash made false or misleading representations that: The Australian Competition and Consumer Commission (ACCC) has applied to the Federal Court to commence proceedings against Geowash, a national car wash franchisor.

The ACCC proceedings will allege that Geowash made false or misleading representations and engaged in unconscionable conduct in breach of the Australian Consumer Law, and the good faith obligation in the Franchising Code of Conduct.

• Prospective franchisees could make revenues of $70,216 and estimated profits of $30,439 in an average 28-day period, when Geowash did not have reasonable grounds for making those representations; and • Geowash had a commercial relationship or affiliation with each of Nissan, Kia, Renault, Audi, Emirates, Shell, Hertz, Holden, Ikea, and Thrifty, when it did not.

According to the ACCC, Geowash directed a substantial portion of franchisee funds for purposes not permitted under the franchise agreement and not disclosed to franchisees.

34 Business Franchise Australia and New Zealand

“The ACCC investigated Geowash’s conduct following complaints from franchisees alleging that they had been misled about their establishment costs, and ultimately had not been provided with an operating car wash franchise,” ACCC Deputy Chair Dr Michael Schaper said.

“The ACCC was particularly concerned that, allegedly, franchisee funds were used for purposes other than those permitted by the franchise agreements, including as commissions paid to the director and franchise manager,” he continued.

If granted leave to commence proceedings against Geowash, the ACCC will seek declarations, injunctions, an order for the payment of pecuniary penalties, orders for non-party consumer redress, corrective notice orders, and costs, as well as orders disqualifying Ms Ali and Mr Cameron from managing corporations for a period of five years.

60 Years of Problem Solving From a single heel bar in Brussels, to a global 300 store retail franchise - Mister Minit is celebrating its 60th Anniversary. The retailer has evolved over half a century, and today fixes more than more than 10 million jobs each year in Australia, New Zealand and South East Asia.

From repairing designer pumps, stiletto heels and work boots, Mister Minit has diversified into a comprehensive range of personal and household services.

“Quality shoe repairs continue to be a large part of what we do, however many of our 4 million local customers each year also visit Mister Minit stores for our wide array of other services. Our brand has become synonymous with ‘real people fixing problems’,” said Chief Executive Officer, Mark Rusbatch.

Key cutting, personalised engraving and watch repairs are among the most popular services, with customers also visiting the retailer for mobile phone screen replacements and a choice of gifts. Since expanding into car keys and remote controls 20 years ago, Mister Minit has also become the market leader of spare car keys in Australia and New Zealand.

“One of the fastest growing trends right now is ‘do it for me’ and Mister Minit is equipped to be able to make the lives of time poor customers that bit easier by fixing their problems quickly and cost efficiently,” said Mark Rusbatch.

“It is wonderful to be celebrating our 60th Anniversary, and as we move through the next decade, we look forward to ‘fixing even more problems for more people’,” said Mark Rusbatch.

Select the right mobile solution: Requirements for mobility, and the dependence on data and collaboration for improved decision-making, are transforming the traditional business processes, triggering an increased demand for mobility solutions.

Ilan Rubin, managing director, Wavelink, says, “Mobility is inevitable in a corporate landscape where speed, instant access to business data, and immediate responses are the new norm. However, keeping a mobile workforce productive can be challenging.

Success depends on choosing the right partners, applications, and mobility solutions.”

Unified communications (UC) tools such as Skype for Business are changing the way employees communicate, share data, and enhance productivity. However, truly successful companies are leveraging the value of UC by deploying the same functionality to their mobile workers.

How to select the right mobile solution

1. User experience. There are more forms of communication than ever before and new technology is changing the way we do business. Yet some organisations are reluctant to invest in new solutions that employees might not use. Introducing a mobility solution to address end users’ needs can mean the difference between success and failure.

2. Environment. Certain business environments create unique obstacles for mobile workers. Organisations need to consider whether their mobile solution needs to be built to withstand harsh working conditions.

3. Process. Companies that have successfully integrated digital technologies, like mobility, have done so to transform how their businesses work. A good strategy considers the critical workflows of an organisation as well as its systems and processes.

4. Policy. Making mobile workers more productive is beneficial but not at the cost of

the business. Data protection policies should be configured to secure sensitive data and protect customer privacy.

5. Support. Enabling mobile workers to be more productive shouldn’t unduly burden the IT team. Businesses should choose solutions that make provisioning easy, provide remote management, have measures in place to facilitate troubleshooting, and offer a mix of maintenance and service plans.

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c ov er sto ry: Pr o pert y G u ys

Property Guys:

The future of Real Estate in Australia In recent years, Australia’s property market has been on the up and up. With house prices sky-rocketing across most capital cities, many property owners have experienced great success with their investment, and when it comes time to sell they want to know they are getting the most money possible for their investment.

That’s where Property Guys comes in.

Canadian foundations

Property Guys provides consumers with a real alternative to the traditional agent and the DIY proposition. Property Guys will provide sellers with a certified real estate agent, who will mentor the homeowner through the home sale process.

A community of professionals that include valuers, stylists, photographers, expert marketers (signage, advertising), legal, building inspectors and more, will also assist the homeowner. Property Guys will do this for a single, one-off fixed fee, starting at $4950.

Established in Canada in 1998, PropertyGuys.com has had great success in disrupting the Canadian property market, and is now taking the model global, first to Australia.

After 19 years of revolutionising the Canadian property market, Property Guys is coming to Australia and is searching for franchisees to build the network across the country.

Chief Executive Officer, Property Guys Australia, and owner of the Australian Master Franchise, Marcus Cann, describes the growth of the successful franchise; “PropertyGuys was established in Moncton, New Brunswick by current owners Ken LeBlanc, Jeremy Demont and Walter Melanson. After several years building a disruptive real estate model, they converted the system into a true franchise business in 2001. Since that time, they have built a national franchise system with over 120 franchisees and over 80,000 home sellers across Canada.

“They are now bringing the successful franchise system to Australia, and we are looking for the ‘Perfect Fit’. Licencees, franchise owners, PG Pros and strategic partners,” Marcus said.

“I met Ken, Walter and Jeremy over two years ago and was impressed with the model,” says Marcus. “I flew to Canada in September 2015 to fully study the business, and it’s franchisees for a month.

I also attended the week long, world-class ‘Property Guys University’ to be fully trained in the system and the culture.

“In late 2016, Ken approached me to say they were ready to launch in Australia and offered me the Master Franchise. Since then, I have spent six months ensuring the system is ready to go in Australia.

“My background of over 20 years in law, finance, property and technology means I am ideally placed to understand how a disruptive digital model is ready to change real estate forever,” Marcus said.

Property Guys in Australia “Australia and Canada are almost identical markets in terms of the number of properties, the number of properties sold,

36 Business Franchise Australia and New Zealand

“We are very similar culturally and more importantly, both countries have a passion for disruptive businesses and have the same level of adoption for franchise systems.”

Property Guys believes the international real estate market is broken.

“Property Guys has solved a 100+ year old real estate challenge. At one end of the market, consumers are being charged excessive commissions whilst being locked out of their own homes and with no access to a range of professionals who can assist them in selling their homes.

“At the other end, so called ‘DIY’ solutions are depriving consumers of the much needed advice from a range of professionals, leaving them without any expert guidance or support while selling their home. That’s where Property Guys comes in and connects buyers and sellers – without charging excessive commissions, all while providing a range of professional services to get the job done!” said Marcus.

Ken LeBlanc, President and CEO, PropertyGuys.com Inc. further explains their approach: “We provide sellers with everything they need to connect directly with buyers, allowing them the opportunity to make more money than when they use an agent,” explained Ken. “With over 120 franchise units in Canada, we’ve proven that our system works time and time again while saving Canadians a ton of money in commissions over the years.

It’s time Australians get to experience more money in their pockets when they sell their property. We’re going global and we couldn’t think of a better place to start!”

“The core values of Property Guys is represented in our ‘We Believe’ statements,” Marcus Cann explains.

We Believe: • Real Estate is Broken • Anyone Can Sell Their Own House • People Work Hard For Their Money • In Connecting Buyers & Sellers • People Should Make More Money on the sale of their house We do this by: • Providing the Home Seller with a fully automated technology system; with • A Community Of Professionals (lawyers, valuers, stylists, REA etc); assisted by • A PG Pro (licensed coach and mentor); • For a Fixed (All Inclusive) Fee

The Opportunity “We are now recruiting our foundation franchisees – The Perfect Fit,” says Marcus.

“The best part is that you don’t need previous real estate experience. You have to have a great attitude and a willingness to learn our rigorous training regime (including completing a real estate certificate), and we will take care of the rest.”

Property Guys is looking for franchisees in all locations across NSW, Queensland, and Victoria. Enquiries for other states are also welcomed.

“We are offering Area Development Agreements, Multi-Franchise Agreements and Single Franchise Agreements,” Marcus says.

According to Marcus, people who have the ‘Perfect Fit’ are people who;

- Real Estate Certificate Training (one week) - Zeenius Program (access to the best of the best in Canada on all things Property Guys) - Mentoring Program (fortnightly coaching and mentoring from Property Guys Australia - one-on-one sessions) Ongoing support includes; - Franchisees can attend Property Guys University at any time for a refresher - Property Guys CLE’s: we conduct CLE sessions on a regular basis for education and compliance - Property Guys Professional Updates: we bring in one of our professionals once a month for an update

• believe Real Estate Is Broken

- Zeenius - you can access local Zeenius’ for help

• want to take charge of their destiny

- Mentoring

• want more freedom on how they spend their time

- Franchisee Council: quarterly

• love the property industry but do not love the current ‘culture’ • want to start something new and be part of something bigger • are ready for a challenge, and ready to learn a new way of doing things

Support Franchisees will have access to over 120 small business owners in Canada on everything that Property Guys has to offer.

“We believe Property Guys franchise owners and their teams will be the most educated and trained new real estate professionals in the market in Australia,” stated Marcus.

Property Guys franchisees are initially supported by; - Property Guys University (one week)

An exciting future Marcus is looking forward to seeing growth throughout the next 12 months, and to seeing Property Guys become a mainstay in the Australian property market.

“We’d like to see at least 10 franchisees come on board in the next 12 months,” Marcus said. “We want to sell over 100 properties, and of course, we want to make home sellers more money.

“With the vast knowledge of our Canadian partners and an industry that’s ripe for change, there’s no better time to get involved.”

For more information contact: +61 4 3496 4887 franchise@propertyguys.com.au www.propertyguys.com.au

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price values, legislation, regulation and franchising law,” Marcus explains.

FE ATURE : fi x ed V ’s M o b i l e Fr anch ises Do you fancy sitting at your desk in your slippers and PJs? Or is hitting the open road more your style?

Deciding which kind of franchise is right for you is one of the greatest decisions you will make when entering the world of franchising. In this edition of Business Franchise Australia & New Zealand we take a look at fixed site franchises and mobile franchises.

Apart from the obvious difference between these two kinds of franchise businesses, each in fact share a number of similarities – including (sometimes) lower start-up costs, and the flexibility to work around your personal schedule. First let’s take a close look at mobile franchises.

HIT THE ROAD Ever felt tied down by travelling day in and day out to the office, staring at the same four walls? Then perhaps a mobile franchise is for you. The freedom and diversity you will

38 Business Franchise Australia and New Zealand

gain by hitting the road and visiting your clients could be the change of scenery you are looking for.

The variety of mobile franchise opportunities is vast and ever-expanding. Everything from food and coffee vans, dog washing, lawn mowing, house cleaning, car washing, selling tools, servicing cars, package delivery, fence building, business consulting…phew! The list just goes on and on. You name it, and there will probably be a mobile franchise available for you to make all your own.

The one thing they all have in common is

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“The variety of mobile franchise opportunities is vast and everexpanding. You name it, and there will probably be a mobile franchise available for you.”

that they do not operate from fixed premises.

TERRITORY Territory, as with most franchise business, is particularly important when operating a mobile business.

With a mobile franchise, your income will be received from the clients that you establish within your specified territory, so of course it is imperative that you know the exact parameters of your allocated territory.

It is also important that when doing your

research into a mobile franchise that you investigate whether it is actually possible to generate the income you require – or desire!

The ways in which franchise systems divide their territories may differ – whether it is by postcode or physical boundaries – you will need to investigate the area thoroughly.

Some franchise systems offer exclusive territories, in which you will be the only operator of that franchise in that area, while others offer non-exclusive territories. In nonexcusive territories you will face competition from not only other similar businesses but

also from other franchisees in your network.

Always check with the franchisor as to the specifics of territory allocation for the franchise system you are investigating.

FREEDOM As a mobile franchise operator, you are master of your own daily schedule. Need to drop the kids at school? No worries! Surf’s up? Grab the board and hit the waves!

Obviously you’re not going to make much money if you spend all your time running errands and hanging ten, but when the

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members into the business, so the costs of doing so, and the associated paperwork, also disappear.

However, just because your investment into the business may not be as high as that of a retail outlet, this does not mean your due diligence should be cut short.

HOME SWEET HOME Working from home is on the rise in Australia. The rapid development in technology over the last 20 years has changed the face of business, with technology available that allows us to communicate instantaneously, even face to face via video conferencing if we desire, with people anywhere in the world. For those working from home, we are no longer isolated; we are connected, both faster and clearer, than ever before.

A home based franchise could be the right way for you to skip the daily commute, leave the office grind behind, and establish a business from home using the tried and tested formula of a successful franchise system.

“As a mobile franchise operator, you are master of your own daily schedule. Need to drop the kids at school? No worries!

Surf’s up? Grab the board and hit the waves!” occasion does arise, it’s great to be able to have some flexibility in your day.

As with any business, you are only going to get out of it as much as the hard work you put into it. With a mobile franchise you can choose to work as little or as much as you want.

CUSTOMER SERVICE Good customer service can set you apart from your competitors, and is what will keep your clients coming back. When operating a mobile franchise, this is truer than ever before. Be on time, be well presented, and ensure that you have everything you need to perform the job, or have the stock your client wants, every time.

The presentation of your vehicle is also imperative. It is representative of your

business – keep it clean and well maintained and it will show your clients and members of the community that you take pride in your business.

$$$ In most cases a mobile franchise will be cheaper to purchase than a franchise operating from a retail outlet, the obvious difference being that fixed premises are not required therefore eliminating the need for a lease and rent payments and the cost of a shop fit out.

Mobile businesses often operate from a home office, also keeping overhead costs at a minimum. To get started all you may need is a phone and computer.

In addition, mobile franchises often eliminate the need to employ additional staff

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Whilst many of us envision working from home slouching around in PJs and slippers, watching the odd midday movie, the reality is that working from home should be treated as a normal job. Setting a daily schedule, showering and dressing as if for the office and closing your office door behind you, is likely to be a more productive and motivating way to go about your day.

Some home-based franchise systems will require you to visit your clients in person, others will allow you to conduct your work via phone calls and emails, and there are even franchise systems available that could provide passive income - meaning you can earn money by doing very little at all!

FLEXIBILTY One of the greatest advantages of operating a home business is that of flexibility. These kinds of businesses are perfect for a stay at home parent; work can be completed in between school hours, late at night or early in the morning whilst the house is still sleeping, even whilst baking a cake.

The little ones may be happily settled in for a nap while you catch up emails and correspondence. It’s this flexibility that appeals to those operating a business at home.

Or you may be an entrepreneur wishing to set up business but without all the associated overheads involved with employees and setting up a shop front.

FE ATURE : fi x ed V ’s M o b i l e Fr anch ises SUPPORT AND TRAINING As with any franchise, it is important to ensure that your franchisor provides adequate support and the ongoing training required to operate your business. This is one of the major benefits of being involved in a franchise system; you are becoming a part of a successful formula that is replicated again and again, and it is the franchisor’s job to ensure that their franchisees are adequately supported to be able to operate their business effectively.

Ensure that you discuss with your franchisor what will be provided in order to begin operating your franchise, and what ongoing training will be provided.

DUE DILIGENCE Regardless of the type of franchise you choose to purchase, by conducting thorough due diligence you will increase your chances of making a good decision and of future success.

Due diligence is the process of evaluating the prospective business purchase by getting information about the financial, legal, operational and other important aspects of the business.

Some of the questions that need to be answered include: • Do you enjoy the work involved in this franchise?

• How much will you need to invest to buy and operate your business?

“A home based franchise could be the right way for you to skip the daily commute, leave the office grind behind, and establish a business from home.”

• What initial and ongoing training will you receive?

be forthcoming with the contact details of current franchisees.

• What level of support will you receive with managing your business?

It’s also recommended you read the Franchising Code of Conduct to understand your rights as a franchise and those of the franchisor. The Franchise Council of Australia has an abundance of information relating to the code as well as recent changes and reviews of these changes on their website www.franchise.org.au.

• What kinds of marketing activities are conducted by the franchisor?

• How will you receive leads? Will they be provided by the franchisor or will you be responsible for generating them for yourself?

• Does the franchise have the ability to remain competitive and maintain its brand value?

Evaluating a prospective franchise business is not an easy process and professionals in franchising can help you carry out your due diligence. An accountant, lawyer and your bank are important sources of advice and knowledge.

Talking to those already involved with the franchise system is a great starting point; franchisees can share firsthand their experiences with operating within the franchise system. The franchisor should

ENJOY THE RIDE So whether it’s a mobile franchise or a fixed site franchise that suits you best, we hope this brief guide has given you some insight into the benefits of each, and wish you luck on your franchising journey.

Look out for our next special feature: out with the old, in with the new

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0

pr o file : g a m es2u

AHEAD OF THE GAME Are you famous within your network for your kids’ parties? Do you want to join a franchise that knows how to party and have fun?

Games2u know how to take the party to where no party has gone before, so join this growing franchise now and don’t miss out on the fun!

people, from children seven years of age through to adults, and are all managed by a trained Game Coach. Offering complete flexibility in location and activities, there is something for everyone, and a great time is guaranteed.

In operation for six years but bought by Con Klestinis in November 2016, Games2u are now franchising and set to grow quickly, with three franchisees already on board.

Mobile Laser Tag: Taking just minutes to set up either indoors or outdoors, players divide into teams and battle for supremacy with lightweight Laser Tag guns.

Tapping into a vibrant market, Games2u are ahead of the game and have secured the lead position. Utilising supplied operating, marketing, and financial systems, franchisees can focus their talents on growing their territory while enjoying being part of a beloved brand within a tried and tested operating platform.

Giant Hamster Ball: Also known as Zorb Balls, kids and adults alike climb inside the giant inflatable balls and have a blast – or have a ball!

GAMES2U BRING THE FUN This mobile franchise is high energy and lots of fun. Parties can cater for a range of

Activities include: Mobile Game Theatre: State-ofthe-art game theatres which include all the hottest games: FIFA 17, Just Dance, Super Smash Bros, Halo, Call of Duty, Rocket League, Minecraft, and much more. Up to 24 players can play at one time in these fully air-conditioned mobile theatres.

Water Tag: On those beautiful hot, sunny days, Water Tag is the hit of the party and a great way for kids (and adults) to cool down.

Water Roller: The ultimate pool party accessory. Imagine the fun to be had, in the swimming pool with the kids (and adults) running inside!

42 Business Franchise Australia and New Zealand

FRANCHISES AVAILABLE NOW With franchises available across all States and Territories, now is the perfect time to join Games2u. The ideal franchisee should have existing business experience, be a motivated self-starter and possess an entrepreneurial spirit. Strong inter-personal skills and a willingness to learn, along with an enjoyment of working with children, is also a must.

Easy to operate with low overheads, a Games2u franchise has unlimited room for growth. Party packages can be designed for small to large birthday groups or the larger sporting and community events including fairs, fundraisers, festivals, corporate and sporting club events. In addition to this, sessions can also be booked for Out Of School Hours Care programs by taking the fun to the kids, meaning no buses to organise for the School or Council.

The opportunities are endless for the right franchisee. So, if you’re young at heart and looking for a franchise that’s high energy and lots of fun, look no further and contact Con Klestinis now on: 1300 780 562 info@games2u.com.au www.games2u.com.au

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FE ATURE : fi x ed V ’s M o b i l e Fr anch ises

e x pert adv i c e

Where’s the money?

Know the financial differences between mobile and fixed site franchises

Mobile franchises have become very popular over the last few years. Some people wonder whether you can make decent money from them, and certainly you can… if you choose a good franchise and work smart.

Years ago, mobile franchises were mainly about lawn mowing, home services and dog washing. However, you can now go mobile with bookkeeping, accounting, renovations,

drug testing, photography, HR consulting, building services, aged care and a host of others. And if you do things well you can make a decent income.

It will take time to build up your customer base, and there are costs to pay. But if you are self-motivated and money smart a good franchise can be a great option.

There are good reasons for the boom in mobile franchise offerings. One is the cost of rent, which means a franchisee in a retail location may need to cover annual rent of $100,000 or more. Mobile franchises don’t have this burden, neither do they have to pay to fit out the store or office. And they don’t have staff to pay - at least at the start!

Here are some of the differences between mobile and fixed site franchises and some suggestions for how to respond to them.

All of which means that mobile franchises are typically less costly to start and to run.

However, this doesn’t mean that you’ll instantly achieve a $100,000 income, or that you’ll be able to spend every cent you make.

44 Business Franchise Australia and New Zealand

Lower cost to get started A mobile franchise usually won’t cost as much to set up as one in a fixed location, but it might cost more than you think. Work out the full costs before you commit.

Start up costs for mobile franchises tend to be much lower than those for fixed location businesses. With no fitout costs and (usually)

However, these headline numbers won’t be your only costs. So, before you borrow the money or invest your redundancy pay, take some time to properly understand the costs to get into business.

For instance, to get your mobile franchise started you’ll need to buy or lease a vehicle, and purchase any equipment needed for your business. You’ll also need advice from a lawyer and franchise accountant and the costs to set up your business trading structure.

Lower running costs Mobile franchises tend to have low expenses whereas the owner of a fixed location business has significant monthly outgoings.

But even in a mobile franchise you have expenses to pay.

What will it cost you to run your mobile franchise? Whilst there will be costs, you won’t have the weekly and monthly expenses of rent and staff wages. Still, it’s important to have a good think about what it will cost to keep the business going.

And it is a business, so you’ll really should run it like one. This means cleaning and maintaining your vehicle, wearing a uniform or appropriate work wear, equipping yourself with necessary technology to get the work done, paying for advertising and marketing, and proper bookkeeping and accounting help. There’s also the royalty fee!

It’s a very good idea to work out these expenses before you start off in business.

That way you know what sales you’ll need to achieve in order to pay the bills.

Time is money In a mobile business, your business income will largely be determined by the hours you are able to charge people for. Be realistic about the hours you can work and the amount you can charge.

In most mobile businesses you are selling your time. Time really is money! Your income will be dependent on two key factors: how many hours you work and what you are able to charge for that time.

Contrast this to a location based business where - in most cases - what you sell is a physical thing or a service delivered by other people. Your wages and profit are not directly related to the hours you work.

“Time really is money! Your income will be dependent on two key factors: how many hours you work and what you are able to charge for that time.”

Kate Groom | Co-founder | The Franchise Accountants Network & Smart Franchise

This business model means a mobile franchisee must think carefully about how they use their time. Questions such as “How many hours can I actually charge people for?” and “What hourly rate is appropriate?” become really important.

Let’s say you think you can charge $80 an hour as a bookkeeper or handyman. If you bill 38 hours a week, 52 weeks a year, that’s more than $150,000 in business income.

Sounds great!

But how many hours will you actually invoice in a month? What about the time you’ll need to spend on marketing and sales, and business management? What if you are sick?

This should lead you to consider questions of how much money you need to make, what is realistic, and how you’ll need to operate the business to achieve these goals. These are important considerations when you’re mobile and working alone… because your time is money!

It takes time to build up your sales When you start your mobile franchise you probably won’t have any customers. In contrast, most fixed location franchises have some income from customers from day one.

Be realistic about what you can make from your mobile franchise at the start.

When you buy a mobile franchise you’ll need to accept that the first few weeks or months may not see much revenue. This stands in contrast with retail business where there is almost always good revenue from the start but remember the owner has a lot more debt, wage costs and overheads to pay.

In almost every mobile business we know, it takes time to build up a customer base and start generating sales income. In fact, in some franchises it can take six months or more to start to see revenue coming in.

This is one reason we think mobile franchisees need to enjoy the thrill of the sales chase! Which then raises two really

good questions to ask the franchisor: “What will you do to help me get customers?” and “How long has it taken existing franchisees to reach $X in monthly sales?” ($X is your initial monthly sales goal).

This leads to this last point...

Self-motivation is vital Without self-motivation, you’ll really struggle to make your mobile franchise work. If you don’t put in the effort, there won’t be many customers.

Almost everyone in franchising will attest to the importance of the owner working in the business. But a retail business can (and should) tick over if you’re not there all the time. However, in a mobile franchise you are the product. If you’re not working, there’s no income.

So, in a mobile franchise you need a high level of self-motivation. This is the internal drive that comes from wanting to build a business and the desire and commitment to put food on the table.

It’s you who has to talk yourself into pulling back the covers and getting on with it each day. And if you’re not that kind of person, it’s likely you’ll find your franchise business quite a challenge.

Even if you are highly motivated, we think it’s important to have clear goals to work towards. This means financial targets and plans for your sales and marketing activity.

Add to that a way of checking your progress against your plans and you’ll be well on your way to creating a solid business.

Kate Groom is a co-founder of The Franchise Accountants Network and Smart Franchise. Kate spends her time understanding the accounting and bookkeeping needs of franchisees and developing practical, affordable ways to help them.

Contact Kate via: www.franchiseaccountants.net.au www.smartfranchise.com.au

Business Franchise Australia and New Zealand 45

FE ATURE : fi x ed V ’s M o b i l e Fr anch ises

minimal equipment, it’s likely that the main costs will be the initial franchise and training fees. For many mobile franchises this will probably come to less than $50,000.

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H AV E YO U R S AY

HOG’S ON THE ROAD Hog’s Australia’s Steakhouse announced earlier this year that it was moving into the mobile food industry after 28 years of operating exclusively as a bricks and mortar restaurant group.

While Hog’s intends to keep growing its 83-strong restaurant group whenever great opportunities arise, the operations team saw huge merit in introducing a mobile offering to complement their traditional full-service restaurants.

Enter stage right… Hog’s Express. Hog’s CEO Ross Worth, a stalwart of more than 30 years in the hospitality industry, says constant evolution in food trends means you have to be willing to embrace new initiatives and adapt to change in the hospitality business. “We’re an extremely agile company that makes decisions and acts on them quickly once the due diligence is done, so we’re efficient in adapting and taking advantage of industry trends,” says Worth.

“There’s no denying that consumers are increasingly looking for quick, accessible and inexpensive, but still good quality, options and we have a great food offering that can be prepared in a quick service environment, so developing a mobile offering was a nobrainer for us really.”

Worth says that Hog’s Express provides many benefits to the group as a whole and to individual franchisees, not least of which is having mobile trucks on the road, essentially operating as moving billboards for the business, thereby providing great brand awareness for Hog’s.

It also allows Hog’s the opportunity to attend events for their many valued sponsors, as well as a wide variety of other occasions.

“We now have opportunity to attend various happenings from sporting and cultural events to music concerts and festivals, and these could be at a small grassroots community level up to major celebratory events on the national calendar,” says Worth.

Hog’s sees another major benefit of the Express model being the ability to provide it’s very loyal fan base with quick and accessible options, that are still fresh and tasty, but able to be consumed on the run.

46 Business Franchise Australia and New Zealand

“The menu still features all the Hog’s favourites cooked to order, including our famous Prime Rib Steak served as the crowd-favourite steak sandwich, and other easy-to-eat staples such as burgers, wraps and ‘hog dogs’.”

The Express model is also a way for the Hog’s brand to be exposed to new markets that may not have a local area restaurant.

Hog’s also sees the Express business as offering the existing franchisees of traditional restaurants an opportunity to cover their local area of influence more dynamically and ensure they have constant engagement with their community at local events, from school fetes to sports fixtures.

As with all Hog’s franchisees, they will also have the grunt of the brand behind them with a proven Express menu, as well as training and marketing support.

Hog’s Express will also come in the form of a smaller static offering and over time will make an appearance in select shopping malls, service centres, airports and food markets. Hog’s is about to launch the Express model in a major shopping centre in Perth, Morley Galleria, and in the Myer Centre in the heart of Brisbane’s CBD.

FE ATURE : fi x ed V ’s M o b i l e Fr anch ises

Despite the emergence of Hog’s Express, the full service traditional restaurants are the lifeblood of the group, where the focus is on providing a great experience, and bringing family and people together. Such is the passion the brand evokes in franchisees that each year at the Annual Hog’s conference a ‘Pink Blood’ award is bestowed on the most loyal and committed of franchisees.

“The Hog’s philosophy has always been to offer our guests a fun and memorable dining experience in addition to great food and service, and this philosophy is personified in most of our franchisees who are all ambassadors for the Hog’s brand in their restaurants and local communities, as are the staff they employ,” says Worth.

“We hire for attitude and train for skill, so franchisees choose their staff carefully and we train them well, and they often become like a work family. They also have regular guests that they develop relationships with, so I would say that familiarity and friendship with staff and patrons is one of the great benefits of the traditional restaurant model.

“Further, very often our franchisees are also heavily involved in local schools, clubs, or charitable endeavours and have great relationships within their community as a whole.”

The restaurant model also allows franchisees to take advantage of some of the group’s more successful national marketing initiatives, like the loyalty program, Hog Squad, which offers patrons a range of benefits that have them coming back time and time again. Hog’s Squad members pay just $19.90 for lifetime membership and receive 25 per cent off their main meal every time they dine, as well as a free birthday meal.

Another initiative that is immensely popular is the ‘Kids Eat Free’ option (T&C’s apply), a popular promotion that brings repeat customers and familiar faces to the Hog’s restaurants.

In summary, there are enormous benefits to both models, it very much depends on what you hope to achieve and what works with your lifestyle best, as well as your level of experience in the hospitality industry, and the time and capital you have available.

Ross Worth is the CEO and Director of Hog’s Australia’s Steakhouse and has now been with the iconic restaurant group for over 16 years after joining the team in March 2001.

Ross started his career in the hospitality industry over 35 years ago as a young teen at KFC and quickly worked his way up the corporate ladder from an inauspicious start as a dish hand. Despite the ever-changing face of hospitality and an industry where things move rapidly, he was to learn many of the business basics at KFC that still apply to today’s business world. And it was there that he developed his passion for hospitality, particularly in the area of Quick Service Restaurants (QSR).

From KFC Ross went on to work with Lone Star Steakhouse for six years, followed by three years with the renowned Joe’s Fish Shack in Western Australia. With both positions he further developed his keen eye for the casual dining sector, including an ability to stay abreast of industry trends as well as understand what customers want.

Ross is privileged to have worked with, and learnt from, some of the pioneers of Australia’s hospitality industry including Jack Cowin, Executive Chairman of Competitive Foods Australia, and Lone Star’s Bob and Robert LaPointe.

The Hog’s philosophy is a clear reflection of the CEO himself - colourful and energetic - but the company and personal philosophy is not only a commitment to giving customers a fun and memorable dining experience, but also to delivering great service and excellent food.

Along with his business partner Brett Dryland, Ross is passionate about the Hog’s brand and the many franchisees that are considered part of the family, and unwavering in his dedication to providing guests across Australia and New Zealand with a unique form of customer service that Hog’s likes to call Hog’spitality.

www.hogsbreath.com.au/franchising

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e x pert adv i c e

The realities of Mobile vs Fixed Site Franchising Working capital, lifestyle and royalties differ between mobile and fixed-location franchises On the face of it, the single and most obvious difference between a mobile franchise versus a fixed-location franchise is the initial investment cost, but there is far more to it than meets the eye.

Typically a ‘greenfield’ (ie. new and not previously operated) mobile franchise will have an initial upfront cost of under $100,000, whereas fixed-location businesses can cost hundreds of thousands more, with the typical entry cost for a greenfield retail franchise tending to average around the $400,000 mark.

For an existing business, those costs can go even higher when factoring in the goodwill component for a going concern that is generating steady profits. (Unprofitable franchisees, on the other hand, can often be worth less than a greenfield).

Working Capital Aside from the initial upfront investment, there are significant cost differences in working capital requirements, and ongoing royalty payments.

Fixed-location brands, especially retail businesses, can deliver fairly strong cashflows to an operator quite quickly after opening if the initial marketing campaign has been effective. In turn, this reduces the amount of working capital an operator needs because the business can meet its working capital requirements from its strong cash flows.

“Mobile service operators are often the whole business themselves – the potential to make a capital gain when they sell is offset by the risk that their customers will not readily accept the buyer.”

Jason Gehrke | Director | Franchise Advisory Centre

However in a mobile franchise, the ‘spoolup’ period may take considerably longer as the operator develops a market, finds customers, performs the services, and then waits for payment. In some white-collar mobile service franchises (such as mortgage broking), a franchisee may need to have six months (or more) of working capital behind them to cover the operating costs of the business while its cashflow develops.

A mobile service franchise that might initially cost a relatively low $50,000 upfront could cost an extra $50,000 or more in working capital over the coming months, meaning that the operator should really have access to $100,000 or more at the outset to ensure they can not only afford to buy the franchise, but also afford to operate it until it starts making money.

This working capital issue is resolved by some blue-colour mobile service franchises (eg. lawnmowing), where the franchisor may offer a minimum income guarantee to a new franchisee for the first month or two after they join the franchise.

In reality, this income guarantee is simply a capitalised form of working capital.

In other words, the franchisee pays for it

48 Business Franchise Australia and New Zealand

in their upfront investment, but can draw down against it only if they fail to achieve minimum turnover targets. Because the franchisee paid for it in their upfront payment to the franchisor to start with, the income guarantee is basically a refund of their own money, but allows the recipient to still pay for costs that working capital would otherwise cover anyway.

Income guarantees (ie. capitalised working capital) occur frequently in mobile franchises but rarely, if ever in fixed-location businesses.

Lifestyle A common benefit perceived by potential franchisees – and sometimes actively promoted by franchisors – is that a mobile service franchise gives an operator a great lifestyle because they can choose the hours they work and will not be tied-down to a shop or an office.

The reality though is very different, with mobile operators often working just as many hours as an operator of a fixed-location business. While mobile operators might be able to take advantage of spare time between appointments for lifestyle activities, this time during working hours is often better used to actively seek more business by following up

FE ATURE : fi x ed V ’s M o b i l e Fr anch ises on quotes or finding opportunities to meet new customers.

The commitment of time to a mobile service business (where the operator is usually the business’ entire labour force) also increases during periods of peak demand such as summer for a lawnmowing or pool maintenance business.

Furthermore, whenever a mobile operator takes time off work it costs them money through lost income, as such businesses rarely have employees to keep things going when the owner is away. Of course this is different for fixed-location businesses where the owner is generally not the sole income-

“On the face of it, the single and most obvious difference between a mobile franchise versus a fixed-location franchise is the initial investment cost, but there is far more to it than meets the eye.” earner for the business, and if they do take time off, the staff can usually keep things going without them (for a short while at least).

So despite the potential for mobile service franchises to offer a franchisee a high level of flexiblity with where and how they spend their time, this often comes at a much greater cost than to the operator of a fixedlocation franchise.

Royalties Royalties are the ongoing payments a franchisee makes to the franchisor in return for the continued use of the brand, systems and the support provided by the head office team.

In most blue-collar mobile service franchises, royalties are paid as a set regular amount, regardless of the franchisee’s sales performance. This has the effect of making

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e x pert adv i c e

the royalties high or low, depending on the franchisee’s turnover, although generally as their turnover increases with the growth of their busines, the royalties will decrease as a proportion of that turnover.

On the other hand, in many white-collar and most fixed-location franchises, royalties are generally calculated as a percentage of the franchisee’s total sales. While this will keep the cost of royalties equally proportional to the franchisee’s turnover regardless of how low or high this turnover might be, it also means that franchisees on this royalty model will usually end up paying a lot more to their franchisor over time compared to franchisees who pay the set regular amount.

However while franchisees on percentage royalty models typically pay more, they also generally have access to higher levels of support as their franchisor is better-resourced through the higher royalties to provide additional support.

In addition to the key differences of investment cost, working capital requirements, lifestyle and royalties, mobile franchises frequently differ from fixedlocation franchises in the levels of support delivered by the franchisor.

They also differ in the degree of responsibility and stress involved in operating a business without staff (less hassle

“In a mobile franchise, the ‘spool-up’ period may take considerably longer as the operator develops a market, finds customers, performs the services, and then waits for payment.” and responsibility) to operating a fixed location business that may be dependent on staff (with all the challenges that managing staff provide).

And then there’s capital gains And while this is not meant to be an exhaustive list of the differences between mobile versus fixed location businesses, a final consideration for any potential franchisee might be the potential for a future capital gain if they want to sell the business in future. Both types of businesses can potentially make capital gains, however the role of the owner in the business will determine the size of any future capital gain.

Because mobile service operators are often the whole business themselves, the potential to make a capital gain when they sell is offset by the risk that their customers will not readily accept the buyer, and in turn, the buyer will price for that risk in what they are prepared to pay for the business. But for fixed-location businesses where there is usually a staffing infrastructure around the owner and the businsess is not so critically dependant on the owner for its daily

50 Business Franchise Australia and New Zealand

operations, the risk to a buyer is reduced and increases the potential of a capital gain accordingly. These factors are reflected in the earnings multiple used to price a going concern business for sale – mobile businesses usually sell for much lower multiples than fixed-location businesses.

As you can see, there is more than price to consider when distinguishing between a mobile service versus fixed-location franchise. Remember in either case to do your homework first, and always rush slowly.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for more than 25 years at franchisee, franchisor and advisor level.

He advises both existing and potential franchisors and franchisees, conducts franchise education programs throughout Australia, and publishes Franchise News, a fortnightly email news bulletin on franchising issues and trends. www.franchiseadvice.com.au

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S H OWCAS E : JIM ’S POOL CA RE

JUMP ONBOARD

AND JOIN THE FLEET Anyone with a pool knows how much regular maintenance they require.

Jim’s Pool Care has captured this market segment, by building a fleet of mobile pool shops around Australia.

Jim’s Pool Care is a true Mobile Pool Shop and have Australia’s pools covered in all major cities in all areas of pool cleaning, maintenance, heating, inspections, lighting, pool blankets, and robotic cleaners.

As part of the Jim’s Group, Jim’s Pool Care began 12 years ago in Western Australia.

Owner and General Manager Brett Blair has

seen the franchise chain grow from around 30 to 92 franchisees and 13 Regionals Franchisors over his eight years in the role.

Brett says, “The Jim’s Pool Care concept is a true mobile pool shop that not only provides pool maintenance but sells a full and complete range of pool equipment and chemicals. This means our franchisees can charge for their time and earn great margins on lucrative chemical and pool equipment products.” This means you can work smarter and not harder by building long term relationships with customers.

A Network that Works As part of the Jim’s Group – there are currently over 3500+ franchisees - making it a nationally recognised brand, Jim’s Pool Care get to leverage off the other divisions who are also out every day in customers’ homes and backyards. While each Division

52 Business Franchise Australia and New Zealand

has a dedicated marketing team and website, all Jim’s franchisees are encouraged to crosspromote the other 40 divisions, using local area marketing, which is extremely useful to a newly launched franchise.

Brett told us, “Jim’s Pool Care has worked hard to develop a strong and supportive culture. The great thing about the Jim’s system is if new franchisees ever need any help, the support team is only a phone call away as we have an amazing network of friendly and helpful franchisees, franchisors and suppliers”.

This strong support network is reinforced with an annual franchise convention, where franchisees fly in from all around Australia.

The conventions are usually 3 - 4 days where they get to hear from other franchisees, industry experts and sales and motivation coaches, which provides a great opportunity to learn and network with other franchisees.

There are some really great stories shared each year of success and innovative ideas.

Opportunities to Earn When looking at a business, consider how many streams of income are available. With a Jim’s Mobile Pool Shop this includes casual pool servicing, regular maintenance programs, the sale and installation of new equipment, and a range of pool accessories. This covers domestic pools, Body Corporates, Hotels and Commercial opportunities.

Jim’s Pool Care franchises are now for sale in selected locations across Australia. The price for a new site starts at $67,500 and includes a complete start-up package. Jim’s is committed to new franchisees and their success by offering a Pay for Work Guarantee of $1500 (incl. GST) per week. Conditions apply, but his means if you follow all the systems, and do not meet the weekly guarantee at the end of the month, you can be topped up the difference.

Another exciting point of difference is a flat monthly franchise fee is charged, which is not percentage based. This means the harder you work; the more money you can make.

What does it take?

“When looking for a franchisee, we are ideally looking for somebody that is personable and able to build great customer relationships, as we are not only about oneoff jobs in pool care, it’s about the ongoing regular maintenance. We are looking for people that are motivated to get into business for themselves, have a positive attitude and are able to get out on the road and build their own business with our systems. I am very proud of the team we have built and the service they provide pool owners around the country.”

The recruitment and application process starts with an initial meeting, usually over a coffee and is a discovery phase for both parties. Potential franchisees are then offered a day on the road with a franchisee. This is

Jim’s Wins: 2017 Best Pool & Spa Business | QLD SPASA Awards | Duncan Smith (Astral Pool), Stephen Cluff (Jim’s Pool Care Award Winner), Brett Blair (Jim’s Pool Care General Manager), Lindsay McGrath (SPASA Australia)

a great concept and the potential franchisee is free to choose any working franchisee as Jim’s Group fully believe in being transparent all the way through the process.

They are also encouraged to ask as many questions as they want.

After they have been out on the road and experienced for themselves how the business works and if keen to move forward, the next step is to start formalising the application.

Part of this process is selecting a territory to build the business. Usually the location is close or near to home to help reduce travel times and to help maximise chargeable hours for the franchisee. It also means that they can pop home if needed or help out with family commitments if they arise.

How can you grow?

“We have franchisees from all walks of life including banking, engineering, trades, administrative and existing industry professionals. Our franchisees don’t need to have existing industry skills as Jim’s Pool Care provides comprehensive training; they just need to be willing to try new things, follow the systems we have developed and provide great customer service,” Brett says.

This in-house training starts with three days at the Jim’s Group Training Centre in Melbourne. All franchisees, from around the country, fly to Melbourne to meet Jim Penman and to learn more about the Jim’s system and how to become successful in business. The franchisees then go back to their respective cities and states where they complete an on-the-road and face to face pool school training program which lasts approximately 15 days with their local Franchisor and trainer.

Working with the best brands in the pool industry, including Astral, Davey, Zodiac,

Maytronics, Daisy and Sunbather, the support that the franchisees receive from the brands with regard to ongoing training and product support is impressive.

Franchisees are encouraged to enhance their professional development each year, attend local team meetings and training sessions.

Jim’s Pool Care also encourage franchisees to become specialised if they wish in certain pool areas. To help franchisees be the best they can be, all new franchisees are now required to complete the Certificate III &IV Pool Technician course, which is a national accredited qualification. This is provided in conjunction with the in house training completed by Jim’s Pool Care.

“Ongoing training is provided by using a local master franchisor model. We have someone on the ground in every region that provides the ongoing training and support. Once trained, every month, as a minimum, the master franchisor will contact the franchisee to provide technical and business support. There are between 6 - 8 local regional meetings a year, which allows all the franchisees in that particular region to get together and share ideas and attend a range of supplier training. This provides our franchisees with a strong support network,” says Brett.

A Jim’s Pool Care franchise is a mobile retail business with huge opportunities.

This system provides you with the opportunity to work outside, to work your own hours, to be your own boss and to build your business without limit. If you too would like to take control of your future, contact Jim’s Pool Care now on: 131 546 info@jimspoolcare.com.au www.jimspoolcare.com.au

Business Franchise Australia and New Zealand 53

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“The Jim’s Pool Care concept is a true mobile pool shop that not only provides pool maintenance but sells the full retail range of pool equipment and chemicals.”

FE ATURE : fi x ed V ’s M o b i l e Fr anch ises

e x pert adv i c e

Territories for Mobile Franchises …what you need to know (and ask your franchisor)

More and more mobile franchises are coming onto the market, many which we expect to be successful: like a business flying drones, or one taking mobile video games to kid’s parties.

A potential client rang me the other day and said he and his wife were looking at going into a mobile franchise in the auto industry.

He said the franchisor had given him a territory, and could we do some work to decide if it made business sense!

Well, while I feel I am reasonably astute in these areas, my first question was: what did your franchisor tell you in the disclosure document, and what are the basic assumptions about the market and business you are becoming part of?

The answer was quite unclear!

This seems to be a common problem, especially with small franchise systems, where the potential franchisee sits between a franchisor telling them enough to raise interest, and trying to avoid saying anything of substance in fear of later recriminations (legal), if there is a problem.

My view is if some logical work and assumptions have been formulated by the franchisor, then there is a reasonable case to give a territory with a realistic explanation, not just “This should work GREAT, but don’t ask me how we came to that

“The franchisor should have a business plan that addresses issues like total market size and forecast market share, and a good understanding of where the opportunities lie for the business.”

Peter Buckingham | Managing Director | Spectrum Analysis

conclusion!” – which then evolves into the ‘Beer and Pizza map’.

The ‘Beer and Pizza map’ is the map derived by a few early entry franchisees and the franchisor, after beers, pizza, and a black texta on the Boardroom table.

Some research and arithmetic: As a potential franchisee, you are predominantly interested in your own market and probably not other capital cities where the franchisor may operate. For this example, let’s consider we are in the automotive aftermarket business. Maybe we are joining a system that services vehicles as a mobile franchise.

The first question is always: How big is the market? Let us imagine we are going into business in an area of Melbourne – so that we can visualise it.

On a world-wide and national basis, if we undertake some research, we may find a report that incorporates the following: “The world slushie drink hire market is expected to reach US$5.59 billion by 2020,

54 Business Franchise Australia and New Zealand

and the Australia market is expected to be $40 million in 2016”. This may be able to be broken down to state level, and ultimately to specific areas.

The franchisor should have a business plan that addresses issues like total market size and forecast market share, and a good understanding of where the opportunities lie for the business. The franchisor and their advisors have decided that with their mobile vehicle service system, they will target 30 per cent of the market, or a Melbourne and Geelong market of $7 million p.a.

NOW WE ARE STARTING TO UNDERSTAND THE MARKET! While you may dispute the detail, at least we are gathering an understanding of the big picture, so now we need to understand: 1. Are the franchisor’s assumptions realistic?

2. How many territories should be created and what should a territory comprise of?

The franchisor’s assumptions In your Due Diligence - doing your own investigations to decide whether you

It does surprise us at times how some franchisors come to us for territory planning advice, and when we ask what is in their business plan and what assumptions they have made as far as market size and market share, we get a blank look.

In our view, a franchisor should consider the question of territory numbers in one of three ways: 1. Have some successful territories that can be measured and replicated, and you understand that each territory has been built to meet a requirement. We call this the ‘Cookie Cutter’ approach, where a franchisor can say that certain franchisees have been able to successfully operate the system based in the following territory.

Usually this is based on population, number of households or number of businesses in a B2B type application. This is then adjusted in size if the area (and postcodes) is seen to be better or worse than the average as far as it is likely to consume the service you are offering.

2. The franchisor may have an internal view that a franchisee needs to invoice out $500,000 p.a. to cover his own labour, return on investment, parts that he would expect to use in mobile servicing and other operating costs. If the Melbourne / Geelong target market is $7 million, then we should be able to support 14 franchisees when we approach maturity.

This may need to be the 5–10 year plan, but at least you can issue some franchises and ask the franchisees to ‘care take’ other areas until the system can support the mature number of franchises.

3. Sometimes a franchisor has been successful in another market, and therefore we can use the territory numbers and sizes from elsewhere, and transpose that into the market we are working in.

For example, if we have been operating for some years and have 20 territories in Sydney / Newcastle / Central Coast / Wollongong, this would be equivalent to having 16 in Melbourne / Geelong, based purely on population and household numbers.

city

persons

housholds

pop.ratio

5,141,783

1,802,104

34%

4,173,248

1,497,125

27%

2,965,630

1,069,104

19%

(Rockingham/ Mandurah)

1,728,743

627,090

11%

adelaide

1,225,233

475,370

8%

sydney (Newcastle/Central Coast/Wollongong)

MELBOURNE (Geelong)

brisbane (Gold Coast/ Sunshine Coast)

perth

*Based on Census 2011 population estimates.

Whichever way it is put to you by the franchisor, you should expect to see realistic assumptions, facts and data to support this view.

Commitment of the franchisor Many applications we receive for Territory Planning at Spectrum Analysis start with the franchisor asking us “How many territories should I have?”

Our initial reply is that we do not write the Business Plan, and this type of work should be considered in an urgent sense before any territory planning can occur. We walk them through most of the steps above to come out with a logical and realistic position. In our view, once established, it should be a Board ratified decision, as it is fundamental to the future of the system.

Only recently we had an inquiry on behalf of an overseas franchise wanting to come to Australia, and we were told based on their experience, they should have 300 – 360 territories. The concept was IT based, and when we delved deeper into the logic, it was a wet finger in the air approach based on the number of businesses.

We can only say that (on behalf of any future franchisees), they do undertake some realistic research, and not try and convince us they know best, or we will be just making another donation to the European Bail Out fund.

Once a Franchisor has undertaken reasonable research, they should be able to show you a logically thought out set of information based on realistic assumptions, with mapping to back it up.

Typical market map for Sydney territories.

Summary If you are looking at taking on a mobile franchise, ask the franchisor what research they have done, and more importantly, what assumptions they are making in working out your territory, and whether it has a reasonable chance of sustaining the business.

If the answer is cloudy or blank, I suggest you look at another franchise system.

Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, the leading Geodemographic and Sales Prediction Modelling Company in Australia. He is a Certified Franchise Executive, and also a past Director and Vic / Tas President of the Institute of Management Consultants. Peter is contactable at: peterb@spectrumanalysis.com.au www.spectrumanalysis.com.au

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proceed or not - you have every right to ask the franchisor to convince you that what they are putting before you is reasonable.

Information such as the above is available, and should probably be included in the Disclosure Document, that is an obligatory right that you have to receive.

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e x pert adv i c e

ON THE ROAD AGAIN Mobile v Fixed Site Franchises

Can you imagine Willie Nelson happily running his mobile franchise? Wind in his hair, guitar in hand…

Mobile franchises can be a good option to the free spirited person who does not want to be tied down to a shopping centre environment, working nine to five. Thanks Dolly!

There is an emergence of mobile franchises on the market with the demand for home services.

We all want our cars repaired at home or work, our dogs washed and taken for a walk, our laundry done and our personal trainer knocking on our door. Consumers have the money to spend on home care and support like in no other decade. Mobile services mean convenience to the overworked Mums and Dad’s out there.

Mobile franchises have a smaller up front capital investment and can offer greater flexibility than a full retail franchise. It may not however suit everyone being out on the road. The franchise fee in a mobile franchise may be the largest component of the upfront cost, whereas for fixed site franchises it is usually the lowest cost due to the equipment

“Mobile franchises have a smaller up front capital investment and can offer greater flexibility than a full retail franchise. It may not however suit everyone being out on the road.”

Robert Toth | Partner | Marsh & Maher Lawyers

and fitout costs required. A typical fixed site franchise may require investment of anything between $600,000 to $800,000, of which the franchise fee would constitute, for example $45,000.

There may be franchises that charge a fixed royalty, payable fortnightly or monthly, not tied to turnover. This can be positive if the business is successful and growing but can otherwise be a fixed cost that becomes a debt to the franchisor, irrespective of the franchisee’s revenue.

Fixed site franchises generally charge a Royalty, based on the turnover of the business of between 4 to 10 per cent with a marketing fund contribution of around 2 to 5 per cent.

A mobile franchise may still charge a franchise fee of $20,000 to $30,000, plus the cost of the vehicle and equipment. The vehicle and equipment can usually be leased, thus reducing the capital outlay. The interest on the lease is tax deductible to the business.

Fixed site franchises generally require the franchisee to hold stock and therefore

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require greater working capital over the first six months or year of operation.

A mobile franchise may involve an investment of $50,000 to $70,000 but will it generate a basic wage and for how many hours worked? Where is the territory that is allocated? Do you have to travel long distances to service clients for a small charge?

You still need to do your financial due diligence and cash flows on the business. If the numbers don’t work, then don’t commit as mobile franchises can be difficult to sell.

Buying a mobile franchise or a fixed site franchise usually requires the franchisee to borrow on the equity in their home. Like any business, this carries risk. Will the business be viable? Can it provide a reasonable salary for effort to the operator? Will it provide a return on the investment over time and also build some capital value?

The rise in mobile franchising has come with the increased consumer demand. Consumers have limited time and from a marketing perspective taking your business to the consumer into their home or office is a great

FE ATURE : fi x ed V ’s M o b i l e Fr anch ises way to generate work without carrying the huge overheads of a fixed site.

“We all want our cars repaired at home or work, our dogs washed and taken for a walk, our laundry done and our personal trainer knocking on our door.”

There can however be issues as to the quality of the service provided with mobile services as opposed to a fixed site business. Mobile franchisees should ensure they receive adequate upfront training upon start up.

They should also ensure customer service is monitored for repeat business and that the franchisor provides ongoing training and development.

worked? A lower start up investment doesn’t mean you may be working any less hours than in a fixed site. Can you separate the business from your personal life? If things don’t go as planned it can be difficult to get out and sell a mobile franchise. There may be little goodwill and all you have to sell are the fixed assets.

Robert Toth is a Partner of Marsh &

Prospective franchisees looking for a mobile franchise still need to be cautious and do their due diligence on the Franchisor. Is it a fad, the demand for which is not sustainable?

What are the expectations for hours to be

So before you hit the road or stay put, do your analysis and get expert advice from specialist franchise lawyers and advisors to limit your risk and make an informed decision before you commit.

international franchisors and franchisees).

Maher Lawyers, with over 30 years of experience in franchise law.

He is an Accredited Business Law Specialist with expertise in franchising, licensing and distribution and franchise dispute resolution (acting for both 03 9604 9400 rxt@marshmaher.com.au www.marshmaher.com.au

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S na psh ot: S na p- o n To o ls

The Next Snap-on Generation

franchise had provided in career enjoyment and success to their mother and father, both Craig and Daniel decided to invest in their own, individual Snap-on franchises.

Snap-on’s comprehensive start-up support included Daniel and Craig heading to Dallas, U.S.A for training before taking possession of their own shiny new mobile Snap-on showrooms, in which was a proud moment for parents Clive and Wendy.

“Snap-on has been a large part of our life. Snap-on offers an organised, proven franchise model, which truly is a whole package. Snap-on understands that if franchises are happy and successful, this is a win-win, so they go the extra mile with support. So we were very supportive when Craig and Daniel chose this path. ” said Wendy Waller.

For Clive, it’s been a great experience having his sons’ learn the life lessons and responsibility that comes from owning their own businesses.

Clive Waller with sons Craig and Daniel Waller

For the Waller family, Snapon Tools means more than for most.

In fact the positive impact of a Snap-on career for the Wallers’ has resulted in the next generation jumping on board to continue the same path of success in the tried , true and proven Snap-on Tools Franchise system, a well-recognised brand and award winning franchise model in Australia and internationally.

Clive and wife Wendy Waller moved from England to Australia in 2003 with their two young sons. After a period settling in, Clive and Wendy searched for a new career for Clive that would be a smart decision for the family. With Clive’s previous success working for Snap-on in England, the Wallers’ leapt at the chance to again invest in their future with Snap-on. They knew that a Snap-on franchise meant the backing of a large support network, the best quality tool

brand, the potential for financial rewards with hard work, plus the ability to be your own boss. All were benefits that suited Clive and Wendy perfectly.

The Waller children, twins Craig and Daniel, were exposed to the Snap-on career lifestyle from an early age. With Clive on the road, plus Wendy handling the stock ordering and accounts on top of her full-time role as a nurse, Snap-on was an ingrained part of Waller family life.

“For as long as I remember, Dad has been working with Snap-on. As children, Daniel and I used to jump into the truck and admire all the cool tools in the back,” said Craig.

When Craig and Daniel finished school many years later, working in the automotive industry was on their career radar.

After both completing diesel mechanic apprenticeships, they then considered their first move into the work force.

Understanding what the family Snap-on

58 Business Franchise Australia and New Zealand

“I’ve achieved success and been enjoying a great career with Snap-on, so I felt very comfortable in recommending the Snap-on franchise model to both of my boys as they came of age. My advice was simple. You get out what you put in, and so far they are excelling in building business. Best of all they are enjoying their work and it’s great to see,” said Clive Waller.

Although only a couple of years into his Snap-on franchise life, Craig Waller is relishing his chosen path.

“I think there is no better company to work for. You are starting from the best place for your career by selling the best tool brand in the market. I love being out and about and building relationships with people in the trade. The financial rewards are also there if you work for them. I absolutely recommend it to others looking for a career change,” said Craig.

If you are looking for a fresh start as your own boss, using a proven successful franchise system with the most successful tool brand in the world, to learn more contact or visit: 1800 810 581 www.snapontools.com.au/franchise

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e x pert adv i c e

Leasing the Franchise Premises:

What a Franchisee Needs to Know Unless a franchisee is operating a mobile franchise or working from home, chances are the franchise will require a lease on a physical premises. Although there is no ‘one size fits all’ approach to franchising and leasing, franchisees typically use either of the following methods to lease the premises:

landlord directly and holds the lease in its name;

Method 1: the franchisee locates the premises, negotiates the lease with the

Following, we set out some of the advantages and disadvantages of each method.

Method 2: the franchisor locates the premises, negotiates and enters into the lease, and then licenses occupation to the franchisee.

The following factors will ultimately drive the leasing method (which the franchisor often decides unilaterally): • nature of the franchise system and the policies and procedures of the franchisor; • risks that each party is prepared to take; and • the level of control that a franchisor wishes to retain over the premises/site of the business.

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1

The franchisee locates the premises, negotiates the lease and holds the lease.

If a franchisee enters into the lease directly with a landlord, the franchisee will have direct obligations to the landlord under the lease. The franchisor will not be involved in this aspect of the franchise business operations.

Key Terms to Look For in the Lease Use of the Premises Ensure the terms of the lease permit the operation of the franchised business from the premises and complies with any aspect of the franchise agreement in this regard.

Emma Heuston | Practice Leader, Commercial Leasing | LegalVision

the franchise agreement? Ideally the same terms and options would be in both the lease and the franchise agreement.

• outgoings expenses,

Outgoings

It is also worthwhile chatting to:

Be aware of ALL costs associated with maintaining the premises, for instance, council rates, repairs or cleaning are sometimes payable in addition to rent. It’s important that the landlord provides you with an estimate of these costs so you can budget accordingly. If the premises is to be a retail premises, the landlord will have disclosure obligations under various state based retail lease legislation.

• existing tenants nearby to see what trading conditions exist and whether they are aware of plans for the area; and

As set out above, where possible, franchisees should ideally ensure the franchise agreement and lease agreement aligns with their start date, term and option to renew.

Otherwise, the franchisee could either have a business with no site or a premises with no business. If the two agreements don’t end at the same time, it is possible to negotiate a clause to end the franchise agreement early or relocate to alternative premises for the remainder of the franchise agreement.

Lease Term and Options Ensure the renewal options and lease terms align with the franchise term and options.

Otherwise, a costly relocation or an early end to the franchise agreement could be on the cards.

Handover Date Will the landlord allow access to the premises before the commencement date to fit out the premises (noting any franchisor requirements for fit out)?

Commencement Date When did the lease commence? Does this align with the franchise agreement?

Option to Renew Do any lease options align with options in

It’s also important to consider whether the length of the lease will allow a franchisee to recover costs of investment in the business and premises. In other words, the period of the lease and franchise agreement should be long enough to obtain sufficient profits to cover the costly fit out and start up costs.

Committing to a lease is a serious responsibility, and if the franchised business does not work out as planned, the franchisee must answer to both the landlord and the franchisor.

As such, it is crucial for prospective franchisees to obtain independent legal advice in relation to the franchise agreement and lease documents to ensure that they understand the key commercial issues such as: • plans for redevelopment that may exist at the time of signing,

• personal guarantees, and • lease make good expenses.

• existing franchisees in the franchise system to determine if they are happy with the franchise.

2

The franchisor locates the premises, negotiates and enters into the lease, and licenses occupation to the franchisee.

Here, the franchisor and the landlord enter into the lease in a separate transaction which the franchisee is not involved in.

The franchisor then grants the franchisee a ‘licence to occupy’ the premises. The purpose of the licence is to place the franchisee in the shoes of the franchisor as if they were the tenant under the lease. The franchisee remains responsible for paying rent, the bank guarantee or security deposit as well as obtaining insurance.

Usually, the franchisee is not involved in negotiating the terms of the lease and must simply accept the lease. It’s often ‘take it or leave it’ and the franchisee usually only has the chance to make amendments to the licence to occupy.

Because the franchisor still exercises control of the premises, it’s easier to remove a franchisee for breaching the franchise agreement or lease and replace them with a new franchisee. This means that if a dispute arises in relation to the franchise agreement, the franchisee cannot merely ‘rebrand’ if the franchise agreement is terminated.

There are advantages with a franchisor often having greater negotiating power to obtain more favourable lease terms.

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“Committing to a lease is a serious responsibility, and if the franchised business does not work out as planned, the franchisee must answer to both the landlord and the franchisor.”

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However, we still encourage franchisees to become involved in this process if possible and review the commercial lease and suggest amendments where possible. If, as a franchisee, you find yourself in this situation, ask to review or draft documents for input to ensure that the terms are balanced — this is especially important if you are the one paying rent each month and are responsible for the make good of the premises at the end of the lease!

Lease Incentive It’s common for the landlord to provide a lease incentive to entice the tenant to lease the premises. For instance, a cash-payment to assist with fit-out or a rent-free period.

In this situation, the licence to occupy and any other associated documentation must be very clear as to who will receive this benefit.

For example, the franchisor should not retain it and then expect a franchisee to fit out the shop without the benefit of the cash payment.

Franchisees should, therefore, ask the franchisor whether there was any lease incentive and obtain a copy of any Fit Out

“It’s common for the landlord to provide a lease incentive to entice the tenant to lease the premises. For instance, a cashpayment to assist with fit-out or a rent-free period.”

Deed along with a copy of the lease.

Franchisees should also pay particular attention to the lease terms. For instance, the franchisor may include a term that says if a tenant leaves the premises or assigns the lease within a period, they must pay back the rental incentive (or part of it) to the landlord.

This is known as a ‘claw-back’ period, and franchisees should ensure they are not caught by such clauses.

Costs The franchisee generally pays the franchisor’s legal fees.

However, where the leased premises are to be a retail premises, the franchisee should be wary of paying the lessor’s legal fees to prepare and enter into a lease. The landlord cannot usually recover these fees under statebased retail lease legislation (unless in South Australia).

In addition to paying rent, franchisees should also investigate the costs of any

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premises security deposit, upfront rent, fit out, and other business establishment costs to better budget for their franchise.

Key Takeaways When buying a franchise, it’s easy to overlook the leasing aspect of the franchise opportunity. However, it’s an important piece of the puzzle that franchisees should not ignore. Seeking independent professional advice (legal, accounting and business) is a must to help identify and address any pitfalls before entering into a transaction.

Emma is the Practice Leader in LegalVision’s Commercial Leasing team.

Emma has been practising law for 17 years with a focus on retail, commercial and industrial leasing and franchise law.

LegalVision is a market disruptor in the commercial legal services industry and has assisted more than 50,000 businesses. emma.heuston@legalvision.com.au www.legalvision.com.au

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