FRANCHISES YOU CAN AFFORD
VOL 13 ISSUE 03 MAR/APR 2019
SNAP-ON TOOLS SUPPORT FOR SUCCESS THE IMPORTANCE OF
A BUSINESS PLAN
CAN YOU AFFORD A FRANCHISE? FRANCHISES YOU CAN AFFORD
TAKING THE LEAP Business Franchise Australia and New Zealand 49
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 Our website also provides additional advertising and information which complements our publications.
www.businessfranchiseaustralia.com.au
CONTENTS 52
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58 52 Cover Story: Snap On Tools – Support for Success 54 Special Feature: Franchises in Your Price Range 58 Expert Advice: Can You Afford a Franchise? FC Business Solutions
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60 Expert Advice: Franchises You Can Afford, Taking the Leap DC Strategy
62 Expert Advice: The Importance of a Business Plan Ian Watt | Retail & Business Banking, Westpac
A regular of Business Franchise Magazine, our special supplement in franchising showcases a different industry each issue
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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
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C OV ER STO RY: S N A P O N TO O LS
SNAP-ON TOOLS
‘support for growth’ Snap-on Tools is preparing to celebrate 100 years of putting high-quality tools and equipment into the hands of mechanics, engineers and other professional tool users in 2020.
Business Franchise Magazine Australia and New Zealand spoke with Stacey Gilbert, Snap-on’s National Franchise Manager, “Snap-on Tools believes in investing in our franchisees’ success by providing ongoing training for both personal and business development. We also offer the franchisees the best possible suppliers for services, such as HR, bookkeeping and insurance, experts who understand what it is like to be a franchisee. New franchisees can access an exclusive finance package to help set up their franchise.”
Established in 1920, Snap-on Incorporated is fast approaching a century of being one of the top international manufacturers of high-quality tools. After 30 years in the Australian market, Snap-on Tools continues to perform, providing robust financial results for its network of over 180 franchisees.
David Johnson, Snap-on’s 2018 Rookie Franchisee of the Year, bought his Snap-on Tools franchise in October 2017. He has worked for many years in mechanical roles, but more recently in sales and business development within the industry.
Snap-on Tools is a subsidiary of Snapon Inc., a leading global innovator, manufacturer of tools, diagnostics and equipment solutions for professional technicians, with an established network of operations across the world. Snap-on Tools prides itself on providing extensive training and ongoing support for its franchisees from the well-established franchisees to those who are brand new to the industry. No previous mechanical experience is required to be a franchisee, but it is essential to have a passion for building strong relationships with your customers and having good sales skills.
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“I had wanted to own my own business for some time and had looked at a number of different businesses. I was familiar with the brand and Snap-on’s strong reputation in the market. The Snap-on franchise was the perfect fit, and the available territory and the timing fell into place. We were offered an available territory which was in a great location, and Snap-on took care of the truck, fit out, initial stock selection, etc. I undertook a week-long training session in Dallas, Texas, covering sales training and franchise ownership, plus 4 weeks on the job training with a franchise development manager. Snap-on run a guided online discovery tour for prospective franchisees, introducing them to the business and the franchise model. We also spoke with the finance department to get the lowdown on the financial arrangements and went out with current franchisees to see how they were getting on with their Snap-on franchises. After 6 months in the business, there was a further 2-day training course for new franchisees. In addition, there are ongoing monthly sales meetings and 6-monthly tool expo’s – giving you the chance to ‘learn more and earn more.’”
“I was familiar with the brand and Snap-on’s strong reputation in the market. The Snap-on franchise was the perfect fit, and the available territory and the timing fell into place.”
The training you get is next level. Your first weeks on the road are challenging but you will be mentored by a territory manager. They are there to help you with the smaller things that may pop up, to help you stay grounded and focused on your training, assist you with following up on the order and delivery process and also connect you to the right people within the Snap-on business.” The long-term goal is to not only expand the number of Snap-on Tools franchisees in Australia and New Zealand but also increase the number of franchisees who own several franchises. Stacey proudly adds, “Snap-on Tools are committed to ‘Support for Growth’ and have tripled the number of owners who own multiple franchises over the last 4 years. Recently, we were awarded
“Down the road 10 years, Mark and Nicole now own multiple franchises. Their confidence in Snap-on Tools as a world-class franchisor which invests in their success is growing all the time.”
No 1 in the Expansion category of the 10 Thousand Feet Top Franchise Awards which are awards based on feedback from our own franchisees.” Mark highly recommends becoming a franchisee for Snap-on Tools. “If someone was looking to join the Snap-on franchise, I would tell them go for it, The Snap-on brand is well known, you get the support and training you need and will meet amazing people and form lifetime friendships. It’s been a great franchise system for us to be part of. Just follow the Snap-on program, the systems in place work.” Snap-On Tools is always looking to expand into other states and territories in Australia & New Zealand. If you want to be like David and Mark and find fulfillment, success and a great lifestyle with a supportive and knowledgeable franchise, contact Snap-on today: AUS: 1800 762 766 NZ: 0800 762 766 Sota.franchise@snapon.com www.snaponfranchise.com.au
Mark and Nicole Abrahams started their Snap-on Tools franchise in 2007. Mark had worked in the automotive industry for 17 years in different roles, from apprentice to mechanic and then service manager. “After being in the industry for that long I was looking for more challenges. I was looking for a different role in the trade, I just wanted to try something new. My Snap-on dealer suggested I look into the franchise.” Down the road 10 years, Mark and Nicole now own multiple franchises. Their confidence in Snap-on Tools as a world-class franchisor which invests in their success is growing all the time. “We had the opportunity to buy our second franchise in June 2017 and our third March 2018. Training is ongoing with help from the business management team. They cover all areas of the business providing group training meetings and one-on-one phone support. They have a great MYOB system that was designed for Snap-on’s franchisees and provide ongoing support and training with the system.” We asked Mark about his experience when he first started out. “I had been buying the brand for a long time during my trade, I always had the Snap-on truck turning up to the workshop. It looked like a good business model and when the time came, we wanted to look into it further.
“Snap-on Tools are committed to ‘Support for Growth’ and have tripled the number of owners who own multiple franchises over the last 4 years. Recently, we were awarded No 1 in the Expansion category of the 10 Thousand Feet Top Franchise Awards which are awards based on feedback from our own franchisees.”
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For experienced franchisees, financial incentives and ongoing support through training and development help them to grow and expand their businesses. Stacey said, “We are constantly responding to our franchisees’ feedback and evolving our services to meet their needs. For example, webinars covering all aspects of the business are being developed so that franchisees can access support whenever they need it.”
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FRANCHISES IN YOUR PRICE RANGE One of the questions that we get asked all the time at Business Franchise Magazine, by people researching the purchase of a franchise, is “Which one would you buy?” But surely the first question the potential franchisee should be asking is of themselves and should be “Which one can I afford?” Over the many years that Business Franchise Magazine has been involved in franchising in Australia and New Zealand, we have dealt with hundreds of different franchise systems on a regular basis. From the newest up-and-coming ‘must-have’ to the ‘old-timers’ established and successful over many years, franchising has never been so diverse. So, where do you start? If you are lucky enough to know the industry you wish to join, the answer to this will help you decide which franchise systems to approach. If you have no idea of the industry type you wish to buy into, this is a helpful exercise as it will help to narrow down the wide range of 1600+ franchise systems available in Australia and New Zealand.
So what is your price range? Business Franchise Magazine is always packed full of current franchise systems available, all categorised by price bracket to give you some helpful information on where
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to start. Head to pages? and ? (line listings) for a list of more great franchise systems.
Can I Afford a Franchise? Are you looking to buy a franchise but aren’t sure you can handle the costs involved? It’s true, an average middle-class salary alone probably won’t be enough to make your dream a reality, but that doesn’t mean starting a franchise is impossible even on a limited budget. You just must know where to find the assistance you need.
Franchise Start-Up Costs Start-up costs vary widely and can range from as low as $10,000 to more than $1,000,000. A big factor is whether or not it will be necessary to own or lease real estate for your business.
What Can You Afford? In order to determine what you can afford to invest in a new business, you need to have a good understanding of your current finances. You can start figuring your net worth by compiling a balance sheet that lists all assets and liabilities. Some franchise experts believe you should not invest more than 15 per cent of your own money, but this percentage may vary. Seeking the consult of a financial advisor is wise because they can help you determine how much of your own money you can afford to invest based on your specific financial situation. Unless you are interested in a low-cost
franchise, you will likely need to borrow the majority of the funds to purchase your business. In general, lenders require you to provide 20-25 per cent of the total investment. For example, if you have $50,000 to invest, you will want to research franchise opportunities in the $200,000 range. Before approaching any lender make sure you are current on all bills, correct any mistakes on your credit report, and be prepared to explain any blemishes.
Why buy a franchise? Wanting to trade under an established brand commonly motivates franchisees purchasing an existing franchise. However, franchising can be a costly business venture, and before jumping straight in, it is important to consider the costs and financial obligations involved in franchising. Below, we look at the financial aspects from the perspective of a franchisee to help you answer the question, ‘can I afford it?’ At the outset, franchisees should carefully examine the franchise documents to determine all the costs involved. In particular, you should carefully read and understand the disclosure document because, as required by the Franchising Code of Conduct, franchisors are required to disclose all actual or potential associated costs of the franchise business, including the initial franchise fees and costs through to the ongoing fees or royalties. The document should detail costs including upfront documentation fees and day-to-day operational expenses, such as postage costs and staff amenities. The fees that a franchisee must pay may be quite costly depending on the length of the contract and the perceived reputation of the franchise. Franchisees should be particularly aware of: 1. Initial Franchise Fees Initial franchise fees are meant to cover the cost of initial assistance needed in setting up the business such as
recruitment, obtaining a lease and/ or licence, fit-outs assistance and any training involved in running the franchise business. Initial fees will typically rise in relation to the length of the franchise contract as well as the brand’s reputation. 2. Ongoing fees Once the business is set-up and operating, franchisees will also be responsible for paying an ongoing franchise fee. This usually based on a percentage of the franchisee’s gross revenue and determined by the division of obligations and responsibilities between the franchisee and franchisor. So remember that a greater reliance on the franchisor for support may be reflected in a higher percentage of ongoing fees. 3. Other Costs Franchisees should also be aware of other aspects involved in setting up a franchise, such as the business structure, which may influence their financial obligations. Additionally, franchisees should consider buyer costs and the costs of setting up company trusts. The key for a franchisee is always to plan. Analyse the franchise documents and use the information to prepare cash flow forecasts and business plans. It is also worthwhile to do your research. While disclosure documents itemise the costs and expenses for which you are liable, they rarely give an indication of the income you will derive against which those costs will be offset. Examining the industry, talking to other franchisees and undertaking some market analysis will be critical in determining the overall financial risk you will take on. As the franchisee, it is important that you understand your financial obligations and business structure. If you have any questions, let a franchise lawyer know.
Buying a Franchise: FCA Guidelines In Australia today there is a franchise operating in almost every type of business category, with varying levels of complexity and cost. Prior to buying a franchise, potential franchisees should do the following; 1. Assess your own reasons for wanting to own a business; 2. Assess the lifestyle and income implications of owning and operating a business; 3. Assess the franchise opportunities consistent with 1 and 2 above. 4. Build your understanding of the franchise relationship by reading the Franchise Guide. 5. Narrow your franchise search to a few systems, then request further information. 6. If appropriate, and you are comfortable with the decision, select a system and commence the application process. 7. Ensure you have adequate borrowing capacity, including working capital, to successfully establish this type of business. 8. Be sure you receive and evaluate all disclosure material during the application process. 9. Be sure you receive legal and accounting advice from lawyers and accountants with franchise experience before making any final commitment. 10. Use the cooling-off period to check your facts and figures and determine if you still want to proceed. This is by no means an exhaustive list of things you should consider prior to buying
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“Start-up costs vary widely and can range from as low as $10,000 to more than $1,000,000.”
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a franchise, but if you work through these 10 steps you will be at less risk of rushing headlong into a hasty and ill-informed decision.
Background Research If you are curious about franchising, The Franchise Council research facilities can help supply the answers you need. Head to www.franchise.org.au for documents that will provide you with an overview of the things you need to consider as you embark on your research.
“It is always essential that anyone considering becoming a franchisee receives competent professional advice from qualified and experienced advisors.”
Due diligence before entering into a franchise agreement is essential. The resources found at www.franchise.org.au will help you identify the next steps in your research. Business Franchise Magazine also produces two annual publications offering advice from various professional advisers. You can order the latest issues via http://www. businessfranchiseaustralia.com.au/annualpublications. The directory is cross-referenced by category and includes an alphabetical index, so finding a particular franchise or type of business is quick and easy via direct links or email. Our website https://www. businessfranchiseaustralia.com.au/ has a comprehensive web-based Directory of many franchise systems in Australia. You can also find various professional advisers for assistance in purchasing a franchise.
Franchise Costs & Fees In all business format or package franchise programs, franchisors directly or indirectly collect payments from franchisees for the right to use their brand and to participate in their systems. Franchise fees can range in price (for up-front franchise fees and set-up) from as little as $5,000 to as much as $1 million, or more. Typically, franchisees are also required to pay ongoing fees for franchise support, which may be a fixed monthly amount, or calculated as a percentage of turnover.
lawyers who are members of the Council and who understand franchising, which is a specialist field of practice. Business Franchise Magazine boasts a large range of Expert Advice articles from a number of leading industry experts in accounting, legal and much more.
Deal only with FCA Members Members of the Franchise Council have committed to following the mandatory Franchising Code of Conduct, plus any FCA designated member Code of Conduct. This, in addition to common law rights, increases protection for franchisees from unscrupulous operators. All intending franchisees should ensure that they deal only with members of the Franchise Council of Australia and ask for proof of an organisation’s membership of the FCA.
Type of business
Fixed monthly amounts may range from $50 per month up, while percentage fees may range from 2% to as much as 15%. Additionally, a further fixed or percentage of turnover fee may be applied to cover the costs of group marketing.
The position of the franchise in the market in which it trades is a vital consideration. You should not only look at the particular franchised business in relation to its own activities, but also make an assessment of the prospects for the overall industry or trade of which it forms a part. The franchise will either be dealing in goods or products, or the provision of services. The accompanying table contains a comparison of the various considerations which should help in making an assessment.
Get Advice
Are you cut out for it?
It is always essential that anyone considering becoming a franchisee receives competent professional advice from qualified and experienced advisors. The FCA can direct potential franchisees to accountants and
Despite the benefits, franchising is not for everyone, and it can be surprisingly competitive just to be selected as a franchise. Good franchisors are highly protective of the brand they have built up and, not
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surprisingly, many actively seek out people who will be enthusiastic brand ambassadors. Even if you have the right personal qualities, you need to commit to playing a very handson role in the business and that inevitably means long hours at the coal face. Investing in a franchise gives small enterprises the benefit of a well-known brand, something that can take years for an independent venture to build up, as well as the proven business systems of the franchisor. According to Dominique Lamb, CEO of the National Retail Association (NRA), 80 per cent of independent small businesses fail in the first five years – “that’s far higher than the 20 per cent failure rate among franchisees”. The advantages of franchising go beyond an established brand. “As a franchisee you’re not entering a new industry on your own,” says Lamb. “You have the support of the franchisor, and this can extend to assistance with human resources, organising business bank accounts, which can mean securing discounts on equipment like EFTPOS machines. Franchisors will also often step in to negotiate leases for franchisees or at the least educate franchisees on how to negotiate a commercial lease.” “Be prepared for hard work,” cautions Lamb. “A franchise is not a way to make money without you being involved. You have to drive the business, make your mark on it and lead by example, especially when it comes to motivating staff to give their best effort.” Enjoy this issue of Business Franchise Magazine’s feature – Franchises in your Price Range!
FRANCHISE DIRECTORY 2019 INSIDE: OVER 2000 BUSINESSES LISTED
ON SALE NOW $9.95 AUD, $11.95 NZD (INC. GST)
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CAN YOU AFFORD A FRANCHISE? Buying into a franchise is a big step in your life. It may be one of the most significant financial decisions you will make. While the bank may say ‘yes’ to the monetary cost of the business, it’s vital to look beneath the surface at the hidden costs. These can have a considerable impact on whether your venture sinks or swims. Have you ever looked out at the ocean when it’s calm? The sun is shining, there’s a pleasant breeze, and the waves are gently lapping at the sand. It looks ideal, right? But how do you know that the water is as calm as it appears? Are there undercurrents or rips that can cause problems for even the strongest swimmer? Buying a business can appear the same. Everything can appear to be in excellent shape – the financials, the business plan, the product, the reputation of the franchisor, the customer demand - but, before you dive in, it’s important to consider some of the costs that lie beneath the surface.
Putting a value on your own time It can be tempting, and even exciting, to think about all that you will be able to do in a business. You may be a people person and the idea of engaging with customers every day is something that is highly motivating to run a café or a gym or play centre. However, it’s essential to assess how much time you will be able to spend on the day-to-day running of the business (serving customers, cleaning, ordering stock, to name a few) compared to a strategy level (reassessing your business plan, professional development of your team, assessing any risks due to changing customer demand or evolving economical situations). You need to be realistic and not sell yourself short, or to put it in another way, don’t underpay yourself. You wouldn’t underpay your employees, so why are you diminishing the value placed on your own time? Carefully examine how many hours a day you can put into a business and how you want to use them. Is it reasonable to spend all day servicing cars, or making coffee or taking classes, and then cramming all the paperwork, forecasting and business development into the evenings and weekends? Is that a wise investment of your own time, and importantly, impacting your health and well-being? Running a business is not a part-time job, there will be extended hours involved, but it’s also important not to run yourself into the ground. Assess the time you will need to invest of your own or how much you can
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afford to delegate to a manager or additional staff before you sign on the dotted line. You need to walk into the business with a clear idea of how you will allocate your working hours, and non-working hours, within that business.
The skills gap Most franchisees come to their new business with a skill set developed over the years in other roles. You may be a fitness instructor purchasing a Pilates and yoga studio – running classes will be simple for you, but managing a team of employees may be something you have not done before. You will need to know what training, coaching and professional development are offered to franchisees in areas such as management by the franchisor. Training will vary significantly depending on the franchise model you buy into, as will on-the-ground support via a field coach. Some businesses offer extensive leadership training, while others focus more firmly on the skills you need to run the business day-to-day such as running classes, serving customers or producing food and beverages. Investigate the training and professional development offered and note any areas where you feel you may still have gaps in your skills and knowledge. External courses
or business coaching is available, but this may require additional time and financial output for which you may need to budget.
Getting the word out Most franchise businesses have a national marketing strategy and branding concepts that filter through all their advertisements, signage, website and promotional materials. Where marketing at a head office level starts and ends will vary based on the franchise you are looking to buy into, and it is a question you should be asking. What marketing initiatives run out of head office? You may be expected to contribute to a marketing pool to fund advertisements, sponsorships or a social media campaign, and this may lift some of the marketing burden off your shoulders. However, very rarely are franchisees not expected to undertake at least some of their own marketing at a local level – perhaps running a venue-specific Instagram or Facebook account, sponsoring a sporting club or community or even letterboxing flyers. It’s important to consider how equipped you are to handle this and determine whether local area marketing is something you can do yourself, or whether you may need to supplement a broader
level campaign with your own time or cost of hiring a casual social media or public relations support.
Get the inside word from those in the know The best way to assess what hidden costs may exist is to talk to other franchisees. Ask them what costs they encountered that they didn’t expect. What questions would they ask if they had their time again? What parts of the business they spent too much time on or not enough? Are there areas they would have outsourced or delegated earlier on to allow them to focus on other parts of the business? Current or former franchisees are a wealth of information – make sure you utilise their experience to help make your venture more enjoyable, profitable and successful.
What are the short term savings vs long term costs? Who doesn’t love a bargain? There is no doubt that if you feel you can get the same outcome at a lower price, it is incredibly tempting to go for the more affordable option. But sometimes, the less expensive franchise may end up costing you more if you need to supplement areas like marketing, training or professional services heavily from your pocket. Consider the costs and what savings you may be making in the long run bypurchasing a franchise that offers more support, compared to one that may offer fewer support services. It’s also worth considering the return on
investment. A smaller investment may be financially appealing, but it may not deliver the sort of profits you are seeking. It may be ideal for a side-hustle or lifestyle change, complemented with other household income, but if you want a franchise to be a full-time household income, you need to examine the rate invested compared to the expected return carefully. Going into a franchise understanding that there may be more beneath the price tag is one of the first steps of setting yourself up for a successful business opportunity. FC Business Solutions is an integrated consultancy focused exclusively on the franchise community. Our team of professionals has been providing specialised and expert services to franchises 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. FC Business Solutions is a business which has proudly been certified in accordance with the internationally recognised ISO 9001: 2008 management system which focuses our business on delivering a consistent level of quality to our clients defined by regularly reviewed processes and procedures. hello@fcbs.com.au (03) 9533 0028 www.fcbs.com.au
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“The best way to assess what hidden costs may exist is to talk to other franchisees. Ask them what costs they encountered that they didn’t expect. What questions would they ask if they had their time again?”
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FRANCHISES YOU CAN AFFORD,
TAKING THE LEAP Are you looking to venture out on a new business endeavour this year? Ready for that career change that you’ve always dreamt about? By all means, take that leap and dive straight into it. This may be your big moment for a career change and in return business success! Before you get too carried away, it’s important that you are aware of the hidden terms & conditions, costs and, most importantly, assessment of your own reliability in terms of owning and operating a business. Of course, there’s nothing to say that you can’t leap head into a new opportunity that you’ve been waiting years for, especially if it’s an idyllic fit for your current living and working situation. However, when taking that initial leap into unknown territory, whether it be franchising our your own solo endeavor, it’s important that you perform your due diligence and do your research into the bigger picture. That way, the path to franchise success will be much smoother and profitable in the long haul. When it comes to assessing your new franchising endeavor, you must first assess
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Whether your sights are set on a fast-food chain or a retail outlet, it’s important to choose an option that’s suited to your budget, saving you from overcommitting your finances. In assessing your finances, you can calculate your net worth by compiling a list of your assets and liabilities. Franchise experts say that you shouldn’t invest more than 15 percent of your own money when considering franchising. Seeking the advice of a financial advisor is crucial to your initial success - although this will increase your expenses column, it’s an additional cost that will benefit you in the long run. You cannot progress (or make an informed decision) without the guidance of a financial consultant and advisor. Before signing a franchise agreement, it’s highly recommended that all future franchisees seek independent advice. Even when purchasing a low-entry franchise, you will most likely need to borrow a portion of funds for your initial investment, administration fees or the purchase of your franchise business. To progress with the investment, you will need to have an equity behind you for any Australian financial institution to consider you for a loan. Most banks or brokers will require substantial evidence to process your request. Remember that in recent years, banks and lenders have tightened their lending requirements and in most cases, you will need a number of specific documents, such as a business plan and financial model, in order to even apply for finance. In this circumstance, you will need to consider your own risk profile, as well as whether the franchise system you’re interested in has bank accreditation. Moreover, initial set-up costs will also be a factor. Keep in mind that the business will take a length of time to grow, before you begin to turn over a profit and start to see your investment returned. Working capital is crucial for the first few months of operations and running the business, as you will need to have money that can continue to support yourself, your business, and your family during the first few months of franchising. With all these points aside, research is
“There’s nothing to say that you can’t leap head into a new opportunity that you’ve been waiting years for, especially if it’s an idyllic fit for your current living and working situation.”
critical, because there are franchises out there that appeal to those with a lower initial investment. This is where due diligence and financial assessment will pay off, as lowcost franchises (which also boast successful business systems) are available to those who are ready to make the investment after performing their own initial assessment. When assessing which franchise to choose, whilst it should perhaps align with your interests or even previous work experience, you should also research the market and the likeliness of your franchise to succeed. There are numerous low-cost franchises across Australia that reflect current trends in the marketplace, everything from burgers and bubble tea to mini excavation hire and fitness; the supply and demand is there. The low-cost entry point makes it all the more profitable for you and your family in the initial stages. Whilst the overarching international presence and brand recognition of a sixfigure franchise may be initially more appealing, it is important to weigh up the pro’s and con’s of the investment. Additionally, it is important to recognise that there are franchise opportunities available for less than $150,000 available to individuals, some of which have gone on to be the most successful in the country, if not the world. Yet, no matter the initial fee, in order to begin your journey to business success and obtain financial growth, it is vital that you seek legal and financial advice. The slightest hesitation or uncertainty you may feel in the initial leap, can be eased with the guidance and advice of a legal practitioner, or financial advisor. This is, however, another cost you must consider when beginning your franchising journey, but as explained, it’s unavoidable. Seeking advice can aid in making the entire process more affordable too, by showing you ways to avoid nasty surprise bills along the way, as well as creating a financial programme that will make franchising costs manageable rather than unexpected. Overall, starting new and exciting business adventures are nerve wracking, yet rewarding all at the same. Whether you’re looking to venture into a developing
industry, or if you’ve honed in on your skills and are prepared to go out on your own, it’s important to always remember the financial and emotional commitment required. From franchising with a small yet highly successful company, to going out and creating your own, the financial matter of the process should be held at the top of your priority list in terms of organising and managing your spending. It is critical that you seek out both legal and financial guidance in the industry of franchising so that you are protected from any hidden costs that may appear along the way. Professional advice will help you to assess the risk factor of your investment and whether or not you are financially equipped to go ahead with this business endeavour. Having said that, low-cost franchises are proven to experience all the same business success and obtain the same if not more brand recognition in the long haul, as well as being easier for the franchisee in the initial investment into the business. Therefore, franchises that you can afford ARE possible, and they ARE out there, it just takes a little bit of guidance, and a little bit of research and of course - a big leap! You’ll thank yourself later. Building the foundations of successful businesses for over 35 years, DC Strategy is Australasia’s expert end-to-end franchising business, specialising in consulting and franchise development, extensive legal services and provides a wide range of franchise sales and marketing capabilities. Working with retail, food, industrial, financial, community, IT, professional, trade and service organisations, DC Strategy’s multidisciplinary approach ensures that the appropriate talent and experience are applied at every stage and that clients’ business needs are served professionally and cost effectively under one roof. DC Strategy have advised over 200 networks and established over 2000 franchised locations in Australia alone, creating well over $2 billion worth of enterprise value for clients. For more information contact DC Strategy at: 1300 682 657 www.dcstrategy.com
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whether you can afford to take this leap. An obvious point, but crucial, nonetheless. Having a thorough understanding of your current and future financial situation. This goes both ways: whether you’re looking to franchise your business or are interested in taking the reins by investing in an already established business model and franchise network, ensure that you’re financial stability is healthy and will be able to carry you through the initial set-up and capital requirement.
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THE IMPORTANCE OF A
BUSINESS PLAN One of the main reasons many businesses, including franchises, fail is because they either do not undertake enough planning before they start, or they do not maintain a solid planningreview process as their business grows and matures. It is vital for the survival of your franchise to take the time to develop your business plan. Your business plan should outline your goals, your strategies, your prospects, and also the method by which you will achieve these. Each business should have its own and unique plan. While it’s good (and often much easier) to work from a template, start out the right way by making sure that you delete any headings which do not specifically apply to your individual business. Don’t consider this as homework, but instead as a serious analysis of how your franchise business will work. Your plan will not only help you to test your ideas, but also to decide on strategies to reach your goals. It’s all about quality. Your business plan doesn’t need to be as long as War and Peace. In fact, the more concise and straight to the point it is, the better it’s likely to be. A five–page document can be sufficient, if it’s five pages of solid content and strategy. You do need to make sure that you cover all areas of your business and that your plan is manageable and contains enough flexibility to be revised as conditions which affect your business change. Your plan should reflect your business life cycle - whether you are starting up,
“Knowing how and when to exit your business is as important as knowing how to start it. Many owners build their business to sell when the time is right.” Ian Watt | Senior Business Development Manager - Franchising, NSW & ACT | RETAIL & BUSINESS BANKING, WESTPAC
supporting a business-loan application or providing ongoing management. For example, a business plan prepared to accompany a bank-loan application should show the loan requirements, describe how the borrowed money will be used, list what collateral will be provided, and propose the repayment plan. Your business plan is your roadmap to success. It needs to be fluid and flexible, and it needs to be reviewed and revised at regular intervals throughout the business year. If at any time you are forced to diverge from your strategy, your business plan will help you find your way back to more familiar ground.
Suggested structure for your Business Plan A summary of the highlights and main points of your plan. Write this last. This section should include detail about the location you will be operating from; the history of the franchise systems; facilities and equipment you will be using; as well as the legal structure, set-up costs, funding, and insurances you will choose. This section paints a picture of your business and describes the legal entity and ownership structure, while also giving an overview of start-up costs and initial funding.
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ANALYSIS: Here is where you describe the products or services you offer. Make sure you emphasise why buyers will purchase those things, and what benefits they will receive by doing so. Show how much it costs to deliver what you’re selling. You should also review current trends in the wider industry or sector, and assess your competition. Here you need to document your overall mission strategy, objectives, and milestones. You can also include your marketing strategy, outlining any plans for advertising and promotions as well as a sales forecast and the cost of sales. It’s a good idea to detail your distribution method/s and plans for growth as well. You should also describe the target market and segment you will be focusing on, including market demographics, market growth, trends and forecast. Finally, describe the nature of your industry and sector as well as your competition, and fine tune your milestones with dates, budgets, and specific responsibilities. Outline staff positions, costs, and facilities and also include an organisation chart. You should identify and describe the key members of your team, list managementteam gaps (if any) and show how they will be addressed.
FE ATUR E : FR A NCH ISES I N YOU R PR ICE R A NG E The key element of this section is your financial plan and needs summary. Other components of this section should include sales forecasts, assumptions, annual income expenditure, a profit-and-loss statement (P&L), a cash flow statement, and a balance sheet. CONTROLS: This is a summary outlining the operational aspects of your business. Here you should define the systems, processes and controls which have (or will be) put in place. Also, identify any gaps and plans for the future. This helps you define your Strengths (for example, reputation, latest technology, good location), your Weaknesses (lack of experience; difficulty finding staff, high overheads), any Opportunities (local market growth, an
unfilled niche in market, the possibility of a joint venture), and any Threats (a competitor opening up, over-reliance on one supplier, raw-material costs rising). Knowing how and when to exit your business is as important as knowing how to start it. Many owners build their business to sell when the time is right. If this is your strategy, make sure that you understand how to do this. There are many books available which explain the details; or you can speak with your accountant, solicitor, or bank. Other considerations and water-cooler topics: - Share your business plan with your staff and summarise it into a one or two-page document. You need their commitment to help you get there!
“You do need to make sure that you cover all areas of your business and that your plan is manageable and contains enough flexibility to be revised as conditions which affect your business change.”
- Share performance outcomes with your staff regularly. Highlight key successes and learnings, and pinpoint where results are not on track to focus everyone’s attention. - Demonstrate key performance measures graphically; a picture really is worth a thousand words. - Consider outsourcing and obtaining professional assistance during all stages of the planning process. - Ensure the analysis is ‘non-emotive’, particularly in terms of what has been achieved to date and the successes and
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FE ATUR E : FR A NCH ISES I N YOU R PR ICE R A NG E
E X PER T A DV I C E
“Your business plan is your roadmap to success. It needs to be fluid and flexible, and it needs to be reviewed and revised at regular intervals throughout the business year.�
reasons for this. These reasons may not necessarily work into the future. - Update your plan every quarter. Even if the final outcome is that there are no changes required, the discipline of holding quarterly planning-review meetings is important. - Set key milestones which identify what you intend to achieve in set time periods. For example, the first six months, second six months, second year, and so on. - Business plans are as important for new companies as they are for established businesses which have been trading for ten years. Would you invest in a business that had no plan? - Your business may require you to share the plan with shareholders and other stakeholders at monthly board meetings perhaps even prospective investors. Westpac has supported the franchise sector in Australia for over 20 years. The growth of a specific franchise system is supported by providing streamlined processes for lending, as well as access to other lending transactional solutions. The bank also has a national network of franchise specialist business bankers who are able to deal with specific day to day needs of the franchise customer. Ian Watt is the Senior Business Development Manager - Franchising, NSW & ACT at Westpac. He specialises in the franchise sector, working closely and assisting many franchise brands grow and maintain their network. He holds a Bachelor of Business degree and is a qualified CPA. Contact Ian at: ianwatt@westpac.com.au www.westpac.com.au
The information contained in this article is intended as a guide only and is not intended as an exhaustive list of matters to be considered. Persons entering into franchise agreements should seek their own independent legal, accounting and other advice.
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