Australian & New Zealand Business Franchise Guide

EXPERT ADVICE FROM INDUSTRY LEADERS HOW TO BUY, MANAGE AND PROFIT FROM YOUR OWN FRANCHISE

The Franchise Guide 2014 is published by CGB Publishing Pty Ltd PO Box 968 Mt Eliza VIC 3930 Australia Phone: 03 9787 8077 Fax: 03 9787 8499 *** The information and contents in this publication are believed by the publisher to be true, correct and accurate but no independent investigation has been undertaken. Accordingly, the publisher does not represent or warrant that the information and contents are true, correct or accurate and recommends that each reader seek appropriate professional advice, guidance and direction before acting or relying on all information contained herein. Opinions expressed in the articles contained in this publication are not necessarily those of the publisher.

PUBLISHER’S SUGGESTED RETAIL PRICE $29.95 Š 2013 CGB Publishing Pty Ltd all rights reserved.

ISBN 978-0-9803923-6-4

Contents Preface .................................................................................................................................................................... 1 Chapter 1: What is franchising?........................................................................................... 3

Franchise Council of Australia Chapter 2: Choosing the right franchise. .................................................................13

Jason Gehrke, Franchise Advisory Centre Chapter 3: How to be a successful franchisee. .................................................21

Jim Penman, Jim’s Group Chapter 4: Should I buy a new or existing franchise?.................................29

Professor Lorelle Frazer, Griffith University Chapter 5: Financing your franchise. ...........................................................................37

Sharen Verrenkamp, Westpac Banking Corporation Chapter 6: Understanding the legal documents..............................................45

Raynia Theodore, Mason Sier Turnbull Chapter 7: Ongoing obligations. .........................................................................................57

Marwan Kojok; Bianca Sevastos, Baybridge Lawyers Chapter 8: Investing in an international franchise......................................67

Rod Young, DC Strategy Chapter 9: Franchising in New Zealand......................................................................77

Graham Billings, Franchise Association of New Zealand Chapter 10: Local Area Marketing for franchisees. ........................................85

Michelle Gamble, Marketing Angels Chapter 11: Selecting the best location. ......................................................................93

Peter Buckingham, Spectrum Analysis Australia Chapter 12: Growing the franchise................................................................................103

Andrew Kelly, FC Business Solutions Chapter 13: Investing in your future.............................................................................111

Tim Kilham, Lanyon Partners Chapter 14: Franchising your business. .....................................................................121

Brian Keen, How To Franchise Simply Chapter 15: The Franchise Council of Australia.................................................131 Franchise Listings. ..............................................................................................................................141 Professional Services Listings. .............................................................................................177 Publications...............................................................................................................................................193 Helpful Organisations....................................................................................................................194 Index

.....................................................................................................195

Preface

By Melissa Wakefield, Editor CGB Publishing Pty Ltd

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f you’re contemplating a move into business ownership, the endless options and knowing where to start can often appear daunting at first. Starting a new business from scratch comes with a lot of unknowns and associated risks.

Before you embark on your franchise journey, it is wise to do your research and this publication is a great start.

Franchising is a valid option for the budding entrepreneur and in recent times, offers more opportunities than just fast food and mobile services. In Australia, franchising generates more than $131 billion and there are over 1,100 franchise systems. The sector has approximately 73,000 individual franchise owners and employs more than 400,000 people nationwide.

In New Zealand there are 446 franchise systems with 22,400 units employing over 100,000 people.

The business represented by franchising today extends to nearly every business sector; from food to furniture, fitness to financial services, building to bedding, printing to professional services… the list is constantly evolving as new market entrants and models emerge.

In our publication of the Franchise Guide we bring together a collection of franchise sector experts who have imparted their insight to help you become your own boss and start your franchise journey well-armed with the knowledge you need to make an informed decision.

It is designed to assist new and potential franchisees as they proceed on their way to becoming a member of a very special community of business owners.

It begins with an explanation of the basic fundamentals of franchising, the legal requirements under the Franchising Code of Conduct, financial and banking related information, taxation considerations and business ownership structures, operating an international based franchise, commercial property and site selection, ongoing financial concerns and developing a franchise to maturity.

An additional chapter in this edition is ‘A guide to local area marketing’ and 1

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describes the options to assist you with driving sales and building business locally.

Each chapter has been written by a specialist within the franchising community, including past and present franchisors, specialist lawyers, business advisors, accredited bankers, and separate chapters on Franchising Laws in New Zealand, and the Franchise Council of Australia.

And finally, once you are convinced that a franchise system is the right move for you – we have some of the leading franchise systems listed in the back of the book. Browse through the categories and see which systems interest you most.

Best of luck on your exciting journey.

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Chapter 1

WHAT IS FRANCHISING? Franchise Council of Australia (FCA)

About the Author The Franchise Council of Australia Limited (FCA) is the peak body for the $131 billion franchise sector in Australia, representing franchisees, franchisors and service providers to the sector.

As the peak body for franchising, the FCA strives to add value to the businesses of its members by providing a range of services relevant to franchising and which represent good value.

The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously.

The success of franchising depends on successful franchisors, and this in turn, depends on profitable and happy franchisees.

The Franchise Council of Australia works constantly to ensure that all activities and services which benefit franchising benefit the broader community – including franchisees, franchisors, employees and their local economies and communities.

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veryone can picture a familiar franchise business. They cover retailing and service delivery and a mixture of the two. The quick service restaurants like McDonald’s, KFC, Subway and Red Rooster spring to mind. Bob Jane T-Marts, Midas, Autobarn and Battery World sell mechanical goods and services. Bakers Delight, Brumby’s and Michel’s Patisserie lead baking and Lenard’s is known for its fresh chicken.

Many new car sales dealerships, some petrol retailing chains, like United, and convenience stores such as 7-Eleven are franchises too. Bulky goods retailers using franchising include Clark Rubber, Forty Winks, Snooze and Freedom Furniture. Snap, Kwik Kopy, Spec Savers, and OPSM are all franchises.

Over the last decade, and continuing today, service franchises are becoming more numerous, with brands like Mortgage Choice, Bendigo Bank, ANZ Mobile Lending and Aussie Home Loans playing a big role in financial services. Jim’s, V.I.P. Home Services, Fastway Couriers and Pack & Send are extending their reach, both in Australia and overseas.

Major contributor to national economy The sum of all this, in addition to the 1100 plus franchise systems not mentioned, is a $131 billion contribution to the Australian economy each year. That represents a significant proportion of gross domestic product; plus a strong contribution to the nation’s export income.

The sector now has about 73,000 individual franchise owners and employs more than 400,000 people nationwide. While franchising started in the 1970’s with a strong American flavour, this has changed dramatically over the years.

More than 90 per cent of franchise systems operating in Australia today are home grown.

Franchising – the model Successful franchise businesses will proudly declare they have a model that is working well. They are talking about the way their franchise system works, as well as how well their franchise owners are selling their branded products or services.

Most successful franchisors base their business concept on a unique offering, a specialist technique or a technical innovation which gives them an edge over their competitors. What they have in common is a franchising system which has helped them to expand their ‘footprint’ – the geographic reach of their product/service – via a franchise ownership format.

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What is franchising?

So, what we have is a franchisor with a business concept. Most commonly, this concept has been tested in two or three locations, over a few years, before it is offered up as a franchise opportunity. Sometimes it will be a family business looking to expand using a successful formula. The system expansion occurs as more franchisees (individual franchise owners) join it. So the franchise system becomes a way for the franchisor to extend the reach of his or her product or service to new markets. For this reason, some people describe franchising as a distribution model.

More than just distribution A franchise system can be a format for distribution of products or services.

However, there is something more powerful involved in successful franchising – the human factor. At its heart, every successful franchising business has a franchisor and a franchisee – two business owners applying their entrepreneurial skill, experience and hard work collaboratively to achieve the best end result.

In this sense, franchising is like a business partnership. Maximum success will only be achieved if both partners work together. The same applies to franchising: maximum success will only be achieved if the franchisor and franchisee work together.

The beauty of the franchising model is that the business relationship will not be confined to a single partnership. In a franchise network, there are many ‘partnerships’ and there are many business owners, all working together to achieve the same goal; the success of the system and their individual franchise units within the system. Working together, they are able to leverage greater buying power to get a better deal from suppliers, and they are able to pool resources to market their goods and services more efficiently and effectively.

It may be that individuals are more readily able to get into a franchise business because of a bank’s willingness to lend money into a business which has an established track record. The franchise business may actually enable business opportunities which may not be available to a stand-alone business start-up.

A meeting place for aspirations So what does this amount to? It shows that franchising can be a lot more than just a method of distribution. Franchising represents a way for business owners to get together, for their own enhanced success, and be a part of building something bigger.

We could say then, that a franchise is a meeting place, where the franchisor and 5

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the franchisee come together to achieve their mutual and complementary goals of business success and expansion. It is a meeting place of aspirations – the aspiration of the franchisor to grow the scale of his or her business concept and the aspiration of a business owner to get into business in an established system with a track record of commercial viability.

In the most successful franchise businesses, this meeting place is not a onceoff; it is visited constantly. Franchisor and franchisee need to stay in step if harmony of aspirations is to be maintained.

This combination of entrepreneurial aspiration is one of the reasons why the franchise model often yields superior results compared to company owned chains. In the franchise situation, both parties have profit incentive. In the employer-employee scenario, the profit motivation often does not exist for the employee. A good employer might introduce a profit-based incentive for a store manager, but this is usually a small portion of profitability. In the franchise scenario, the franchisee owns 100 per cent of the profits.

The Australian Bureau of Statistics does not separate franchise business from the general small business population in its statistical reports. Therefore, it is impossible to be sure what portion of small business profitability is earned by the franchise sector.

However, the profit-fired franchise model surely punches above its weight compared to non-franchised businesses, in terms of unit profitability. It is sometimes said that small business is the engine of the economy. If that is so, then franchising is surely the turbo charger on that engine.

The franchise agreement As in many businesses, there is an underlying contract in franchising. This is called the ‘franchise agreement’. A major difference between franchising and other business models is that the underlying franchise contract, the franchise agreement, is prescribed by law. A franchisor must provide a franchise agreement conforming to the Franchising Code of Conduct, which is a set of regulations specifically designed to protect the rights of franchising participants and to give confidence to new entrants to the sector that they are doing so with certain rights, entitlements and protections.

The franchising model is legally defined in the Code, which has been a mandatory addition to trade practices law in Australia since 1998. In essence, a franchise agreement is defined as an agreement where one party (the franchisor) provides to another (the franchisee) the right to carry on business 6

What is franchising?

under a system or marketing plan using a trademark or symbol owned by the franchisor, in return for a fee paid by the franchisee.

The four key elements are described in the Code as follows: 1. The agreement is written, oral or implied in whole or in part.

2. The franchisee’s business operation is substantially or materially associated with a trademark, advertising or commercial symbol that is either owned, used, specified or licensed by the franchisor.

3. The franchisee pays the franchisor fees – except for four payment categories excluded by the Code.

4. There is a grant, by the franchisor to the franchisee, of a right to carry on a business of offering, supplying or distributing goods or services in Australia, under a system or marketing plan substantially determined, controlled or suggested by the franchisor.

These criteria apply irrespective of how the parties describe their arrangements.

While there are legitimate reasons to establish arrangements that fall outside the Code, the franchising regulator, the Australian Consumer and Competition Commission, takes a dim view of organisations that do so with the intention of avoiding the Code’s provisions.

This very broad definition covers almost every conceivable type of franchise and branded distribution arrangement. When the term ‘franchise’ is used in common parlance, it is normally used to describe what is called ‘business format franchising’, where the franchisor specifies much of the business format under which the franchisee must operate. However, the broad definition is useful as it highlights that franchising comes in many and varied forms, and franchising techniques can be used selectively if desired.

This means that franchising contracts are many and varied. They contain elements prescribed under the Code, but they then contain many aspects, clauses and so on which are specific to the business in question. It is essential for all new entrants to franchising to pay close attention to the detail in the franchise agreement.

Operating procedures Franchising techniques are used by different companies in different ways, and franchise formats vary widely in levels of sophistication. Some businesses, such as major fast food systems, mandate processes for almost every aspect of 7

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the franchisee’s business. Other franchisors are less prescriptive in terms of operating format. The key to franchising is the creation of a synergistic business relationship between independent business proprietors that enables each party to focus on their strengths to provide a superior offer to consumers.

Franchisee obligations Some of the most common and important elements of a franchise agreement relate to the commercial terms between franchisor and franchisee. In addition to providing the licence to operate the brand, a franchisor will often offer initial and ongoing training, as well as marketing support and sometimes other support services.

In return, a franchisor will often require a franchisee to provide the following compensation: Franchise fee: This is an up-front fee, paid by the franchisee to the franchisor, for the right to use the brand name and systems required to operate the business in a specified location or area for a specified period of time.

Royalty: The franchisee may pay ongoing fees to the franchisor for management and technical support and other ongoing services provided. This may be a flat fee, paid on a monthly basis or, more commonly, a percentage of sales.

Marketing levy: A regular flat or percentage based fee paid into a central advertising or marketing fund. This is used by the franchisor to promote the whole business network.

The key idea here is that the franchisee fee buys the right to use the brand for a specified period. There will usually be rules written into the franchise agreement about the way franchisees must represent the brand. Franchisors will often police these rules stringently, in order to maintain the consistency of product or service delivery, which is an essential part of overall consumer brand recognition and integrity.

The way it works In most cases, the franchisor sets the operating format for the business and takes responsibility for developing and managing the franchise network. The franchisee gets the right to use the franchisor’s system and brand, and the right to use intellectual property such as trademarks, business and operating systems and procedures; many of which may be confidential or the subject of copyright.

Franchisors will often manage activities, such as marketing and the purchase 8

What is franchising?

of products for sales, across the franchise network. Stock may be supplied by the franchisor or sourced through third party arrangements established by the franchisor.

Taking care of these tasks on behalf of the entire franchisee network allows the franchisees to focus on operating their individual businesses. Franchisees will generally own the equipment, vehicles, fixtures and fittings used in the business (if there are any) and will take care of ordering and holding stock.

Employees involved in the business are usually principals or employees of the franchisee, and the franchisee will handle most dealings with customers.

A great opportunity – but no guarantee In his book, The E-Myth, renowned US author, Michael Gerber, identifies the advantages of franchising as among the most remarkable in business.

Back in Australia, in his book, The Franchise E-Factor, outstanding author, psychologist and franchising educator, Greg Nathan, identifies some of the ‘e’ words which can define a rollercoaster of emotional development for a new franchise business owner.

From ‘glee’, through ‘me’ and ‘fee’ to ‘we’, Nathan plots how emotions for a franchisee can fluctuate from initial excitement to questioning, to a satisfactory longer-term trajectory of business success.

The message of both authors is simple: franchising offers great opportunity, but it has its challenges. There is no guarantee of success and no substitute for the hard work which is necessary in every small business.

It is sometimes said that franchisees are in business for themselves, but not by themselves. They have their franchisor, and a network of peers, who can often be the best mentors. There is plenty of upside from the franchisee’s perspective, but there are also risks. Good advice for the prospective franchisee includes doing all your due diligence and then making sure the decision is right for you.

Advantages of franchising • A franchised business has a track record of commercial viability. Accordingly, there is less risk of failure than in an untried start-up.

• Franchisees should receive ongoing assistance from the franchisor, as well as getting access to the franchisor’s know-how, knowledge and experience.

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• Franchisors may be able to negotiate better rates of finance for funding the business, and/or better lease location and terms, if there are premises involved.

• Franchisors can help with store design and fit-out.

• Bulk purchasing power may be available to franchisees through the franchisor.

• Access to franchisor research and development may be available to keep the business up-to-date with market trends.

The risks of franchising • Franchisors must instil operating standards across the network. If franchisees fail to meet these standards, conflict can occur.

• The process for sale or transfer of the franchise rights is likely to be controlled by the franchisor – under the authority of the franchise agreement – though approval for sale/transfer cannot be unreasonably withheld.

• Franchisor authority to make changes to the system can affect cash flow and/ or profitability for franchisees.

• The behaviour of the franchisor or other franchisees may affect the brand integrity for other franchisees.

• If a franchisor goes into receivership, franchisees may have to face the prospect of having to change brand name or elements of the system operation (possibly under a new brand owner).

• Franchise businesses face the same challenges as other businesses. Economic downturn, increased competition, under-capitalisation and many other risks afflict franchises in the same way they do non-franchise businesses.

• Because of the length of term of a franchise agreement (on average five to seven years) and the degree of interdependence it creates between franchisor and franchisee, it is one of the more demanding business relationships. As a result, it is sometimes described as a commercial marriage. Managing the relationship is critical, from both the franchisor and franchisee perspective, and is one of the most testing factors in sustained success.

Summary Franchising is not a magic formula that guarantees business success. It is simply a method of carrying out business which can offer significant commercial advantages for franchisors and franchisees.

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What is franchising?

Franchising works best when the franchisor provides a proven and successful business formula to its franchisees and the franchisees follow the formula and work as a team. When it works well, it is a system which rewards entrepreneurial flair, innovation and commitment to team discipline.

Like any great sporting team, franchising has a coach, a captain and team of players who each have a role to play. When they each do their jobs, collaboratively and in unison, it can be splendid to watch and rewarding for all.

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

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Chapter 2

CHOOSING THE RIGHT FRANCHISE

By Jason Gehrke, Director Franchise Advisory Centre

About the Author Jason has 20 years’ experience in franchising and has worked at the franchisee, franchisor and advisory level within the industry.

His firm, the Franchise Advisory Centre, advises both franchisors and franchisees on pre-entry considerations as well as on sector best practice across a range franchising issues. The Franchise Advisory Centre also conducts specialised franchise education workshops and seminars around Australia.

Jason is often quoted in franchise articles in the business media, writes a regular column on franchising and publishes ‘Franchise News & Events’, a free national email news bulletin on franchise trends and issues.

He has a Masters of Business Administration (MBA) and is a former award-winning CEO of a mobile service franchise system.

Jason teaches undergraduate and postgraduate franchising programs at Griffith University’s Asia-Pacific Centre for Franchise Excellence.

As a former member of the Australian Competition and Consumer Jason is a member of the Australian Competition and Consumer Commission’s (ACCC) Franchise Consultative Panel, and national deputy chairman of the Franchise Council of Australia.

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ranchising continues to appeal to people who want to go into business for themselves.

The decision to buy a franchise can be just as emotional as the decision to buy a house or a car. The desire to enjoy a better lifestyle and to make a better life for themselves drives many potential franchisees to place greater emphasis on these intangible outcomes of business ownership, than the necessary focus on the business model itself.

Given that the purchase of cars and houses will be the next most significant capital acquisition in someone’s life, potential franchisees often gloss over the ‘detail’ aspects of the business in the pursuit of the dream it is expected to deliver.

People buy houses because they shop in a price range (or slightly above it) and can picture themselves living in a particular house, or because after looking at houses for a while the right house will become self apparent and wrap itself around the potential buyer like a warm blanket.

This is likewise with cars, where many consider the vehicles that we drive to be an extension of our personality, (and rather expensive fashion accessories which also happen to serve as a method of transport.)

With houses and cars, we attempt to shop in a price range, and then buy what makes us feel good, but which might not actually be the best decision for us.

Buying a franchise involves a similar emotional experience, but is different most people generally lack the knowledge of how to go about buying one.

For many, the importance of knowledge about buying a franchise only becomes apparent when something later goes wrong and they are faced with a “I wished I’d known that before I bought this” moment.

These moments can range from trivial annoyances to financial tidal waves that may wipe out the business and the franchisee’s assets with it.

Prior knowledge is essential to better manage the risk involved in any business enterprise, yet many potential franchisees only seek out knowledge after they have already made a decision to buy a particular franchise.

In this regard, many franchise lawyers around the country will have first-hand experience of clients who are determined to buy a franchise, and only get legal advice as an inconvenient formality that they will not allow to change their mind in any way.

For this reason, knowledge obtained after the decision has been made to buy a 14

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franchise can be too late to make a difference to the purchase decision.

The best and most effective time for knowledge about franchising to make a meaningful difference to a potential franchisee is before they have decided what franchise to buy.

Therefore, to buy and operate a successful franchise requires more than just having the cash to pay for it. Potential franchisees must be prepared to do some hard work to research and understand the business, the franchisor, and themselves in order to make the best possible decision.

And here is the first hurdle: A potential franchisee must be prepared to roll up their sleeves and put some real time and effort (as well as some money via personal development and professional advice) into their franchise search.

If not, they greatly increase their chances of picking the wrong franchise, and losing part or all of their investment.

To increase the chances of picking the right franchise, here are some key pointers:

What should I look out for?

This boils down to three key things: Profitability, sustainability and strong, competent leadership. In good times, tough times, or anytime, these three criteria remain the same.

Of course, it’s rare that a franchisor will make representations about profitability or concede that their business is anything less than sustainable. It is rarer still that a franchisor would claim to have anything less than strong, competent leadership, so these concepts all need to be tested by a potential franchisee’s own research. If a potential franchise buyer is not prepared to invest the time to properly research what they are buying, then they must accept some or all of the responsibility if the investment fails.

How much time should I spend researching a franchise?

As a rule of thumb, I recommend that a first-time potential franchisee be prepared to spend at least one hour of research for each thousand dollars they are looking to invest in a business.

So, for a business that costs $100,000, this is up to 100 hours of research, or the equivalent of just two and half weeks full-time effort (assuming 40 hours work in a normal week).

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That might sound like a lot, but the saying that a fool and his money is easily parted might have been created specifically for those people who recklessly invest after making hasty, ill-considered decisions.

Gaining as much prior knowledge and experience in the industry and the specific franchise will be useful and should be included as part of any prepurchase research.

What sort of research should I do?

Such research might include (but not be limited to): 1. Reading books (such as this), magazines and other publications about franchising. This information will provide an important first step in building your knowledge of franchising.

2. Conducting extensive searches of online franchise directories. In considering which franchises might be suitable, you should look at particular industries, and then all of the franchise systems operating within that industry.

3. Once a couple of franchise systems have been shortlisted, you should complete the application forms and carefully read through the information provided. You should also engage an experienced franchise advisor who can also refer you to experienced franchising lawyers and accountants. You should read the documents for yourself as well as get professional advice.

(Many franchisees fail to read their franchise contracts, and then afterwards discover they have signed for something that they didn’t know about or wouldn’t otherwise agree with. Reading the documentation for yourself will also help you understand the advice you are being given, and to ask more informed questions of your advisors and the franchisor.)

4. Contact all the current franchisees in the system (or at least as many as possible) to ask them about their satisfaction with the franchise, the lessons they’ve learned along the way, and the sort of research they did (or wished they had done) before buying the franchise. The list of current franchisees and their contact details will be included in the franchisor’s disclosure document. However, this document may only be available at a relatively advanced stage of negotiations with the franchisor, and in the meantime, franchisees’ details or locations may also be available on the franchisor’s website and in the telephone directory.

5. Contact the former franchisees who have left the system in the last three years. Franchisors must provide a list of these franchisees and their 16

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contact details (where known) in the disclosure document. By contacting former franchisees, you will have an understanding of their satisfaction with the business and their reasons for selling or otherwise no longer being involved with the business. Again, it is important to contact all (or as many as possible) of the names provided. Calling just one or two is likely to provide a distorted positive or negative view of the system, and only after contacting the full list can a potential franchisee develop a balanced view of the satisfaction of former franchisees and why they left.

6. Compare concepts. There is usually more than one franchise concept servicing a market niche (however unique), so check out the value of the competing offer. Even if the initial investment price is the same, similar franchises may have different fee structures, marketing levies, support systems, purchasing or other arrangements that can radically affect the long-term value and profitability of the business, or satisfaction of the franchisee.

7. Verify for yourself any statements or representations made by the franchisor, or issues raised when contacting current and former franchisees. This might include even spending time doing market research such as counting houses in a territory, searching the Australian Bureau of Statistics website and other sources of statistical information, counting vehicle or pedestrian traffic and directionality outside a potential shopfront, or many other things.

While this may sound tedious, it’s all part of ensuring that the facts being used to make the decision to buy the business are the right facts.

8. Working part or full time for a period in a franchised store or territory to get a genuine feel for the business (in which case, the longer the better, and the one hour per $1,000 invested rule can be extended). People who have worked in franchises before buying them increase their operational proficiency and become culturally acclimatised to the organisation, thus reducing the likelihood of a horrible “I wished I’d known this before” moment after the investment has been made.

9. Undertaking small business and franchise training courses and workshops.

People going into self-employment for the first time don’t know what they don’t know and look to the franchisor to fill this void for them. This creates the opportunity for unscrupulous franchisors to abuse their trust or for the franchisee to develop unrealistically high expectations of the system for which the franchisor cannot deliver. Understanding basic principles of franchising, as well as basic business concepts and financial literacy are essential to improving and maximising the long-term value of any franchise 17

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investment. (The Franchise Advisory Centre (www.franchiseadvice. com.au) runs education events for potential franchisees. There is also an excellent online education program available at www.franchise.edu.au).

What are the best franchises to buy?

Established systems with a critical mass of profitable, satisfied franchisees will be quite appealing to many potential franchisees. Furthermore, mature systems will generally have dynamic and talented leadership teams, strong corporate governance, and enduring customer appeal.

Having said that, concepts such as ‘established’, ‘critical mass’, ‘satisfied’, ‘dynamic’, ‘talented’, ‘corporate governance’, and ‘enduring appeal’ are subjectively assessed, and relative to the eye of the beholder. An evaluation of a system on these criteria might produce different outcomes for different people.

What about new franchises?

New franchise concepts emerge in Australia at the rate of about 100 per year, however not all of these will be viable in the long run.

There may be more risk associated with investing in a new franchise system with just a handful of franchisees, compared to larger and more-established brands, however there may also be more flexibility and growth opportunities for franchisees of new systems. It is also possible that the franchisor’s training; field support and marketing assistance for new franchisees may not be as well developed in new systems compared to established systems.

What should I be wary of?

The recently-unemployed, particularly those with sizeable payouts for years of accumulated service, holiday pay, etc, are prey for unscrupulous operators. In particular, advertisements that claim a business is a “license, not a franchise”, or which include income guarantees or similar offers should be approached with caution.

Never be in a rush to buy a franchise, especially if you have not been in business for yourself before. Always remember the golden rule of one hour of research for each thousand dollars to be invested. Do not allow yourself to make a hasty and poorly-considered decision, simply because a franchise salesman or business broker tells you that someone else is interested in the same thing. It’s better to miss out on an opportunity and have something else turn up later, than to rush into the wrong decision.

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You should also be wary of offers to buy multiple outlets at the same time, or master franchises. It will be difficult enough in most cases to learn how to operate just one business, without compounding the challenge across many businesses.

The key lesson here is to undertake proper research. (See research hints above).

What laws exist to protect franchisees?

No amount of legislation can adequately protect a franchisee from a hasty, unresearched and ill-considered investment decision.

Distributorships and licensed business opportunities are often advertised alongside franchises, but can look, sound and feel the same as a franchise. No matter what they call themselves, if in the eyes of the law they are a franchise as defined in the Franchising Code of Conduct, then buyers are entitled to receive a disclosure document.

A disclosure document contains a variety of important information as well as the lists of current and former franchisees critical for proper research. Codecompliant franchise agreements include a mandatory cooling-off period, recourse to mediation in the event of a dispute, and various other protections.

The best way to distinguish between a legitimate franchise offering and something that is designed to separate an aspiring business owner from their cash is to educate yourself, and do your research. Only then can you make a balanced decision that takes into account your long-term interests.

Jason Gehrke, Director Franchise Advisory Centre (AUS) 07 3716 0400 jason@franchiseadvice.com.au www.franchiseadvice.com.au

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Chapter 3

HOW TO BE A SUCCESSFUL FRANCHISEE

By Jim Penman, Founder Jim’s Group

About the Author In the early 1980s, Jim Penman was a struggling student working towards his PhD in history, and mowing lawns in suburban Melbourne part-time to help make ends meet.

In 1982, with a personal debt of $30,000 and a marketing budget of just $24 he started mowing lawns as a full-time business. His focus on customer service, attention to detail and desire for perfection was appreciated by his clients and he soon had more work than he could handle. He began taking on subcontractors, with the expectation that they would meet his standards of workmanship and customer service and over the next few years his business grew as he built up and sold lawn mowing rounds.

In 1989 he began to sell Jim’s Mowing franchises providing support and training to new franchisees ensuring they could meet his standards of workmanship and customer service, before taking on the Jim’s name.

Since then Jim’s Mowing has become the largest and best-known lawn mowing business in the world.

The Jim’s Group now has 35 divisions including Jim’s Cleaning, Jim’s Dog Wash, Jim’s Antennas, Jim’s Bookkeeping, Jim’s Building Maintenance and Jim’s Pool Care and has more than 3200 franchisees and franchisors.

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eing successful as a franchisee starts a long time before you begin working in your franchise. It starts when you begin thinking about whether to go into business at all. Because while a good franchise system can improve your chances of success, the only real guarantee is your own hard work and business sense. In general, the more successful you have been in previous employment or in business, the more likely you will be to succeed as a franchisee. We find that managers and sales people tend to be especially successful, but any job that requires self-discipline and the ability to work independently is a good background.

Then it’s a matter of choosing the right type of business. People often ask me which Jim’s division they should go into, and I always ask them: “What do you like doing?” I became a mowing contractor because I love the outdoors: trees, grass, sunshine and rain, the lot. Others prefer the indoors, or like driving, or want the robust physical challenges of working with trees or building fences.

Potential income should always be secondary. You’ll do best at what you most enjoy.

Thirdly, and this really counts, is to choose the right system. And here there is one key principle: do your homework! I’m astonished at people who make decisions involving tens of thousands of dollars and years of their life without spending a few dozen hours on research. Don’t be afraid to ask hard questions.

Check out all the companies in your chosen industry, and ask: “what makes them the best?” Most importantly, get a list of all their current franchisees, with direct contact numbers, and speak to as many as possible. This should be handed over without even the need for a deposit. Failure to do so is a breach of the law, and highly suspicious. A good franchisor will welcome you phoning their people. A poor one will try not to hand over the list, or restrict it to a few chosen favourites. We have found the best franchisees tend to do intensive and careful research, involving competitors and extensive contact with our own people.

Another good clue is to see how selective the system is. A good franchisor will question you intensively, want to know all about your background and skills, require a tryout before even considering your application. A poor franchisor will deliver an intensive sales pitch and try to get a deposit out of you as soon as possible. This suggests low standards, poor customer service and lack of concern for franchisee success. Don’t think this attitude is unknown, or even rare. I once employed (briefly) a salesman from a rival franchise system, and at one stage asked him: “what was their criterion for selecting franchisees?”

His answer: “$50,000, and a pulse!” It is no coincidence that this system, once a major player in the industry, is now a fraction of its former size and no 22

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longer franchises at all. Even within our own system, divisions and franchisors who select most intensively have better franchisee satisfaction, better customer service, and faster growth. It has been one of our major challenges in recent years to make our selection systems tougher and more thorough.

The value of customer service Once in business, there is one key principle that counts more than everything else: look after your customers. This should be a matter of emotion and deepseated principle, rather than simply of logic. The second principle of our Jim’s Group values states that we are ‘passionate’ about customer service (our first principle is service to franchisees). This means that we look after customers well because this is a matter of our pride and integrity and sense of identity.

I’ve made countless mistakes in my business career, and my character flaws are legion. Yet when I look over a business career that has taken a $24 start-up to Australia’s largest franchise network, there is one principle that was correct from the beginning. I was always passionate about customers. I can still remember the horror I felt, decades ago, when through a bookkeeping mistake, I failed to service and thus lost two of my regular clients. It was not the loss of income that mattered, because I had as much work as I could handle, but the sense of guilt for letting my clients down.

In mowing a lawn, I was always looking to do that little bit more. For example, in the early days when edging was done with a wheel, I used to edge first and then run the left side of the mower down the mower strip to create a really clean edge. But it always bugged me that where grass met a retaining wall or tree, there was always that annoying fringe with no possible option (doing it with shears was just too much work for the benefit). One day, and this was in the 1970s, I walked into my local mower shop and saw a strange looking gadget on the floor. It was a long pole, with a handle in the middle, a small engine on one end, and a strange looking fixture with a piece of nylon cord sticking out at the other. It was a brushcutter, one of the first ever imported into Australia, and I had never seen anything like it.

I asked the owner what it was for, and he demonstrated. At last, I saw the solution to my annoying furry edges. And though I didn’t have much money and it cost more than a lawnmower, I bought it on the spot. And thus I became one of the first contractors in Australia to own a brushcutter. Edging was such a fetish with me that my contractors said they could go into a street and tell which lawns I had mown, simply from the quality of the edges. To me, a single blade of grass over a cut edge is like a giant red boil on a beautiful face – ugly, 23

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and impossible to ignore. If this seems exaggerated and unreasonable, well it is. It’s an entirely emotional reaction far beyond any immediate financial benefit. And yet, it is exactly this passion that has reduced our complaint rate by 98 per cent since pre-franchise days.

Any good franchising system will have standards of service, and sanctions to make sure franchisees stay within them. But this should not be your guideline.

Find out what the system requires, and go beyond it. Then try and improve on that. Never be satisfied that any level of service is good enough, given normal constraints of time and money. The aim should be not so much to satisfy clients, as to amaze them. In a mobile service business like ours, the biggest challenge is always to do with time. It’s a matter of responding fast to the first phone call, and then turning up on time. When clients phone our office we promise them a franchisee will call them back within two hours. But we tell our people not to wait nearly that long. The speed of response has a huge effect on the rate at which leads are converted into jobs.

Our customer surveys tell the story. Clients who report a call back after two hours have less than a 50 per cent chance of booking the job. If the call was made after ten minutes but before two hours, 78 per cent will book. If it comes within ten minutes, 85 per cent will book. Calling back within two hours meets the client’s expectations. Calling back within ten minutes exceeds them.

Customer service is also directly reflected in our franchisees’ income. Of franchisees who rate highest on customer service, which includes calling back within ten minutes and having their work normally rated as ‘excellent’, two per cent report poor income. Of those who rate lowest on customer service, 25 per cent report poor income. The same pattern applies to regions, divisions and even countries. The better the customer service, the more the leads, and the better the reported income.

The one area where we do not go all out to please customers is on price. Our franchisees are permitted, even encouraged, to charge what the market will bear. And the better the service, the more they can charge. We even suggest that if their conversion rate of leads to jobs is too high, say above 90 per cent, they increase quotes to lose a few more. But most customers do not mind paying an extra four or five dollars, if it means their property looks immaculate and they don’t have to wait around all morning for someone to turn up. This is not an option available to retail franchisees, of course, since prices tend to be fixed. But better service to retail customers means more people through the door; while a service franchisee can only do the work he or she has time for.

Either way, profit increases.

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To be a successful franchisee, in other words, is for the most part no different from the road to success in any business. Customer service is number one, as is charging correctly and properly. Other aspects include operating efficiently without waste of time, reducing costs, controlling debts and so forth. But this is exactly where a strong franchising system comes into its own.

Lesson learnt I often say, when talking to franchisees at induction training, that I wish I could have a time machine and attend our course when first starting out in business more than three decades ago! In the beginning I made so many mistakes, some serious, including (for example) being immensely proud of having all my quotes accepted in my first month of full time business. I was even more proud that clients commonly gave me extra money for a job well done. Looking back now I realise I was quoting far too low, and could have earned several hundred dollars more per week. This would have made an immense difference to my quite desperate financial situation at the time. Other hard earned lessons included the techniques for picking up wet grass clean, tricks for getting round trees fast, efficient use of grass bags, brushcutter technique, systems of navigation, mower maintenance principles, and much more.

I spent fifteen years in the field and was a hugely successful contractor, giving it up only just before launching our franchising system in 1989. But then I started having regular meetings with franchisees, and immediately found a huge urge to get back out again. It wasn’t that I had too much time on my hands! It was finding out how much better my business could have been run using all the new ideas that were being shared around.

Even today I am learning lessons which would make me a better and more successful contractor. For example, one of the keys to success in a service business is offering clients extra services. It makes for happier customers, more income, and a better hourly rate. And yet, often we refrain from asking for fear clients may find us too ‘pushy’. So here’s a simple idea: simply mention to the client something you have done or intend to do. For example, you apologise to a client for being grubby because you’ve just cleared someone’s gutters (the client you are speaking to has leaves poking over the edge of theirs!) This is something I didn’t think of in 15 years in the field, or for 15 years after that.

And yet it’s one technique, among many, we now teach all new franchisees.

Buying a franchise can have many advantages including an established brand and shared marketing. In the case of a service franchise like ours it usually means quite a bit of work in that crucial early stage when building the business.

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But even more important in the long term is the knowledge of how to run a successful business, the immense fund of experience gained by franchisors and your fellow franchisees. Some of this is available to independents through trade associations or similar, but the key advantage within a franchise system is that the people you talk to are not your competitors. They are actually on your side and have a considerable benefit, especially franchisors, in seeing that you do well.

One of the most frustrating experiences as a franchisor is franchisees who do not want to take advantage of this. Late last year I was phoned by a cleaning franchisee who was just new in business and not doing well (all my 3200 franchisees have my direct phone number and email address and are encouraged to use it). I looked at the notes and saw that his franchisor was giving him advice on marketing that he simply refused to accept. He was intent on using leaflets instead, which have very poor results. After talking to him for a while, I suggested a few more ideas but basically backed up his franchisor. He still refused to budge, arguing that our way (which he had not tried) was wrong, and his right. And yet he also complained that our ‘system’ was not working for him! This was a franchisee who was failing badly, but refusing the advice of his franchisor who had decades in the cleaning business, and myself with decades as a franchisor.

The importance of learning We divide our franchisees, at least notionally, into gold, silver, bronze and lead.

Gold franchisees are people who learn the system, and then go on to improve it. They’re so good at business they would almost certainly succeed without a franchise, but they flourish massively and often go on to take franchisor roles or (with us) even start new divisions. Then there are silver franchisees, who learn and follow the system and can sometimes be mentored and coached into gold. Then there are bronze, who need to be encouraged and helped to follow the system. Outside the franchise they would probably fail, but with the right support they can do very well.

And then there are the ‘leads’. It’s not a label we apply lightly, but these are people who cannot learn. Sometimes it’s for sheer lack of ability, in which case we selected poorly. But more often they have the ability but simply don’t want to follow. They have a poor income, often because of poor service to clients, but always want to do things their own way. We sometimes also call them ‘yes buts’, because whatever we suggest they have a reason why it won’t work – in their case. It’s as if they cannot accept that what they are doing could be wrong, seeing it as an attack on their ego. So what is wrong with the 26

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business must be the fault of the system, the franchisor, myself, the economy, anyone or anything but themselves. Such people can be highly intelligent and articulate, but in a franchising system they are hopeless.

So one very vital trait for a successful franchisee, unlike the owner of an independent business, is the willingness to follow a system and take advice.

This is why people used to operating within a disciplined system, such as bank managers and army personnel, often do strikingly well. What matters is the willingness to keep on learning, mont.h after month and year after year. This is what turns a bronze into a silver franchisee, or a silver into a gold.

In our system there are two main ways for franchisees to continue learning.

One is through attendance at meetings, which are compulsory in theory but not enforced. A pattern we notice is that those most regular in attending are the new franchisees, and the best ones. What both of these have in common is that they are eager to learn. The established franchisees, who are muddling along but failing to flourish, are often not there. Even though they are the ones we would think had most to gain. The other way our franchisees can keep learning is through what we call ‘pro-active’ calls. Our franchisors are asked to call franchisees wherever possible at least once a month, to give practical advice and encouragement on how to improve their income. We find that when franchisors do this consistently, as reported by confidential franchisee surveys, they have more satisfied franchisees, more sales, and lower attrition.

This is a system with proven usefulness and most franchisees are happy to accept and benefit from such calls, but others simply do not want them. I have a story to illustrate my feelings about people who buy into a system and fail to take advantage of the benefits. I’m an absent-minded person, usually with my thoughts far away from the everyday business of life. So when going shopping, I have a frequent habit of paying for my goods and failing to take them away. Sometimes the shop assistant will run after me, or more often I realise the mistake and go back. But either way, what I’ve done is pay for something and then not take the benefit.

Someone who buys a franchise but doesn’t follow the system is doing exactly that. What a successful franchisee needs is a certain level of what I might call humility, the willingness to accept and follow someone else’s system. This doesn’t imply a lack of creativity. The best franchisees will learn everything the system has to offer and then extend and improve it, often being the model for others to follow. In fact, a certain level of humility is a very useful trait for a franchisor, because it helps us to pick up and spread around the best ideas. It is not widely known that most of the successful McDonalds meals, including 27

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the Big Mac, were devised and tested initially by franchisees. This is one reason why I make myself readily accessible to franchisees, because they often have ideas and insights that can help the system to keep on improving. In fact, most of the really significant changes in the system over the past ten years have been a direct result of franchisee feedback.

Nothing in the world can totally guarantee success. But if someone has the right level of ability, chooses a good franchise with a style of work that suits them, offers great customer service and is willing to follow the system, their chances are pretty good!

Jim Penman, Founder and CEO Jim’s Group (AUS) 131 546 www.jims.net

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Chapter 4

SHOULD I BUY A NEW OR EXISTING FRANCHISE?

By Professor Lorelle Frazer, Director Asia Pacific Centre for Franchising Excellence, Griffith University

About the Author Professor Lorelle Frazer is Director of the Asia-Pacific Centre for Franchising Excellence at Griffith University, and has been actively involved in franchising research and sectoral policy initiatives for more than 15 years.

Lorelle is one of the world’s leading franchising researchers and co-author of the Franchising Australia surveys. She also lectures in franchising and is a member of the Australian Competition and Consumer Commission (ACCC) Franchising Consultative Panel.

Her research is used to drive positive policy reform and one of her latest initiatives – free, online pre-entry franchise education to better inform prospective franchisees – connects research outcomes with practical solutions for business. The first person in Australia to complete a PhD in franchising, Lorelle also mentors franchising PhD candidates, to enhance understanding of issues faced by the sector.

In 2010 Lorelle was awarded the Franchise Council of Australia’s national Contribution to Franchising Award.

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here is risk involved in buying any business, whether independent, franchised, new or existing.

If you’re looking for a quick answer to the ‘should I buy a new or existing franchise site?’, the short answer is, ‘it depends’.

Although an existing site will have trading history you can consider in your assessment and may already be operating profitably, there are other elements to consider.

Why is the existing franchisee selling?

Franchisees don’t always leave a business on bad terms. Some franchisees are ready for a new challenge, have made enough money and are ready to retire, or their situation may have changed. However, sometimes franchisees leave because they’re unhappy.

If there are a lot of franchise units on the market for a particular franchise brand, this could be a warning sign that there are some internal issues affecting the franchise.

As part of the franchise recruitment process in Australia, franchisors are required to give prospective franchisees contact details of existing and former franchisees for up to three years prior.

By speaking with as many franchisees as possible you’ll be able to get an idea about what being a franchisee in that franchise business is going to be like – both the good and bad elements.

This also applies when buying a new or existing franchise site.

Case Study: The danger of not speaking to former and existing franchisees Julie* was a franchisee of a well-known brand five years ago.

After emigrating from the UK she and her husband decided to buy a franchise.

They didn’t shop around much. They chose a brand and went with it.

They didn’t even speak to any of the current or previous franchisees.

“If I’d spoken to the franchisees I would have known not to get involved,” Julie said.

“I would have been aware of the issues.”

Instead they were wooed by the sales staff and the offer and signed on the 30

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line, having done very little due diligence.

Once inside the franchise, they felt the franchisor training didn’t teach them enough about business, the level of support wasn’t what they had expected, and they discovered their site was too big for what they needed, which meant they were paying excessive rent.

Although cautious with their business planning figures, working from the franchisor’s figures and then halving it, their sales didn’t get close to this reduced figure.

However, Julie was fortunate in that she kept every email and every communication with the franchisor, so when she and her husband decided to sue the franchisor they were able to achieve an out-of-court settlement for the amount remaining on the franchise loan.

They weren’t left in debt, although it was as if they’d received zero income for the three to four years they were involved with the franchise.

In hindsight Julie now realises the value of due diligence before signing a franchise agreement.

When franchisees don’t do their homework it can mean more than just four years of income that they lose. The worst case scenario is they can lose their house, their parent’s house and even their marriage.

She told of one elderly franchisee she knew who had to cash in her superannuation to pay for mounting debts and cover shop rent, with her store experiencing even poorer performance than Julie’s.

On the up side, when a franchisee does undertake due diligence properly and selects the right franchise, they can achieve their lifestyle goals. This may be financial freedom, international travel opportunities or more time with the kids.

There is no need to rush in. Buying a franchise is a large, life-changing long term investment.

Do your due diligence and get educated before you sign anything.

(*Please note: Julie’s name has been changed to protect her privacy).

Location, location, location A key element to consider is the site location.

Whether it’s an established business you’re buying or a brand new site, even if the franchisor suggests the location, it’s up to you to do your own due diligence to ensure it’s the right location.

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It’s important not to feel rushed by the real estate agent or seller when making a decision. There are a number of site selection experts who can assist you, and it is possible to do some analysis on your own too.

The Australian Bureau of Statistics website has a ‘Quick Stats’ section under Census Data, which allows you to enter a postcode, suburb name or local government area to reveal a map of that area and the basic demographics comparing that to the Australian average.

If you know your target market this will help you identify if the site is in the right area.

You may also like to ask the franchisor about stores in similar locations or formats. It’s a good idea to go and speak with those franchisees (as well as others in the system) to find out about their experiences.

For retail franchises you also need to consider aspects such as pedestrian traffic, access and visibility.

You need to consider whether the rent is suitable for your anticipated income.

If the business you are looking to buy is a destination business (where people are likely to seek you out), you may not need to be on the main street or in high traffic areas paying the higher rents those areas attract.

However, if you need a high volume of customers or are what is considered an ‘impulse’ business, then you will need to be in a high traffic area.

You also need to ensure the length of the lease is the same as the Franchise Agreement term, and read through any lease agreements carefully before signing.

Lease Agreements For franchises that are operated from a fixed location, such as a shop or office (rather than a mobile vehicle-based franchise), the lease agreement and conditions are critical to the success of the business.

Lease agreements are binding contracts that can be as extensive, detailed and complicated as a franchise agreement, and involve many terms and conditions which obligate the tenant.

Some elements to be aware of in retail leasing: • For a new franchise, a lease should coincide with the franchise term. In other words, the start and end date of the first term of the franchise should be the same as the start and end date of the term of the lease.

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• The term of the lease should also be long enough to allow for the franchisee to recover their business establishment costs.

• The rent may be one of the single greatest costs of running a fixed-location business.

• In addition to the payment of rent, tenants may also be required to contribute toward the landlord’s operating costs of the building or centre in which the tenancy is located, such as cleaning and maintenance of common areas, lifts and elevators, air conditioning, lighting, local authority rates and centre management costs.

• Many leases will provide a tenant with an option to renew, however the terms and conditions associated with the renewal offer – particularly the rent to be charged – may not be as attractive as those in the initial term and potentially cost the business more in a second or subsequent term.

• Depending on the franchise, franchisees of fixed-location businesses will either lease the site from the landlord directly or the franchisor will lease the site and provide arrangements for the franchisee to use the site.

By understanding the rights and obligations of a lease in advance, a potential franchisee is in a better position to make an informed decision about a franchise business offer.

It is important to obtain independent advice from qualified and experienced professionals in relation to both the franchise agreement and lease.

Goodwill and service standards When purchasing an existing franchise business you need to consider the outgoing franchisee’s relationship with the local community and the standard of customer service.

This is sometimes referred to as goodwill.

If there has been poor customer experiences this may take some time to rebuild although it may also provide an opportunity for you to increase service standards, win back customers and attract new customers, therefore increasing the value of the business.

Similarly, if the franchisee community engagement and customer service levels have been high, you will need to ensure these standards are maintained.

Need for capital If you start your own franchise site your capital needs may be higher, however 33

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you may have purchased the site for a lower price than an established franchise business.

When starting a business from scratch it usually takes some time for the business to become profitable, so in addition to the start-up costs you need to ensure you have enough capital to cover operating costs (as well as any personal financial requirements) until the business turns a profit.

This could take up to two years or longer depending on the business you purchase.

Some franchises will be able to tell you how long it is likely to take to reach breakeven and then become profitable based on similar franchise sites.

However, it’s still up to you to do your own calculations to see if they appear reasonable.

If you’re purchasing an existing franchise site it’s a good idea to ask if you’re likely to be required to undertake a refurbishment during your franchise term to ensure you factor these costs into your assessment of the franchise offer and whether you’re likely to receive an acceptable return on investment for your purchase. Also consider whether any of the equipment is likely to need replacing during the franchise term.

Running out of cash is one of the most common reasons businesses fail.

Staff Depending on the franchise you buy you may be required to hire staff.

If you buy an existing franchise you have the benefit of having staff already trained in the franchise procedures.

Alternatively, when you start a new franchise outlet you will have to hire and train all your staff yourself. While this will take more work it does allow you to select the people that will work for you, and provides the opportunity to create the culture you want from day one.

If you do buy an existing franchise you should also consider if there are any ‘key’ staff required to run the business and the likelihood they’ll stay on after the business sells.

Other elements to consider when buying a franchise – new or existing Starting a new franchise site from scratch can be attractive – having a brand new business that is all your own – however, unlike buying an existing business, 34

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there is no trading history or existing customer base, which may be perceived as a greater risk.

Location, goodwill, leasing arrangements, staffing and capital are just a few of the aspects you need to consider.

You also need to assess each franchise opportunity against your goals for entering franchising.

You need to determine the likely return on investment you’ll receive in the first term of the Franchise Agreement, and whether that is an acceptable outcome for you.

Most of all you need to talk to as many existing and former franchisees as possible, as they can provide the greatest insight into what being a franchisee in a particular franchise will be like.

You should also have a list of questions to ask the franchisor.

Some questions to consider as part of the decision-making process may include: • Is there increased competition in the local area that is likely to impact on future performance of the business?

• What local area marketing support is provided by the franchisor?

• Do the financial records of the business seem accurate?

• What do the business debtor and creditor days tell you (for an existing business)?

• Does the support provided by the franchise meet your needs?

• How many hours a week (and for how long) will you need to work to get the business profitable?

• What other franchise opportunities are available?

• Are there other investment opportunities which may be better suited to your goals?

Here are some further due diligence suggestions: • Get advice from experienced advisors • Read everything • Talk with current or potential customers • Verify the information you have received 35

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• Undertake web searches • Engage your partner/spouse, family and friends • Assess your own living costs • Do a business plan • Take your time.

Due diligence assistance for franchisees Franchisees need to be checking and double-checking any figures provided by franchisors or previous owners of the franchise outlet and make their own assessments to verify whether information provided is accurate.

Franchisees may also find it valuable to seek the assistance of a site and territory specialist, as well as financial and business advisors, to assist them with their due diligence, although there are a number of resources available to help them conduct their own assessment.

Publicly available site and territory selection resources, along with many more resources to assist franchisees with their due diligence, are covered in the Centre’s free pre-entry franchise education program, which is funded by the Australian Competition and Consumer Commission.

To register or for more information on the free program visit: http://www. franchise.edu.au/pre-entry-franchise-education.html.

Buying a franchise is a big investment and one worth spending the time and resources to ensure that you’re selecting a profitable franchise and the right franchise for you.

Professor Lorelle Frazer, Director Asia Pacific Centre for Franchising Excellence, Griffith University www.franchise.edu.au

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Chapter 5

FINANCING YOUR FRANCHISE

By Sharen Verrenkamp, Senior Franchise Development Manager Westpac Banking Corporation

About the Author Sharen Verrenkamp is the Senior Franchise Development Manager at Westpac. With over 25 year’s experience in Banking & Finance in Retail and Commercial Banking, Sharen holds a Bachelor of Business and has over 10 year’s experience working in industry specialisation and the franchising sector.

Westpac Franchising works with over 80 national franchise brands and their state based franchise specialists drive local strategy as well as manage the training and development of their specialist local bankers.

Sharen is also responsible for monitoring the Bank’s franchise banking portfolio and the ongoing approval and reviews of accreditation requests.

Westpac is well regarded in the franchise sector and has built a solid reputation through its support and commitment to franchise brands over many years.

Supported by the National Industry Head Of Franchising, spread across their network nationally is a team of Specialist Franchise Relationship Managers who take up the responsibility of the day to day management and support of their franchise partners.

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What you should prepare before you ask for a loan Going to a bank and making a loan application for finance to purchase or set up a business can be very daunting. Some say this is one of the most stressful things you will do in your life. This doesn’t need to be the case as this stress can be reduced by some pre meeting preparation and research.

Research your bank Choose a bank which has expertise in your industry and will provide the range of financial products and services you will require. Do they have specialists in your business segment, such as franchise finance? Do they have a banker you can meet face to face or will you be directed to a call centre?

Your application and the quality of advice you receive will be improved by some preparation. They say in real estate, ‘Location, Location, Location’. In business, this mantra can be replaced by, ‘Prepare, Prepare, Prepare’.

This view is true irrespective of the amount of money you are looking to invest in the business purchase. Mobile businesses, for example, while at the lower end of the cost spectrum, still have the potential of losing a lot of money if the purchaser gets it wrong.

Potentially you can lose not only your initial investment but you will also be liable for any losses you may accumulate. Before making that all important appointment to see your banker spend some time to prepare.

Understand your financial capacity Your banker will need to assess your financial capacity. Write down a list of all your assets (what you own) and your liabilities (what you owe). Don’t forget balances in your superannuation funds and limits on your credit cards.

Also include a list of your income and fixed outgoings (loan repayments, credit card payments, private school fees).

You should include dividends from shares, rent from investment properties and external income from part-time work.

Bring a copy of your personal tax returns for the past three years and bank statements for your bank accounts.

The banker will look towards securing your loans against your house or other property and in some cases the business itself.

This may require a re-finance of loans if they are with another lender.

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Prepare 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 planning-review 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. This should outline your goals, your strategies, your prospects and also the method by which you will achieve these.

Each business should have its own 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 test your ideas, but 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 but straight to the point it is the better it is 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 in and around your business change.

Your plan should reflect your business life cycle - whether you are starting up, supporting a business-loan application or providing ongoing management. 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 • The Executive Summary:

This should be a summary of the highlights and main points of your plan.

Write this last.

• About the Business:

This section should include detail about the location you will be operating from, the history of the franchise systems, facilities and equipment you will 39

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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, as well as giving an overview of start-up costs and initial funding.

• Industry and Market Analysis:

Here you want to 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.

• Strategies:

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 also detail your distribution method/s and plans for growth. 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 refine your milestones with dates, budgets and specific responsibilities.

• Management Structure:

Outline staff positions, costs, facilities, and also include an organisation chart. You should identify and describe the key members of your team, list management-team gaps (if any) and show how they will be addressed.

• Financials:

Here you must include a 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.

• Information Systems and 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.

• SWOT analysis:

This helps you define your strengths (for example reputation, latest technology, good location), your weaknesses (lack of experience; difficulty 40

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finding staff, high overheads), any opportunities (local market growing fast, an unfilled niche in market, the possibility of a joint venture) and threats (a competitor opening up, over-reliant on one supplier, raw-material costs rising). • Exit Strategy:

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; alternatively you can speak with your accountant, solicitor or bank.

Get advice Speak to your business advisors, business accountant and lawyer. These advisors are able to recommend business structures, tax planning, GST obligations and book keeping. They can also assess leases and agreements, etc.

Time and money spent at this stage will ensure the proper processes are put in place and legal obligations are understood.

Most state governments provide a free or low cost service to assist people get into business. There may be some training programs available.

Look at any weaknesses you may have and put a plan in place to develop yourself. Few people will have all of the required skills up front. Learning is a continuous process for all business owners.

When speaking to family and friends, ensure you are getting a balanced view.

Like with all things in life others will have their own opinions and bias when giving their views.

Prepare cash flow projections Of all the reasons as to why businesses fail, insufficient cash flow is one of the most common. Often this is not due to the lack of actual business or the amount of sales being made but the mismanagement of the funds available.

Every business has its differences, but the core principles are the same. Cash is the lifeblood of your business. Without proper cash flow management and planning your business will die.

The difference between profit and cash It is important to understand that profit and cash flow are two different things.

Many operators will tell you that it is possible for a business to generate strong 41

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profits but collapse because they have run out of cash. The easiest way to explain this is to imagine a business whose profit and loss statement showed that last year they made a profit of $50,000. What the profit and loss statement doesn’t show is that for the first eleven months of the year this business was strapped for cash and nearly went under as they only made enough sales to cover their costs. In the last month of the year they made a couple of large sales and this is what resulted in the annual profit of $50,000. Profit is the result of trade over a given period; cash flow is required to keep the business in operation by covering day to day expenses. This is why it is important to manage and understand how cash flows through your business.

What is a cash flow budget?

A cash flow budget simply records the amount of money that you expect to flow in and out of your business over a given time frame. It is a financial tool that will help predict the availability of cash in a business at any given time.

Income and expenses are calculated monthly to help plan for any future short falls in cash.

How to construct a cash flow budget A cash flow budget is based around a series of assumptions about the expected performance of the business in the future. These assumptions need to be realistic and supported by the most accurate data you have available. If you have access to previous trading results then the best place to start is last year’s sales and expense records. Allocate these results into similar months that they occurred last year unless you know they will change in the future. You may want to increase sales to account for more growth or you may know that you made an unexpected sale/expense in a particular month last year that was a one off. You could be looking at introducing a new product line or service, looking to buy a new piece of equipment or employ another person. These will all have an impact on the cash flow budget and are the type of things you should account for so that you can forecast as accurate a picture as possible.

If you plan to use the information on your profit and loss statement understand that these have been prepared for tax purposes and will account for non-cash payments such as depreciation. This shouldn’t be included in a cash flow budget as you don’t physically make a payment for these things.

If the business is new, then you will need to base your assumptions on research, market expectations, contracts held, known expenses such as rent, or compare with other similar business results. The more information you can build into the picture the stronger the tool will be.

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Some will say it is a good idea to have three cash flow budgets that account for the best, most likely and worst case scenario. Computer spreadsheets allow you to quickly adjust scenarios and as you receive your actual figures for each month it is important that you fill these in so that you have an up to date position of the business. This will allow you to react as quickly as possible to any changes that may be required. Based on this, the cash flow forecast should be a living document and not filed away and forgotten about. Used properly it is one of the most important business indicators and planning tools you can have.

Many people in business will have their accountant prepare their cash flow budget for them. There is nothing wrong with doing this as long as you, the business owner, understand the information that your accountant has prepared.

If you don’t understand the assumptions that your accountant has put into the cash flow budget, then you won’t be able to use it as an effective tool. Why would you pay to have it done if you are not going use it and just file it away?

Research the opportunity As outlined in this article, research will assist you to understand the business you are looking at purchasing. Spend time with the vendor, and in the case of a franchise, speak to as many other franchisees as possible, including some who have left the system.

This process will provide a well-rounded and realistic view of the business.

There is no such thing as a perfect business.

Involve the franchisor at an early stage. Franchising is like a marriage and all parties need to build a sound professional relationship.

Look at the industry and how it is being impacted. Many industries have been impacted by such things as changes in consumer behaviour and legislation.

These issues may be different from state to state and region to region.

We have all seen the rise and fall of the video rental industry and the environmental impact on the car detailing industry.

Look at what the competition is doing. Ask questions such as: • Will there be a price war?

• What is your business’ point of difference in the market?

• How easy is it for others to enter the market?

• What are the barriers to others entering the market, including cost, expertise, access to product, location, etc?

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If buying an existing business, find out about your customers: • Who are your customers?

• Will they stay with you as the new owner?

• How hard would they be to replace if they went elsewhere?

Consider what you need What are you looking for from your bank? Business loan, overdraft facility, transaction accounts, internet banking, equipment finance, landlord guarantee, business credit cards, merchant facilities, personal and business insurances, etc.

The list is extensive so your banker will help you through this. However, some thought on your part will ensure all your business and personal financial needs are covered.

Provide a breakdown of the finance you will need. Include purchase price (or detailed set up costs if new), working capital, legal and accounting costs, stamp duties etc. Detail your cash contribution and financial reserves.

Support of family Family support is critical to the success of any business. Buying a business can be an added strain, at least initially, so it’s important that you consider how this will impact on you and your family.

Who will work in the business and on what basis? How will they be paid?

Will employment outside of the business continue? Communication channels need to remain open to ensure any hiccups don’t get blown out of proportion.

Buying a business is an exciting time. Time spent before meeting with your bank will be worthwhile as it will reduce the stress for you and the time taken by the bank to come to a decision on your loan and other services your bank may be able to provide.

Sharen Verrenkamp, Senior Franchise Development Manager Westpac Banking Corporation (AUS) 0438 426 319 sverrenkamp@westpac.com.au www.westpac.com.au/business-banking/franchising/

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Chapter 6

UNDERSTANDING THE LEGAL DOCUMENTS

By Raynia Theodore, Principal Mason Sier Turnbull

About the Author Raynia Theodore is a Principal at Mason Sier Turnbull. She has extensive experience in commercial, franchising and leasing law.

She acts for a number of well known national retail chains and franchise brands in a variety of industries, including food and beverage.

Raynia dedicates her practice to: • advising franchisors in all aspects of franchising, including drafting key franchise documents, advising on Franchising Code Compliance and franchise dispute resolution • corporate structuring, restructuring and joint ventures • acquisition and disposal of businesses, including pre-purchase and pre-sale due diligence • advising franchisees in relation to the acquisition or sale of franchise businesses, including pre-purchase and pre-sale due diligence, review of franchise documentation and dispute resolution • Competition and Consumer Act compliance and advice.

Raynia also has extensive experience in retail and commercial leasing, including an intimate knowledge of retail legislation in all states of Australia, conducting lease reviews and negotiation of lease terms for retailers, handling lease disputes as well as preparation of standard leases and ancillary disclosure documentation for lessors and national chain lessees.

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B

uying a franchise is an exciting venture, usually the result of much thought and consideration. The parties to a franchise relationship will, at some point, have to execute a suite of franchise documents which explain and detail their relationship. These documents generally comprise a Disclosure Document, a Franchise Agreement and, for franchises that operate from fixed business premises, a lease or an occupancy licence agreement.

Sifting through the franchise documents may appear to be an overwhelming exercise but it does not have to be if you receive the appropriate advice. This guide is designed to help you navigate your way around the key documents.

It is important to note that:

1. there is no such thing as a ‘standard’ Franchise Agreement. Each franchisor will have its own Franchise Agreement. These documents are not bought ‘off-the-shelf’. Whilst there will be common provisions in every franchisor’s Franchise Agreement, do not let anyone tell you that their Franchise Agreement is standard.

2. Franchise Agreements are weighted very much in favour of the franchisor and although many of the provisions in the Franchise Agreement are onerous for the franchisee, this is not unusual.

3. given that the essence of any franchise system is uniformity, franchisors are unlikely to agree to make changes to their Franchise Agreement, unless of course they have agreed on special conditions or the agreement contains a manifest error.

4. The Franchising Code of Conduct (‘the Code’) governs the documents that franchisors must give franchisees and the processes that franchisors must follow in entering into a franchise relationship with a franchisee.

KEY DOCUMENTS If you are buying a franchise the franchisor will provide you with the following key documents: A. Disclosure Document - this document is required to be provided to franchisees under the Code and must follow the format prescribed by the Code. The purpose of the Disclosure Document is to provide information about the franchisor, the franchise system and the franchise opportunity to enable a franchisee to make a reasonably informed decision about buying the franchise.

B. Franchise Agreement - is the agreement that governs the relationship between the franchisor and the franchisee and sets out the parties respective rights and obligations.

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THE DISCLOSURE DOCUMENT The Code provides that the franchisor’s Disclosure Document must be provided to a potential franchisee at least 14 days before the franchisee enters into a Franchise Agreement (‘the disclosure period’). The purpose of the disclosure period is to ensure that franchisees have sufficient time to consider the franchise documents provided by the franchisor and obtain professional advice. You should not feel pressured by a franchisor to sign franchise documents.

Further, under the Code new franchisees are entitled to a seven day cooling off period. This will allow you to terminate the Franchise Agreement within seven days of entering into the Franchise Agreement or making a payment under the Franchise Agreement (whichever occurs first). You should note that the cooling off period does not apply to a renewal, extension or transfer of an existing Franchise Agreement.

If you exercise your cooling off right you will be entitled to a refund of moneys paid to the franchisor less the franchisor’s reasonable expenses, provided these expenses were disclosed to you prior to you signing the Franchise Agreement.

The Code also requires franchisors to update their Disclosure Document annually within four months of the end of each financial year.

In summary, the Disclosure Document should provide the following: 1. contact details for the franchisor and its associates, directors and officers; 2. details of the franchisor’s business experience and that of its associates, directors and officers; 3. details of certain litigation involving the franchisor or its directors; 4. details of existing and past franchisees; 5. details of the intellectual property and importantly details of who owns it; 6. details of the franchisor’s territory and site selection policies; 7. details of whether there is a marketing fund and of how the marketing fund operates and is administered; 8. details of the set up and ongoing costs and expenses of the franchise; 9. a summary of the provisions of the Franchise Agreement; 10. details of other agreements that the franchisee may be required to sign; 11. details of the franchisor’s financial position.

The Disclosure Document should also contain a copy of the Code and a copy 47

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of the Franchise Agreement in the form that the franchisee will have to sign.

Typically, in considering the Disclosure Document you should ask yourself the following questions: 1. Does the Disclosure Document follow the format required by the Code?

2. Is the Disclosure Document up to date? If the Disclosure Document is not up to date you should insist that an updated version be provided to you.

3. Is the franchisor currently involved in any litigation of the type described in the Code? If there is any current litigation it should be disclosed in Section 4 of the Disclosure Document. In particular, you should look for any proceedings brought by past franchisees for example, proceedings relating to a breach of a Franchise Agreement or misleading or deceptive conduct.

Past proceedings involving the franchisor or a director of the franchisor regarding the following must also be disclosed: a. a conviction of a serious offence within the last 10 years;

b. final judgments in relation to civil proceedings within the last five years; c. bankruptcy or insolvency within the last 10 years.

4. How do franchisees currently in the system feel about the franchisor and the network? Section 6 of the Disclosure Document should set out contact details of current franchisees. You should seek to contact some of these franchisees and discuss with them the business, the system and their dealings with the franchisor - how easy the franchisor is to deal with and the level of support provided by the franchisor.

5. Have any franchised businesses been terminated or ceased to operate within the last three financial years? These details should be set out in Section 6.4. If such events have occurred you should query why? Note that the Disclosure Document must set out contact details of previous franchisees (unless such franchisees have requested their details not be disclosed). You should contact past franchisees to ascertain the reasons for the termination or closure of their franchise.

6. Is the territory an exclusive territory? Section 11 sets out the franchisor’s policies for site and territory selection and will detail whether a franchised business previously operated in the territory or from the site that you will be operating. If a franchised business previously operated in the same territory and/or from the same site then the circumstances in which the previous franchisee ceased to operate should be disclosed to you.

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7. What payments will you be required to make, both upfront and ongoing to the franchisor and to third parties, such as landlords and suppliers? These details will be set out in Section 13. It is critical that you seek advice from an accountant in relation to these payments and whether the franchised business will be viable.

8. What are your obligations under the Franchise Agreement in relation to key areas such as training, complying with standards, or marketing?

9. What is the franchisor’s current financial position? Franchisors are required to include in their Disclosure Document either financial reports for the last two financial years, or an auditor’s report. You should review these reports and also discuss these with your accountant when obtaining financial/ accounting advice.

THE FRANCHISE AGREEMENT Put simply, the Franchise Agreement is what gives you the right to operate the franchise under the franchisor’s system or marketing plan. Many of the standard terms in the Franchise Agreement are replicated in the Disclosure Document, so you should ensure these are consistent.

The following are the key terms of the Franchise Agreement:

The Grant: The Franchise Agreement will set out what rights are granted to you. Usually a right to market, distribute and sell goods and services using the franchisor’s intellectual property and systems.

The Territory: Some franchise systems (usually service based mobile franchises) are territory based. That is, the franchisee is granted the right to conduct its franchised business within a specified territory.

Important considerations are: 1. Whether the territory is large enough so that the business can be conducted profitably.

2. Whether the territory is exclusive or not, that is whether the franchisor can grant other franchises in the territory or whether it is able to conduct business in the territory itself (e.g. mobile franchises, internet sales, wholesale or retail sales from non franchisor branded outlets such as supermarkets and special events such as sporting events).

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3. Whether the territory can be unilaterally changed by the franchisor.

4. Whether exclusive rights can be lost, for example, because of failure to comply with the Franchise Agreement or meet any minimum performance obligations (such as minimum sales) set out in the Franchise Agreement.

5. Whether the territory is clearly defined in the Franchise Agreement, whether by way of a description or a map with the territory clearly marked.

The Term: The term of the Franchise Agreement is important. For a franchisee, the principal consideration is whether the term plus options is long enough for the franchisee to obtain an adequate return on its investment.

Franchise agreements generally provide for an initial term followed by an option to renew for a further term or series of terms. An option to renew for a further term is not a guaranteed right to renew – it is generally tied to certain conditions such as franchisee ‘good behaviour’ and the payment of a renewal fee.

It is important to note that: 1. you only get the rights to operate the franchised business for the term of the Franchise Agreement. If the Franchise Agreement ends because it expires or it is terminated your rights to operate the franchised business also end; 2. you must abide by the terms of the Franchise Agreement during the term.

Unless you have a right under the Franchise Agreement to terminate the Franchise Agreement early or the franchisor agrees to an early termination you cannot get out of the Franchise Agreement before the expiry date if things are not going to plan. It is rare to see provisions in a Franchise Agreement that allow a franchisee to terminate or withdraw from the Franchise Agreement during its term.

The Premises: For franchises which are conducted from business premises, the Franchise Agreement will contain provisions that deal with those premises.

The following considerations are important:

1. Who determines where the premises will be located? Some franchisors prefer to have control over selecting the site from which a franchised business is to be conducted. In fact, some have teams of staff devoted to this function. Other franchisors are happy to allow their franchisees to choose the premises but reserve the right to approve them.

2. Who negotiates the terms of the lease? Franchisors generally prefer to 50

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negotiate the lease terms themselves even if the franchisee is to hold the lease of the premises.

3. The terms of the lease: The Code requires that the franchisee be provided with a copy of the lease, or at the very least a summary of it. Leases and ancillary documents such sub leases and occupancy licence agreements are usually complex, difficult documents which may require the assistance of a lawyer to be understood.

4. Who holds the lease – the franchisor or the franchisee? The most common property holding options are: a. the franchisor leases the premises from the landlord and grants the franchisee a sublease or a licence to use or occupy the premises, or b. the franchisee leases the premises from the landlord.

The decision about who leases the premises is usually one that the franchisor makes. If the franchisor holds the lease, the basis on which the franchisee will have the right to use or occupy the premises will need to be clarified.

Some Franchise Agreements give the franchisee occupancy rights. Others require the franchisee to enter into a separate agreement - either an occupancy licence or a sublease. In either case you will be required to comply with the terms of the lease and the landlord’s consent to an occupancy licence or sublease will also need to be confirmed.

If the franchisee holds the lease, the Franchise Agreement may contain provisions about what is to happen when the Franchise Agreement ends.

Franchise Agreements generally provide that the franchisor will have the option of requiring the franchisee to transfer the lease to it. However, the Franchisor does not have to accept a transfer of the lease. This means that a franchisee could find itself in a situation where the Franchise Agreement has ended but the franchisee remains bound to the lease.

5. Whether the term of the Franchise Agreement and the term of the lease coincide: Generally speaking, landlords - especially the major shopping centre landlords - do not offer further terms. Accordingly, a Franchise Agreement may provide for an initial term that either exceeds the term of the lease or the Franchise Agreement may provide for options to renew which go beyond the term of the lease.

A well drafted Franchise Agreement will need to deal with what happens if the Franchise Agreement continues beyond the lease – does the Franchise Agreement end if the lease ends or does the franchisee have the opportunity to relocate to new premises - and if so where and at whose cost? Generally, 51

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the costs will be borne by the franchisee.

Franchisee Obligations: Franchise Agreements will set out your obligations which will no doubt include: 1. complying with the system; 2. following the franchisor’s policies and procedures; 3. marketing the franchise system and your own franchised business; 4. undertaking initial and ongoing training; 5. attending meetings and conferences; 6. using the franchisor’s intellectual property as specified by the franchisor; and 7. selling only approved products and services and using approved suppliers.

Operations Manual: Although the franchisor’s systems, policies and procedures will be set out in general terms in the Franchise Agreement, the detail will usually be found in the franchisor’s manual. You should endeavour to obtain a copy of the manual prior to signing the Franchise Agreement. You should also consider whether the franchisor is able to unilaterally change the manual when it chooses.

Goods and Services: Most Franchise Agreements contain provisions dealing with goods and services that can be used or sold in the franchised business. Generally speaking, franchisees can only use or sell in the franchised business goods and services approved by the franchisor.

Some Franchise Agreements specify a minimum amount of inventory that the franchisee must hold. Franchisees should consider such requirements in the same light as the royalties and other payments they will be liable to make under the Franchise Agreement – and should seek financial advice. A franchisee does not want to find itself in a situation where it has slow moving inventory and does not have the flexibility to adjust its purchasing requirements.

Franchise Agreements often deal with from whom goods or services can be purchased. Some franchise systems operate on the basis that goods and services be purchased from the franchisor. Others require goods and services to be purchased from approved suppliers. Franchisors cannot, without authority 52

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from the Australian Competition and Consumer Commission, compel their franchisees to purchase from third party suppliers.

Fees: Franchise agreements generally provide for the payment of the following fees:

One off fees: 1. Initial Franchise Fee for the grant of the franchise.

2. Training Fee for the initial training provided by the franchisor.

3. Renewal Fee payable on renewal of a Franchise Agreement which contains an option to renew.

4. Transfer Fee payable by the franchisee to the franchisor on the sale of the franchised business to a new franchisee. This fee could be a flat fee or one based on a percentage of the sale price.

Recurring fees: 1. Royalties otherwise known as administration fees or management fees, are payable by the franchisee to the franchisor for the ongoing right to use the franchisor’s intellectual property or business system or for the ongoing services which the franchisor provides. Such fees may be flat fees or based on a percentage of the franchisee’s sales. They are generally payable weekly or monthly.

2. Where the franchisor maintains a marketing fund, advertising or marketing contributions or levies are payable by franchisees. These sums are used to market and promote the franchise system as a whole. Again, these may be flat fees or based on a percentage of the franchisee’s sales. They are generally payable weekly or monthly.

3. Inventory/stock purchases. Where franchisees are required to purchase all or some of their inventory or stock requirements from the franchisor, the franchisor’s terms of trade will need to be examined. Those trading terms are also likely to vary during the term of the Franchise Agreement. You should make inquiries confirm that the inventory or stock is competitively priced.

4. Technology Licence Fees are imposed for using hardware/software/intranet/ point of sale systems which the franchisor has supplied or developed.

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Other costs: • Initial Fitout Costs (where the franchised business is conducted from premises). A franchisee may also be required to pay to the franchisor a project management fee where the franchisor manages the fitout on the franchisee’s behalf.

• Site Evaluation Fees may be charged to a franchisee when the franchisor locates and evaluates premises, especially if the franchisor engages external consultants.

• The franchisor’s legal costs associated with the Franchise Agreement, occupancy licence agreement or sub lease or where it negotiates the lease on behalf of the franchisee.

• The franchisee will also have its own legal costs associated with reviewing the Franchise Agreement, occupancy licence agreement or sub lease or lease (as the case may be).

• Fees for any permits or licences required to operate the business.

Sale of franchise Another standard provision in a Franchise Agreement is a provision allowing the franchisee to sell the franchised business. Under both the Code and the Franchise Agreement a franchisor cannot withhold its consent to a sale without good reason. The Franchise Agreement will usually contain conditions that will need to be satisfied to obtain the consent of the franchisor. The usual conditions are: • the franchisee must first offer the franchise back to the franchisor;

• the franchisee must remedy any breaches of the Franchise Agreement; • the franchisee must pay a transfer fee;

• the franchisee must show that the purchaser is reputable, responsible and solvent, and • the purchaser must complete the franchisor’s training program.

Where the franchisee is an individual and dies or becomes disabled, family members will sometimes be given the opportunity to take over the franchise.

However, many of the considerations that apply on a sale will apply to this situation, especially the training requirement.

Termination The circumstances in which a Franchise Agreement can be terminated by the franchisor will be covered in the Franchise Agreement and are also governed by the Code.

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The franchisor can only terminate a Franchise Agreement immediately on the following grounds: • where the franchisee no longer holds any licence or authority required to carry on the franchised business; or

• where the franchisee enters into any form of insolvency administration, such as voluntary administration, receivership, liquidation or bankruptcy; or • where the franchisee voluntarily abandons the franchised business or the franchise relationship; or • where the franchisee is convicted of a serious offence; or

• where the franchisee operates the franchised business in a way that endangers public health or safety; or • where the franchisee fraudulent in connection with the operation of the franchised business.

Otherwise the franchisor can only terminate the Franchise Agreement where the franchisee is in breach of the Franchise Agreement and fails to remedy the breach within a reasonable time (which need not be more than 30 days).

A franchisee and franchisor can always agree to the termination of a Franchise Agreement. It is uncommon for franchisees to be provided with reciprocal termination rights.

You should be aware of your post termination obligations. Following the end of the Franchise Agreement (e.g. due to expiry or termination of the Franchise Agreement), the agreement usually requires the franchisee to stop operating the business and return all confidential information and intellectual property, including manuals, to the franchisor.

The Franchise Agreement may give the franchisor the right to purchase the assets of the business at a pre agreed price or at a price to be determined in accordance with a pre agreed formula (e.g. written down value).

You should also be wary of any restraints. Most Franchise Agreements provide for a period after the end of the Franchise Agreement during which the franchisee is restrained from being in any way involved in a competing business within a specified area from the Territory and/or premises.

Dispute Resolution The Franchise Agreement must contain a dispute resolution procedure. This procedure involves the party complaining issuing a notice of dispute on the other party. The notice will need set out the nature of the dispute, required action and the desired outcome. The process then requires the parties to make 55

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attempts to resolve their dispute within 21 days. If the dispute is not resolved either party can refer the matter to mediation. The Office of the Franchising Mediation Adviser has been set up to conduct mediations under the Code.

Special Conditions If you have negotiated any special conditions with the franchisor (that is, terms specific to your agreement), you should ensure that these find their way and are accurately represented in the Franchise Agreement.

Conclusion Although the Disclosure Document follows a standard format and Franchise Agreements contain common provisions such as those discussed earlier there is no substitute for reading the Franchise Documents thoroughly and obtaining professional advice. Disclosure Documents and Franchise Agreements are complex lengthy documents and buying a franchised business, in fact any business, is a serious undertaking. It is one of the most significant decisions a person can make. It is therefore essential that you obtain advice both financial and legal advice from an accountant and lawyer expert in franchising.

An accountant can provide advice about the financial commitments which the Franchise Agreement imposes and can assist with formulating a business plan.

A lawyer can advise on the legal implications of signing the Franchise Agreement. A Franchise Agreement is a legally binding agreement and is generally binding for a long period so it is important to obtain advice.

If the franchisor terminates the Franchise Agreement, say because the franchisee has breached the agreement in some way, this does not necessarily relieve the franchisee of its legal obligations under the Franchise Agreement. In such circumstances, the franchisee may still be liable to compensate the franchisor up until the time the Franchise Agreement would have otherwise expired.

A lawyer will also be able to explain the terms of the Franchise Agreement, highlighting any terms that are unusual or excessively onerous.

Raynia Theodore, Principal Mason Sier Turnbull (AUS) 03 8540 0242 www.mst.com.au

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Chapter 7

ONGOING OBLIGATIONS

By Marwan Kojok, Managing Partner and Bianca Sevastos, Senior Associate Baybridge Lawyers

About the Authors Marwan Kojok is the Founder of Baybridge Lawyers and is a leading authority in the franchising, licensing and distribution sectors. Marwan has a wealth of commercial, corporate and franchise experience, highly valued by SMEs, publicly listed companies and large businesses, both in Australia and internationally. Marwan has worked in a diverse range of industries, assisting in the international protection of well-known brand names. He has negotiated multi-million dollar transactions for international brand rights, including representing numerous Asian Governments in securing international property rights.

Bianca Sevastos is a Senior Associate in the Sydney office of Baybridge Lawyers where she specialises in franchising and licensing. Bianca advises on all aspects of franchising industry compliance with the Code, day-to-day management of franchise systems and relationships with suppliers and franchisees.

Bianca has extensive experience and advises on a range of national and international transactions, industry master and area development rights and advises both franchisors and franchisees in dispute, obligations under the Franchising Code of Conduct and the Competition and Consumer Act.

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here are almost 10,000 franchised brands across the globe and international franchising is growing. With over 73,000 franchise units in Australia, an annual turnover in the order of $131 billion dollars and employing more than 413,500 people, there is no doubt that franchising makes up a significant portion of Australia’s economy. While statistics enable us to evaluate franchising from a national business perspective, for franchisees and franchisors the relationship is more personal. The parallel has been drawn before, but in many ways the franchise relationship is much like a marriage. For most franchisees, the decision to join a franchise network is one of the biggest decisions they will make in their lives. Just like a marriage, once you sign on the dotted line you are committed, there is no easy way out and there is no guarantee the relationship is going to work. A good franchising relationship, just as a good marriage, requires mutual trust, respect and a commitment to perform ongoing obligations.

IS HE/SHE RIGHT FOR ME? Many factors need to be considered when deciding which franchise network is right for you. No doubt you will have considered the strength of the brand, the depth of the franchisor’s experience, whether the franchise business will complement your lifestyle, and what you are getting for your investment.

You will have met with the franchisor and its key people to ask many questions in respect to the general operation of the business and to determine whether you can envisage being tethered to that relationship for the next five to ten years, knowing that the average life cycle of a franchise relationship is seven years.

In turn, the franchisor will have assessed your financial standing, business acumen, general suitability and whether you will be a good ambassador for its brand.

You will have met with and spoken to other franchisees in the network to garner their impressions of the franchisor and the network at large. You will have asked many probing questions as to what the franchisor is like to deal with, the efficiency of the systems, and whether individual franchisees are meeting their minimum performance criteria and financial hurdles.

You will have undertaken due diligence on the franchise and the franchisor just as they have vetted you. Such due diligence will include seeking independent business and accounting advice as to the viability of the business, to ensure that the numbers stack up and to provide reasonable assurances that the business will provide you with the financial security you require and a reasonable return on your investment.

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You will also have sought specialist independent legal advice in respect to the franchise documentation to ensure that you are fully aware of all of your rights and obligations in respect to the franchise. A franchising specialist lawyer will determine if the documentation provided to you is compliant with the Franchising Code of Conduct (Code) and will guide you through the process while advising you on the pitfalls to look out for.

You have been through the franchisor’s recruitment process and you have been approved by the franchisor for the grant of a franchise. You feel as though you are making an informed decision and you are excited about the prospect of your new venture and being your own boss, but with the comfort of the franchisor’s support and within the framework of the franchise system.

Once the 14 day mandatory disclosure period has expired and you can sign the final documents the courtship is over and it is time to get to know each other better.

THE COMMITMENT/ONGOING OBLIGATIONS Compliance with the system If you have an entrepreneurial spirit and a desire to be creative in your business, or if you have owned and operated your own business before, the franchising model as a business may not be right for you. As a franchisee you are bound to comply with the systems implemented, and as directed, by the franchisor.

It is likely that the franchisor will have spent considerable time, effort and money developing the systems to create the greatest efficiencies within and throughout the franchise network having drawn upon their experience in running the business. While good franchisors are open to their franchisee’s suggestions as to any accommodations or efficiencies that can be made, it should be remembered that even if you think your way of doing things is better, you must still conform to the systems, policies and training provided by the franchisor.

Financial obligations The franchise agreement and disclosure document should set out all payments required to enter and exit the franchise, as well as any recurring payments required over the life of the franchise. Such payments will likely include a royalty fee and a marketing fee, either expressed as a percentage of the franchisee’s sales or as a flat fee, payable on a weekly or monthly basis.

Additionally, there may be a requirement to upgrade the premises at your cost, pay a renewal fee at the beginning of any renewal term of the franchise, and attend any ongoing training and annual conferences. All of these costs add 59

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up to your cost of doing business and need to be factored into your business modelling at inception.

Many franchisors do not provide any financial information or data as to the expected turnover of a particular franchise. The exclusion of any such information will mean that you will need to prepare your own cash flow projections and budget based on your own information and research. While, for franchisees, there is a certain element of comfort provided within the framework of the franchise model, it is important to remember that franchising does not provide a silver bullet to success. Just as in any business, there is a risk that the business may not succeed and you will need to ensure you can financially survive in the event the business fails.

Marketing fund Many franchisors operate a marketing fund whereby they collect a prescribed percentage of the franchisee’s sales, or a flat fee amount, to market and promote the franchise network at large. You should be aware that most franchisors are not obligated to spend the marketing fund monies to benefit your particular franchise. The use of the marketing fund monies can be a much contested issue among franchisees and is one of the major reasons for disputes between franchisors and franchisees. Franchisees often feel as though the monies generated through the marketing fund are better spent elsewhere and that it only serves to benefit the franchisor in their efforts to sell franchises.

That being said, under the Code there are very strict rules and regulations in respect to the governance of the marketing fund to keep the franchisor accountable. Within four months after the end of each financial year, the franchisor must prepare an annual financial statement detailing all of the fund’s receipts and expenses for the past financial year. The financial statement must then be audited by a registered company auditor, unless 75 per cent of the franchisees in Australia who contribute to the fund vote otherwise.

Local marketing In addition to your contribution to the marketing fund, the franchisor may also require its franchisees to conduct their own local marketing to promote the sale of the products and services sold by the franchise business. Some franchise agreements will stipulate that a certain percentage of the franchisee’s sales must be spent on local marketing and while the franchisor does not collect the monies and spend it on behalf of the franchisee, you may need to prove to the franchisor that you have spent the allocated amount on local advertising and complied with the obligation.

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Minimum Performance Criteria Many franchise agreements stipulate that the franchisee must achieve a certain set of minimum performance requirements which will either be articulated in the franchise agreement itself or in the operations manual. Such requirements may be as basic as “the franchisee must complete the store opening training program during the first year of operation” or be financial in nature such as “the franchisee must achieve gross sales of at least 95% of the previous year”.

It is important that you carefully consider whether the minimum performance criteria are reasonable and achievable. Failure to meet the minimum performance criteria can result in further training costs and in worst case scenarios termination of the franchise agreement.

If the minimum performance criteria are contained in the operations manual and not the franchise agreement, you should request to see the operations manual before you enter into franchise agreement to ensure you are comfortable with its provisions.

Supply of Goods and Services Most franchisors require their franchisees to purchase the goods and services sold in the business from the franchisor or a nominated supplier to ensure consistency of supply and quality throughout the network. Such an arrangement will also provide the franchisor, and the network at large, with greater economies of scale or ‘buying power’ which will result in a lower cost of goods and services to the franchisees and a higher profit margin. In turn, this arrangement may allow the franchisor to clip the ticket on the supply of goods and services down to the franchisee or to receive rebates from nominated suppliers. Under the Code, any rebates received by the franchisor must be disclosed in the disclosure document.

Operations Manual Many of the franchisor’s systems and policies for the day to day running of the franchise will be set out in the operations manual. The manual is developed by the franchisor to set a minimum standard for franchisees and to provide a consistency of operations throughout the network. It is important that you understand that the operations manual is a living document which can be updated at any time by the franchisor and that a breach of the operations manual may also be considered a breach of the franchise agreement.

Records and audits Most franchisors will require its franchisees to provide them with the records of the business including profit and loss statements and balance sheets on a 61

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monthly basis. Such records may also include any reports, sales information, invoices or bank statements as required by the franchisor. The franchisee’s obligation to provide these records is often a source of tension between the franchisor and franchisee. The franchisee may view the requirement to provide such information as a breach of their privacy while the franchisor will want to assess the performance of the business and identify any areas for improvement.

If the franchisor suspects that the records are not a true reflection of the sales of the business the franchisor will most likely have the right to inspect the records and have them audited by an independent auditor. You should be aware that if there is a reasonable discrepancy in the records the costs of such audit will be passed on to you as the franchisee.

Confidential Information In essence, a franchise agreement grants the franchisee a licence to use the brand, trade marks, systems and any other intellectual property of the franchisor for the operation of the business for the term of the franchise. Franchisors are very protective of their intellectual property and will require its franchisees and any key personnel of the business to hold any such information in strict confidence which obligation survives the termination of the franchise agreement.

Default and termination In certain circumstances, the franchisor may terminate the franchise agreement automatically and without notice to you. Such circumstances are prescribed by the Code and apply only where the franchisee: • No longer holds a licence that the franchisee must hold to carry on the franchised business; or • Becomes bankrupt, insolvent under administration or an externallyadministered body corporate; or • Voluntarily abandons the franchised business or the franchise relationship; or • Is convicted of a serious offence; or • Operates the franchised business in a way that endangers public health or safety; or • Is fraudulent in connection with operation of the franchised business; or • Agrees to termination of the franchise agreement.

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In all other circumstances, if you are in default or breach of your obligations under the franchise agreement the franchisor must provide you with written notice that you are in default, set out the nature of the default and what you must do to rectify the default within a reasonable period of time. If the franchisor provides you with such written notice and you fail to rectify the default within the allotted time, the franchisor may have the right to terminate your franchise agreement.

Sale or transfer of your business If you wish to sell your franchise during the term, the franchise agreement will set out the procedure that must be followed which will include seeking the franchisor’s consent. It is likely that the franchisor will have the right of first refusal to purchase the business which means that you must first offer to sell the business to the franchisor. Under the Code, the franchisor is taken to have given consent to the transfer if the franchisor does not, within 42 days after the request was made, give to the franchisee written notice that consent is withheld and setting out why consent is withheld.

In accordance with the Code, the franchisor may not unreasonably withhold consent to you transferring or selling your business. Notwithstanding, there are certain circumstances where the franchisor may withhold its consent which includes where the purchaser is unlikely to meet the financial obligations of the franchise agreement, or such transfer will have a significantly adverse effect on the franchise system, or the franchisee is in breach of the franchise agreement among others.

Non-Compete Most franchise agreements contain provisions that will preclude franchisees from setting up, operating or holding any interest in any competing business during the term of the franchise and for a period of time following the end of the franchise relationship. As the franchisee, you will have the benefit of the franchisor’s intellectual property, systems and know-how and the franchisor will want to be sure that you or any of its franchisees do not use such information to set up a business in competition with the franchise network.

The ‘non compete’ or restraint of trade provisions within a franchise agreement are often confusing to franchisees. Several options may be provided in respect to the period of time (eg, twenty four months – twelve months – six months) and in respect to the geographical area (eg, 5 km radius – 3 km radius – 1 km radius) in which you may not operate, or hold an interest in, a competing business following termination of the franchise agreement. Clauses drafted in this manner are called ‘cascading provisions’ or ‘ladder clauses’. The 63

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purpose of such drafting is so that if a court determines that the period of time or geographical area stipulated in the restraint of trade provisions are unreasonable, the provisions can be read down so that the lesser period of time and smaller geographical area can be enforced.

The enforceability of non-compete clauses is a bit of a grey area in the law. On the face of it, they are considered anti-competitive and therefore unenforceable. Notwithstanding, a court will enforce the provisions where it considers protection of a franchisor’s goodwill is necessary. Unfortunately, the only way to determine whether the restraint provisions provided in your franchise agreement are enforceable is to test it in a court of law.

DISPUTES Just as in a marriage, many disputes between franchisors and franchisees occur due to the lack of communication between the parties or differing expectations.

Where franchise problems or conflict occurs, it is advisable that the parties first seek to resolve the dispute among themselves and if able have a lawyer or trusted advisor available to guide you through the process. Where disputes cannot be resolved informally between the parties, the Code provides that parties to a franchise agreement are required to first trigger mediation before going to court over the dispute.

The dispute resolution provisions of the Code clearly sets out the procedure which must be followed including formal written notice outlining the nature of the dispute, the desired outcome of the dispute, and a timeframe within which it should occur. Should the dispute progress to a point where mediation is required, it is advisable to then engage a specialist franchising solicitor to assist in your preparations for mediation or to enter into direct negotiations with the franchisor to settle the dispute.

Figures from the Office of the Franchising Mediation Adviser indicate that up to 75 per cent of mediations result in a settlement, which means that both parties are satisfied with the result and in many cases are prepared to continue the franchise relationship. If the dispute is not resolved through the mediation process, the parties may then need to consider taking further action through the court system.

THE END OF THE RELATIONSHIP Unlike a marriage, when you enter into a franchise agreement you know that the relationship with the franchisor has a set expiry date. It is important to have in your mind from the outset what your exit strategy for the business will be. It may be that you intend to build the business up and on-sell it mid-way 64

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through the franchise term or during the renewal term. You should remember that when the franchise term comes to an end, in most cases, you will not have the right to sell the business and you will not be entitled to an ‘exit payment’ from the franchisor.

THE MORAL OF THE STORY A good relationship between a franchisor and franchisee can result in a profitable, fruitful and rewarding outcome for both parties. Many franchisees have built significant wealth through franchising and as any good franchisor recognises, happy and successful franchisees are imperative to the overall success of the franchise network. As with any marriage, open lines of communication are key to a harmonious franchise relationship together with a strong commitment from both parties to uphold their end of the bargain by performing their respective specific duties and ongoing obligations.

Baybridge Lawyers (AUS) 02 9232 3511 marwan.kojok@baybridge.com.au or bianca.sevastos@baybridge.com.au www.baybridge.com.au

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Chapter 8

INVESTING IN AN INTERNATIONAL FRANCHISE

By Rod Young, Chairman DC Strategy

About the Author Rod has over 30 years’ experience in franchising, licensing and business development in Australia, Europe, China, South East Asia, India and the United States and is considered one of the world’s leading franchise consultants.

He has been a key advisor to some of Australasia’s leading franchise groups. His business interests have also included roles as both a franchisee and franchisor. As well as his role of Managing Director of DC Strategy and DCS Lawyers, he currently serves as Chairman of Hairhouse Warehouse (Australian Franchisor of the Year 2011), is the Executive Chairman and Global CEO of Cartridge World and serves on the Board of several national and international companies.

DC Strategy, the firm Rod founded, is the region’s premier franchise consulting and legal firm, providing strategic consulting and legal services to the franchise community. The specialist teams at DCS have been involved in developing many of the region’s most successful franchising organisations.

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here are almost 10,000 franchised brands across the globe and international franchising is growing. With over 1,100 franchise systems, Australia is over-represented in terms of franchise networks per head of population but its market is only 1.2 per cent of the global economy. So how do you choose that next market leader or that emerging franchise system if you want to invest in an international franchise?

International franchising is taking off While Australia is a small market, it punches well above its weight in terms of profit per unit and has proven attractive to US-based McDonald’s, Burger King, KFC, Subway, Ben & Jerry’s, Jani King and now a raft of Frozen Yoghurt brands and many other international franchises. While other jurisdictions will lag in franchise growth until certainty of IP rights and franchise contracts and other matters of a commercial nature can be backed by transparent and enforceable legal rights, Australia is well positioned to attract more international franchises.

The world is awash with capital and there are many groups or individuals with substantial net worth, who are searching for the next big idea in their country or region. Many franchise systems have pioneered internationalisation of their brand and demonstrated that master franchising can help a company grow on a global scale. International franchising will become a bigger part of the revenue stream of more successful franchise systems.

Governments and financial institutions have recognised that franchising creates economic activity, opportunity, jobs and profits. Delegations of government and semi-government officials from emerging economies are actively encouraging overseas franchise systems to establish franchise networks in their jurisdictions. Countries such as the US, France, Singapore and Malaysia have proactively supported franchise development for many years and today, politicians in most countries understand the link between franchising, SME’s and economic prosperity.

The emerging retail, food, service and online businesses of the future are focussed on the needs of a changing consumer attitude shaped by eCommerce and social media. The alignment of the physical offer with an eCommerce and social media strategy designed to capture more walk-in and log-in sales must be a feature of the international franchise of the future.

However, local representation will always be a critical part of any business model (even Google has offices in most large cities to sell its services) and international franchising will flourish as a result.

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These new-age businesses are reaping the benefit of this changing consumer and economic momentum and franchising is surfing this wave as the need for motivated owner-operators continues to grow.

The investment Investing in an international franchise offers the potential to either expand an Australian franchise business off-shore or import a foreign-based franchise into Australasia. Many Australian companies are doing so now and more Australians are part of that migration of a local brand to an international market by securing Master Franchise rights in foreign countries.

The investment usually involves the payment of an initial upfront fee for a defined territory which may or may not include the right to sub-franchise.

Further investment will be required to open at least one and sometimes several company owned outlets to prove the franchise model in the market before a franchise can be granted in the territory. An investment in localising the operations manual, sourcing suppliers and developing a localised marketing and advertising campaign will also be needed. Good franchisors will also require you and your management team to attend training in the home market at your cost before the first location is established in your territory.

Ongoing commitments to the franchisor typically involve a share of the local revenue from both initial local franchise fees and continuing product or service sales by way of a monthly or quarterly royalty payment.

Experienced franchisors look for investors who will be hands on and operate the business on a day to day basis and have some prior experience in business, people management and real estate if it is a bricks and mortar based business.

Good franchisors are selective about who they will grant their rights to so expect to prove you are financially and operationally capable.

How do you choose the right international franchise?

In developing national and international franchise systems, the DC Strategy team found that the features of many businesses which stood out for their growth trajectory and market share had common elements that were not confined to industry groups or country of origin. These features were present across businesses as diverse as food, retail, service and online networks that built substantial enterprise value for their proprietors and shareholders and offer similar potential to an investor looking to secure an international franchise.

It goes without saying that the product or service offering must have consumer demand in the market but if you are seeking to invest in an international 69

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franchise it should also rank highly in the following: 1. Consistent execution of the fundamentals

At the heart of any business is the customer proposition. While this may seem so basic that you may say that every business has one, the best practice franchisors have a focus on the customer proposition which develops loyalty and keeps them coming back.

There is an understanding that each customer is more than just one transaction and they understand that the ‘lifetime value’ of their customers is many multiples of the first transaction with a new customer. This lifetime value is being calculated and benchmarked across the network.

The point of sale experience either in store or online is a key focus to capture new customers and is supported by recognition and acknowledgement that is backed by email and text communication as well as direct mail to build true customer loyalty to the brand.

Included in the fundamentals are the staff / store / uniform / vehicle / website and online presentation that create and reinforce good impressions and a commitment to keeping the customer’s experience fresh.

2. Well defined KPI’s, benchmarking and financial reporting

Alfred P. Sloan, the Head of General Motors in the 1950’s, said “the purpose of an enterprise is to make a profit”. We are always fascinated to hear the excuses used as to why a franchise organisation does not require, collect and analyse the monthly profit and loss statements of all franchised outlets. How can any senior executive build, run and maximise the performance of an enterprise if he or she does not have access to the key metrics and especially the net profit of the franchise outlets?

Franchise systems that flourish have highly developed point-of-sale systems and dashboards linked to management reporting processes that measure and benchmark KPI’s across the network. The better franchisors publish entire networks’ store by store profit and loss and educate their franchisees on how to analyse this data and their performance relative to others in the group.

3. Comprehensive compliance management

A complaint of many better franchisees in some networks is that the franchisor is soft on compliance and is letting other franchisees operate a poor standard of business which reflects badly on their franchise and ultimately its value.

These better franchisees soon sell up and migrate to networks with more professional compliance standards. The great franchise systems understand that the customer promise conveyed by advertising and marketing and via 70

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the website must be faithfully reflected at the customer’s end of the business.

They define what the standard of the network is during the recruitment, screening and selection of franchisees with a view to weeding out people who do not value standards. Induction and training programs highlight what the standards are and how they are measured, managed and achieved.

The field staff provides a fresh set of eyes to prevent ‘store blindness’.

Compliance in reporting is also well ingrained in the culture of great franchise systems to measure compliance to defined standards.

4. Field staff as coaches, not auditors The best franchise systems are focused on developing their franchisees to become better business people by education rather than policing. We all know that every light globe should be working but if field staff spend too much time on trivia, or develop a culture of blame, they miss the opportunity to earn the confidence of a franchisee and become a mentor. This confidence is critical before coaching commences and quality field staff develop far better franchisees and businesses when they have invested the time to listen and understand the goals and motivation of a franchise owner and his or her family.

5. A focus on the value of intellectual property (IP) Real champions are brand champions. They understand that the brand is one of the few ways to add a premium price to an otherwise commoditised product or service. We see the best franchisors don’t just focus on the trade mark and colour scheme which is of course the cornerstone of the brand, but understand their IP also embraces their systems, processes and documentation.

In a world where any tangible item can be easily copied, the true value of IP is often enshrined in the way things are done in the organisation. A respect for these processes and an understanding of how they create value for the business has become part of the culture and is trained into new recruits in the leading franchise systems. Intellectual Capital, which is the collective knowledge in the heads and hearts of the franchisors network of staff and franchisees, also falls under the IP category of an enterprise.

6. Real marketing and advertising muscle Nothing builds a business like a commitment to advertising. We use the word commitment advisedly because a feature of all leading franchise systems is a focus on advertising and marketing from the very beginning of the network.

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While many competitors decide to wait until they are bigger before spending big on advertising and as a result fail to grow, the best franchisors typically allocated a more substantial percentage of turnover to advertising than their competitors and then supplement these funds with additional investment in advertising to help establish new markets.

Another feature we see is highly developed local area marketing activities by franchisees. This does not just happen. The market leaders understand that marketing can drive community engagement and look for, train and expect franchisees to go beyond the store front or vehicle into their local community.

The advertising and marketing is multi-faceted with traditional leaflet and direct mail, local newspapers, radio, TV, billboards, public relations and a growing online commitment to internet advertising.

Innovative cross-promotional activities with non-competing business serving the same consumer pool are often evident. These innovations are almost always developed first by the better emerging franchisors that are looking for cost effective ways to create a larger than life image.

7. Continual innovation

Innovation is where the best franchises keep ahead of the pack. They realise that competitors will eventually copy the market leaders and understand that differentiation is important. This differentiation is not just in product but in every aspect of the business.

The best players have an ongoing innovation program in almost every area of the business. It may be seen by the customers and competitors in new products, services or advertising but the invisible innovation that defends and extends market share is often related to staff training, direct customer communication via email, text, social media, direct mail and online and web communication with new technology to track the nature of the business and customer trends.

This leads to more correct decisions being made earlier that edge better franchisors even further ahead of competitors and re-engage customers who may become jaded without change.

8. Supply chain management

When franchisors start to treat their suppliers as strategic partners they start to approach best practice not only in franchising but in business generally.

By harnessing the know-how and experience of their suppliers, good franchisors find a willing partner in new product research and development because suppliers understand that assisting customers to grow will result in increasing sales volumes for those suppliers.

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There are also substantial benefits being created or costs saved by working with suppliers who understand the strategic plans of their franchisor customers. Many of the better franchisors are deriving substantial income by actively managing the supply chain relationships for the benefit of their franchisees as well as for themselves. The key to supply chain management is firstly ensuring that standards are specified for quality, service and delivery and are not compromised, and secondly, the prices paid by franchised owner/ operators across the full range of approved products result in a higher gross profit than if that franchise owner purchased independently.

Many good franchisors have a strong representation of franchisees in supply chain issues with some international brands having the franchisee body control the buying process with the benefits being shared between franchisor and franchisee and/or applied to the advertising fund to boost brand exposure.

9. Sound two-way communication Many franchisors do not appreciate that franchising is a human resource strategy more so than a capital raising strategy. As networks grow, so does the experience of the franchisee body. The very best franchise systems appreciate that ignoring or isolating the franchisees leads not only to a stifling of innovation but the loss of quality franchisees to other more open networks.

The franchisor/franchisee relationship is the cornerstone of a successful franchise network and the higher the degree of franchisee satisfaction the better execution of growth strategies. Growth often entails change. Strong communication between franchisee and franchisor including consultation to gain both ideas and support for change build the trust needed to make difficult change management programs successful across the network.

The communication process starts with an open mind by the franchisor and especially the field support team and a willingness to listen and respond to franchisee concerns. The process of monitoring and responding to these concerns is where great franchise networks excel. Franchise Advisory Councils, franchisee product development input, regional advertising committees and annual conferences are all hallmarks of the better franchisors.

10. Induction and ongoing training When a franchisee applies for a franchise it is obvious he or she is doing so because they do not have the expertise to operate a business similar to 73

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that of the franchisor. If the recruitment screening and selection process is professionally developed and executed, the franchisee will understand the standards expected by the franchisor and the process by which the franchisee will be trained in every aspect of the franchisor business.

Good franchisors understand that the initial induction and training prior to a franchisee taking over his or her business is merely an orientation process.

The real training starts once the first few months of trading are under the franchisee’s belt and the franchisee starts to settle into a rhythm which will allow the franchisee to absorb the subtleties for what makes the franchise really tick.

For the best franchise systems, training is an ongoing activity which is directed not just at the franchisee but his or her staff to ensure that execution of the customer service strategies and the customer experience is being faithfully applied.

Training programs at each level of the business are evident, from the most junior new recruit that may be trained by the franchisee via train the trainer programs, to franchisee and manager training supported by suppliers as well as the franchisor both off-site and in conjunction with regular field support coaching and guidance at the franchisees location.

Online learning via intranet and webinar is also emerging as a feature of more progressive and committed franchisors as the best of the best understand that training is a commitment that pays dividends by building franchisee and staff satisfaction, sales and profits and the cost for this training are incorporated into the annual budgeting and planning process.

Trends Over the next five years, the international franchise sector will grow at an annualised rate well exceeding inflation.

Substantial growth will occur in the Asian, Indian and Middle East markets.

There will be an increase in the number of franchised owner operators, many of them being multi-unit owners, regional or master franchisees or area developers. They will emerge as a powerful lobby group enjoying higher profitability levels than their independent counterparts, and will require sophisticated management by franchisors. eCommerce and social media will need to be a core part of brand and sales development to keep up with the demands of the new consumer.

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better conduct in the franchising sector and there are only a few countries without a national franchise association. Access to information via the web is creating better decision making. There are more accountants and lawyers who understand domestic and international franchising and are better able to advise prospective franchisees. This franchising education is diluting risk.

In summary, the reader can see that the very best international franchise investments also have the very best business franchise and business practices.

They are constantly monitoring the outcomes that result from the ongoing application of the ten key features of best practice franchisors.

For any franchise to develop into an international brand, how well these features are developed and executed in the local market will determine an organisation’s position in the competitive pack. The value prize is market leadership and the rewards it brings for all stakeholders in those businesses, be they brand owner, franchisee, master franchisee or area developer is the Enterprise Value upon exit.

If you want to invest in an international franchise the first step is determining if the franchised business has these features of success and you have the capital, commitment and experience to modify and apply them.

Rod Young, Chairman DC Strategy (AUS) 02 8220 8711 rod.young@dcstrategy.com www.dcstrategy.com

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Chapter 9

FRANCHISING IN NEW ZEALAND

By Graham Billings, Executive Director Franchise Association of New Zealand

About the Author Graham Billings’ early career led to extensive experience at a senior level in the UK, New Zealand and Australian newspaper and magazine publishing industries and he served on industry bodies in each of these countries.

Moving out of the media industry, he was appointed Managing Director of the Australian arm of a UK multi-national company, where one of his businesses was a product licensee of the Sydney Olympic Games Committee (SOCOG).

Returning to New Zealand in 2001, Graham spent seven years in the health and disability Not-For-Profit sector. In 2008 he was appointed Executive Director of the Franchise Association of New Zealand, the peak body for the franchising sector. Since 2011, he has also fulfilled the function of General Secretariat of the World Franchise Council, the association of 45 National Franchise Associations, whose purpose is to encourage international understanding and cooperation in the protection and promotion of franchising worldwide.

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he franchise sector of the New Zealand economy is substantially larger than most people realise. The number of units operating with business format franchise systems has increased considerably since 2003 when a major survey was conducted. The Franchising New Zealand 2010 survey conducted

by Massey University, Auckland and Griffith University, Queensland found 423 active franchise systems in New Zealand compared with an estimated 350 in 2003. The survey also estimated a total 23,600 franchisee units, which was a 92 per cent increase over the seven years.

The most recent survey, Franchising New Zealand 2012, however, found that system growth had slowed in the previous two years and that there were now approximately 446 active business format franchise systems. Whilst the number of franchise units had fallen slightly to 22,400, the level of employment in the franchising sector had grown by more than 25 per cent to over 100,000 people.

The franchise model is operated across all sectors of business. In New Zealand, franchising has comparatively fewer businesses in the retail sector compared with many other countries, but is comparatively stronger in home and businessto-business services. Indicative of the entrepreneurial spirit of New Zealanders, approximately 88 per cent of franchises operating here are home-grown and despite the economic situation, there are some franchise systems that are still experiencing growth.

Franchising in New Zealand continues to play an important role in the economy with an estimated contribution of between $19.4 billion and $21.0 billion in turnover.

The Franchise Association of New Zealand If you are looking for a business opportunity or needing advice on franchising, our recommendation is that you don’t sign anything until you have asked the question: “Are you a member of the Franchise Association of New Zealand?”

Members of the Franchise Association are the franchise professionals, committed to uphold ‘Best Practice in Franchising”, and the Association works hard to promote the benefits of dealing with members, both for those looking to purchase a franchise and also those who need to gain professional advice”.

The benefit of Association membership for franchisees was recognised in the New Zealand Prospective Franchisees Survey. *The survey found that 75.7 per cent of prospective franchisees considered membership of FANZ important or very important, when considering a franchise to buy into.

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As the peak body for the franchise community in New Zealand, the Association makes representations to Government on issues of concern to franchisors and franchisees including such issues as proposed legislation; new business support programmes and business taxation. The Association often conducts email surveys of members on key issues to gain valuable feedback prior to making a submission.

Unlike a number of other countries in the world, including Australia, franchising in New Zealand is governed by the same commercial laws as any other business.

In 2008 the Ministry of Economic Development called for submissions on the possibility of introducing franchise specific regulations following a high profile fraud case. In 2009, however, the Minister of Commerce concluded that there was no need at that time for the introduction of franchise-specific regulations and went on to say that that there was little evidence of widespread problems in the sector. He drew attention to the Franchise Association of New Zealand’s (FANZ) Code of Conduct as an area where self regulation was working.

Despite the substantial difference in the regulatory environments between New Zealand and Australia, the two 2012 Surveys show remarkably similar levels of franchising disputes.

Buying your New Zealand franchise Buying the right franchise can have many benefits over the stand-alone business, not least of which is that you can potentially purchase into a franchise system that has a proven track record and one where you will receive all the help you need to become successful.

As a prospective franchisee, an important part of your due diligence should be to establish whether or not the franchise you are considering is a Member of FANZ. Don’t be misled by a statement such as, “we are not members but we abide by their Codes.” There have been several reports of this in recent times where something has subsequently gone wrong in the relationship but we have been unable to assist the franchisee, as we have no powers to intervene unless the franchise is actually a Member.

Of course, there are franchise systems such as McDonalds who are currently not in membership but who operate ethically and provide valuable business opportunities for the prospective franchisee. In all cases, however, you should ask the franchisor to explain to you why they are not members.

For a franchisor to gain membership of the Association requires that they submit their documentation for scrutiny to ensure that their Franchise Agreements 79

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contain all the elements required under the Association’s Codes and Rules.

Some of the key elements that are required are: • Full and proper disclosure of matters important for a prospective franchisee to know and understand • A seven-day cooling off period before a prospective franchisee is finally committed to the purchase • A requirement that the prospective franchisee produces a certificate from their solicitor to the effect that they have had the agreement explained to them – or a signed statement that they have declined to take independent legal advice • If things go wrong, compulsory mediation by a FANZ appointed experienced franchise mediator as a first step in dealing with the issue.

The Association’s independent Scrutineer carries out compliance checks on a biennial basis to ensure that documentation maintains the standards that are required.

Carrying out your due diligence on every aspect of your intended franchise system is vitally important. The New Zealand Prospective Franchisees* survey found that over 70 per cent of prospective franchisees met with three or more franchisors before making up their minds and nearly 75 per cent talked to three or more franchisees of their intended franchise system as part of their decision making process.

To assist prospective franchisees make informed decisions, FANZ has developed, in conjunction with Massey University, a five segment free online training course that is available through the FANZ web site www. franchiseassociation.org.nz.

If your franchise system is in membership, you have the ability to make a formal complaint to the Complaints Panel if you believe that your franchisor is in breach of the Association’s Codes or Rules. The Complaints Panel is fully independent of the Board of FANZ and its members are experienced in franchising both from a legal and practical standpoint. If your complaint is upheld, the franchisor can be required to rectify the situation or face a range of penalties that are contained within the Association’s Code of Practice.

If the franchise you are going to purchase is from a Member of FANZ, you too will be required to sign up to the Association’s Code of Conduct and Code of Ethics to ensure that as a franchisee you undertake to maintain ‘Best Practice’.

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In addition to standards and compliance, franchisors, franchisees and service provider members gain much from membership to the Association. Apart from the significant marketing advantage of being able to use the Association’s logo as a sign of credibility, membership also opens up a whole range of opportunities to advance their knowledge and learn from the experience of others. This is a unique advantage not available to non-member franchise systems and is clearly demonstrated at Annual Conferences where first time attendees regularly comment that they are amazed by the amount of advice and information that was freely exchanged by members.

As a Member or the franchisee of a Member you have the opportunity to enter the prestigious annual awards, which culminate in a gala awards dinner in November each year. These awards are based on an internationally recognised business excellence system and not only provide you with the opportunity to showcase your business, but also gain valuable insight into the opportunities to improve your business from the feedback reports provided by the evaluators.

There are entry categories for both franchise systems and franchisees and winners regularly use their success in marketing campaigns.

Exporting your franchise to New Zealand For an Australian franchisor coming into New Zealand it is a relatively straight forward process from a legal point of view. Most systems that come into New Zealand from Australia set up a local company both to protect intellectual property in New Zealand as well as to ensure a ‘foothold’ in New Zealand.

It is important to get trademarks registered in New Zealand as early as possible.

It is not an expensive process but should be considered well before actually arriving in New Zealand.

If the Australian franchisor is operating directly in New Zealand then the franchise agreement should be reviewed by a New Zealand lawyer and made subject to New Zealand law and to New Zealand jurisdiction for ease of franchise rights enforcement. Reputable Australian systems that come here ensure that they have a disclosure document that is relevant to New Zealand circumstances as well as a cooling off period etc. A number of Australian systems have made, as a key feature of setting up in New Zealand, an early application to join the FANZ especially as the FANZ requirements for disclosure differ in some ways from those required under the Australian regulations.

Proper disclosure documents, cooling off period and mandatory mediation as a dispute resolution process are all part of the voluntary Code of Practice to which all FANZ members are required to adhere. It certainly enhances the 81

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reputation of the system operating in New Zealand. Obviously, if a Master Franchisee is appointed in New Zealand then having that franchisee become a member of the FANZ is likely to be perceived as a system which respects the maintenance of high standards.

In spite of a minority of lawyers and accountants seeing franchising as something akin to the Wild West, the vast majority of lawyers, accountants and business brokers throughout New Zealand have a reasonable understanding of franchising and the benefits it can bring to franchisees. There are a growing number of lawyers, accountants and business brokers who specialise in franchising.

There is still a good deal of education to be undertaken for the public about avoiding doubtful franchise systems, but the trend is for specialised business brokers to promote healthy systems and to steer people away from the moonlight operators.

The majority of the banks in New Zealand now have a strong presence in the franchise industry and bear in mind that all the major banks in New Zealand are Australian owned. There are reputable franchise consultants in New Zealand with well-established track records and for anyone who attends the annual FANZ conference it is manifest to observe that there is a strong and proactive congeniality within the franchise industry in New Zealand.

There are a small number of dedicated and respected franchise consultants in New Zealand who can be invaluable in modifying systems coming into this country. Involving their use can considerably diminish the likelihood of a legal claim being brought against a franchisor coming across from Australia.

Be aware that employment laws in New Zealand are similar to Australia and dismissing staff is not an easy process. Also New Zealand has an act called the Resource Management Act which, coupled with the Building Act, means that obtaining building consents for shop fit outs can be slow and expensive. It is vital to stress the need to do plenty of homework.

Obtaining sound taxation advice is essential before coming into New Zealand.

There is a withholding tax system for payment of royalties and other fees from New Zealand to Australia but there is plenty of advice available from accountants who understand the taxation laws between the two countries.

It is important to remember that GST applies to everything in New Zealand (even food items) and the tax structure here is somewhat different from Australia. For a start there is no such thing as stamp duty. The government Kiwi Saver superannuation scheme requires contributions from employers to 82

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be made when employees opt in to the scheme.

It is also important to know that we have the Personal Properties Securities Act which is a system of an online registration of all charges (e.g. what used to be debentures for companies) against both individuals and companies as security for moneys lent and where goods and services are supplied on credit.

New Zealand has recently been named as the 6th highest ranking country based on the United Nations Development Programme which has regard to the standard of living of its people, its population’s access to knowledge and its population’s chances of living a long and healthy life.

There are many success stories for Australian systems entering into New Zealand. A point to remember, however, is that the disposable income of New Zealanders is not quite the same as that of Australians. Having said that, the lifestyle differences between Australia and New Zealand are not significant and so long as the homework and planning are done carefully then there are good prospects for Australian systems to enter into New Zealand and becoming successful.

For more information or to find out more about the work of the Association and the Codes of Practice, visit www.franchiseassociation.org.nz *New Zealand Prospective Franchisees – Franchize Consultants Ltd and franchisebusiness.co.nz - April 2011 Additional legal commentary provided by Rory MacDonald – MacDonald Bailey Law

Graham Billings, Executive Director Franchise Association of New Zealand (FANZ) (NZ) 09 274 2901 contact@franchise.org.nz www.franchiseassociation.org.nz

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Chapter 10

local area marketing for franchisees

By Michelle Gamble, Chief Angel Marketing Angels

About the Author Michelle Gamble is the Chief Angel of Marketing Angels, a national marketing consultancy that provides education, advice and outsourced marketing management.

Marketing Angels work with small and medium businesses and the Franchise sector in Sydney, Melbourne, Brisbane and Perth.

Their services include building brands, writing full marketing plans, including local area marketing programs and all creative from logo development to search engine optimisation.

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s part of a good franchise group you should have strong support from your franchisor when it comes to building brand awareness on a national level including the implementation of national promotions at a local level.

That being said, it’s still up to you, the franchisee, to drive sales and build awareness locally. Franchisees don’t have budgets for expensive advertising campaigns so you need to be clever with your marketing tactics to make sure you are getting the best bang for your buck.

Marketing your business can seem like an overwhelming task with so much to do. No doubt you’ll be spending a lot of time working in your business, getting to know your customers better, hiring and training staff and keeping on top of the operations.

The following is a guideline on how you might approach local area marketing for your business.

Get to know what your brand is all about By doing everything you can to build your brand locally, this will compliment the national efforts of your franchisor, forming a winning combination. Your local activities will both leverage off and raise the effectiveness of the national marketing activities.

Review the brand’s personality, brand essence and the story behind your brand.

By understanding the brand promise to customer’s means you can bring that to life for people.

This is really important especially when you might be recruiting staff. If your brand is about “fun” you can make sure that the people you hire who are dealing with your customers, have fun, playful personalities and can live out the brand values through the customer experience.

Get the most from your franchisors marketing initiatives When your franchisor runs national marketing campaigns be prepared to leverage off the activity in your local area. Educate your staff on the details of the promotion and how to action it successfully. Perhaps there’ll be a series of television advertisements running a special deal with a strong call to offer to your target market. Make sure that when customers come to your business that their experience matches the promotion on offer. This creates a great customer experience and increases the chances of the best referral of all; word of mouth.

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Getting to know your customers Your franchisor should have provided you with detailed information about “who” represents the ideal customer for your product.

Take the time to really understand the ideal customer so that you can identify someone who is likely to be a loyal, high value customer that raves about your brand. That way you can make sure that you are really looking after them.

Your marketing will be more successful if you are targeting your ideal target market. It’s tempting, especially when business is quiet to target everyone.

The problem with that is that you spend time targeting people that will not become customers, which is costly and frustrating.

It’s important to understand their attributes, (e.g. professionals, retired, young parents, etc.) and also to look at what their characteristics are. What are their sensitivities (e.g. time poor, safety conscious, etc.). This will help you develop specific marketing messages about your products or services that will resonate with them. You’ll then have a better idea of how to communicate with them and what channels are most appropriate.

Get to know the demographics of your local area. Whilst your franchisor has customer information that applies to the brand broadly, every area is different and only you can really identify the customer base in your local area. The Australian Bureau of Statistics Census information can provide you with a breakdown of demographics by postcode, which will help you understand in more detail the attributes of your local area.

Keep your customers happy Unfortunately, word spreads faster about a bad experience than a good one.

This makes keeping your customers happy the most important thing you do in your business. You can’t always be at your business, especially when you are out there marketing it, so perhaps you can get family and friends to mystery shop so that you know what is happening when you are not there. The customer experience is paramount. There’s no point in putting all the effort in to attracting new customers to your business if they bounce straight back out after one transaction or even worse, not making a transaction.

Tap into your biggest fans – your family and friends Your close friends and family are willing participants in helping support your business. Invite them into your business and extend an offer if they bring a friend or provide them with something that will help them spread the word 87

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about your business on your behalf.

Communicating and creating loyalty within your customers The chance of selling a service to a new customer is 1 in 16 compared with 1 in 2.2 for current customers. It’s also worth noting that when a loyal customer refers others it costs you nothing. It’s easier and generally costs less to get current customers to buy 10 per cent more than it is to increase your customer base by 10 per cent. Having a database is essential in your business, if your Franchisor does not have a database system, it’s easy these days to access cost effective database/customer relationship management systems. Be vigilant with keeping your customer’s details (including email and phone number) up to date. To build your database put together an incentive for customers to add their name by offering simple things like a monthly prize draw.

The most cost effective and enduring way to grow your customer base and revenue is to encourage customer loyalty. A strong base of loyal customers means you have to spend less time and money gaining new customers. Loyal customers will bring friends and family to you.

If you have a rewards system – use it, from the very first time someone purchases from you.

Facebook is a great way to communicate regular promotions and offers to your customers. However, it’s important to check in with your franchisor about their policy using social media. Encourage any customers to “like” your Facebook page or follow you on other social media platforms. That way you get to have a passive ongoing conversation with them, keeping them top of mind.

Other social media platforms that are worth experimenting with include Twitter and Instagram. Many businesses have had great success tweeting special deals to their followers, whilst Instagram is proving to be a more and more popular way to communicate allowing businesses to showcase their products through visual imagery.

Make friends with your local media Build a relationship with your local media channels. Give some free product, samples or an offer to come into your store to try what you have to offer.

Follow up with a phone call and give them your personal number so you can be there to greet them.

Add them to your database so they know what you are up to. You might even offer to write a regular column, a good relationship with the media will prevent 88

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you having to spend money on advertising to get your brand out there. Maybe you have a healthy foods shop and you offer to write a column every week on the benefits of eating healthy.

Introduce yourself to your business neighbours If you are located in a busy street or have many businesses around you, go and introduce yourself. Drop in a business card and provide them with an offer to sample your products or service for free. It’s simple, effective and will bring you customers.

Meet your local community People love to deal with people they know and like. So, getting involved in any community events and promotions ties you closer to your community.

Donate your time and/or service to community fundraising activities. Not only does it feel good, but it will gain you the respect of the community who are in-turn your customers.

Do some research on local business groups, and go along to some to see how you might get involved. These include your local chamber, business networking groups (such as BCI), charities, community groups and organisations, and perhaps even local clubs such as Rotary or Lions. Wear your branded uniform at events and take along samples, business cards, brochures etc. Ask permission from people you exchange business cards with to add them to your database.

Introduce yourself to local sporting clubs and groups to see if there’s a way you can support them in return for branding and promotion.

Getting involved in local events Find out what local events are happening in your area that you could possibly get involved in. Think Australia Day Activities, Family Fun Days, Local Fundraisers and festivals.

Use the opportunity to provide free offers, free samples to get people into your store in return for brand exposure and promotion. Your franchisor should have creative templates and ads you can provide local groups.

Building your business profile Find a local business award and put everything into winning it. This is a golden opportunity for your business, to not only create a buzz, but to also be recognised for excellence. You can ask your customers to vote for you and 89

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start creating a team/community spirit in your business. If you win, then you can leverage this through media exposure, adding to signage, adding to your website and social media. This will also position you as the best in the eyes of your target market.

Run your own event Holding your own event is a great way to get out there in the community and raise your profile. Perhaps you can collaborate with other businesses, for example a photographer, clothes shop and cake shop, to work with a hotel to create a wedding fair. Create a special offer to drive customers to your business when the event is over and consider running a competition offering prizes if they join your database.

Stand out from the crowd Depending on the size and resources available from your franchisor, you should have access to customised materials. Take every opportunity to stand out and be outstanding; great uniforms, car decals, promotional giveaways, sponsoring the kids school newsletter and more.

Get familiar with the national marketing plan Make yourself familiar with any national promotions that you can leverage at a local level. Get a copy of the head office marketing plan and make an appointment with your area manager, or business development manager to brainstorm ways you could make the most of any promotions locally.

Spend time reviewing and planning Regularly review the results of your marketing efforts. What led to new customers? Which of those have turned into loyal high value customers that grow your business? Also evaluate what hasn’t worked and why.

Based on the results, work on a formal marketing plan and calendar for the next 6 to 12 months. This does not have to be a 50 page strategic document. It can be as simple as a few pages. Writing down your business objectives will really help with shaping your marketing activity and also give you a benchmark to measure your success by. When you are writing your plan you should access any details from your franchisor on national promotions they are planning to run so your can add these into your marketing calendar for the forthcoming year.

If sitting down and writing a plan is a struggle for you, seek the assistance of the 90

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franchisor marketing team or the business development team. They have the benefit of knowing what has worked and not worked with other franchisees.

Getting referrals The best time to get a referral from a customer is when they have expressed how happy they are with you. This is where following up with customers every ninety days or so really helps. If a client has expressed that they are happy with you, ask them if they would allow you to use their comments as a testimonial.

Make it easy for them by sending a follow up email with their comments in text for them to edit and approve. You’ll easily get testimonials following that process.

You can also offer customers a reward for any referral’s they bring to your business. We often overlook the people closest to us; our family and friends as a source of referrals. People who love and respect you want to see you doing well, so don’t forget to keep them informed on your business and the types of customers you are targeting.

Create a local online presence A large percentage of purchases are already decided before the customer contacts you. That’s because they often do their research online before picking up the phone or calling in to your premises.

Your franchisor may already conduct online activities at a national level.

However, there are still effective tactics you can apply locally.

Ensure you are listed on Google Maps, and in the various local directories and review sites. As well as providing coupons on your Google places listing, you can now add video and photos. Customers can provide reviews on your listing, so let them know you are there and encourage them to provide any positive feedback. This helps your business to appear more prominently in search engines – where local searches are being made.

Consider starting your own blog about running a business in your area. It does not have to be about your brand exclusively as it’s more about building your profile as a business owner and being the centre of influence in your area.

Co-marketing Identify key businesses that compliment your product/services with the same target market as you and look at running co-marketing promotions.

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Traditional marketing Of course, don’t forget the fundamentals of an effective local area marketing strategy. Include activities such as letter box drops, prize donations, local paper advertising, shopping dockets and local sponsorships.

In summary Marketing your business so that it achieves its full potential should be an everyday activity. From the time you open the doors, ask yourself “What can I do today to market my business?”

Here are some key things to help you market smarter: • Train your staff to gather customer details to build your database • Provide training to staff in preparation for all promotions locally and nationally • Create a focused marketing plan for your business • Educate yourself in marketing skills and strategies You don’t have to throw a lot of money at marketing to do it well and have it achieve results for your business. However, you do have to invest in planning, learning and reading about different marketing tactics, and of course the all important investment of time.

A consistent, strategic marketing effort will always drive results regardless of whether your marketing budget is limited.

Michelle Gamble, Chief Angel Marketing Angels (AUS) 1300 858 311 www.marketingangels.com.au

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Chapter 11

SELECTING THE BEST LOCATION

By Peter Buckingham, CMC, FFCA, FIMC, Managing Director Spectrum Analysis Australia Pty Ltd

About the Author Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, the leading Geodemographic, Strategic Network Planning and Retail Sales Modelling Company in Australia.

Spectrum assists many retailers and franchisors in better understanding the retail market from a site and area selection view.

Peter spent 20 years with Caltex Australia Ltd in a previous life, including roles in most states of Australia, one year overseas and has spent around four years in property development.

Education is something Peter cares about, and he runs a series of workshops in conjunction with Franchise Advisory Centre, titled “Franchise Site Selection and Territory Planning�. He also lectures for the Diploma of Franchising, as sponsored by the FCA. Peter is a Fellow of the Franchise Council of Australia (FCA), Fellow and a Federal Director of the Institute of Management Consultants and a Certified Management Consultant (CMC).

Peter is a regular speaker at the National Franchise Convention, FCA State Conferences, and has spoken internationally at conferences including in New Zealand (FANZ) and in Singapore (FLA) in recent years.

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M

oving into the world of franchising probably leads you to an encounter with the fickle world of site selection and site analysis? You are about to invest much of your hard earned money into your new venture, and you must be asking “Where should I open my first, second, third store?” – and it doesn’t get any easier.

Whilst your franchisor should assist you, there will be a degree of responsibility you will have to shoulder, and this probably means thinking as a retailer.

You have all heard the adage that the most important thing in real estate is ‘location, location, location’, and I guess retail site selection is definitely a subset of real estate.

The Billy Baxter appeals court decision has shown that a franchisor does have some degree of responsibility for site selection, and it also shows that the decisions must be based on facts and data; not the ‘wet finger in the air’ approach.

You can have the greatest products, best fit out, fantastic look and still fail miserably, if you have not given site selection some really hard consideration.

It continually amazes me how much effort some clients put into selecting a new store without addressing the biggest issue – WHAT $’s (OR REVENUE) DO I THINK THIS SITE WILL SELL?

What should I expect from my franchisor?

Franchisors will normally not tell you their sales forecasts for a store (mainly for legal reasons). They should offer you information about the area – maybe demographics, maps of where the competition is, and information about the shopping centres etc. However, they will tell you that it is your responsibility to make the call on your future sales.

Most franchise systems will offer to give you the names/contact points of other franchisees, so we can only recommend you take them up on that, and try and make contact.

The simplest method of sales prediction is what we call the ANALOGUE model. This means find like stores, see what they are selling, and then make your judgment from that.

If I am planning to open a kiosk for a particular brand in Southland (Super Regional Shopping Centre in Melbourne), then the analogues I would be looking for is what sales other kiosks are selling in the likes of Chadstone, Fountaingate, Knox City, Highpoint, Chatswood, Warringah Mall and other 94

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Super regional sized shopping centres around Australia. What are NOT relevant would be the sales in strips or the CBD or small shopping centres.

Maybe you can also take into account which shopping centres (above) are most like Southland in size, demographics, position you are being offered etc., and this will help to decide which of the comparative sites are most relevant.

Once we have some comparisons, you should be able to at least have a feel for a range of sales the store should achieve.

The forecast profit and loss Before signing a lease for any store – you must have done some forecast Profit and Loss? This can be broken down into six lines: Sales (Gross Revenue) Less

• Cost of Goods Sold • Rent

• Labour • Other

= Profit <or Loss> If we ask ourselves how accurate we can be with the various factors, it should look something like: Sales – NEED HELP TO HAVE A CLEAR UNDERSTANDING OF WHAT $’s THIS LOCATION WILL SELL. Naturally, the real estate agent or the shopping centre leasing executive will have put a positive spin on how good it will be, but they are not the ones putting in their money!

Cost of Goods Sold – easier – should be a percentage of sales (or a range) Rent – we know that from the lease in front of us Labour – we should have a good idea of staffing requirements Other – we should have a fair idea – Petty cash, telephone, uniforms etc., etc.

The point that is the biggest source of error that will make or break this profit projection, will be that line called SALES or Gross Revenue.

This chapter is partly what to think about, as far as the site is concerned, to make the SALES as high as possible.

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Available information for good decision making The 2012 Census of Population and Housing was released in June 2013, so when you read this book, you know the data you can use is fairly fresh.

The Census is available on the Australian Bureau of Statistics website, and I suggest you may want to try the following to experiment with what information is readily available for free: Go to www.abs.gov.au

Go to Census Data (left hand side)

Go down to the green box called Quickstats

Put in on the right hand side the area you want â&#x20AC;&#x201C; suburb, postcode etc.

You can now see much of the relevant information for that area, and you can scroll down, comparing it to the State and National averages.

Business data on how many businesses are in an area is not that simple, but at the time of writing, we have this data as per the numbers, type and size of businesses at 30th June 2012.

For most business decisions, these are the most relevant data sources to describe the area you are looking in to.

Should I be looking in shopping centres or strips?

Many businesses have a preference to go into big shopping centres (or malls) whilst others believe shopping strips are the way to go.

Shopping centres definitely have higher attraction power for the customers as the volume of traffic is normally higher (and therefore the rent). In Australia we can gather the basic statistics on shopping centres from the Property Council of Australia, who produce books giving a page of details for nearly every shopping centre in Australia, unless the owner is not a member of the Property Council of Australia and does not wish to be included.

The Property Council data tells us the owner, manager and their contact details.

It then tells us the GLAR â&#x20AC;&#x201C; gross leasable area retail and MAT â&#x20AC;&#x201C; moving annual turnover of the centre. It also gives details on the major tenants and their area, number of car parks, who many of the specialty stores are, estimated pedestrian traffic and details on major refurbishments of the centre.

Different owners may collect data in different ways, so we are at the mercy of the details supplied to the Property Council.

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In the case of strips, there is no formal collection procedure or body that acts

like the Property Council. We use a product called Strip Locator which is a method of comparing one strip to another as an indication of the strength of the strip.

The comparisons as we see it are: Shopping Centre

Strip Shopping

Traffic

Normally higher in a SC and measurable

Lower and unpredictable

Product mix (competitors)

Some governance in a Mall depending on the owners as they can limit the competition if they wish

No protection from your competition acting any way they wish

Rents

Normally much higher with little long term protection

Higher chance of a lower rental

Long term renewals

Currently most SCs will give only a 5 year lease with no options, so you are at their mercy at time of re leasing

More likely to be able to negotiate longer tenure, including options for lease renewals

My tips on what is important: For a free standing store – FSDT – or Free Standing Drive Thru The FSDT store is the very high investment that McDonalds, KFC, Hungry Jacks or one of the supermarket chains or oil companies make. If food is the main sale, then it is often known as a Quick Serve Restaurant or QSR. The first ‘Driver’ they must be looking for is traffic, and how many vehicles per day pass the store. Traffic measurement can be done in many ways, State Roads Department, Councils or standing outside with a counter! We also suggest looking at www.zenithtraffic.com.au, a new website set up to give consistent measurement or estimates in all 5 major capital cities. The normal measurement you are looking for is 24 hour, both directional, weekday traffic counts.

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The second Driver is visibility, because you can have a great store and great traffic, but it needs to be seen, preferably from far enough away so the drivers can make a conscious decision to turn in. Visibility of signage and the building both contribute to a highly visible FSDT. Site suitability is the next on my ‘Drivers’ list, and this is the physical items the site can offer. Many years ago when working with KFC, we used to see huge variation from the little, original stores that had 20 seats to the more modern 100 seat restaurant. If leasing an existing store, these areas must be considered: ie. number of tables, counter length, outside seating, drive-thru windows and queuing, access, parking and many more physical attributes.

My next item is the demographics. It is no good having a store selling one product range when either there are few people in the area, or they are not likely to be your customer. Whilst companies like ours can provide detailed demographic information, you can always look up any area in Australia yourself on the ABS website, www.abs.gov.au and then look for Census Data, and then Quikstats. You can put in a postcode or suburb, and find out from the Census 2011 about that area.

Think in terms of what you are selling, and the pricing point and who you are selling to. If your average meal price point is very high, then selling into low socio economic areas is probably less attractive than high socio economic areas. If you are selling kids meals and ice cream, then young kids and their parents should be the best target audience. A Target Market Index is one way of putting together 2 or 3 demographic variables to see which areas are best for what you are selling.

My final point is competition. In food QSR’s we have seen the advent of what we call a ‘cluster’. A cluster is a group of three or four QSR’s that may share common access and parking, and partially they are successful as they offer a variety for a family to shop at. As well, the average rental may be slightly lower than a pure stand alone, as the site efficiency is better with shared parking and multiple access points.

Our view is that it is a “friend and foe” situation, where the others in the cluster actually work for each other to bring in a greater amount of business than the sum of the individuals would bring in. On the other hand being a single store, say 1 km away from a strong cluster is detrimental, as a single store does not have the attraction of a cluster. In $ terms, we use to estimate each additional store in the cluster added around $800 pw of sales to the client we were working with.

In summary, my top five things for consideration for a FSDT are Traffic, 98

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Visibility, Physical site issues, Demographics and Clustering.

For an Inline store My definition of an Inline site is normally in a shopping strip, or amongst other sites facing on to a road and / or footpath. A shopping mall, such as Pitt St Mall or Rundle Mall (with no cars allowed), are also Inline sites.

The first thing I feel is important is the power of the shopping strip you are planning to enter. We call this the Generator rating, and what is it that is around you that will attract business to your immediate area.

We run a methodology called ‘StripLocator’, which is a methodical way of measuring the number of stores in the strip, and the proportions or mix of stores, and look to how they suit the business proposed. As I said earlier, you can look for the daytime generators in the form of supermarkets, banks, chemist shops, post office and newsagents. If you are a night time product or a café or restaurant, you probably are best clustering in the vicinity of other similar businesses. For example, why do you find many restaurants and coffee shops near picture theatres? The answer is because they draw a continuous flow of people before and after the films.

StripLocator allows you to compare shopping strips in each capital city in the same way, and create a ranking or priority order for how you will lay out your future network.

Secondly, before selecting a site, you need to think in terms of how my product rates in terms of Impulse vs. Destination. If we think of it in terms of a line, where do we sit on that line?

High Impulse Low Destination

QSR

Low Impulse High Destination

BMW Showroom

High impulse items are usually low cost, spontaneous purchases such as buying a carton of milk, a packet of cigarettes for a smoker or a newspaper.

You may make some decision where you go, but convenience normally drives this purchase.

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When we look at the most high impulse business we can imagine, think of a Busker. In this case, they are very mobile, and are able to move to the best traffic flow at no cost, other than moving their instrument and case and walking to the other side of the pavement or location.

The rental you pay for a property is probably defined by the owner’s view on whether the premise is on high traffic flow and high visibility. What you need to do is pay the appropriate rental for the appropriate store, and if you have a high destination type product, then you do not want to be paying top rental for the peak corner on the strip. If you are a high impulse product, then you do need high passing trade, or you will not sell your goods. There is no point being down the side street paying cheap rental if you have a high impulse product, such as phone cards, sandwiches or other food items.

Store suitability in a strip is pretty much a function of size, window frontage, whether you are on a corner or not, and to an extent being at ground level with easy access. Store suitability is having the right size and shape of store for what you are selling (and rent you are paying). If you need 80 sq m, it is no good having 120 sq m. If you need to display your goods in the window, it is no good having a 3 metre frontage, with the door taking up the first 1.5m!

The fourth area is the demographics. Here, the same principles apply as outlined in the above section on Free Standing Store’s (see above).

My final point is competition. Whilst you may not want to be exactly beside your main competitor, being in a group of like-minded businesses tends to draw the public to the area, and gives you a higher turnover than being out on your own.

I speak with many FSDT and QSR operators, and I hear comments like – “we just go near a McDonalds, or in a strip, let’s just go near the Grill’d”. This is probably quite a compliment to their site selection procedures; however they do draw business to the immediate area. Why do we see high concentrations of QSR’s in the likes of Glenferrie Rd, Malvern or Northbridge in Perth?

Basically, it’s because they work well together.

In summary, my top five things for consideration for an Inline are: 1. Generators

2. Pedestrian traffic 3. Store Suitability 4. Demographics

5. Competition / Clustering.

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The reality of selecting a commercial site The first thing you learn is all real estate agents are born optimists. The reality is they will advise you that the site you are seeking will be hard to find, and that they have the perfect opportunity, (normally if you sign up quickly)!

Reality is that out of about 20 stores you will see, probably only one or two will truly meet your requirements.

I normally recommend you write a ‘Property Guideline’ that you can show agents and others what you are seeking.

At Caltex, we would be offered about three or four ‘opportunities’ a week. The oil industry works to some reasonably clear parameters, and it was just a matter of filtering real opportunities from time wasting ones.

My property guidelines to address the following types of issues are:

• Size – we were looking for mid blocks of around 80 m long X 40 m wide approx. If a corner block, then around 60 m X 60 m.

• Physical characteristics – our preference was a flat block, or if possible slightly above the road rather than below. We would prefer to be on a flat section or slightly uphill section of the road, definitely not a steep decline.

• Side of road – we would prefer to be on the ‘going home’ side of the road, or the ‘neutral’ direction. Inbound was not so good.

• Competition – we obviously did not want to be on the same traffic flow as any of our other sites. Even better if few or no other competitors were servicing the area.

• Road type – traffic flow was important, and the more, the better in general.

You can now go to www.zenithtraffic.com.au to buy data relating to traffic estimates for any capital city area.

• Visibility – we would want good visibility for our signage. The best was on the outside of a right hand curve in a road, so our signage was directly ahead of the traffic.

• Access – you had to be able to come in and out easily. No much good if you could not come in off the main road.

• Demographics – in Australia probably the highest fuel users are medium income people, living in outer suburbs of the capital cities.

• Suburbs or areas – we would nominate suburbs or specific areas we were actively seeking new sites in, and not be afraid to mention areas we were not looking at, either because we were well serviced in the area, or we knew the land cost would be prohibitive.

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Once this was all formed in the property guideline, it was willingly sent to all agents, developers and other interested parties we knew.

Summary There is no magic formula to selecting a commercial site, rather a process you need to follow and a line of thinking to make sure the site you finally select meets all the criteria that YOU feel is essential for your new business venture.

I cannot tell you to look at the left hand side compared to the right hand side of the road, or look for the busiest, most expensive store in a shopping centre compared to the $2 discount store at the back.

What I can tell you is think on what your business is about and try and match, as best you can, the commercial sites being offered to yours and your customer’s needs. There will always be the attraction of a better/bigger site – at more rent, and you have to evaluate that to your real needs, not the sales pressure being placed on you by a leasing agent.

Good Luck Grasshopper!

Appendix – Terms used GLAR – Gross Leasable Area Retail

Shopping centre term for how large a Centre is based on the total area that is leased to retailers.

MAT – Moving Annual Turnover

12 month figure telling us the total dollars have been sold by all the retailers in a Centre.

Both the figures above are available through the Property Council of Australia in books they print and sell. The input for these comes from the shopping centre owners, who are normally members of the Property Council of Australia.

MAT figures are normally derived from the individual retailer’s figures as they normally have to disclose their sales to their Lessors as part of the lease conditions.

Peter Buckingham, Managing Director Spectrum Analysis Australia Pty Ltd (AUS) 03 9882 6488 peterb@spectrumanalysis.com.au www.spectrumanalysis.com.au 102

Chapter 12

GROWING the FRANCHISE

By Andrew Kelly, Director FC Business Solutions

About the Author Andrew Kelly is a professional journalist and PR specialist with more than 15 years’ experience in franchising corporate communications.

Andrew fully understands the dynamics and idiosyncrasies of franchising and is able to play an active and ‘hands on’ role in promoting and growing the businesses of existing and new clients.

Andrew’s skills and experience have been honed over the course of his career during which he has helped build national brands such as Amcal Pharmacies, Bob Jane T-Marts, Brumby’s Bakeries, McDonalds, Sportsco, and Clark Rubber.

FC Business Solutions is a boutique franchise business consultancy headed by Directors Corina Vucic and Andrew Kelly who work operationally in the business as well as leading a young, vibrant team of dedicated industry professionals that collectively have more than seventy-five years’ experience in the Australian franchise industry.

Located in Melbourne’s south east, FC Business Solutions is a fully integrated consultancy specialising in strategically and sustainably developing, growing and marketing Australian franchise businesses. In 2012, FC Business Solutions received the FCA National Supplier of the Year Award.

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t’s a common misconception that in franchising, you’re buying into a system in which all the hard work is done for you. Whilst it’s true that the franchisor has developed a business model which is tried and tested and proven to be successful, and has presented it in a neat package; it comes down to you to make the most out of your investment.

Ask any successful franchisee about starting their franchise business and they’ll tell you that it took hard work to get them where they are today.

Far too many people take on a franchise and expect the franchisor to deliver all the business and clientele they will ever need. This is simply unrealistic and not true.

Your business needs to be in the healthiest condition it can be to ensure sustained growth. For this very reason, it’s important to have a close, hard look at your operation. What has been working well for your business over the past 12 to 24 months? Have you made connections with your local community which will provide you with ongoing business? What are the areas that you believe need improvement in order to take your business to a new level in the next one to three years?

There are a number of key areas to consider when growing your business: • Follow the system; • Staff training and development; • Leadership; • Local area marketing; • Multi-unit franchising.

It is important to ensure that your business is in a healthy position to expand and grow. You may even reach a position where you could consider becoming a multi-unit franchisee. We’ll look more closely at multi-unit franchising later in the chapter.

Follow the system It would be very difficult for a new franchisee to succeed in their business without proven systems and procedures.

As a franchisee, you have chosen to become part of a system which has been tried and tested and most importantly, has proven to be successful. The Operations Manual is the written version of how to operate your franchise 104

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according to a successful formula. Follow it and you give yourself the best chance of success.

Effective Operations Manuals promote consistency and quality throughout the franchise network. A quality system will have a comprehensive, well written set of Operations Manuals for its franchise network. Operations Manuals contain the details of the proper procedures and provide an invaluable support mechanism for franchisee education at all levels.

Training and Development Motivating individuals helps achieve business success. People development, in the areas of OHS and risk management, recruitment, performance and management skills, is vital for the successful growth of a business.

Excessive staff turnover can cost companies dearly. But by focusing on staff engagement and providing staff with the training and tools to engage and empower them, retention rates are able to be improved.

In the majority of businesses, leaders spend their time strategising with their office door closed. They don’t spend the time thinking about their business, they waste their valuable time being a ‘doer’ in the business.

Business leaders of proven franchise systems have ‘taken back control’ and can spend that time thinking about ways to grow their business, how to sell more, how to get into new markets and how to get the best people they can into their organisation to take the next step and become an industry leader.

Leadership Strong leaders with purpose possess courage: The courage to make the best decision for the betterment of the group as a whole at all times. Brands will confront challenges, remove obstacles and create an opportunity from the potential diversity - this is expected from the franchisor as they lead and protect the brand.

All highly successful franchisors are leaders who promote respect and integrity within their teams and throughout the brand. They set the path; share the end destination and make the best decision at the right time with the best information. This is leadership. They have taken on the responsibility to grow a business, to expand the product or service offering, to increase market share and to increase brand awareness.

Successful franchisors are not shy in sharing their plans with the team members who choose to live and breathe their vision. The level of leadership differs 105

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amongst the franchise network; some require the detail, the how, when and where; others require just the overall perspective and are committed to the cause. The franchisor’s responsibility is to deliver all these needs and continue to share the message in all available learning and development forums on a regular basis throughout the network.

If you are prepared to work hard, committed to following the system that you have invested in, embrace the training, support and mentoring available, and if you manage your back office (financials) in a professional manner, then you will give yourself every opportunity to succeed and grow.

Like any business, it will be demanding. However, knowing you have the ongoing support of the franchisor, together with their internal knowledge and experience, as well as many supportive franchisees that are on the same life journey, franchising can be extremely satisfying.

Local Area Marketing One of the greatest advantages you have being part of a franchise is the support of a recognisable brand. Successful franchisees understand marketing and know how to leverage off the brand awareness that comes with the franchise, and are able to turn this into successful marketing, at least at a local level.

What is Local Area Marketing?

Local Area Marketing (LAM) involves identifying and implementing marketing opportunities in local communities by engaging positively with individuals, groups, organisations, businesses and local media.

A pro-active and sustained LAM program can increase your profile as a dynamic member of the community and will increase overall brand awareness of the franchise system and its role in the community.

Franchisees that sit back in their franchise and expect the franchisor to achieve everything for them are going to run their business into the ground very quickly.

One franchisee recently summed it up perfectly when she said to me: “You’ve got to spend money to make money.”

This particular franchisee has taken two ordinary performing stores to become the number one store in the network. This franchisee also spends a minimum of three per cent of her turnover on local area marketing. In addition, this franchisee also has a strong staff incentive program in place, ensuring that her team helps her to drive her businesses.

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How much should you spend on LAM? The rule of thumb in franchising is that franchisees are expected to pay anywhere between 1.5 to three per cent on local area marketing, over and above their national marketing contribution, which can sit anywhere between four and 10 per cent, depending on the franchise.

Far too often, franchisees believe their marketing finishes when they contribute to the national fund. The national fund is certainly utilised to promote the brand, however, there are many marketing costs that are taken from that marketing fund, including creative design, website, online media, national sponsorships, print and electronic media, etc.

The large majority of Franchise Agreements stipulate that no local area marketing can be conducted by franchisees without the approval of the franchisor.

This should be standard across all agreements. A lot of money is invested by the franchisor to develop, promote and maintain the integrity of their brand.

A lot of the good franchises have local area marketing portals, which allow all franchisees to utilise artwork, ideas and campaigns that have been created and have worked successfully at other franchises. If rogue franchisees want to alter logos, create different themes and colours, change tag lines and USPs, then they should ask themselves whether they want to be part of a franchise or create their own business.

The success of a franchise is the brand, how that brand is promoted, how that brand engages and how that brand drives sales.

The LAM program must complement the systemâ&#x20AC;&#x2122;s national marketing plan and all LAM activities should be consistent with the systemâ&#x20AC;&#x2122;s over-riding marketing plan. However, it is also vital that the individual franchisee forms a distinct relationship with their local community and local media to help generate local loyalty to their business.

By actively and consistently engaging in your local community and with your local media outlets, you will help drive the success of your own business, but will also contribute to the overall success of the brand.

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want to take the next step. Now what? Perhaps you may consider becoming a multi-unit franchisee.

Multi-unit franchising was once considered an alternative route travelled by entrepreneurial and ambitious franchisees, investing heavily in the major systems. These days, multi-unit franchising has emerged as a clear pathway, across all sectors of the industry, for franchisees looking to take the next step in their franchising journey.

Many systems, particularly retail and staff-operated service franchises, are strategically set-up to encourage multi-unit franchising.

Becoming a multi-unit franchisee can both challenge and enhance your skills, while also increasing rewards gained from the franchise business.

Most successful multi-unit franchisees start with one franchise outlet and grow sequentially by adding additional franchise outlets as franchise business opportunities become available. It is less common for a new franchisee to start out as a multiple-unit operator from the outset.

Transitioning from a single to multi-unit franchisee can be a difficult leap for a franchisee. Single-unit franchisee owners are focused on the internal workings of their franchise business and often allocate themselves both a management and operational role, whereas successful multi-unit franchise business ownership requires a greater focus on management skills.

Just because you are a top performing franchisee in your system, does not guarantee you right of passage into multi-unit franchising. Most systems will have restrictions and eligibility requirements in place with regards to multi-unit franchising, so it is important to check these clauses in the Franchise Agreement.

For example, some franchises which are modeled on the franchisee carrying out all of the actual work, do not allow multi-unit franchising. Those that do allow or even promote multi-unit franchising may require you to undergo additional training before taking on additional units, as the skill set is different for managing across several businesses. You should also note that all systems will require the franchisee to be in 100 per cent compliance with the system and relevant codes before considering them for multi-unit franchising.

All new and potential franchisees should look at the possibility and requirements for multi-unit franchising, right from the due diligence phase, to consider it an option as part of succession and expansion planning. Even if you initially just want to buy one site, you never know where your business may lead you, and one day, you may decide to buy another one or more franchises in the same system.

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From a franchisor’s point of view, the benefits of multi-unit franchising are many: • It’s a great way to reward/recognise the stand-out franchisees within the group • It reduces franchisor’s costs in searching for new franchisees • It reduces the recruitment risks for the franchisor – they are proven performers • It’s a great way to keep franchisees engaged with the system and motivated • It can also speed up the franchisor’s expansion plans.

Benefits for the franchisee are: • You already know how to run the business • You can provide better opportunities and clearer career pathways for your staff • You have an opportunity to expand while also reducing the costs associated with establishing a new franchise business • You are able to deliver operational efficiencies/synergies and associated cost savings in the areas of administration, training and staffing, etc.

• You will have the capacity to market and run promotions across your stores with greater impact, reach and improved results • You have greater buying power and can drive better deals from suppliers.

But not all franchisees are suitable for multi-unit franchising. Managing multiple sites requires a different skill set from managing one franchise site and working across several businesses require a mind shift from working ‘in the business’ to working ‘on the business’.

Ideal multi-unit franchisees Before you approach your franchisor, you need to ask yourself the following questions: • Do I have a good understanding of the key drivers of the business?

• Am I able to implement a solid management structure?

• Am I able to successfully manage, recruit and develop my team?

• Am I able to delegate roles and responsibilities?

• Am I able to implement successful local marketing initiatives?

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• Is customer service a major focus?

• Do I have strong financial planning skills?

Multi-unit franchising replicates success Franchising offers the opportunity for people of all walks of life to pursue their dreams, and franchisors as a group can pool their resources, so they have the power of big business but with the energy and drive of small business.

This ‘pooling of resources’ also applies to multi-unit franchisees and helps to lower their overheads per business and increase their overall profitability.

In most well developed systems, as long as the franchisee is strong on sales and customer service, they will be successful. If they are also business-minded and entrepreneurial, the transition to multi-unit franchisee may seem a natural business progression.

With the right support from the franchisor and the appropriate skill-set and mind-set from the franchisee, the move can be profitable for both parties.

For those systems that make it work, multi-unit franchising is a natural extension that fits the fundamental franchise formula, of replicating a successful business, perfectly.

Andrew Kelly, Director FC Business Solutions (AUS) 03 9533 0028 andrew@fcbusinesssolutions.com.au www.fcbusinesssolutions.com.au

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Chapter 13

INVESTING IN YOUR FUTURE

By Tim Kilham, Director Lanyon Partners

About the Author Tim Kilham is a Director of the Accounting Division of Lanyon Partners and is in charge of the franchising section of that Division. Lanyon Partners is a professional services firm with three distinct Divisions â&#x20AC;&#x201C; Accounting, Financial Planning and Insurance Broking. It provides a unique blend of professional services that enables its clients to build, manage and protect their wealth and assets.

Tim has been involved in franchising for over 20 years. In the course of his career in franchising he has acted for or advised on literally hundreds of franchise systems.

He has on several occasions served on the Board of the Victorian Chapter of the Franchise Council of Australia. He has made many presentations on franchising to actual and potential franchisors and franchisees, banks, lawyers and the general public.

Tim has published numerous articles on franchising in a wide range of publications and has been a speaker at State and National franchise conferences as a franchise industry accounting expert. He is particularly active in advising potential franchisors and franchisees on the purchase and set up of franchise businesses, assisting with preparation of forecasts and business plans, and then providing on-going compliance and taxation services.

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T

here are many reasons why people decide to buy their own business.

These reasons include the desire to make more money, the desire to be their own boss, the desire to work shorter hours, and the desire to have control of their destiny. Of course, in some cases, purchasing or setting up a business can be forced on people, if they are unemployed, or are made redundant and are unable to find a job.

If you are in a position where you are choosing to set up or buy a business, I do recommend that you begin by considering seriously whether running a business is the right thing for you to do. Not everybody is suited to running their own business. No matter what assistance you get [and with a franchise, the assistance you get is often considerable] much will depend on your ability, your personality and your work ethic. It is no slur on you as a person if you are one of those people – probably the majority of people – who is not suited to running their own business. So examine carefully your motives and consider your suitability to run your own business. When necessary, seek advice of family, friends and mentors to help you evaluate your decision.

Assuming you have made the decision to run your own business, what next?

Why buy a franchise?

There are many businesses that you could buy or set up. Many of these businesses are franchises, but many more will not be. Which should you choose: a franchised business or a non-franchised business?

There are many good reasons to buy a franchise business. Some of these are:

• The survival rate for franchised businesses is higher than for non-franchised businesses – but that is not to say franchised businesses do not fail. Some do.

• In many cases, bank finance is easier to access when you are buying a franchise. This is particularly the case when a franchise is accredited with one or more of the lending institutions [accreditation is discussed later in this article].

• The brand name and potential of the franchise should lead to a higher resale value.

• The assistance provided by the franchisor in setting up and running a business can be invaluable, particularly if you are running your own business for the first time.

Having said that, franchising is not for everybody. Franchise businesses might have a higher survival rate, but they do fail. When you a buy a franchise you 112

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are buying your own business, but it is subject to the rules and regulations of the franchise system as set out in the franchise agreement and operations manual. Often these rules and regulations include what product or services you may and may not sell, where you may sell, the maximum price at which you may sell etc. If you don’t wish to follow the rules, and if you are not a team player, then franchising may not be for you.

People often talk about the franchising industry. This is technically incorrect as franchising is not so much an industry as a marketing method. A good franchise is a good quality system.

Franchise legislation When is a business a franchise?

Franchising is governed by specific legislation – the Franchising Code of Conduct. This Code applies to all businesses that fall within the definition of a franchise as set out in the Code. Some businesses call themselves licences, some call themselves agencies, but if they fall within the definition of a franchise as set out in the Franchise Code of Conduct, those businesses must adhere to the Code. The Australian Competition and Consumer Commission keeps a watchful eye out for businesses that are in truth franchises but try to pretend they are not, to avoid complying with the Franchise Code of Conduct.

Education It makes sense if you are going to buy a franchise business to first educate yourself about franchising, its rules and regulations and how it operates. There is a wealth of information available, at little or no cost. Sources of information include: • The Franchise Council of Australia • The ACCC

• The internet

• TAFE’s and Councils of Adult Education

• The Centre for Franchising Excellence at Griffith University

• Service providers to the franchising industry, including lawyers, accountants and banks.

It often amazes me how little education and research potential franchisees do before buying a business, despite the purchase of a franchise often being one of the biggest financial decisions many people will ever make. A glossy brochure or a well-established brand does not (necessarily) a good business make!

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Having educated yourself, the next step is to find out what franchises are available for purchase. There is no shortage of choice as there is in excess of 1100 franchises in Australia, most of which are looking for franchisees. You may not realise it, but it is a buyers’ market.

Sources of information There are many sources of information to provide an overview of what is available for purchase: • Online franchise directories • The internet • Business brokers. There is a handful that deal only with franchise businesses, and many others that deal with franchises as part of their service offering • Specialist franchise magazines such as Business Franchise Australia and New Zealand • Daily newspapers.

Due diligence When you do purchase your franchise you may find yourself purchasing an existing franchise from an existing franchisee, an existing business from the franchisor or a brand new [greenfield] franchise from the franchisor. Whichever option you choose, you will need to carry out appropriate due diligence to satisfy yourself that you are buying the right business at the right price.

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

I think it is fair to say that two things that most business owners want when they purchase a business is to enjoy working in the business and to make money – although there are some who say they are happy not to enjoy themselves provided they are making enough money!

For most people it is vital that they have passion for the business – they must really want to run the business and enjoy doing so. If that passion is not there for you, then I would ask you to question whether you really want to or should buy a business.

However, passion in itself is not enough. You also need to make sufficient profit while you are running the business and then hopefully make a gain when you sell the business. This is why due diligence is so important.

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Professional advisors Evaluating a prospective franchise business is not an easy process. You will almost certainly need professional help to carry out due diligence. These professional advisors usually include an accountant, a solicitor and a banker. I strongly advise in each case you use a professional advisor who is a specialist in the area of franchising. In the medical field, general practitioners do a great job but there are times when you need the services of a specialist. So it is with franchising. Most accountants, solicitors and bankers do a great job, but franchising occupies a special niche, with its own legislation and circumstances, and it requires the services of specialists to carry out proper due diligence.

What are the roles of your professional advisors?

• An accountant will help you evaluate the existing business and establish its true sustainable profitability (which may be, and very often is, very different to the profit shown in the financial statements). An accountant will help you prepare your business plan and your profit and loss and cash flow forecasts and help you work out a fair price to pay for the business.

• A solicitor will help you understand all the legal documents – the disclosure document, the franchise agreement, the lease, the sale contract, etc., etc. – and provide advice on these documents.

• A banker will advise whether the finance will be forthcoming and if so what types of finance are available and appropriate. Whilst a banker’s role is not generally that of providing advice about the potential purchase, a specialist franchise banker’s perspective is nonetheless often very useful.

An important point to note is that whilst you will seek advice from your professional advisors and from other people, the ultimate decision to purchase or not purchase the business is always yours and yours alone. If you have chosen good advisors you will receive sound advice, but it is not your advisors’ roles to make the purchase decision.

I have stressed how important it is to get professional advice to evaluate your proposed purchase. I also stress how important it is – and perhaps this selfevident - to get the opinions of existing and former franchisees of the franchise system into which you are thinking of buying. Contact details of existing and former franchisees will be available in the disclosure document. Ask the question “would you buy the franchise again knowing what you know now?”

If a sufficient number of current and former franchisees would not buy the franchise then that should be a telling indicator, no matter what else your due diligence reveals.

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Business structure I want to touch on the choice of business structure, although a detailed analysis of this topic is beyond the scope of this article.

Possible structures in Australia include sole proprietorships (also known as sole traders), partnerships, trusts [there are many and varied forms of trusts] and companies. There are reasons, why each of these structures might be the most appropriate for your business. However, in general terms, when choosing business structure the important issues to be addressed are: • Simplicity and ease of operation

• Minimisation of income tax on ongoing profits

• Minimisation of tax on capital gain on sale of the business • Flexibility in distributing profits

• Asset protection [to ensure personal assets are protected if the business fails].

I cannot overestimate the importance of choosing the correct structure for your franchise before you buy the franchise. Once you have chosen a structure, it is often difficult to change that structure and to change it might involve considerable cost. The wrong structure may lead to paying far more income tax than is necessary, to paying far more tax on capital gains than is necessary – generous tax concessions make it relatively simple to pay no tax on capital gains if the business is properly structured – and to putting your house and other personal assets unnecessarily at risk.

Finance There are two important questions to consider if you are borrowing to buy your franchise: • How much can you borrow?

• How much do you want to borrow?

The answers to the two questions may not be the same.

How much can you borrow?

The answer to the first question depends on two factors – your assets, and whether or not the franchise system you are buying into is accredited.

When you are buying a franchise, a bank will require security against tangible assets, usually a house. A bank will generally lend, in total, up to 80 per cent 116

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of the value of a property. So if you take 80 per cent of the value of your property and subtract any existing loans against the property, it will give you a fair indication of how much you can borrow. A bank might possibly lend against other assets such as shares, but not as much as 80 per cent of the value of those assets.

If, however, the franchise is accredited with the bank from which you are borrowing, then your borrowing capacity is far greater. For accredited franchises, banks will lend against the security of the franchise itself, usually about 50 per cent of the cost of the franchise. In practice this means that with an accredited franchise your borrowing capacity is approximately double what it would be for a non-accredited franchise. Accreditation is therefore an important issue.

I have referred above only to banks and not to other lending institutions. There are a limited number of institutions other than the banks that will lend money for the purchase of a franchise. The vast majority of the funding for franchise purchases is provided by banks.

There are in some cases other sources available to help fund the purchase of a franchise (or at least minimise the initial cost). These include part ownership by the franchisor of the franchise (with the franchisee progressively acquiring a larger stake in the franchise), finance provided by the franchisor and in some cases paying lower up-front fees and higher on-going fees. What is possible will depend on the specific franchise you are buying.

How much do you want to borrow?

The second question â&#x20AC;&#x201C; how much do you want to borrow? â&#x20AC;&#x201C; is also a vital question. Just because you are able to borrow $X does not mean to say that you should borrow $X. The larger the amount you borrow, the greater the risk you take [and, probably the greater the return you will receive]. But you should consider how much of your wealth you want to put at risk? When you are buying a business, even when it is structured to maximise asset protection, you are likely to have to give personal guarantees to the bank, the landlord [if applicable] and the franchisor. A personal guarantee means that you personally become liable for the debts of the business if the business is unable to pay its debts. Do you want to risk everything if the business fails? Or do you want to take less risk, so that if the business fails you still preserve some assets? Your attitude to risk will help you to answer the question of how much you want to borrow.

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Types of finance The types of finance that are available to you to finance your business are varied â&#x20AC;&#x201C; they include long term loans, overdrafts [short term loans], hire purchase finance, lease finance and others. As a general rule, the type of finance should match the type of asset â&#x20AC;&#x201C; so, for example, a long term asset requires long term finance. An experienced banker will help you chose the most appropriate forms of finance.

Exit strategy You may wonder why you should be thinking about an exit strategy at the time of buying a business.

This issue is particularly important if you are acquiring a business in conjunction with business partners. When two or more business partners are involved, there needs to be an agreement as to what is to happen if one partner wishes to exit the business at a different time to the other partners. This could happen for many reasons, including death or illness. Having an agreement how to deal with withdrawal of a partner [a buy/sell agreement], with the purchase price between partners and how to fund the withdrawal is particularly important.

All business owners wish to maximise the price for which they sell their business. In the first place, this is achieved by maximising the on-going trading profits of the business. The greater the profits, the more somebody will pay for a business. This may seem self-evident, but I do come across business owners who are more concerned with minimising tax than maximising profits. As I say to these business owners, at the very worst, for every dollar of profit you make, the tax man takes 46.5 cents and you keep 53.5 cents. If you spend an unnecessary dollar, you might save some tax, but you are still out of pocket. So the best strategy for exiting the business with maximum return is to maximise profits.

As I have already indicated, the business structure that is chosen can have a dramatic effect on the taxes paid on the profit on sale of the business. The tax can be between zero per cent and 46.5 per cent. Which would you prefer to pay? Another good reason to think of your exit strategy when you are buying the business!

Timing of sale The timing of the sale of the franchise business is very important and will have a big impact on the price you receive.

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Most franchise agreements endure for a finite period. At the end of that period, and depending on what the franchise agreement says, it may be that the franchise is not renewed or is renewed subject to conditions. Generally, when a franchisee sells a business the incoming franchisee is entitled to run the business for the remaining period of the original franchisee’s franchise agreement. The shorter the remaining franchise period – and particularly when there is uncertainty about renewal – the lower the price a potential purchaser will pay for the business. The timing of the sale of your franchise must therefore be carefully planned. This is doubly so when there is a lease of premises involved as well – even if the franchise agreement has considerable period to run on sale of a business, the value of the business will be impacted if the remaining lease period is considerably shorter than the remaining franchise period.

Most persons’ objectives when buying a franchise are to pay a fair (or low) price when they buy the franchise, to make as much money as possible while they are running the franchise, and then to sell it for as much as possible.

Attention to the matters outlined above will help achieve these objectives.

Tim Kilham, Lanyon Partners (AUS) 03 9861 6140 timk@lanyonpartners.com.au www.lanyonpartners.com.au

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Chapter 14

FRANCHISING YOUR BUSINESS

By Brian Keen, Managing Director, How To Franchise Simply

About the Author From a quantity surveyor in London to a business entrepreneur in the 60’s, Brian Keen’s business prowess has shone over 40 years. He arrived in Perth in 1975 and by the early 80’s Brian became a franchisee with the then new Bedshed group, opening and operating seven stores in five years.

It didn’t take Brian long to realise that creating franchises was the true direction in his life. Leaving Bedshed behind, Brian established a national franchise consultancy and sales group, The Franchise Alliance.

Throughout his time with The Franchise Alliance, the company developed sales strategies and business systems for over 40 businesses including Jim’s Mowing, UltraTune, Brumby’s and Donut King; and internationally, groups such as Expense Reduction Analysts.

Within the first five years, Brian and his partners also built their own six franchise groups with over 120 outlets. Today Brian has established a new franchise business, ‘How To Franchise Simply,’ which delivers a simpler step-by-step franchising system through the internet and workshops.

Brian is also the founder of MicroLoan Foundation Australia, a charity providing small business loans to impoverished women in Malawi, Central Africa.

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franchise without a system is like a car without wheels – it’s just not going anywhere. Whether you are just starting up, you currently have 50 franchisees or are somewhere in between, every franchise needs a system.

Brian Keen of How to Franchise Simply, explains his straightforward seven step process.

For over 30 years Brian has developed, advised and mentored businesses keen to enter the world of franchising. “Not all businesses fit the bill,” said Brian from his Gold Coast location, “It is not just a matter of waking up one morning and thinking, ‘this is a great day to start a franchise!’ There is a lot of work that needs to be done before you can even consider that your business may be ripe for franchising.”

You may think you have heard it all before but Brian has lived through some of the great Australian examples of franchising and consequently has some interesting stories to tell and valuable advice to offer. “I was there in the early 90’s when Jim Penman was just getting going with Jim’s Mowing. I worked with him as he expanded into the west and as a result of careful planning and strategic direction he now owns 36 businesses in Australia and overseas.

This growth has come from a man who started as a student mowing lawns in 1982.”

It’s Not Rocket Science “Getting it right takes more than practice alone, it takes know-how – and that comes from experience.” Brian went on to explain that even though there was a lot to understand when undertaking a franchising venture, it didn’t have to equate to rocket science. With modern technology Brian has seen so many of the traditional systems streamlined and over the past few years and has worked towards creating a process that eliminates a lot of the time, energy, cost and frustration that many new franchisors experience. Brian calls this his 7-StepSystem.

“Essentially what it boils down to are the 7 steps needed to start from a small, or in fact any size business or concept, and then develop it into a nationwide franchise operation.” As Brian explains it, there are three common types of franchises: • manufacturing franchise; • product franchise; and • business format franchise such as any retailing or service franchise.

A good example of a manufacturing franchise is Coca Cola, where the rights 122

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to manufacture their secret recipe are franchised around the world. A product franchise would typically be any one of the major car brands such as Ford or Holden dealerships that are franchised by the manufacturer to sell their products. Business format franchising on the other hand is where an entire business system is reproduced such as retail outlets like McDonald’s, or service centres such as Ultra-Tune. Business format franchising does not always have to have a retail front, a franchise could be a fleet of vans or a home operated business that visits consumers or services clients in their homes, offices or other venues – as long as it is following the proven franchise system. The list of business types that can be franchised is virtually endless.

So what is it that will make your business stand out and entice people to pay you to become part of it? You may currently be operating under a ‘take it as it comes’ attitude, thinking you are in too much of a hurry to worry about finetuning your systems. Perhaps you are thinking that everything will work itself out along the way. Wrong! Having a tight, foolproof system is the ONLY way that you can ever hope to succeed in a successful franchising venture.

7 Steps in a Nutshell By ticking all the boxes and working through all of the key steps, launching your franchise operation will simply become a matter of progression. How To Franchise Simply has produced a manual that will guide beginners through the crucial steps needed to launch a successful franchise. In a nutshell these steps are: 1. Knowledge – learn about franchising 2. Feasibility – will it work?

3. Build the franchise model 4. Develop the franchisor business 5. Establish a pilot franchisee business 6. Recruit franchisees 7. Management – leading your business into the future.

“Before you even begin to think about franchising you must know how franchising works,” explained Brian. “Too often I see people jumping right in before they know the first thing about franchising. If you are going to be successful you have to know what you are doing. The right legal advice is critical and I can’t stress enough that you must consult with people who are familiar with franchising and not simply the accountant next door.

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“A good example using the franchising process of systemisation and putting these principles into practice is Jack Cowin.

“Jack Cowin came to Australia when he was 26 years old and negotiated for the franchise rights to Kentucky Fried Chicken in WA. He opened ten stores from money raised through friends. Now today he owns the Hungry Jacks chain with 340 stores - only around 100 are franchised so he owns the rest! He also owns the KFC group in Western Australia and Northern Territory plus the food service company Competitive Foods which supplies foodstuffs to KFC as well as other chains and groups.

“Jack Cowin is also the largest beef farmer in Australia! All because he knew his stuff. By applying the same principles that led him to success in the beginning, he was able to expand into other businesses. He is a 40 per cent owner of the Sydney Bridge Climb which is a huge commitment and a significant investor in Ross Consulting, a personnel and employment business. He was cited on the BRW rich list in 2010 worth over half a billion dollars!

“Wouldn’t that be nice?” he said.

But franchising is not for everybody. You may know everything there is to know about franchising but you have to ask yourself the questions, ‘Is franchising right for your business?’ and ‘Do you have the business skills, confidence and personality to make your franchise system work?’

“Some businesses are just not suitable to franchise,” continued Brian. “However many businesses can be changed and developed into a franchisable business, but there are rare cases where the product is so specialised that only one or two outlets are needed to service customer needs. Or perhaps the business relies solely on the talents of one person, such as an artist or writer. Keep in mind that many businesses operate very successfully and very profitably with as few as 3 to 10 outlets. You don’t have to be a giant to support the lifestyle that you crave.”

Are You Fit to Lead?

One of the other deciding factors when analysing whether a business is ripe to franchise, is the personality of the business owner or owners. Is that person a natural leader? Does he or she have the characteristics to manage a franchise chain? From perhaps dealing directly with your products and customers you will suddenly become a manager of your franchisees as you manage your franchising system.

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with the day to day challenges of customers and product. Budding franchisors need to have the personality to take on the different skill set needed.

How To Franchise Simply offers two levels of feasibility assessment which can be done by filling in simple questionnaires or with the help of expert franchise mentors. The How To Franchise Simply Franchisor Business Health Check is designed to give you an in-depth assessment of your business and the steps you need to take to convert to the franchise model.

These assessments identify your personality, your current business skills, the changes you need to make and the avenues you have available in order to develop the skills needed. They also examine your business and identify the suitability of your business for franchising and any changes that can be made to increase its suitability. In most cases, the necessary skills can be learned.

“The benefits of using feasibility studies, business plans and putting together accurate projections and budgets are clearly demonstrated by Murray D’Almeida,” said Brian. “Murray was an accountant in Perth and started the Retail Food Group, originally with Donut King and then BB Coffees and Croissants.

“He started in the mid 80’s and grew to over 300 stores in seven countries. He sold out to investors on the Australian Stock Exchange and the group went on to buy Michelle’s Patisseries and Brumby’s. Today the Retail Food Group overall has over a dozen brands and well over 1100 franchisees… and all this was done by sticking to the knitting and having precise goals,” he said.

The franchise documents Development of the franchise documents is the central action taken to convert a business into a franchise system. A prospective franchisor designs and develops a franchise business by writing two sets of documents: • Those that will control the overall franchise system or franchisor business; and • Those that will control the franchise outlets owned and operated by the franchisees.

Some of these documents are required by law and others are there simply to clarify business practices. As the documentation is developed you may find that you are changing your existing business to create two simpler new businesses, one for the franchisor and one for the franchisee.

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• The initial design of the franchisee business; • The Operations and Procedures Manual that controls the details of the way the franchisee business is managed; • The Legal Agreement between the franchisor and franchisee; and • The Disclosure Document from the franchisor to the franchisee.

The franchisor documents include: • The initial design of the franchisor business; • The franchisor business plan; • The franchisor Operations and Procedures Manual that controls the details of the way the franchisor manages franchisees and creates the culture to grow the business; • The Marketing Plans for selling each franchise; and • The Recruitment Package given to each prospective franchisee.

Not only are these documents necessary, they are crucial. These need to be developed in a logical fashion from the time you begin to design the franchisee structure, right through to developing marketing plans and franchisee recruitment package material. Brian gives the example of Doug McDonald from Speedy Lube:

You Can’t Beat the System “Speedy Lube is a car servicing business. Doug was thinking of franchising and I worked with him to systemise the business. We got all the documents in place, uniforms and scripts for each employee to greet and treat customers.

Everyone needed to deal with clients in the same way.

“Doug became unwell and decided not to go down the franchising path but to sell the business. The systems and standards meant that the business sold fast and for significantly more than it would have otherwise done. The purchaser knew that he could slip into the business easily, the systems were there and the staff well trained,” he explained.

The corporate structure of your business is critically important and this is the time to organise the way your company will look. Brian explained that this is an area where expert advice is paramount. Not only is the business setting its operations firmly in place, it is also developing the fee structure and it is important to get it right.

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able to make changes. You need to look at the annual franchise fees and work out a figure which makes both your franchisor business and your franchisees viable. If you are supplying product to franchisees you will have to work out the margins. You may be supplying other services as well such as marketing and advertising and need to raise a charge to cover this.

“Training and conferences will need to be accounted for and there may be accounting fees. Think about negotiating the purchase of products with suppliers to give you rebates, but be sure to disclose them to your franchisees so there is no feeling that you are making some extra on the side.

“What about renewal fees? Goodwill? Fit out? Plant and equipment? There is a lot to think about when setting your fee structure and professional advice is clearly the right avenue to take,” Brian pointed out.

One of the other fundamentals in franchising is the corporate structure of your operation. Are you currently a sole trader operating under a business name?

It is recommended you have a company structure to limit liability and to make the whole operation easier to sell at the end of the day.

Before you can sell any franchises, you will need to get the various new parts of the franchisor business up and running. Branding will need to be carefully considered with logo, corporate colours and design for any shop-front, vehicles and uniforms. A webpage is a necessity for any business operating today and this will probably need to be partnered with a blog, Facebook and other social media. Accounting and reporting systems will need to be in place as will the detailed planning for any advertising or marketing that the franchisor will be responsible for.

Pilot for Success You’ve reached Step 5 and you need to show that you can operate the business successfully as a franchise outlet. So, it is usual to have a franchised outlet running under your management for at least one year to show that the systems work and the business is profitable. To do this, you will need to use your Franchisee Operations and Procedures Manual to systemise your existing business so it becomes your pilot franchise or develop a new outlet.

“Automasters springs to mind when it comes a pilot operation,” said Brian.

“They operated in the late 80’s with about 7 company outlets in WA. In about 1994, they franchised. They used one of their existing stores with one of their managers to refresh all the systems. The manager helped with the documents, then he bought a franchise. Within six months he was operating that store with 127

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50 per cent more profit than he had as a store manager.

“Automasters then found it was easy to sell to other franchisees because they could show that the profit was there and the system worked. In fact, it’s worked so well that they now have 34 outlets and have expanded interstate as well.

“The pilot also showed that performance level improved significantly when the store was operated by an owner rather than a manager,” he added.

Don’t Sell - Recruit At last you move onto recruiting your franchisees. Now, as the franchisor, you will be in the exciting position of being able to advertise for franchisees and then select your franchisee carefully. Congratulations, your first outlet is secured!

Brian pointed out that it is important to remember to ensure you attract really good people. “Think about it this way, you are not selling franchises, you are selecting franchisees and it is important to have that clear difference in mind. You are looking for people who are driven, who are energetic, who are experienced, and who have got skills and want to see the group succeed,: he said.

These days a broad range of people are interested in becoming franchisees.

A lot of younger people who previously would have gone in to a career are now seeking more exciting opportunities. Perhaps they are uncomfortable in the job market where the hire and fire mentality combines with the vulnerable economy and promotes a sense of insecurity. Owning a business would seem a far more stable proposition and franchising is a perfect way to get started in your own business.

Franchising also attracts people of middle age. They may have come out of middle management , taken early redundancy and are now looking to invest in their own business. “A lot of tremendously successful franchisees have come from those sorts of backgrounds, but franchisees really come from all walks of life. There are people who just want to buy a job and that can be a bit risky for the franchisor. It really depends on the sort of franchise they are buying.

Be sure that they have the commitment, experience, and right goals in place to succeed in business,” he warned.

As Brian explained, franchisees can come from anywhere. With babyboomers making up such a large percentage of Australia’s adult population older members of our workforce are now retired or retiring and they are looking for ways to continue in business or to supplement their income. Often 128

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people in their 50’s and 60’s cannot get the sort of job that will give them the responsibilities and job satisfaction that their credentials warrant. By owning their own business in a franchise system, they can increase their income, get plenty of job satisfaction and a feeling of independence. This demographic is great to have on board because they often have tremendous experience, maturity, are well-funded, and a lot to contribute.

Summary Now your franchise chain is up and running. All of these steps combine to give you an accelerated growth. Your expansion can grow rapidly as we saw from those examples earlier and you’ve got the exit strategies. “That to me is a very big attraction to franchising because it opens up the opportunity for some significant capital gains when the time comes for you to sell your business,” Brian went on. “You’ve now got those franchisees in place that may, just by the way, group together and buy the business from you. I’ve seen this occur a number of times. So that’s another element to your leverage as far as eventually selling the business is concerned.”

You believe you have good leadership skills, you have a passion for the industry you are in and you have vision – then you may just be a good proposition for franchising. By crystallising goals for your career, your business, your life, your family and your future - it is surprising what you can do.

“You may be scratching your head and saying, ‘Wow there’s more to this than I realised.’ Don’t be discouraged because franchising creates exciting opportunities”’ concluded Brian. “If you think you can handle growth and are prepared to learn then you may have the opportunity to become a leader in your market.

“I have created the 7-Step-System to guide you along the way. Just remember, keep going until you have as many outlets as you need to sustain the business in accordance with your business plan. Your job is to keep being the entrepreneur and manager you always knew you were,” he said.

Brian Keen, Managing Director How To Franchise Simply (AUS) 1300 960 136 brian@howtofranchisesimply.com.au www.howtofranchisesimply.com.au

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Chapter 15

The Franchise Council of Australia Franchise Council of Australia (FCA)

About the Author The Franchise Council of Australia Limited (FCA) is the peak body for the $131 billion franchise sector in Australia, representing franchisees, franchisors and service providers to the sector.

As the peak body for franchising, the FCA strives to add value to the businesses of its members by providing a range of services relevant to franchising and which represent good value.

The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously.

The success of franchising depends on successful franchisors, and this in turn, depends on profitable and happy franchisees.

The Franchise Council of Australia works constantly to ensure that all activities and services which benefit franchising benefit the broader community â&#x20AC;&#x201C; including franchisees, franchisors, employees and their local economies and communities.

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he Franchise Council of Australia Limited (FCA) is the peak body for the $131 billion franchise sector in Australia, representing franchisors, franchisees, service providers and advisors to the sector.

The FCA is a nationally incorporated not-for-profit association with a national head office based in Melbourne, Victoria.

The FCA’s main aim is to help people get into franchising and ensure the sector they are joining is as good as it can be. This means promoting best practice in the sector and providing the education and other services necessary to ensure a healthy sector constantly striving to lift its own standards.

The FCA was formed in 1983 as a not-for-profit trade association, with the following objectives: • to establish standards of international best practice in business format franchising for Australian franchise systems • to provide information and education about franchising to existing and potential franchisees and franchisors • to educate State and Federal Governments on issues relevant to the sector.

Since 1983, these objectives have been further expanded to include the following: • to develop a vital, strong and financially viable franchising sector • to advance the interests of members in Australia and in specific interest areas including franchisee interests, women in franchising and international market development • to continually foster among consumers, governments and the business community, a broad-based understanding of the economic importance of having a strong franchise sector in Australia • to design efficient, identified, value-added services to members, and assist them to be more effective in franchising.

The FCA is available to assist all stakeholders in the Australian franchise sector in a variety of ways, to ensure the sector is a vibrant place to do business.

Membership of the FCA is voluntary, and is open to any individual or organisation involved in the franchising sector, including; franchisees, franchisors, lawyers, accountants, banks, consultants, academics, publishers and many more.

Whether offering advice on best practice franchising, educating government on policies affecting the sector, promoting franchising in the media or providing professional development services to its members, the FCA does its part to make the sector a positive, sustainable place to earn a living.

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The FCA is closely affiliated with franchising associations around the world, and is a founding member of the Asia Pacific Franchise Confederation (APFC).

It is also a member of the World Franchise Council (WFC) and for 1999 and 2000 was its secretariat.

Membership of the FCA means credibility – maintained through the FCA member standards and the Franchising Code of Conduct; professional support – through education programs, networking opportunities and regular events; and representation – ensuring members’ voices are heard by governments, regulators and other important groups.

Membership also means solidarity. FCA members belong to an association where their peers work together for the betterment of the sector. FCA members share a common method of doing business – not a common business. For this reason, franchisors, franchisees and suppliers can freely exchange ideas without fear of losing their competitive edge.

The FCA currently has more than 650 franchise systems and suppliers in its membership base – about two thirds of the total franchise systems currently operating in Australia. This strong commitment to belonging demonstrates the relevance and value brought to the sector by the FCA.

The FCA has a federated governance model. The national Board of Directors has representation from each State chapter as well as specific interest representatives, including those representing franchisees and women in franchising. The FCA Constitution allows a maximum of 15 directors. Each State Chapter elects a president, who is then appointed to the national board.

Up to ten additional directors may be included on the Board – five by direct member election plus up to five additional directors appointed by the Board.

Major services and initiatives The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously. The success of franchising depends on successful franchisors, and this, in turn, depends on profitable and happy franchisees. The FCA works constantly to ensure that all activities and services which benefit franchising will benefit the broader community – including franchisees, franchisors, employees and their local economies and communities.

As well as commitment to the highest industry standards, the FCA facilitates a number of services and initiatives to assist in promoting and advancing the role of franchising in Australia, as well as supporting its members. These include:

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The FCA Franchise Academy

The FCA Franchise Academy is the premier training provider for the sector committed to providing franchisors, franchisees, franchise consultants and suppliers with the best education programs available.

The FCA Franchise Academy aims to provide both franchise-specific and generic business skills training and education for pre-entry, in-market and succession (exit) to all organisational levels. The establishment of the FCA Franchise Academy coincided with the introduction of nationally recognised qualifications in franchising.

In 2012 The FCA Franchise Academy launched the Certified Franchise Executive program (CFE). The CFE is the only internationally recognised professional accreditation program for franchise executives. It is an educational framework designed to enhance the professionalism of franchising by certifying the highest standards of quality training and education.

The program offers existing and aspiring franchise professionals and entrepreneurs the opportunity to grow professionally and reach a recognised standard of excellence within the local and international franchise community.

Franchisee Forum

In 2007, the FCA announced the first Franchisee Forum as a way for franchisees to meet and discuss issues, ideas and future goals for franchisees within the Australian franchise sector.

The Franchisee Forum has an FCA nominated Chair and representatives from each state/territory. The Chair has full voting rights on the FCA Board.

FCA is one of the worldâ&#x20AC;&#x2122;s few franchising organisations to ensure franchisee representation and to provide member benefits for franchisees without charge â&#x20AC;&#x201C; so long as their franchisor is a member.

Supplier Forum

Established in 2008, the objective of the FCA Supplier Forum is for suppliers to the sector to advise the FCA on what products and services they expect and need from their industry representative body.

The FCA recognises that a franchise cannot sustain success without the assistance of the many and varied consultants, services and business systems they provide.

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and franchisees to travel above the competitive landscape, on their way to a sustainable commercial advantage.

Women in Franchising Committee

The number of women participating in small business and franchise ownership is increasing, with almost 28 per cent of franchised units predominately owned or operated by females (Franchising Australia survey).

In 2007, the FCA announced the introduction of the Women in Franchising Committee (WIF), dedicated to promoting and advancing the achievements of women in franchising and small business.

The aim of the WIF Committee is to increase female participation in franchising.

It aims to be a professional, organised group within the FCA that will provide women inside and outside the sector with information and encouragement, as well as genuine opportunities for contribution, networking and professional development.

The National Franchise Convention

The FCA hosts the annual National Franchise Convention. The Convention brings together the Australian franchise community â&#x20AC;&#x201C; including successful business people, CEOs, government officials and industry advisors â&#x20AC;&#x201C; to enjoy education, networking and business development opportunities.

Traditionally a three-day event, the National Franchise Convention also includes a trade exhibition where suppliers to the franchise sector can showcase their products and services. The convention is open not only to those in franchising circles but also to the small business sector generally and it is not necessary to be an FCA member to attend.

FCA Excellence in Franchising Awards

The FCA Excellence in Franchising Awards recognise and reward companies and individuals within the Australian franchise sector and provide a platform for entrants to showcase their achievements on the national stage.

The Awards are open to FCA member companies only and are committed to ensuring that franchisors, franchisees and suppliers to the sector are appropriately represented.

Success at the Awards can increase brand recognition, customer enquiries and media coverage. It can boost company morale and help attract the best talent to companies.

The Excellence in Franchising Awards ceremony is held in conjunction with the National Franchise Convention and is the pinnacle of the franchising year.

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Past winners include 2012 Established Franchisor of the Year, 7-Eleven, 2012 Franchise Woman of the Year, Carolyn McManus (The Coffee Club) and 2012 Multi-unit Franchisee of the Year, Michelle and Tony Graham (PoolWerx) and many more.

Hall of Fame

The Australian Franchise Hall of Fame was established in 2003. During its creation, the selection panel searched back to the origins of franchising in Australia and, by a meticulous process of elimination, identified the groundbreakers, influencers, quiet achievers, selfless contributors and outstanding performers who endured the trials and laid the foundations of the sector’s success.

Now, it is members of the Hall of Fame itself who induct new entrants. The sole criterion is an outstanding contribution to franchising – whether as a franchisor, franchisee, academic, lawyer, consultant, politician, financier – whomever.

FCA Member Standards Members of the FCA receive many benefits which help businesses keep informed and connected with the franchise sector and facilitate education.

One of the hallmarks of a reputable sector is a commitment to high standards of personal and professional conduct. This enhances public perceptions of franchising, helps safeguard the investments of franchisors and the businesses of franchisees, protects franchise networks from unfair or unethical attack and provides guidance for those seeking to commence their franchising journey.

The FCA encourages its members to maintain standards of conduct worthy of franchise sector professionals. The Member Standards are designed to provide members of the FCA with an authoritative guide on acceptable standards of conduct.

The FCA believes the Australian franchise sector to be well regulated with the Franchising Code of Conduct (the Code) allowing for affordable, efficient dispute resolution procedures and disclosure provisions to assist and guide the sector. It also considers that the relationship between the franchisor and the franchisee can be developed even further with best practice guidelines in the form of FCA Member Standards.

It is the FCA’s view that a member gains significant market benefit in identifying themselves with FCA membership and as such the business practice and activities of members should work towards franchise best practice.

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Member obligations:

All FCA members are expected to conduct their franchising activities professionally and in accordance with Australian law. They are expected to comply with agreed minimum standards of conduct. The FCA considers the following standards to be relevant to members: • Members of the FCA shall abide by all relevant State and Federal laws including, in particular, the Franchising Code of Conduct and the Competition and Consumer Act. Within 14 days of a written request by the FCA, a member shall furnish to the FCA a copy of its current disclosure document, franchise agreement and any other documentation or advertising material used in connection with the appointment of a franchise.

• No member shall imitate the trademark, trade name, corporate name, slogan, or other mark of identification of another member of business in any manner or form that would have the tendency or capacity to mislead or deceive.

• Members will become familiar with the content of these Member Standards and draw them to the attention of clients as appropriate from time to time.

• A member, be they a franchisor, vendor, franchisee, franchise broker, or representative of a franchise system should not sell a franchise if at the time the franchisor or vendor franchisee knew or ought to know that a reasonably competent franchisee would be unlikely to be able to successfully operate the franchise.

• Members are expected to behave professionally and refrain from illegal, unethical or improper dealings or otherwise act contrary to the image of franchising or the FCA. Relating to a franchisor and franchisee: • A franchisor shall, as part of the franchisee recruitment process, make reasonable investigations to assess whether a prospective franchisee appears to possess the basic skills and resources to adequately perform the needs and requirements of the franchise.

• The franchisor shall have training and support processes, as applicable, to the franchise system to help franchisees improve their abilities to conduct their franchises. Franchisees will endeavour to apply and adapt all learning to their operation.

• A franchisor and franchisees should be reasonably accessible and responsive to communications, and provide a mechanism by which ideas may be exchanged and areas of concern discussed for the purpose of improving 137

Business FranchiSe Guide

mutual understanding and reaffirming mutuality of interest.

• Franchisors and franchisees shall endeavour to resolve complaints, grievances and disputes through direct communications and negotiation. Failing this, consideration should be given to mediation or arbitration.

• Franchisors and franchisees should, in their dealings with one another, avoid the following conduct, where such conduct would cause significant detriment to either party’s business: (a) substantial and unreasonable overvaluation of fees and prices; and (b) unnecessary and unreasonable conduct beyond that desirable for the protection of the legitimate business interests of the franchisor, franchisee or franchise system.

Relating to a supplier member: • A member who is a lawyer, accountant, consultant or other supplier or service provider (‘supplier member’) should behave in a manner consistent with these guidelines, respect the integrity of established franchise systems and not seek to inflame any dispute, incite litigation, generate media coverage or otherwise act in any way which is unprofessional or may create a misleading impression of the system.

• Provide a client or prospective client on request with a written resume or profile of any relevant qualifications of the supplier together with true representations of the supplier’s franchising education and experience.

• Respect the confidentiality of all information received concerning a client’s business which is not in the public domain and will not disclose or permit disclosure of any such information without the client’s prior permission in writing.

• Not advise any franchisee or prospective franchisee in relation to any franchise opportunity offered by any franchisor for who the adviser has acted, without full disclosure of relevant circumstances. Disclose to a client or prospective client any personal or financial interests or other material circumstances which may create a conflict of interest in respect of that client and in particular, without derogating from the generality of the foregoing: - any directorship or significant interest in any business which competes with the client - any financial interest in goods or services recommended by the adviser for use by the client - any personal relationship with any individual in the client’s employment 138

the franchise council of australia

- Not undertake work for which they are not appropriately licensed, qualified and experienced.

The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously. The success of franchising depends on successful franchisors, and this in turn, depends on profitable and happy franchisees. The FCA works constantly to ensure that all activities and services which benefit franchising will benefit the broader community including franchisees, franchisors, employees and their local economies and communities.

The Franchise Council of Australia (AUS) 1300 669 030 info@franchise.org.au www.franchise.org.au

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Franchise Listings categories: Automotive Products & Services.................................................................................. 142 Beauty Products & Services............................................................................................... 145 Building & Construction........................................................................................................ 146 Business Services........................................................................................................................... 147 Clothing Alterations. ................................................................................................................ 148 Convenience Retailing............................................................................................................... 149 Courier Services.............................................................................................................................. 150 Education / Entertainment.................................................................................................. 151 Financial Services......................................................................................................................... 152 Food - Coffee & Cafes.................................................................................................................. 154 Food - Restaurants & Dining Rooms.......................................................................... 157 Food - Retail.......................................................................................................................................... 161 Food - Takeaway. .............................................................................................................................. 162 Furniture & Bedding.................................................................................................................... 166 Health & Fitness............................................................................................................................... 167 Outdoor Living. .................................................................................................................................. 169 Printing Services............................................................................................................................ 170 Real Estate / Property Inspection................................................................................ 171 Retail. ........................................................................................................................................................... 172 Vending....................................................................................................................................................... 176

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automotive products & services

BATTERY WORLD PO Box 46 Brisbane Markets QLD 4106 Telephone: (AUS) 07 3373 1764 Fax: (AUS) 07 3373 1770 Email: delena.farmer@batteryworld.com.au Website: www.batteryworld.com.au Contact: Delena Farmer Position: Network Development Manager

BUSINESS DESCRIPTION: 80 stores Australia-wide and growing!

Do the quick battery test yourself!. Think of how many things you use each day that rely on a batteries? Now multiple that by the amount of households in Australia or even just in your local area?

There is still room for more stores to meet the growing battery and portable power needs of everyday people and businesses.

COMPANY DETAILS: Date of first franchise: 1997 Membership: Franchise Council of Australia, Australian Retailers Association of Australia; Australian Battery Recyclers of Australia.

Training provided: 4 weeks Induction Course (2 weeks in store+ 2 weeks in classroom).

Territories available: Various areas in Melbourne and Regional Victoria; Sydney and Regional NSW, Brisbane, Gold Coast and Sunshine Coast; Adelaide.

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FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 72 franchise outlets

FINANCIAL DETAILS: Initial franchise fee: $49,900 Minimum investment: $250,000+ Royalty fee: 7% max Financial assistance: ANZ accreditation Advertising/marketing fee: 3.4 %

automotive products & services

NOVUS AUTO GLASS 1/2 Jenner St Nundah QLD 4012 Telephone: Fax: Email: Website: Contact: Position:

(AUS) 07 3625 2400 (AUS) 07 3256 6349 businessmanager@novusautoglass.com.au www.novusautoglasss.com.au Peter Neville Business Manager

BUSINESS DESCRIPTION: NOVUS Autoglass are the inventors of the windscreen repair process. We have established business in 43 countries with over 1500 employees.

NOVUS have a policy of â&#x20AC;&#x153;repair first or replace when necessaryâ&#x20AC;?. Our branches are a mixture of fixed and mobile locations.

The automotive industry is still a growth industry and hence the Autoglass replacement is also growing.

COMPANY DETAILS: Date of first franchise: 1974 Training provided: Yes

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2011:

78

2012:

74

Current: 75

FINANCIAL DETAILS: Initial franchise fee: $10,000 +Gst Minimum investment: Depending on previous experience allow $35K Royalty fee: Averaged 3.5% Financial assistance: Yes Advertising/marketing fee: 2% + 4%

Territories available: Through Australia

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automotive products & services

SNAP-ON TOOLS PO Box 6077 Blacktown NSW 2148 Telephone: (AUS) 1800 762 766 Fax: (AUS) 02 9837 9199 Email: nicholas.hudson@snapon.com Website: www.snapontools.com.au Contact: Nicholas Hudson Position: National Franchise Manager

BUSINESS DESCRIPTION: Snap-on Tools are a status symbol with a designer pedigree and a heritage spanning nearly a century. And the Snap-on franchise is as good as its product, with incredible franchisor support, a business model thatâ&#x20AC;&#x2122;s been proven for decades, exclusive territories, extensive training and no messy commercial leases. Snap-on finance available.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 168

FINANCIAL DETAILS: Initial franchise fee: $40,000 Minimum investment: From $37,000 Royalty fee: NIL

COMPANY DETAILS:

Financial assistance: Accreditation with major banks + Franchisor Finance

Date of first franchise: 1997 in Australia

Advertising/marketing fee: NIL

Membership: FCA Training provided: 6 days at the Snap-on Training Centre, Dallas, Texas, USA. 2 days at Snap-on National Distribution Centre, Sydney, 3 weeks in territory followed by ongoing support.

Territories available: Various around Australia and New Zealand

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Beauty Products & Services

HAIRHOUSE WAREHOUSE Level 1, 605 Doncaster Road Doncaster VIC 3108

Telephone: (AUS) 03 9234 2200 Fax: (AUS) 03 9234 2266 Email: franchising@hairhousewarehouse.com.au Website: www.hairhousewarehouse.com.au/information/become-a-franchisee.aspx Contact: Peter Fiasco Position: Development Manager

BUSINESS DESCRIPTION: Over the past 20 years Hairhouse Warehouse has grown to over 140 stores Australia wide and has been listed for the last 7 years in BRW as one of the fastest growing hair & beauty franchises in Australia.

The combination of the largest range of hair & beauty products along with professional salons and beauty services has proven highly successful.

Hairhouse Warehouse is embarking on an expansion plan to lead the industry in product, store locations and services. No hair or beauty certification required.

COMPANY DETAILS: Date of first franchise: 1998

Territories available: Selected sites across Australia

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 115 2011: 128 2012: 138 Current: 142

FINANCIAL DETAILS: Initial franchise fee: $66,000 plus GST Minimum investment: $350,000 plus SAV for Greenfield sites Royalty fee: 6% of gross sales plus GST Advertising/marketing fee: 3% of gross sales plus GST

Membership: FCA, HBIA Training provided: Yes, intensive workshop and in store training, as well as ongoing training and support in-store

145

Building & Construction

JIM’S FENCING PO Box 686 Mount Martha VIC 3934 Telephone: (AUS) 03 9708 2111 Fax: (AUS) 03 9708 2112 Email: administration@jimsfencing.net Website: www.jimsfencing.net Contact: Warren Smith Position: Divisional Manager

BUSINESS DESCRIPTION: “In business for yourself, not by yourself”….if that strikes a chord with you then Jims Fencing could be your perfect opportunity.

With not only strong brand recognition and strength of business system’s, Jim’s Fencing is your perfect choice for those who love working outdoors and handy with the tools.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Australia: 150 +

FINANCIAL DETAILS: Initial franchise fee: POA Minimum investment: POA Royalty fee: Nil Financial assistance: POA

COMPANY DETAILS: Date of first franchise: 1997 Membership: FCA, MBA Training provided: 8 weeks – Paid for Training @ $1,000 inc per week Territories available: Australia Wide

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Advertising/marketing fee: POA

business services

MAIL BOXES ETC (AUST) PTY LTD Level 1, 117 Willoughby Road Crows Nest NSW 2065 Telephone: (AUS) 1800 556 245 Fax: (AUS) 02 8088 0773 Email: richard.saar@mbe.com.au Website: www.mbe.com.au Contact: Richard Saar Position: Franchise Development Manager

BUSINESS DESCRIPTION: Established in 1980, Mail Boxes Etc. is a global network with more than 6,000 locations worldwide, serving more than 60 million customers a year in 32 countries. Mail Boxes Etc. has been consistently rated as the #1 Postal and Business Services franchise for 20 consecutive years.

Mail Boxes Etc. stores offer print and finishing services, design and marketing services, mailbox rental and shipping services (domestic and international).

COMPANY DETAILS: Date of first franchise: Started in 1980 in San Diego, since 1992 in Australia

Territories available: Various around Australia in all states.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 35 in Australia 6,000+ stores worldwide

FINANCIAL DETAILS: Initial franchise fee: $50,000 Minimum investment: $175,000 Royalty fee: 7% Advertising/marketing fee: 2%

Training provided: 2 modules of training. 2 weeks classroom style at our Sydney Support Office (nationally accredited dual qualification: Diploma of Business Management, Cert IV in Sales Management), plus 4 weeks in-store handson training. Ongoing support and training.

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clothing alterations

LOOKSMART ALTERATIONS Level 3, 73-75 Dunmore Street Wentworthville NSW 2145 Telephone: (AUS) 02 9637 8222 Fax: (AUS) 02 9637 8200 Email: contact@looksmartgroup.com Website: www.looksmartgroup.com Contact: Ray Bryant Position: CEO

BUSINESS DESCRIPTION:

COMPANY DETAILS:

LookSmart Alterations is The Stylist Tailor in the Australian and New Zealand marketplaces.

Date of first franchise: 2000

You don’t need to be a tailor to own a LookSmart Alterations franchise. A LookSmart franchise can be run under complete management.

54% of franchisees are non-tailors 49% of franchisees are multi-site owners 53% of LookSmart franchises are under complete management LookSmart Alterations’ loyal customers include one million consumers per annum, 2000 fashion brands, David Jones, Myer, ACS, Tarotcash, YD, Virgin Australia, Roger David, the corporate market and Australian Defence.

Membership: FCA Training provided: 2 to 4 weeks in-store training and ongoing support Territories available: All States in Australia and New Zealand

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: Over 100 stores in major shopping centres across Australia and New Zealand

FINANCIAL DETAILS: Initial franchise fee: $25,000 - $50,000 Minimum investment: $125,000 - $175,000 Royalty fee: 8% Financial assistance: Conditional Advertising/marketing fee: 4%

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convenience retailing

NIGHTOWL CONVENIENCE Locked Bag 3020 Springwood QLD 4127

Telephone: (AUS) 0403 188 027 Fax: (AUS) 07 3387 8788 Email: franchises@nightowl.com.au Website: www.nightowl.com.au Contact: Dean Atkins Position: Commercial Sales Manager

BUSINESS DESCRIPTION: NightOwl is Australiaâ&#x20AC;&#x2122;s longest standing retail convenience franchise offering highly motivated individuals the opportunity to join the successful system.

NightOwl help guide and develop franchisees into profitable and sustainable retailers through our Coyote Information Technology system, NOEL online training and development platform, and heavily resourced national merchandising and marketing support teams.

COMPANY DETAILS:

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

Current: 65

FINANCIAL DETAILS: Initial franchise fee: $59,500 + GST Minimum investment: $250,000 - $650,000 + GST Royalty fee: 3.5% Financial assistance: Major banks and lending institutions Advertising/marketing fee: 1%

Date of first franchise: 1987 Membership: Australasian Association of Convenience Stores, Franchise Council of Australia.

Training provided: Full training provided.

Four week induction program and ongoing development assistance.

Territories available: Brisbane, Gold Coast, Sunshine Coast, Mackay, Townsville, Cairns, Northern NSW and regional cities.

149

courier Services

FASTWAY COURIERS Level 9, 491 Kent Street, Sydney, NSW, 2000 Australia Shed 5, Level 1, Lever Street, Ahuriri, Napier, NZ Telephone: Fax: Email: Website: Contact: Position:

(AUS) 1300 FASTWAY or (NZ) 06 833 6333 (AUS) 02 9264 4966 or (NZ) 06 833 6344 (AUS) fso@fastway.com.au or (NZ) recruitment@fastway.co.nz www.fastway.com.au or www.fastway.co.nz (AUS) Fastway FSO or (NZ) Fastway FSO (AUS) Support Office or (NZ) Support Office

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA:

Established in 1983. Fastway Couriers is one of the world’s leading courier franchise organizations. Having enjoyed a 30 year growth history and winning over 51 franchise and industry awards, today we’re represented by over 1,600 franchisees delivering over 40 million parcels worldwide.

2010: AUS 554 and NZ 252 2011: AUS 600 and NZ 247 2012: AUS 660 and NZ 260 Current: AUS over 700 Courier Franchisees and NZ, over 270 Courier Franchisees

COMPANY DETAILS: Date of first franchise: 1984 Membership: FCA and Franchise Association of New Zealand Training provided: Ongoing training and support is provided to our franchise partners Territories available: Various territories are available throughout Australia and New Zealand

150

FINANCIAL DETAILS: Initial franchise fee: From $25,000 + GST ($AUS) and from $10,000 ($NZ) Minimum investment: From $25,000 + GST ($AUS) and from $10,000 ($NZ) Royalty fee: N/A Financial assistance: N/A Advertising/Marketing fee: N/A

education / entertainment

CHIPMUNKS PLAYLAND AND CAFÉ Telephone: (NZ) 03 472 8480 Email: info@chipmunksplayland.com Website: www.chipmunksfranchising.com Contact: Lance Spence Position: Founder

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Chipmunks Playland and café is the largest franchised indoor children’s playground and café in the South Pacific.

Date of first franchise: 1996

Catering to children aged 0-11 years, all franchisees gain revenue via multiple channels including:

Training provided: As an established brand, offer a proven system and excellent training and support programme.

Territories available: NSW, QLD, WA, VIC

• Pay for unlimited play • Birthday parties • Café and beverage sales • Before/after school care (subject to licensing) • Merchandise and in store rides • Group and school bookings • After hours functions • Loyalty programme

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 11 throughout Australia

FINANCIAL DETAILS: Initial franchise fee: $70,000 plus GST included in overall investment Minimum investment: Between $350k$550k including franchise fee Royalty fee: 7% Financial assistance: Finance available to approved buyers Advertising/marketing fee: 1.5% 151

financial Services

THE INTERFACE FINANCIAL GROUP 180 Renfrew Drive, Suite 245 Markham, Ontario, L3R 9Z2 Canada Telephone: (AUS) 1300 940 908 Email: ifgau@interfacefinancial.com Website: www.interfacefinancial.com.au Contact: David T. Banfield Position: President

BUSINESS DESCRIPTION: Interface franchisees provide short-term working capital for small, expanding businesses through a unique and proven invoice discounting programme.

COMPANY DETAILS:

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: Australia 5 New Zealand 13 Canada 12 U.S.A. 148 UK & Ireland 17 Singapore 3

Date of first franchise: 1990 (Canada) Training provided: Extensive initial training (5 days) covers both theoretical and practical aspects of the business.

Ongoing regular training and coaching is also provided.

FINANCIAL DETAILS:

Territories available: Both single unit and master opportunities are available.

Financial assistance: N/A

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Initial fee: $39,000 (exc. GST) Minimum investment: Franchise fee + working capital of $50,000+

Advertising/marketing fee: N/A

financial Services

RAMS Level 7, 17 York Street Sydney NSW 2000 Telephone: (AUS) 1800 616 082 Fax: (AUS) 02 8218 7171 Email: franchising@rams.com.au Website: www.ramsfranchising.com.au Contact: Paul Maraia Position: National Franchise Recruitment Manager

BUSINESS DESCRIPTION: RAMS is one of Australiaâ&#x20AC;&#x2122;s most successful and well recognised home loan specialists.

Since the launch of the RAMS brand in 1995, RAMS has developed a reputation for offering home buyers competitive rates, innovative products and great service.

Building on its success as a home lending specialist, RAMS now also offers home loan customers a range of RAMS deposits that are available online, and insurance solutions through referral partners.

COMPANY DETAILS: Date of first franchise: 2003 Membership: FCA Training provided: RAMS has developed an extensive learning and development curriculum covering a wide range of topics such as lending, sales, products and running their business.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

Current: 60

FINANCIAL DETAILS: Initial franchise fee: Currently $35,000 + GST Minimum investment: The average initial working capital required is estimated at approx.$175,000 Royalty fee: The ongoing RAMS Royalty is currently 6% of gross revenue from relevant products Advertising/marketing fee: RAMS does not currently charge a marketing levy, however there is a minimum level of Local Area Marketing expenditure you must make in your marketing area. This is currently $8,000p.a.

Territories available: Australia wide

153

Food - Coffee & Cafes

THEOBROMA 38 Bellevue Cres Preston VIC 3072 Telephone: Fax: Email: Website: Contact: Position:

(AUS) 03 9480 1030 (AUS) 03 9480 1035 Franchising@Theobroma.com.au www.Theobroma.com.au Franchising Department Franchise Manager

BUSINESS DESCRIPTION: Theobroma a â&#x20AC;&#x2DC;Total Chocolate, Food and Beverage Conceptâ&#x20AC;&#x2122; retail lounge offering consumers a wide variety of chocolates, hot & cold chocolate beverages, chocolate desserts. Breakfast, Lunch and Dinner with some stores offering a fully licensed menu.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

COMPANY DETAILS:

Current: Australia 18 New Zealand 7 Malaysia 1 United Kingdom (opening 2013) Singapore (opening 2013) Saudi Arabia (opening 2013) China (opening 2013)

Date of first franchise: 2007

Training provided: 3 weeks and ongoing support

FINANCIAL DETAILS:

Territories available: Australia, New Zealand, United Kingdom, Malaysia, Saudi Arabia and China.

Minimum investment: $150,000 to $500,000

Theobroma is the natural choice.

Initial franchise fee: $40,000

Royalty fee: 6% Financial assistance: referral available Marketing fee: 3%

154

Food - Coffee & Cafes

XPRESSO MOBILE CAFÉ 35 Railway Terrace Milton QLD 4064 Telephone: Fax: Email: Website: Contact: Position:

(AUS) 1300 655 559 (AUS) 1300 655 569 jonathan@xpresso.com.au www.xpresso.com.au Jonathan Payne Franchise Development Manager

BUSINESS DESCRIPTION: The best coffee served from the best coffee vans – Xpresso Mobile Café is THE premium espresso option but without a premium price. An Xpresso Mobile Café has Di Bella Coffee at its core. Strength in branding and product contributes towards franchisee success. As well as numerous events, franchisees also develop an income stream from their mobile coffee bean showcase.

Customers can choose from a range of blends and then have the beans custom ground, bagged and heat sealed on the spot.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 28

FINANCIAL DETAILS: Initial franchise fee: Included in purchase price Minimum investment: $110 000 + GST Royalty fee: 0% Financial assistance: Ability to rent or conditional access to funds through a range of lenders Advertising/marketing fee: $175 + GST per week marketing & licensing levy

COMPANY DETAILS: Date of first franchise: 2003 Training provided: 1 week at Di Bella Coffee training centre in your capital city and then 2 weeks on the job in your exclusive territory Territories available: Multiple.

Please enquire.

155

Food - Coffee & Cafes

FOOD â&#x20AC;&#x201C; COFFEE & CAFĂ&#x2030;S

ZARRAFFAâ&#x20AC;&#x2122;S ZARRAFFAâ&#x20AC;&#x2122;SCOFFEE COFFEE 1/54 1/54 Siganto SigantoDrive Drive Oxenford OxenfordQLD QLD4210 4210 Telephone: Telephone: Fax: Fax: Email: &NBJM Website: 8FCTJUF Contact: Contact: Position: Position:

(AUS) 070800 5500 0800 07 5500 (AUS) 070900 5500 0900 07 5500 franchise@zarraffas.com BENJO![BSSBGGBT DPN www.zarraffas.com XXX [BSSBGGBT DPN Belinda Kearns Christine Allsopp Franchise Franchise Coordinator Manager

BUSINESS DESCRIPTION: BUSINESS DESCRIPTION: Ranked 20th in BRW Fast Franchises in Zarraffaâ&#x20AC;&#x2122;s CoffeeCoffee is an Australian-owned 2009, Zarraffaâ&#x20AC;&#x2122;s is an award winning and operated chain, specialty retailretail coffeecoffee outlet.franchise It has been with head office operations based on providing premium coffee products andthe Gold since 1997. freshlyCoast, roasted coffee beans since its establishment on the Gold Coast in 1997.

The successful growth of the company Recently awarded Gold Coast Business of stems from a dedication to a consistently high standard of and product the Year in 2007 2008and andservice, winner of in addition to Golden businessBean innovations such various Equal Coffee Roaster as drive thru stores. The award-winning awards. franchise group operatesonover stores The business is founded the 60 mantra throughout New South to create â&#x20AC;&#x2DC;AnQueensland, individually perfect cup ofWales and now also in Western Australia, with coffee - every timeâ&#x20AC;&#x2122; which encapsulates five store sites opened in late 2012. the Companyâ&#x20AC;&#x2122;s mission and our customersâ&#x20AC;&#x2122; Zarraffaâ&#x20AC;&#x2122;s healthy is attributable expectation.

Great expansion service is our practice to strongquality commitment their mission anda fresh, coffee istoour business. statement of producing â&#x20AC;&#x2DC;an individually COMPANY perfect cup ofDETAILS coffeeâ&#x20AC;Śevery timeâ&#x20AC;&#x2122;. This mantra is the foundation all facets of the Date of ďŹ rst franchise: of 2001 business from frontline customer service to ongoing franchise Membership: FCAtraining; ensuring delivery on this promise to the loyal customer base.  Training provided: Yes With available franchise sites in areas Territories Available: QLD New South such as regional Queensland, Wales and Western Australian the brand is on track to continue successful expansion,

156

FRANCHISE OUTLETS AUSTRALIA/ providing a proven business opportunity for INTERNATIONAL potential franchisees.

2006:

3

2007: 3 DETAILS: COMPANY

Date of7first franchise: 2001 2008: Membership: FCA Current: 35 stores as at 18/05/2009 with 5 stores dueprovided: to open byYes 31/12/2009 Training TerritoriesDETAILS: available: FINANCIAL QLD, NSW, VIC, WA Initial franchise fee: $50K Minimum investment: $300K FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Financial assistance: Westpac & NAB

Current: 63 stores as at 21/08/2013 Advertising/Marketing Fee: 3% FINANCIAL DETAILS: Initial franchise fee: From $50,000 Minimum investment: From $400,000 Financial assistance: Westpac, NAB, ANZ Advertising/marketing fee: 3% 175

Food - Restaurants & Dining Rooms

FASTA PASTA PTY LTD Level 1 137 The Parade (ENT Via Edward Street) Norwood SA 5067 Telephone: Fax: Email: Website:

(AUS) 08 8304 8600 (AUS) 08 8332 8389 reception@fastapasta.com.au www.fastapasta.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

With our authentic Italian background and 20+ years success story, Fasta Pasta is now Australia’s largest, independently owned group of ‘fresh pasta’ Italian restaurants. An innovative ever-changing menu, with more healthy options and commitment to outstanding service, have all contributed to Fasta Pasta being voted Roy Morgan’s ‘Quick Service Restaurant of the Year’.

Date of first franchise: 1990

Fasta Pasta is Australia’s largest, independently owned Italian fresh pasta restaurant chain, loved for our affordable fresh family meals in relaxed fully licensed surroundings. This is a great opportunity to be part of our winning national franchise team.

Training provided: 12 weeks training in one of our company stores which will cover areas such as, front of house, kitchen (all areas), necessary bookwork, Point of Sale, Management Skills.

Territories available: Nationally

FRANCHISE OUTLETS AUSTRALIA: Current: 38

FINANCIAL DETAILS: Initial franchise fee: $ 50,000 + GST Minimum investment range: $650,000 - $950,000 Royalty fee: 6% of net sales Marketing fee: 3% of net sales

157

Food - Restaurants & Dining Rooms

HOG’S BREATH CAFE Level 1, 152 Shore Street Cleveland QLD 4163 Telephone:

Fax: Email: Website: Contact: Position:

1800 HOGSTER (AUS) or 0800 HOGSTER (NZ) +61 7 3488 6900 +61 7 3488 6901 peterjosefski@hogsbreath.com.au www.hogsbreath.com.au or www.hogsbreath.co.nz Peter Josefski Franchise Development Manager

BUSINESS DESCRIPTION: Hoggies set out to be unlike any other restaurant. In a nutshell, it is about providing quality food and beverages in a casual environment with an over-riding friendly, party atmosphere. The diverse menu is centred around our famous Prime Rib, an unbelievably tender steak that melts in your mouth.

COMPANY DETAILS: Date of first franchise: Established in 1989 and opened its’ first franchise store in 1990 Training provided: The eight-week Franchisee Training Program at Hog’s University covers: Management procedures, Front of House procedures, Back of House procedures, Account management, Introduction to the Support Office Team and Theoretical and practical instruction. We also provide comprehensive Operations, Kitchen and Staff Training manuals. Additional 3 week instore training for new store opening 158

Territories available: Nationally and throughout New Zealand

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 74 2011: 74 2012: 78 Current: 83

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

Minimum investment: $750,000 - $950,000 AUD Royalty fee: 5% of Net Sales* Financial assistance: Accredited with a number of banking institutions Advertising/marketing fee: 2% of Net Sales*

*Net Sales is Gross Sales less promotions, discounts and merchandise sales

Food - Restaurants & Dining Rooms

NOODLE BOX 13A 663 Victoria Street Abbotsford VIC 3067 Telephone: (AUS) 03 8851 4200 Fax: (AUS) 03 8851 4277 Email: franchise@noodlebox.com.au Website: noodlebox.com.au Contact: Michael Standley Position: Network Development Manager

BUSINESS DESCRIPTION: Noodle Box’s goal is to be the first choice noodle base restaurant concept in every market in which they operate.

Representing excellent value for money their quality Asian flavoured food is healthy, fresh, fast and made right in front of you by friendly trained Team Members – it doesn’t get tastier than that.

COMPANY DETAILS: Date of first franchise: 2002

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 70 plus

FINANCIAL DETAILS: Initial franchise fee: $40,000 Minimum investment: $250,000 - $280,000 Royalty fee: 6% Financial assistance: Bank Accreditation Advertising/marketing fee: 3% + 3% Local Area Marketing

Membership: FCA Training provided: 3 weeks at Noodle Box Franchise Support Centre, Abbotsford VIC Sites available: National restaurant opportunities available

159

Food - Restaurants & Dining Rooms

ZAMBRERO Unit 33/105A Vanessa Street Kingsgrove NSW 2208 Telephone: (AUS) 02 8068 8131 Mobile: (AUS) 0479 180 528 Email: franchise@zambrero.com OR talia@zambrero.com Website: www.zambrero.com Contact: Talia Waelsch Position: Business Development Manager

BUSINESS DESCRIPTION: Zambrero is a quick-service Mexican restaurant by trade and a humanitarian, socially-responsible organization by values, which is growing organically in a competitive market. Zambrero has opened restaurants throughout Australia that offer healthy and tasty quick-serve options to our Australian consumers.

Founded by Dr Sam Prince, entrepreneur and philanthropist, Zambreroâ&#x20AC;&#x2122;s success is a catalyst for enabling charitable pursuits.

Sam remains passionate about education for the under-privileged, tackling aboriginal health issues and helping to instil a global mindset that no one deserves to go hungry, all while serving nutritious and delicious Mexican food.

COMPANY DETAILS: Date of first franchise: 2007 Membership: Franchise Council of Australia Training provided: One month initial training period and ongoing as required Territories available: Australia-wide and internationally

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 30* *as of August 2013

FINANCIAL DETAILS: Initial franchise fee: $20,500 Minimum investment: $250,000 - $350,000 Royalty fee: 6% Advertising/marketing fee: 3%

160

Food - retail

BAKERS DELIGHT Level 1, 293 Camberwell Rd Camberwell VIC 3124

Telephone: 1300 309 759 Email: franchiserecruitment@bakersdelight.com.au Website: www.bakersdelight.com.au Contact: Franchise Recruitment Team

BUSINESS DESCRIPTION: Bakers Delight, Australia’s most successful bakery franchise was established in 1980.

An Australian owned company, Bakers Delight boasts over 700 bakeries employing more than 15,000 people throughout Australia, New Zealand and Canada.

Bakers Delight holds a healthy 12.5 per cent of the Australian bread market (Roy Morgan Single Source data March 2013) – a stable market based on Australia’s love for freshly baked bread, and growing demand for nutritionally sound produce.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 700 across Australia, New Zealand and Canada

FINANCIAL DETAILS: Minimum investment: 30% or $150k

COMPANY DETAILS: Date of first franchise: 1980 Membership: FCA & FANZ Training provided: Full business and baking training provided as well as ongoing operational and network support.

161

Food - takeaway

DOMINOS PIZZA ENTERPRISES LTD Level 5, ‘KSD1’ 485 Kingsford Smith Drive Hamilton QLD 4007

Telephone: (AUS) 07 3633 3318 Fax: (AUS) 07 3633 3399 Email: franchise.webapplication@dominos.com.au Website: www.dominosfranchise.com.au Contact: Jenna Rugers Position: Administration Assistant

BUSINESS DESCRIPTION: Established in 1983, Domino’s Pizza Enterprises Limited (“Domino’s”) is the largest quick service pizza franchise in Australia.

Domino’s strong growth plan across Australia and New Zealand means it is always on the lookout for passionate and motivated people to become franchisees.

Our whole focus is to help franchisees sell more pizza, make more money and, most importantly, have more fun.

COMPANY DETAILS: Date of first franchise: 1983 Training provided: 8 weeks Territories available in: VIC, QLD, NSW, SA & WA

162

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2011: 535 2012: 562 Current: 588

FINANCIAL DETAILS: Initial franchise fee: $60,000.00 + GST Minimum investment: 40% of cost Royalty fee: 7% Financial assistance: Accreditation with all major banks.

Advertising/marketing fee: Maximum 6%

Food - takeaway

RED ROCK NOODLE BAR PO Box 1463 Capalaba QLD 4179

Telephone: (AUS) 1300 473 376 Fax: (AUS) 07 3393 5269 Email: admin@redrocknoodlebar.com.au Website: www.redrocknoodlebar.com.au Contact: Phil Colburn Position: Director

BUSINESS DESCRIPTION: Red Rock Noodle Bar is one of the healthiest food franchises in Australia in this popular, growing fast food industry.

We deliver this by offering an exciting and delicious range of Asian 97% Fat Free tastes that appeal to everyone who wants to eat and stay healthy.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 12

FINANCIAL DETAILS: Initial franchise fee: $25,000 Minimum investment: $180,000 - $220,000 Royalty fee: 8%

COMPANY DETAILS:

Advertising/marketing fee: 4%

Date of first franchise: 2006 Membership: FCA Training provided: 4-6 weeks Sites available: QLD cities including Gold Coast/Sunshine Coast, Townsville, Mackay plus other states when available

163

Food - takeaway

RED ROOSTER Level 1, Unit 17, 202 Ferntree Gully Road Notting Hill VIC 3168 Telephone: Fax: Email: Website: Contact: Position:

(AUS) 03 9582 8716 (AUS) 03 9582 8744 gary.glen@red-rooster.com.au www.redrooster.com.au Gary Glen Brand Franchise Manager

BUSINESS DESCRIPTION: ‘Be in business for yourself…but not by yourself’ with one of Australia’s most recognised brand identities.

Red Rooster offers ‘rippa’ business opportunities for the right candidates.

COMPANY DETAILS: Date of first franchise: 1986 Membership: FCA Training provided: Full structured training program Territories available: VIC, NSW, QLD, WA

164

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 269 2011: 275 2012: 295 Current: 296

FINANCIAL DETAILS: Initial franchise fee: $50,000 Minimum investment: $500,000 Royalty fee: 5% Financial assistance: Bank accreditation Advertising/marketing fee: Up to 6%

Food - takeaway

SUMOSALAD Level 1, 1 Short Street Leichhardt NSW 2040 Telephone: (AUS) 0401 055 437 Email: steves@sumosalad.com Website: www.sumosalad.com Contact: Steven Shirley Position: General Manager, Business Development

BUSINESS DESCRIPTION: SumoSalad has enjoyed phenomenal success and growth since its inception in 2003 and has built a strong, trusted and recognised brand in the food retail industry with loyal customers following the brandâ&#x20AC;&#x2122;s continual expansion into key sites throughout Australia and abroad.

Due to increased visibility, awareness and convenience, our brand has grown in strength and more importantly popularity.

As a franchisee, you get the benefit of being in business for yourself but not by yourself! You have the opportunity to use your entrepreneurial skills and to be your own boss, whilst taking advantage of established business processes and procedures.

COMPANY DETAILS: Date of first franchise: February 2004 Membership: Franchise Council of Australia (FCA) Training provided: We provide an extensive 4 weeks training program which includes two weeks in an existing

SumoSalad store and a further two weeks at your newly acquired store.

Territories available: Stores available in Sydney, Regional NSW, ACT, Melbourne, Brisbane, Regional QLD, Adelaide and Perth.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 96 across Australia, New Zealand, Singapore, Dubai and UK

FINANCIAL DETAILS: Initial franchise fee: $45,000 plus GST Minimum investment: $280,000 to $350,000 plus GST Royalty fee: 6% Financial assistance: Accreditation available through major Banks Advertising/marketing fee: 2%

165

furniture & bedding

SNOOZE 21A Shierlaw Ave Canterbury VIC 3126 Telephone: (AUS) 03 9830 4166 Fax: (AUS) 03 9888 6327 Email: alistairb@snooze.com.au Website: www.snooze.com.au Contact: Alistair Browne Position: Franchise Network Development Manager

BUSINESS DESCRIPTION: As one of Australia’s longest-running, most successful and innovative franchised business, Snooze’s experience in the bedding industry is second to none.

Boasting more than 70 stores across Australia and a goal to reach 90 stores by 2014, Snooze is looking for ambitious and passionate people to join the business’ exciting future.

COMPANY DETAILS: Date of first franchise: June 1977

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 74 2011: 74 2012: 75 Current: 73

FINANCIAL DETAILS: Initial franchise fee: $50,000.00 plus GST Minimum investment: $450,000 Royalty fee: 3.5% Franchise Fee

Membership: FCA members

Financial assistance: • Vendor finance options

Training provided: • Sales and product training

• NAB & ANZ accreditation

• Business management support • A national marketing program

166

Advertising/marketing fee: 5% + 1%

health & fitness

ENVIE FITNESS Suite 301, 19a Boundary Street Rushcutters Bay NSW 2011 Telephone: Fax: Email: Website: Contact: Position:

(AUS) 02 9332 2824 (AUS) 02 9326 0144 Manal@enviefitness.com.au www.enviefranchise.com.au Manal Haydar Business Development Manager

BUSINESS DESCRIPTION: EnVie is the innovative approach to inspirational Womenâ&#x20AC;&#x2122;s Health and Fitness.

If youâ&#x20AC;&#x2122;re passionate about owning your own business, have an interest in health and fitness and are looking to be part of a business that will grow to become a global leader, then this is the franchise for you..

Incorporating the best elements from a range of franchise models an EnVie business is completely systemised. An innovative new franchise model means franchisee and franchisor have the mutual goal of your SUCCESS.

Territories available: Australia Wide and International Opportunities

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 7

FINANCIAL DETAILS: Initial franchise fee: $29,900 Minimum investment: From $120,000 Royalty fee: Your royalty fees are calculated at a fixed rated - per Member, per week.

Date of first franchise: 3rd September 2012

Financial assistance: We have partnered with national suppliers to secure monthly lease options for equipment and other high cost items.

Membership: FCA and Fitness Australia

Advertising/marketing fee: Nil

COMPANY DETAILS:

Training provided: You are supported by extensive training and ongoing coaching from a team of fitness, business, franchise operations, marketing and sales experts with a combined 127 years of experience in the franchise and fitness industries.

167

health & fitness

PLUS FITNESS 24/7 Head Office â&#x20AC;&#x201C; 16/1 Exchange Parade Narellan NSW 2567 Telephone: (AUS) 02 4648 2099 Fax: (AUS) 02 8569 1899 Email: info@plusfitness.com.au Website: www.plusfitness.com.au Contact: Nigel Miller Position: Director/Franchisor

BUSINESS DESCRIPTION: Exercise your freedom with the only true Turn Key 24 hour Gym Franchise in Australia. Capitalising on strong supplier relationships developed over 16 years in the Australian Fitness Industry, Plus Fitness 24/7 provides the most comprehensive, supportive and competitively priced 24 Hour Gym Franchise. Fast breakeven, impressive ROI, low staffing and unrivalled franchisee support is just the beginning!

Territories available: Various territories across Australia and New Zealand

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

2009: 6 2010: 7 2011: 24 2012: 54 Current: 125 Across Australia

COMPANY DETAILS:

FINANCIAL DETAILS:

Date of first franchise: 2009

Initial franchise fee: $40,000

Membership: FCA, Fitness Australia, IHRSA

Minimum investment: $289,000 Total investment includes all Gym Equipment*

Training provided: Marketing, enquiry handling, membership sales, administration, gym operations, systems & database management, Access control & CCTV systems and fitness programming.

Initial training conducted at a Live Site prior to opening. A Plus Fitness Buddy will support you through your initial eight weeks of trading and ongoing.

168

Royalty fee: $895 per month Financial assistance: NAB, GoGetta and Plus Fitness inhouse finance option Advertising/marketing fee: $1 per Active Member per quarter * Based on 250sqm facility

outdoor living

AUSSIE OUTDOOR ALFRESCO / CAFÉ BLINDS Unit 2 – 8 Villanova Street Wanneroo WA 6065

Telephone: (AUS) 08 9306 5588 Fax: (AUS) 08 9306 5522 Email: aussieob@bigpond.net.au Website: www.aussieoutdoor.com.au Contact: Lloyd Gaunt Position: Managing Director

BUSINESS DESCRIPTION: Established in 2004, Aussie Outdoor is Australia’s leading manufacturer and installer of Alfresco and Café Blinds, Window Shades and Patio Roofing Insulation.

With 14 outlets across the country and growing, Aussie Outdoor leads the way in the design and manufacture of alfresco and café blinds and offers franchisees many benefits, including access to a massive growth industry, and a great return on investment.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 12 2011: 13 2012: 13 Current: 14

FINANCIAL DETAILS: Initial franchise fee: $55,000 Minimum investment: $200,000 Royalty Fee: 4% Advertising/marketing fee: 2%

COMPANY DETAILS:

Date of first franchise: 2004 Membership: Master Builders Association Training provided: 6 weeks on site training to turnkey. Ongoing updates and support.

Territories available: National

169

printing services

SNAP Ground Floor, Building D, 12-24 Talavera Road North Ryde NSW 2113 Telephone: (AUS) 1300 810 233 Fax: (AUS) 02 9887 4252 Email: marketing@snap.com.au Website: www.snap.com.au Contact: Peter Haggitt Position: National Franchise Development Manager

BUSINESS DESCRIPTION: Snap is the most successful franchised print, design and website network for SMEs in the Southern Hemisphere, with over 150 Centres in Australia and 35 Centres in New Zealand, Ireland and China.

This is an exciting opportunity to own a successful franchise business, with excellent financial and lifestyle rewards.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 157

FINANCIAL DETAILS: Initial franchise fee: New territory $50,000; existing territory $35,000 Minimum investment: >$100,000 Royalty fee: 8%

COMPANY DETAILS: Date of first franchise: 1979 Membership: FCA Training provided: 3 weeks pre-training and 1 week face-to-face training, with ongoing training support Territories available: A variety of existing and greenfield territories are available

170

Advertising/marketing fee: 2% national

real estate / property inspection

RESICERT PROPERTY INSPECTIONS 13 Approach Road Boya WA Telephone: (AUS) 0451 598 180 Fax: (AUS) 08) 9200 5672 Email: luan@resicert.com Website: www.resicert.com/lifestyle Contact: Luan Atkinson Position: Personnel Manager

BUSINESS DESCRIPTION: Resicert is a rapidly expanding property inspection business. We have Licensed Operators in WA, VIC, NSW, SA, ACT & QLD. We are a truly paperless, work from home business that allows you to find a work/life balance. Some of the key benefits at Resicert are: Earning potential $120,000 to $250,000, Low overheads, No premises, No stock, No staff, No quoting or outstanding debtors.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 2 2011: 10 2012: 20 Current: 24

FINANCIAL DETAILS: Initial franchise fee: $68,500 + GST (minimum)

COMPANY DETAILS: Date of first franchise: 2010 Training provided: We provide initial training, to give you the skill and knowledge base needed to start operating, then we continue your training “on-the-job” for up to 6 months, providing ongoing support in all aspects.

Territories available: NSW, VIC, SA, QLD, TAS, ACT, NT, (Metro & Regional) WA (Regional)

171

retail

7-ELEVEN STORES PTY LTD 357 Ferntree Gully Road Mount Waverley VIC 3149 Telephone:

Website:

(AUS) 03 9550 0600 - VIC (AUS) 02 9798 1200 - NSW (AUS) 07 3291 9400 - QLD www.7elevenfranchise.com.au

BUSINESS DESCRIPTION: 7-Eleven is a global success story with more than 50,000 stores world wide.

Territories available: VIC, NSW, QLD, ACT

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

FRANCHISE OUTLETS AUSTRALIA:

As a 7-Eleven Franchisee you will benefit from our position as market leader in convenience retailing. You will be backed by our comprehensive support system. Our system gives you a complete turn-key set up including state of the art POS systems, product innovation and promotion as well as operational support.

FINANCIAL DETAILS:

COMPANY DETAILS: Date of first franchise: 1977 Membership: FCA, AACS Training provided: Our extensive training program includes time in the classroom, instore hands on training and also support in your store during your first week of trading.

172

Current: 600+

Initial franchise fee: Site specific Minimum investment: $300,000 - $800,000 Royalty fee: Gross profit split Advertising/marketing fee: N/A

retail

AMBER GROUP AUSTRALIA pty LTD 1 Rowood Rd Prospect NSW 2148 Telephone: Fax: Email: Website: Contact: Position:

(AUS) 02 8848 7000 (AUS) 02 8848 7001 glynch@ambertiles.com.au www.ambertiles.com.au Greg Lynch Business Development Manager

BUSINESS DESCRIPTION: Established in 1973, Amber is Australia’s largest network of paving and tile retail franchises. Amber has almost 40 years’ experience in providing hard flooring advice, service and solutions to customers in the core business areas of pavers, retaining walls, floor tiles, wall tiles, natural stone and associated products.

Strong brand and strap line – Amber has the answer...

COMPANY DETAILS: Date of first franchise: 1993 (Amber founded in 1973-trading 40 years) Membership: FCA Training provided: Initial and on-going training in business and product

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 27 – Stores NSW & QLD 2011: 29 – Stores NSW & QLD 2012: 27 – Stores NSW & QLD Current: 27 – Stores NSW & QLD

FINANCIAL DETAILS: Initial franchise fee: NIL Minimum investment: Depends whether existing or new site.

Range $150,000 - $450,000 Royalty fee: Average 3.8% (lower in some territories) Financial assistance: Nil Advertising/marketing fee: 3.25%

Territories available: NSW and QLD only

173

retail

BRIGHT EYES franchising PTY LTD “The Dock - Retailer House” Level 1 Unit 3 321 Kelvin Grove Road, Kelvin Grove QLD 4059 Telephone: (AUS) 1800 178 251 Fax: (AUS) 07 3056 3322 Email: enquiries@brighteyes.com.au Website: www.brighteyes.com.au Contact: Ralph Edwards Position: National Franchise Director

BUSINESS DESCRIPTION: RANKED #10 FRANCHISE OVERALL in the 2013 10ThousandFeet Survey (topfranchise.com.au) Bright Eyes Sunglass Stores are part of a business system that has been operating successfully for more than 25 years. No prerequisite qualifications are required to become a franchisee and it is suitable for an owner-operator or investor.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: 2010: 78 2011: 72 2012: 54 Current: 47

FINANCIAL DETAILS: Initial franchise fee: POA Minimum investment: $120,000

COMPANY DETAILS:

Royalty fee: 5%

Date of first franchise: 1985

Financial assistance: No

Membership: FCA

Advertising/marketing fee: 1.5%

Training provided: Full training provided & ongoing support Territories available: Australia wide

174

retail

TELECHOICE 74 Eastern Road South Melbourne VIC 3205 Telephone: (AUS) 03 6899 2555 Fax: (AUS) 03 8699 2550 Email: dealership@telechoice.com.au Website: www.telechoice.com.au Contact: National Franchise Manager

BUSINESS DESCRIPTION:

COMPANY DETAILS:

TeleChoice is Australiaâ&#x20AC;&#x2122;s largest independent Mobile Phone retailer and Telecommunications Carriage Service Provider.

Date of first franchise: 1995

All Australians, young and old are having a greater dependence on their mobile phone every day. As such, the industry is experiencing exciting and continual changes in technology, resulting in insatiable demand for the newest smart phones, tablets and very soon Phablets and Phone Watches.

As a specialist retailer, TeleChoice provides consumers with unique offers, concepts and cost savings. TeleChoice Dealers can offer our products to consumers through either of two rewarding business models.

As a TeleChoice Dealer you are not required to pay Royalties or Advertising Fees. Put simply, the more money you make, the more you keep for yourself and your family.

Membership: FCA Training provided: Initial 4 weeks training. Ongoing support and training from Head Office and phone manufacturers.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 90

FINANCIAL DETAILS: Initial franchise fee: NIL Minimum investment: $100,000 (including Licence Fee and working capital required) Royalty fee: NIL Advertising/marketing fee: NIL

175

vending

PROVENDER® AUSTRALIA PTY LTD Unit 3, 207 Young Street Waterloo NSW 2017 Telephone: (AUS) 02 9318 5700 OR 1800 121 111 Fax: (AUS) 02 9318 5799 Email: Kellie.W@provendervending.com.au Website: www.provendervending.com.au Contact: Kellie Werder Position: Business Manager

BUSINESS DESCRIPTION: provender® is a vending business with local franchise owners providing businesses with snacks, small meals and drinks directly to them from their dedicated van’s on a regular basis ensuring customers Stay Revived!™.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 50+ (QLD, NSW, ACT, VIC, TAS, SA, WA, NT)

FINANCIAL DETAILS: Initial franchise fee: $23,000 + GST

COMPANY DETAILS: Date of first franchise: 1991 NZ / 2008 AUS

Minimum investment: Minimum of $80,000 dependent on franchise option.

Royalty fee: 10 %

Membership: FCA

Financial assistance: No

Training provided: 1 week initial pretraining in field, followed by head office training and induction programme (2-5 days). Continued support provided.

Advertising/marketing fee: No

Territories available: Australia wide

176

Professional Services categories: Accountants. ...................................................................................................................................... 178 Financial / Insurance Services....................................................................................... 180 Financial Institutions. ............................................................................................................. 182 Insurance Brokers....................................................................................................................... 183 Lawyers..................................................................................................................................................... 183 Point of Sale........................................................................................................................................ 188 Printing Services............................................................................................................................ 190 Support Services / Consultants.................................................................................... 191 Training..................................................................................................................................................... 192

177

accountants

BABO GROUP PTY LTD Level 1, 12 Cramer Street Preston VIC 3072 Telephone: (AUS) 03 9471 0092 Fax: (AUS) 03 9471 0102 Email: michael@babo.com.au Website: www.babo.com.au Contact: Michael Hymer FCPA (Taxation) Position: Director BUSINESS DESCRIPTION: Babo Group provides a complete accounting and business structuring service to aspiring business entrepreneurs and to those entering into franchising.

Our in-house services and dedicated partner to your specific requirements will make sure that you are ready for business.

Our service is independent and objective making sure your expectations can be achieved.

Going into business is not always straight forward and entering into a franchise can be even more complex. We believe there may be a minimum of 92 points you need to consider when considering buying a franchise.

With our assistance and guidance we will make the experience as smooth and friendly as possible. Babo Group is a proud member of the Franchise Council of Australia.

A Quick Test â&#x20AC;&#x201C; ask yourself!

1. Why am I considering this particular business?

2. What are the short and long term rewards I hope to achieve?

3. How can I improve this business?

4. What personal sacrifices does my family have to make for this business?

5. What are my financial and personal risks?

6. Can I realistically achieve the expected business targets?

7. What will prohibit me from selling this business to at least recover my costs?

8. Do I agree with the operational and ethical aspects of this franchise?

9. Will I be happy, wealthy and healthy?

Please call us to assist you with the proposal.

178

accountants

Liston Landers Chartered Accountants & Advisers 242-246 Glenferrie Road, Malvern VIC 3144 85 Lascelles Street, Hopetoun VIC 3396 36 Woods Street, Donald VIC 3480 39 Dundas Street, St Arnaud VIC 3478 Telephone:

Email: Website:

03 9509 0366 (Malvern) 03 5083 3117 (Hopetoun) 03 5497 1399 (Donald) 03 5495 1855 (St Arnaud) shaun.newton@listonlanders.com.au or kieran.liston@listonlanders.com.au www.listonlanders.com.au

BUSINESS DESCRIPTION: If you’re asking yourself questions like; How do I choose the right franchise? How do I sell my franchise? We could help you.

For example, how do you select a franchise? With over 1,000 franchise options available, it is difficult to know which option would best suit you. That is why it is essential to get the right advice from experienced franchise advisors and undertake the appropriate level of due diligence. We have the specialist experience to evaluate the franchisor’s financials, answer all of your questions and provide appropriate franchise selection advice.

We can help you consider the right franchise pre-purchase questions: • What are your long term goals for the business?

• What does the franchisor provide (e.g. training, branded equipment)?

• Are they an ethical trader?

• Have there been any failures in the company/similar businesses?

While considering purchasing a franchise it is crucial that a detailed and expert examination is undertaken prior to purchase, and that you only pay what the franchise is really worth.

Liston Landers can provide: • Accurate valuations that are APES 225 compliant (as issued by the Accounting Professional and Ethical Standards Board).

• Knowledge of over 30 different franchise systems.

• The promise of a five-day turnaround for business valuations.

• Provision of an assurance to your financier that the value of the business corresponds with the finance required.

In Business since: 1978 179

financial / insurance services

FRANCHISEINSURANCE.COM.AU Telephone: 1300 500 700 Email: Tony@capitalmutual.com.au Website: www.franchiseinsurance.com.au Contact: Tony Caruso Position: Manager BUSINESS DESCRIPTION: Franchiseinsurance.com.au was built specifically for franchisees and franchisor groups.

We deliver specific business insurance packages for individual franchisees and franchisor master policies. We have years of experience in a demanding market where competitive pricing, quality products and immediate certificates of insurance is a must.

Talk to someone who truly knows your industry. Give me a call.

In Business since: 2010

180

financial / insurance services

SHOPINSURANCE.COM.AU Telephone: 0412 123 300 Email: frednadde@outlook.com.au Website: www.shopinsurance.com.au Contact: Fred Nadde Position: Director BUSINESS DESCRIPTION: Shopinsurance.com.au was designed after much research with franchise groups, shopping centre operators, franchisors and individual shop owners.

We deliver an easy and accessible business insurance product online for all groups. The covers are intended to be broad and simple to use. The whole process of obtaining a quote at your leisure and insurance cover in under 5 minutes is at your fingertips. If you need assistance or advice we are a phone call or email away.

We have over a hundred occupations online and cover most outlets ranging from Gloria Jeans, Lenardâ&#x20AC;&#x2122;s, Wendyâ&#x20AC;&#x2122;s, Subway, Just Cuts, Hairhouse Warehouse and similar businesses.

As the owner of the company, I take great pride in ensuring we deliver some old fashioned service.

You are welcome to call me direct.

In Business since: 1990

181

financial institutions

SILVER CHEF LTD PO Box 1760 Milton BC QLD 4064 PO Box 91379 Victoria St West, Auckland 1142 Telephone: (AUS) 1800 049 743

(NZ) 0800 443 334 Fax: (AUS) 1800 884 431

(NZ) 0800 452 907 Email: jscurr@silverchef.com.au Website: www.silverchef.com.au

www.silverchef.co.nz Contact: James Scurr Position: National Franchise Manager BUSINESS DESCRIPTION: Silver Chef has been helping businesses to fund their equipment needs for over two decades. Silver Chef’s Rent. Try. Buy.® Solution offers a simple 12 month term so that you have the flexibility to: • Buy equipment and enjoy generous rebates • Return equipment if you don’t need it anymore • Keep renting and the purchase price keeps reducing • Upgrade your equipment at any time • Easy OwnTM your equipment over an additional 36 month term If you are part of an accredited franchise, you will enjoy even greater benefits like access to pre – approved funding and reduced rental bonds.

Silver Chef is an Australian publically listed company, a member of the Franchise Council of Australia and was the FCA Supplier of the Year for 2011.

In Business Since: 1986

182

insurance brokers

NATIONAL FRANCHISE INSURANCE BROKERS (NFIB) PO Box 495 Leederville WA 6903 Telephone: (AUS) 1800 776 747 Fax: (AUS) 1800 194 525 Email: info@mynfib.com.au Website: www.mynfib.com.au Contact: Brad Dixon Position: National Development Manager BUSINESS DESCRIPTION: NFIB meets the Australian demand for a dedicated online provider of insurance cover for franchisees, franchisors and franchised businesses.

Our service is fully automated, compliant and provides you with full documentation.

Put simply, our service is the fastest, most affordable way to get the most appropriate level of cover you need to protect your business.

In Business Since: Established in 2010

Lawyers

BAYBRIDGE LAWYERS Level 1, 109 Pitt Street Sydney NSW 2000 Telephone: Fax: Email: Website: Contact: Position:

(AUS) 02 9232 3511 (AUS) 02 9223 4625 info@baybridge.com.au www.baybridge.com.au Marwan Kojok Managing Partner

BUSINESS DESCRIPTION: Baybridge Lawyers is a premier corporate and commercial firm with expertise in franchising, licensing and dispute resolution. A firm that has proven abilities, expertise and networks that matter when you need them most. We are sought after by many national and international organisations for our depth of expertise and more importantly our skills in forming trusted relationships with our clients.

In Business since: 2002 183

lawyers

IVAN POOLE LAWYERS Level 6, 64 Marine Parade Southport QLD 4215 Telephone: (AUS) 07 5591 2522 Fax: (AUS) 07 5591 2511 Email: pt@ivanpoolelawyers.com.au Website: www.ivanpoolelawyers.com.au Contact: Peter Thelwell - Associate Ivan Poole - Principal Sam Rees - Solicitor

IVAN POOLE L A W Y E R S

BUSINESS DESCRIPTION: Ivan Poole Lawyers specialises in Franchising, Mediation and Intellectual Property, servicing clients around the Gold Coast, Queensland and Australia.

We act for Franchisor and Franchisee clients when buying, selling and throughout disputes to maximise their success.

We develop long-term partnerships with clients and take pride in contributing to their success.

In Business for: 25 years

MADGWICKS LAWYERS Level 33, 140 William Street Melbourne, VIC 3000 Telephone: (AUS) 03 9242 4744 Fax: (AUS) 03 9242 4777 Email: franchising@madgwicks.com.au Website: www.madgwicks.com.au Contact: Ed Browne Position: Partner BUSINESS DESCRIPTION: Madgwicks is a full service business law firm. Our team of experienced lawyers provide the full range of legal services to franchisors, franchisees and franchise industry service providers. Our strong connections with non-legal franchising specialists and links with franchising lawyers at Meritas member firms across Australia and globally, allow us to help clients locally and across the world.

In Business Since: 1973

184

lawyers

Mst lawyers 315 Ferntree Gully Road Mount Waverley VIC 3149 Telephone: (AUS) 03 8540 0200 Fax: (AUS) 03 8540 0202 Email: raynia.theodore@mst.com.au Website: www.mst.com.au Contact: Raynia Theodore Position: Principal BUSINESS DESCRIPTION: MST Lawyers is widely recognised as one of Australiaâ&#x20AC;&#x2122;s leading franchising law firms having more than 30 years of experience in advising franchisors, franchisees and suppliers to the franchising sector on all aspects of franchising. MST Lawyers acts for a number of well-known national franchisors, international franchisors, new and emerging franchise systems and franchisees Australia wide. Our international affiliations allow us to stay in touch with global franchising trends and developments.

Our dedicated franchise team prides itself on providing commercial, practical and current advice to its franchise clients.

MST Lawyers: Great Service, Sensible Solutions In Business Since: 1959

185

lawyers

STEWART GERMANN LAW OFFICE Ground Floor, 2 Princes Street, Auckland Central PO Box 1542, Auckland 1140 New Zealand Telephone: (NZ) 09 308 9925 Fax: (NZ) 09 308 9922 Email: stewart@germann.co.nz Website: www.germann.co.nz Contact: Stewart Germann Position: Principal BUSINESS DESCRIPTION: Stewart Germann Law Office is New Zealand’s longest established franchise law firm. SGL has been selected as Best Lawyers in New Zealand – Franchise for 2013, and was the winner of the 2012 Franchise Law Form of the Year in New Zealand in the DealMakers End of Year Awards, Franchise Law Firm of the Year in New Zealand in the 2012 Global Law Experts Awards and also Franchise Law Firm of the Year 2011 for Australasia – DealMakers Law Awards.

Stewart Germann (B.Com, LLB, FCIS, MNZIM and Notary Public) is the principal and is a Barrister and Solicitor of the High Court of New Zealand. Stewart specialises in franchising, licensing, sale and purchase of businesses and commercial law. He is also a qualified mediator and is on the Panel of Mediators of the Franchise Association of New Zealand (FANZ).

Harshad Shiba (LLB) is an Associate and is also a Barrister and Solicitor of the High Court of New Zealand. Harshad has extensive experience in commercial and franchising and was previously an Associate of another franchising law practice. He advises both franchisors and franchisees in all aspects of commercial law and also provides advice in relation to setting up and implementing franchise systems.

Stewart Germann has over 30 years’ experience in franchising law and acts for many of New Zealand’s best known national and international franchise brands. Stewart is a past chairman of the FANZ and is listed in the International Who’s Who of Franchise Lawyers. He has spoken at franchising conferences in New Zealand, Australia and USA and is very active in international franchising. He has also written many published articles on franchising.

In Business Since: 1993

186

automotive products &lawyers services

WISEWOULD MAHONY LAWYERS Level 8, 419-425 Collins Street Melbourne VIC 3000 Telephone: (AUS) 03 9629 8333 Fax: (AUS) 03 9629 4035 Email: robert.toth@wisemah.com.au Website: www.wisewouldmahony.com.au Contact: Robert Toth â&#x20AC;&#x201C; Franchise Partner

franchise specialists

BUSINESS DESCRIPTION: Wisewould Mahony Lawyers acts for local and international clients and companies and can assist international companies to establish their business operations in Australia, establish franchise operations via master franchise and area development arrangements, licensing and distribution agreements, as well as regulatory compliance, corporate and taxation advice.

The firm has specialist advisors in the areas of franchising, licensing, employment law, litigation and dispute resolution and provides clients fees based on the scope of services and in many cases can provide fixed fees for clients.

In Business Since: Wisewould Mahony is the result of the successful amalgamation of Wisewoulds and Mahonys on 1 July 2009. Wisewoulds has been in business since 1853, and Mahonys since 1885.

187

point of sale

ORDERMATE POS 59 Fennell Street Port Melbourne VIC 3207 Telephone: (AUS) 1300 667 067 Fax: (AUS) 1300 667 101 Email: sales@ordermate.com.au Website: www.ordermate.com.au Contact: Clinton Capuzzi Position: Director and Co-Founder BUSINESS DESCRIPTION: With over 10 years of industry experience – OrderMate is designed and developed in Australia by hospitality people, for hospitality people.

We service and support all areas of the Hospitality industry - especially Franchises.

So why should you use OrderMate as your Franchise POS solution?

• Powerful backend centralised reporting that can drive your business to success and manage your KPI’s from Head Office – Business Central and on Store Level.

• Integrations with the latest in reservations, online ordering, accounting and multi-site customer loyalty.

• Our nationwide network enables us to seamlessly; rollout, service and support large scale operations.

We are members of: Franchising Council of Australia (FCA) Australian Hotels Association (AHA) Hospitality Service Association (HSA) Restaurant and Catering Association (RCA) Our clients: We service a wide cross section of the hospitality landscape around Australia. Our dynamic software allows us to meet the needs of customers in all verticals including; bars, hotels, clubs, restaurants, quick sale and cafes.

In Business Since: 2001

OrderMate - the future in Point of Sale

188

point of sale

REDCAT PTY LTD Level 2, 70 Park Street South Melbourne VIC 3205 Telephone: (AUS) 1300 4 REDCAT Fax: (AUS) 03 9696 1553 Email: info@redcat.com.au Website: www.redcat.com.au Contact: Spiro Vournazos Position: National Sales Manager BUSINESS DESCRIPTION: RedCat supplies integrated Point of Sale and Accounting solutions that manage sales, staff, stock, payroll, accounts, GST and reporting solutions to provide the complete business management system for the needs of franchised groups. We have a flexible centralised management capability that permits multiple levels of control and reporting capabilities and web based consolidated reporting tools. We also offer an iPhone or Smartphone capable global loyalty and gift card and payment system which is also fully integrated into the point of sale and can provide a very effective part of your marketing strategy.

From small single terminal sites through to large multi-location and franchise operations, RedCat adds value to a clientâ&#x20AC;&#x2122;s business through greater financial control and significant cost reductions.

With a significant Research and Development operation in Australia, their commitment to ongoing product development enables RedCat to maintain its position at the forefront of Franchise Solutions in Australia and International markets.

OUR CLIENTS RedCat serves some of the best hospitality venues in the country and over recent years has become a supplier of products and services in the leisure industry, clubs and an ever-expanding range of franchise and retail operations.

In Business Since: Started in 1991, focusing on the franchising sector since 1998.

189

printing services

WHIRLWIND PRINT 22 Henderson Road Knoxfield VIC 3180 Telephone: (AUS) 1300 129 227 Fax: (AUS) 03 9780 4445 - VIC

(AUS) 02 9368 5889 - NSW Email: info@whirlwindprint.com Website: www.whirlwindprint.com Contact: Gis Marven Position: Sales Director BUSINESS DESCRIPTION: • Printing Services • Online Print Management System • Fulfillment & Warehousing Facility • Marketing & Promotional Products Sourcing • Campaign Print Management

• Certified to ISO Standards for colour, quality & safety • Environmental accreditation & Forest Stewardship Council (FSC) Certified

About Whirlwind Print As a franchise specialist with a dedicated online print management system, certified quality print products and cutting edge upgradeable technology, Whirlwind Print is the preferred print partner for the franchise community. Servicing clients nationwide, including many of Australia’s top franchises, we believe that exceptional customer service and delivering great results while minimising our environmental impact sets us apart from the rest.

Online Print Management System Our user-friendly Online Print Management system supports franchise multi-site print distribution.

Therefore franchisers across Australia can rely on rapid order fulfilment and deployment of their marketing collateral and branding campaigns. We’ll work seamlessly as a natural extension of your marketing department and maintain your brand integrity.

And here’s a testimonial from one of our Franchise customers: “The Online Print Management System (OPM) that Whirlwind provides is a convenient and functional platform that provides our franchisees with the benefits of conveniently accessing and personalising Back In Motion Health Group marketing collateral pieces. Our franchisees have access to a dedicated Whirlwind account manager and convenient credit card or account payment options. From a franchisor perspective, the OPM platform is an effective way to manage the distribution of our marketing pieces, facilitates brand consistency and the ease of sharing of marketing resources across our ever growing group. Whirlwind is able to hold our marketing collateral stock in inventory which enables us to print large quantities of material so we can offer our franchisees a lower unit costs for collateral they can order on demand.”

Natalie Whittington, Marketing, Communications and Public Relations Manager, Back In Motion Health Group

Learn more about how we can support your franchise printing needs: www.whirlwindprint.com In Business Since: 1996 190

support services / consultants

FRANCHISE SELECTION Level 8, 330 Collins Street Melbourne VIC 3000 Telephone: (AUS) 1300 FRANCHISE (372 624) Fax: (AUS) 03 8640 0688 Email: kevin@franchiseselection.com.au Website: www.franchiseselection.com.au Contact: Kevin Bugeja Position: Managing Director BUSINESS DESCRIPTION: We assist potential franchisees through the interview and selection process. Our approach is not to sell franchises but to educate and assist buyers in finding the right business opportunity for them and to assist franchisors in selecting the very best franchisees.

We also offer training to franchisors that wish to improve their recruitment internally by using best practice standards and systems that are used in recruiting franchisees.

Franchise Selection also specialises in training Franchisors to increase the success of their own recruitment. We specialise in creating personalised CRM systems for Franchisors to increase the success of their franchise recruitment process. Franchise Selection also assist in lead generation strategies.

In Business Since: 2006

191

training

TRAXION TRAINING Suite 1, Commerce Centre, 146 Bundall Road Bundall QLD 4217 Telephone: (AUS) 1300 286 694 Fax: (AUS) 07 5677 0106 Email: service@traxiontraining.com.au Website: www.traxiontraining.com.au Contact: Kate Baring Position: Operations BUSINESS DESCRIPTION: Setting up a training academy to meet the learning and development needs of your Franchisees or head office team may be easier and more cost effective than you think! Traxion Training is an FCA member and specialist Registered Training Organisation passionate about linking Franchise groups with government funding programs to enhance your workforce development programs. We offer a no-obligation service to review your organisationâ&#x20AC;&#x2122;s skill requirements and provide a complimentary report outlining how best to structure your training programs to tap into nationally accredited qualifications and government funding opportunities. To arrange this service, call Kate Baring on 1300 286 694 In Business Since: Business consulting since 1998 | RTO since 2010

192

Publications BUSINESS FRANCHISE AUSTRALIA AND NEW ZEALAND PO Box 968 Mt Eliza VIC 3930 Phone: (AUS) 03 9787 8077 Fax: (AUS) 03 9787 8499 Email: cgb@cgbpublishing.com.au Website: www.businessfranchiseaustralia.com.au

BUSINESS FRANCHISOR PO Box 968 Mt Eliza VIC 3930 Phone: (AUS) 03 9787 8077 Fax: (AUS) 03 9787 8499 Email: cgb@cgbpublishing.com.au Website: www.businessfranchiseaustralia.com.au

AUSTRALIA & NEW ZEALAND BUSINESS FRANCHISE DIRECTORY PO Box 968 Mt Eliza VIC 3930 Phone: (AUS) 03 9787 8077 Fax: (AUS) 03 9787 8499 Email: cgb@cgbpublishing.com.au Website: www.businessfranchiseaustralia.com.au

THE FRANCHISE REVIEW The official journal of the Franchise Council of Australia PO Box 2195 Malvern East VIC 3145 Phone: (AUS) 1300 669 030 Phone: +61 3 9508 0888 Fax: (AUS) 03 9508 0899 Email: info@franchise.org.au Website: www.franchise.org.au

193

Helpful organisations FRANCHISE COUNCIL OF AUSTRALIA Suite 5B, Level 1, 307-313 Wattletree Rd Malvern East VIC 3145 Phone: (AUS) 1300 669 030 Phone:+61 3 9508 0888 Fax:+61 3 9508 0899 Email: info@franchise.org.au Website: www.franchise.org.au

FRANCHISE ASSOCIATION OF NEW ZEALAND Unit 27, 2 Bishop Dunn Place Botany South, Auckland New Zealand Phone: +64 9 274 2901 Fax: +64 9 274 2903 Email: contact@franchise.org.nz Website: www.franchise.org.nz

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION GPO Box 3131 Canberra ACT 2601 Phone: +61 2 6243 1111 Fax: +61 2 6243 1199 Email: info.centre@accc.gov.au Website: www.accc.gov.au/franchisingcode

SPECIALISED EVENTS PO Box 209 South Yarra 3141 Phone: +61 3 9999 5460 Fax: + 61 3 9999 5461 Email: info@specialisedevents.com.au Website: www.specialisedevents.com.au

AUSTRALIAN RETAILERS ASSOCIATION Level 10, 136 Exhibition Street Melbourne VIC 3000 Phone: (AUS) 1300 368 041 Fax: +61 3 8660 3399 Email: info@retail.org.au Website: www.retail.org.au

194

AUSTRALIAN TAXATION OFFICE GPO Box 9990 (In your relevant Capital City and State) Phone: 13 28 66 Website: www.ato.gov.au

Index of franchises & services NUMERICAL 7-Eleven Stores............................................................................................................................................................................................172

A Amber Group..................................................................................................................................................................................................173 Aussie Outdoor Alfresco / Café Blinds. .......................................................................................................................................169

B BABO Group. ..................................................................................................................................................................................................178 Bakers Delight...............................................................................................................................................................................................161 Battery World................................................................................................................................................................................................142 Baybridge Lawyers....................................................................................................................................................................................183 Bright Eyes Sunglasses..........................................................................................................................................................................174

C Chipmunks Playland & Café. ...............................................................................................................................................................151

D Domino’s Pizza..............................................................................................................................................................................................162

E Envie Fitness..................................................................................................................................................................................................167

F Fasta Pasta......................................................................................................................................................................................................157 Fastway Couriers........................................................................................................................................................................................150 Franchise Selection...................................................................................................................................................................................191 Franchiseinsurance.com.au. ...............................................................................................................................................................180

H Hairhouse Warehouse.............................................................................................................................................................................145 Hog’s Breath Café.......................................................................................................................................................................................158

I Interface Financial Group, The...........................................................................................................................................................152 Ivan Poole Lawyers. ..................................................................................................................................................................................184

J Jim’s Fencing. ...............................................................................................................................................................................................146

L Liston Landers...............................................................................................................................................................................................179 LookSmart Alterations.............................................................................................................................................................................148

195

M Madgwicks Lawyers................................................................................................................................................................................184 Mail Boxes Etc..............................................................................................................................................................................................147 Mason Sier Turnbull. .................................................................................................................................................................................185

N National Franchise Insurance Brokers. ........................................................................................................................................183 NightOwl Convenience. ..........................................................................................................................................................................149 Noodle Box......................................................................................................................................................................................................159 Novus Autoglass.........................................................................................................................................................................................143

O OrderMate POS. ...........................................................................................................................................................................................188

P Plus Fitness 24/7. .......................................................................................................................................................................................168 Provender. ........................................................................................................................................................................................................176

R RAMS..................................................................................................................................................................................................................153 Red Rock Noodle Bar...............................................................................................................................................................................163 Red Rooster. ...................................................................................................................................................................................................164 RedCat................................................................................................................................................................................................................189 Resicert Property Inspections............................................................................................................................................................171

S Shopinsurance.com.au...........................................................................................................................................................................181 Silver Chef........................................................................................................................................................................................................182 Snap Printing..................................................................................................................................................................................................170 Snap-on Tools................................................................................................................................................................................................144 Snooze................................................................................................................................................................................................................166 Stewart Germann Law Office.............................................................................................................................................................186 SumoSalad. .....................................................................................................................................................................................................165

T TeleChoice........................................................................................................................................................................................................175 Theobroma.......................................................................................................................................................................................................154 Traxion Training............................................................................................................................................................................................192

W Whirlwind Print. ...........................................................................................................................................................................................190 Wisewould Mahony. ................................................................................................................................................................................187

X Xpresso Mobile Cafe................................................................................................................................................................................155

Z Zambrero...........................................................................................................................................................................................................160 Zarraffaâ&#x20AC;&#x2122;s Coffee...........................................................................................................................................................................................156

196

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Business FranchiSe Guide

notes

200

Tired of working for someone else?

Ready to be your own boss?

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This guide utilises decades of experience from experts in the franchising industry to help you on your franchising path to success.

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• How do I choose the right franchise system?

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