Business Franchise AUS & NZ Guide 11th edition by CGB Publishing

Your key to buying, managing and profiting from your own franchise

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The Franchise Guide 2018 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. PUBLISHERâ&#x20AC;&#x2122;S SUGGESTED RETAIL PRICE $19.95 ÂŠ 2017 CGB Publishing Pty Ltd all rights reserved. ISBN 978-0-646-97957-1

Contents Preface ................................................................................................................................................................................................ 1 CHAPTER 1: Are You Suited to Franchising?. ............................................................................. 3 Mike Stringer, Car Care Australia CHAPTER 2: How do you Choose the Right Franchise?.............................................11

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

CHAPTER 3: New to Franchising? Your questions answered.......................17 George Yammouni, Bathroom Werx Group CHAPTER 4: How to Conduct Due Diligence when Buying a Franchise.......................................................................................................................................25 DC Strategy CHAPTER 5: Funding Your Franchise.................................................................................................37 James Scurr, Cashflow It CHAPTER 6: Understanding the Legal Documents........................................................45 Raynia Theodore, MST Lawyers CHAPTER 7: What to Consider Before You Buy....................................................................57 Nathan Hood, Carbon Group CHAPTER 8: How Not to be an ‘Unhappy Franchisee’..................................................63 Mike Irving CHAPTER 9: Payroll Basics for New Franchise Owners......................................71 Kate Groom, Franchise Accounting and Tax CHAPTER 10: Marketing and Social Media for Franchisees...............................77 Katherine Grace, Elemental Solutions Marketing CHAPTER 11: Employing staff – A New Age of Accountability. .......................83 Joe Murphy, Australian Business Lawyers & Advisors CHAPTER 12: Franchising in Australia.............................................................................................89 The Franchise Council of Australia

CHAPTER 13: Franchising in New Zealand....................................................................................97 Stewart Germann, Franchising Lawyer CHAPTER 14: Want to Franchise Your Business? What You Need to Know.............................................................................................. 105 Timothy Mak, LegalVision Franchise Listings.................................................................................................................................................... 111 Professional Services Listings.............................................................................................................. 131 Helpful Organisations....................................................................................................................................... 139 Index. ............................................................................................................................................................................................ 140

Preface Joanne Tuffy | Editor CGB Publishing Pty Ltd

ranchising has many advantages over independent business ownership, because it allows franchisees to own their own business without being totally alone.

Franchising in Australia and New Zealand together adds more than $170 billion to our countries’ economies, and provides employment opportunities for more than half a million Aussies and Kiwis. The 2017 Franchising New Zealand survey* shows that New Zealand is the most franchised country in the world with 37,000 franchise units – that’s one for every 124 Kiwis! Franchising has helped realise the business dreams of tens of thousands of Australians and New Zealanders, with more than 1600 systems to choose from. Franchising offers ‘anybody and everybody’ the opportunity to own and operate a business so no matter what your work background is, or qualifications are, there is a franchise system to suit your finances, family, skills and lifestyle. Originally all about food - with the cafe, restaurant and takeaway sectors continuing to evolve and expand - franchising has grown to include practically every type of product and service imaginable. Categories include automotive, beauty, business services, cleaning, clothing alterations, courier services, financial services, fitness and retail amongst many others and we have a selection of the leading franchise systems currently available listed at the back of the book. Set out to assist you as you embark on your journey to becoming a member of a very special community of business owners, this book includes a wealth of information from leaders in the franchising industry – giving you professional insight on how to research, select, buy and successfully run your own franchise. We have asked franchisors, franchise lawyers, accountants and consultants to share with us their tips and tricks to achieving personal and financial stability. Once you are convinced that franchising is the right move for you, browse through the listed franchise systems and see which interests you most. No matter where you are on your franchising journey, whether you are simply toying with the idea of business ownership or have made the decision already to become your own boss, this book will help you on your franchising path to success. *2017 Franchising New Zealand Survey completed jointly by Griffith University’s Asia-Pacific Centre for Franchising Excellence and the Massey University Business School.

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Chapter 1

Are You Suited to Franchising? Mike Stringer | Franchisor Car Care Australia Pty Ltd

About the Author Mike Stringer is a multi brand Franchisor, operating three systems in the mobile services area - Car Care, Housework Heroes and United Home Services - which collectively have around 250 Franchisees throughout Australia. He served six years as WA State President and Board Member of the Franchise Council of Australia. Mike is also the recipient of the 2011 National Outstanding Contribution to Franchising Award, and the Paddy Thompson Award. Prior to his involvement in Franchising he held various sales roles and spent 12 years with Canon in the UK in Sales Management and as Marketing General Manager. After leaving Canon he was involved in the set up of companies in the technology sector.

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t was J.F. Kennedy that said “Ask not what your country can do for you – ask what you can do for your country”.

To bring this idea into the context of franchising: “Ask not which is the best franchise to buy – ask if franchising is the right fit for you”. Whilst franchising is a great business model, and the success rate (length of trading) is generally higher than the general business environment, it is not a guarantee of success. A franchise system provides you with a set of guidelines that, when applied, should give you a proven outcome. Sounds great doesn’t it? But, if it were that simple, wouldn’t every franchise owner in that business achieve the same result? Why then, is that not the case? To illustrate why this doesn’t happen, I like to compare a franchise system to a gym, since most of us have been a member of one at some point. Gyms are usually fitted out with the latest equipment – in franchising, these are the tools and/or products. Gyms have people to show you how to use all that equipment – these represent the franchise system, and the training and the support it provides. Finally, there are no restrictions on how often or when you can visit, especially with the latest trends in 24/7 gyms – which represents 24/7 trading in franchising. So… why doesn’t everyone who joins a gym get the result they are looking for? This probably won’t surprise you, but around 80 per cent of people who join a gym in January quit by May, and only 18 per cent visit more than once per week. Is it the gym’s fault? We can come up with a whole range of excuses: • I am just too busy; • It’s too cold; • I haven’t been feeling well; • My friend stopped going; or • It’s full of fit people. What does this mean for operating a franchise business? The key here is to recognise the role of the individual in the franchise system. Understand why people quit or don’t achieve what they thought they would, and what can be done to ensure you don’t fit into that category. For me, this complex problem can be answered with three words: 1. Commitment 2. Discipline 3. Responsibility. Let’s break down these elements.

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Are You Suited to Franchising?

Commitment We are all guilty of a lack of commitment at some point or other. Maybe it’s that New Year’s resolution that doesn’t last until the end of January. It might even come down to a single throw-away line that a friend or associate makes. Are you easily swayed by the opinion of others or always starting things but never finishing them? Look at your resume, how frequently have you changed jobs? Whilst these are not the only indicators to why running your own business may not be the best option, it should form part of your considerations. The thing that amazes me the most is that some people enter into a franchise system, and then don’t follow the systems which are there to make their business a success!

Discipline Are you able to follow rules? Joining a franchise is not like joining the military, but you still have to follow the system. Imagine going into a McDonald’s restaurant, asking for a Big Mac and the server saying “I’m sorry we don’t sell meat products”. This might seem laughable, but this happens every day in a franchise in Australia, when a franchise owner decides they don’t like the company flyer, or business card, or they have found a cheaper product than that recommended by the franchisor. You need to be an Intrepreneur*, not an Entrepreneur. What’s the difference? The term Intrapreneur was originally used to describe “A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation”.[2] Koch (2014). The parallel with franchising is clear, when you realise that most of the good ideas for change within a franchised business come from franchisees, and not the franchisor. One of the best known franchise systems in the world can point to various instances of where franchise owners are responsible for innovation. Three unrelated McDonald’s franchise owners separately invented the Filet-O-Fish (1963), the Big Mac (1967), and the Egg McMuffin (1972). Looking closer to home, the first McCafe opened in Melbourne in 1993. You may think this doesn’t apply to long established brands, but Subway’s $5 foot-long sandwich was introduced by a Miami-based franchise owner, who in 2008 decided on his own one weekend to start offering sandwiches for $5. It proved to be such a hit that the idea turned into a marketing campaign for the entire corporation. Probably a good illustration of the principal of better to ask for forgiveness than permission! Good franchisors don’t stifle innovation from franchise owners. However, there is good innovation and bad innovation. By way of example, changing the colour of your company logo or using an alternative product because it is cheaper is bad innovation. Using your official company logo in a way that hasn’t been done before would be good innovation.

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The number one success factor in any business is to continue to do what works. If the gym instructor says to do three sets of 10, doing one set of 12 won’t give you the same result. If you want to lose weight there is only one sure way to do it, and it’s the exact same technique used to succeed in business: be disciplined.

Responsibility You need to be someone who takes responsibility for their choices. The old saying “If it is to be, it is up to me”, should be your mantra. This doesn’t mean that you shouldn’t look for advice wherever you can find it, that is completely sensible. What it does mean is that you need to consider advice, do what you think is right for you, and then take responsibility for the result. For most people, the attraction of running their own business is that it will give them control of their own destiny. Ironically, they either expect the franchisor will grow it for them, or believe it just happens. Remember the gym analogy – going to the gym and looking at the equipment will not help you achieve your goals. You have to use the right equipment in the right way at the right frequency. It is in this area that many franchise owners struggle, especially when they mature in a system. They can become frustrated and feel they know best. From the franchisor’s perspective this is a very difficult time as they try to balance the desire to keep a well performing franchisee and the greater needs of the group as a whole. Australia’s own Greg Nathan, bestselling author and psychologist, calls this “The Free Stage” in his book – The Franchise E-Factor – a must read for any franchisee or franchisor. Start today by doing a self-audit. Not everyone is suited to running their own business. Regardless of how good the system is, your success is largely going to be down to you. Ask yourself some very basic questions: How do you handle stress? Do you subscribe to the theory of ‘bite off more than you can chew and then chew like crazy’, or does stress put you into a sort of mental paralysis. Inevitably, there will be issues in the business that take you out of your comfort zone – machine breakdowns, employee issues, bad debts, etc. The great thing about a franchise system is that there is an excellent chance that someone else has gone through the same thing before, so help is not too far away. Are you a glass half full or glass half empty type person? A positive attitude is probably the greatest thing any business owner can have. Do your due-diligence. You would be staggered by how many prospective franchise owners don’t even call existing franchisees to see what they think. It is a requirement of the Franchise Code of Conduct that a franchisor provide you with information of existing and previous franchise owners by way of a Disclosure Document. This should include their contact details and when they left the system. They will help you cut through the sales speak that forms every franchisor’s presentation of their business. Don’t just ask the generic questions like “What’s it like?” “What’s the franchisor like?” They will either go into a rant about things that are not relevant to

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you, or give you a one or two word answer which would not provide much help. Write down questions that give you an idea of the realities of the day to day operation of the business. For example: • “How many hours do you work in a week?” • “What do you find is the hardest part of operating your business?” • “What is the best part?” Also, ask questions that answer any fears you might have. Don’t worry; it’s normal and probably necessary to have some reservations about starting any business. These questions may include: • “How long did it take before you were earning what you expected?” • “What sort of support do you get from the franchisor?” • “How physical is the work?” Be sure to weight the responses just as you would a restaurant review. Read between the lines and look for common threads. Not everyone is happy, and not everyone is happy every day. Some franchise owners also believe that more franchisees will reduce their share of the pie and lower their income… but the opposite is actually true. There are always the doomsayers that will tell you that “one in three businesses goes bust” or “I know someone who bought a franchise and they lost their house”. These are usually people who have never run a business and are never likely to. In many cases they will be the same people that would love to own their own business but are too scared to try, so they try to put you off in order to justify their own decisions. Are your expectations realistic? I had a friend who used to say “the best way to make a small fortune is to start with a large one”. For most people, the overriding drive to start their own business probably comes down to two main things: 1. Financial independence 2. The freedom to control their own work and life. On the first point, it is highly unlikely that you will be able to sell your franchised business for millions. So, in reality, whether you buy a retail franchise or a mobile service business, you are essentially buying an income stream - what some people call “buying a job”. Let’s be honest here, if you go to work every day you are working for a living. Very few business owners are in a situation where they can be completely divorced from their business. The old adage that a business that is not growing is going backwards is probably accurate. And guess who is going to keep your business moving forwards: you. This brings me to the second reason – freedom. Most business owners will tell you they work as many, if not more hours than they did when they were employed. The difference now, is they work when they want to. We have a number of franchisees in

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our systems that work a three day week. They are not restricted to five weeks’ holiday a year, or forced to work set hours, or even deal with clients they don’t want to. Strangely, many people will work harder for someone else than they will for themselves. The key to success as a franchisee is to work smarter, rather than harder. What does the ideal franchise owner look like from a franchisor’s perspective? I have had the opportunity to meet many successful franchise owners over the years, both within our network and other systems throughout Australia. If I had to describe the single thing they had in common, it would be that they took responsibility for their own successes and failures. The person that will achieve their goals is the one who puts together a plan and then sticks to it. They don’t make excuses, they simply execute their plan. I have seen many people with all the necessary attributes who could talk the talk, but unfortunately couldn’t walk the walk. Good franchise owners and franchisors see the franchise relationship for what it is – a partnership. The most successful partnerships are those where the partners divide up roles, and each sticks to their part. In franchising the role of the franchise owner is almost exclusively the customer facing sales role.

The S word Sales make the difference between an average business and a great one. If you are in business, you must learn how to sell: your business depends on it. As someone who comes from a sales background, I can let you into a little secret… it’s not that difficult, and it’s probably not what you think it is. We have this impression of the salesperson being the type that never pauses for breath until you agree to buy whatever they are selling. In reality, the best salespeople are those that you don’t think are selling to you. They’re the café owner who knows what coffee you like and probably also remembers your name, or the car detailer who lets you know that your car needs a polish. When I tell people that I’m from a sales background they usually give me all these reasons why they couldn’t possibly be a salesperson. Yes, they are selling me on why they can’t sell! If you’re not prepared to sell your business’s services or products, then maybe you are not sold on them. You might have noticed the pattern developing here. We’ve talked about commitment, discipline and taking responsibility, but if you could encapsulate all that in a word it would be Consistency. Consistency is the one word which sets out what franchising is all about this is it. I want you to imagine you are travelling through the US. You’ve been on the road for hours and starving when you come across a small town, and this being the US, there are neon signs everywhere enticing you in. Most of the names you have never heard of, but then you see one you recognise. That’s the one most of us would choose. It may not offer the best food, but at least you know that you’re not going to be staring at the menu for ages and end up with something you can’t eat. I myself went on a trip with a

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bunch of mates to a campsite in France, and we would go to the local Macca’s to use the bathrooms… we knew they would be cleaned every 20 minutes – consistency. Of course, we then felt compelled to order something. Do you ever wonder how many burgers or drinks McDonald’s sell just because they have clean and convenient bathrooms? This is largely why, in a service business, most groups offer a standard type offering. Not because they are controlling, but to ensure the clients get a consistent result. So, there you have it. To be a successful franchise owner you need to be prepared to make a long-term commitment, be disciplined in your application of the franchise system and take responsibility for your results. In addition, make sure your due diligence on yourself and your chosen franchise system is thorough and honest, and that your expectations are realistic. And remember: Success is 20 per cent inspiration and 80 per cent perspiration. The first written use of the terms ‘intrapreneur’, ‘intrapreneuring,’ and ‘intrapreneurship’ date from a paper[5] written in 1978 by Gifford Pinchot III and Elizabeth Pinchot. Later the term was credited to Gifford Pinchot III by Norman Macrae in the April 17, 1982 issue of The Economist.

Mike Stringer Franchisor Car Care Australia 0402 775 059 mike@carcare.net.au www.carcare.net.au

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Chapter 2

The Answer to the Big Question for New Franchisees –

How do you choose the right franchise? Professor Lorelle Frazer | Asia-Pacific Centre for Franchising Excellence Griffith University

About the Author The Asia-Pacific Centre for Franchising Excellence was launched by Griffith University in March 2008, formalising the University’s commitment to franchising research and education, developed over more than a decade. Its aim is to help advance franchise sector best practice through independent research, education and the dissemination of information via the Centre’s website. Since its launch, the Centre has been led by one of the world’s leading and most highly respected franchise researchers Professor Lorelle Frazer. Based at Griffith University in Brisbane, the Centre works to transform research findings into practical outcomes for business, such as the Centre’s free, online Pre-Entry Franchise Education Program, sponsored by the Australian sector regulator, the Australian Competition & Consumer Commission, which was developed following research into franchise conflict uncovered a greater need for prospective franchisees to conduct better due diligence before buying a franchise. Its research helps inform policy and Centre members actively engage with key government bodies and franchise associations across the Asia-Pacific, as well as with other franchise academics across the globe. - 11 -

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here are consumer signposts everywhere in modern society for people looking to make purchases of all shapes and sizes. But how do you find the same roadmaps that will guide your way into franchising? For large purchases such as a house, car or holiday, right down to everyday dining or grocery items, consumers now have a myriad of ratings and comparison mechanisms at their fingertips. From open for inspection and test drive checklists to detailed advice on choosing holidays, restaurants and household products, readily accessible knowledge underpins all modern-day decision making. Buying a franchise is arguably the biggest and most important decision that someone will make in their lifetime, and is one that will have a huge impact on their finances, work-life balance and future. It therefore makes sense for this decision to be afforded the same level of scrutiny, comparison and analysis as more routine and less-influential purchases.

A BIG DECISION As Professor Lorelle Frazer of Griffith University’s Asia-Pacific Centre for Franchising Excellence explains, you wouldn’t buy a car before taking it for a test drive, having it checked by a mechanic and making sure there was no money owing on it. Franchisees should take a franchise purchase even more seriously, for two reasons. First, a franchised business is likely to cost much more than a car. Second, unlike when you buy a car, there are no consumer warranties when you buy a franchise. Franchisees must take responsibility for their own investment decisions. Many people have a dream of one day being their own boss, and buying a franchise can provide the pathway to making this happen. However, there are endless franchises out there to choose from and plenty of traps for unsuspecting newcomers to franchising. Also, the reality of life as a franchisee can be very different to the dream.

DON’T WAIT UNTIL IT’S TOO LATE – ASK QUESTIONS Those looking to chase their franchise dream need to analyse, ask questions and think hard about what it will actually be like in reality. The time to do this is upfront, before they make the decision to buy a franchise and it is too late. Are you the right personality for that business? How will it affect your lifestyle, your relationships with your family, your social life? Regardless of the franchise and the product or service it provides, it is important for people who are considering buying a franchise to undertake pre-entry education and ask critical questions about what they are seeking to achieve. Is return on investment the key motivator for becoming a franchisee, or is it predominantly a lifestyle choice? Seek to define upfront what your priority is and exactly what it is you want to achieve by buying a franchise. Prospective franchisees need to rely on much more than just their ‘gut feel’ or their dream-like vision of what franchising will actually be like. Doing your homework, or ‘due diligence’ as it is more formally referred to in the franchise sector, will help to

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READY TO OWN YOUR FUTURE? When itâ&#x20AC;&#x2122;s your own business, thereâ&#x20AC;&#x2122;s no limit to the amount that you take home. With franchising opportunities now available, it makes sense to join our world class team.

ENQUIRE TODAY (03) 9234 2200 | franchising@hairhousewarehouse.com.au www.hairhousefranchising.com.au

More information at your fingertips! Check out our other resources available, designed to empower and educate you on your franchising journey.

Business FRANCHISE Australia and New Zealand magazine The Magazine for Franchisees, Bi-monthly publication

Australian and New Zealand Business FRANCHISE DIRECTORY Annual publication CGBâ&#x20AC;&#x2122;s website also provides an additional advertising and information format and complements our publications.

www.businessfranchiseaustralia.com.au

How do you choose the right franchise?

build solid foundations for any potential franchisee, and will ensure you are as fully prepared as you can possibly be and know exactly what you are getting into.

RESEARCH, RESEARCH, RESEARCH Research by Griffith Universityâ&#x20AC;&#x2122;s Asia-Pacific Centre for Franchising Excellence has shown that many franchisees enter franchising with unrealistic expectations. An emotional attachment to a franchise brand and a dream-like vision of what their life as a franchisee will be like often overrides objective information. The more due diligence prospective franchisees conduct and the better informed they are before they buy means they are much more likely to invest in a franchise with realistic expectations that are aligned to their business and lifestyle goals. The first port of call for anyone thinking of buying a franchise should be the free online Pre-Entry Franchise Education Program developed by the Asia-Pacific Centre for Franchising Excellence and funded by the Australian Competition & Consumer Commission (ACCC). This program was introduced in 2010 and in 2017 passed a major milestone of more than 15,000 registered participants, with an average of approximately 2000 prospective new franchisees completing the program every year since its launch. Armed with this invaluable pre-entry information and having made a decision that becoming a franchisee is the best path forward, how do you then go about actually finding the right franchise business for you? The best advice for deciding on a franchise to invest in is to not totally rely on one single source of information. Remember, there is always going to be another franchise opportunity so if you are not completely happy do not rush into buying. Prospective franchisees are encouraged to do as much homework as they possibly can before making the decision to invest. Take full responsibility for what is a life-altering decision. Probe, question, compare and analyse, not just blindly accept what someone selling a franchise says. Thoroughly research the franchise brand, its competitors and the industry in which it operates on the internet. Talk to your friends, family and colleagues. Ask them if they heard of your potential brand and what do they think of it? Have they shopped there, used their services, or would they? Also, try to imagine what your day-to-day life will be like in that franchise? You may like drinking coffee, eating pizza or looking after dogs. But have you really thought about what it would be like if you have to serve coffees, make pizzas or wash dogs all day, every day? Does the franchise feel like a good fit for you? Will you be engaged for the next six months, two years or 10 years? How does this fit with your earlier decision about what you want, a high yield on your investment or greater lifestyle flexibility? Be diligent in asking for all costs involved in your purchase. This should be in your disclosure document so make sure you scrutinise this and ask questions before you buy.

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There is much to consider. Are you the right personality for that business? How will it affect your lifestyle? What are the financial implications in the short and long-term? This is before you even get to managing staff, cashflow, IT, HR and the hundreds of other issues that come with being your own boss. There is a lot more to becoming a franchisee than meets the eye. The crucial first step for prospective franchisees is to define what they want, knowing what to look for when researching a franchise, and learning how to accurately access franchise business opportunities. Only then will they be in the best position to buy a franchise that is profitable, aligned to their personal interests and goals, and a pleasure to own.

DO YOUR HOMEWORK Here are some key signposts to navigate the way into buying a franchise: • Know your ‘why’ for buying a franchise; • Analyse your financial position to know what price range to look for; • Create your personal selection criteria to use when making franchise enquiries; • Know your strength, weaknesses, skills and abilities that will help you become a franchisee; • Prepare your personal information package to share with potential franchisors; • Learn what to look for in a franchise system and its business model; • Actually analyse your chosen franchise system; and • Complete a five stage due diligence process. The reality of life as a franchisee is usually very different to the dream. That is why it is so critical to take a step back and start asking questions and finding answers in order to make well-informed decisions. Anyone contemplating jumping into a new life as a franchisee needs to take a deep breath and do their homework so that it is their head, not just their heart, driving their decision-making. Building on the success of its ACCC Pre-Entry Franchise Education Program, the AsiaPacific Centre for Franchising Excellence has developed an innovative educational offering for prospective franchisees – the How to choose a franchise that is right for you eClasses. This new product adds another important layer of learning to pre-entry franchising education for those who have made the decision to buy a franchise, but have yet to decide which one. How to choose a franchise that is right for you provides practical guidance, knowledge and education on the key question of how to choose a franchise that is right for your personal, professional, financial and lifestyle goals. This is the essential guide to choosing, buying and becoming a franchisee. The eClasses are filled with valuable tools, checklists, calculators, timelines and templates to ensure

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How do you choose the right franchise?

you are making the most informed and rigorously road-tested decision possible. The How to choose a franchise that is right for you program empowers those seeking to buy a franchise with the knowledge to expertly navigate this process, covering everything from understanding franchise terms, the questions to ask, the paperwork and costs involved, due diligence and the professional advisers you need on board. The eClasses will help to avoid the pitfalls, save money in the long run by making the right decision upfront, and set the foundations for a successful and sustainable franchise journey. Key learning outcomes include an understanding of: why you want to buy a franchise; the different franchise types and their pros and cons; how to assess the franchise business model and if it is suited to you; the processes to go through to know what you are actually buying; and how to go about making a decision on which franchise to buy. This is a unique educational tool, not available anywhere else in the franchise sector, which provides the valuable framework and signposts for prospective franchisees to navigate what is a life-altering business decision. It is 100 per cent impartial and independent, with no vested interests or selling of franchise systems. It is the only product of its kind that will step you through the process of actually deciding which franchise is best for you, with no strings attached. These eClasses have been specifically developed in response to demands for more practical guidance, knowledge and education on the key question of how to choose a franchise that is right for you. Just as ever-increasing consumer demands have lifted the standards of product and service offerings across all aspects of modern society â&#x20AC;&#x201C; from buying a coffee, a car, a house or holiday â&#x20AC;&#x201C; it is envisaged that this new learning tool will help to boost standards throughout the franchise sector on the back of better educated and more discerning franchisees. The authentic and ethical nature of the educational resources provided to prospective franchisees is what sets the Asia-Pacific Centre for Franchising Excellence apart in the franchising sector. There is no hidden agenda or selling of franchise systems or products. As well as setting franchisees on the right path to franchise business success, the Centre offers a wide range of ongoing, industry events, resources, and educational programs for both franchisees and franchisors, as part of its commitment to lifelong learning and professional development for all in the franchising sector. Visit the website for more information on the educational resources available.

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

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Chapter 3

new to franchising? your Questions answered George Yammouni | CEO Bathroom Werx Group

About the Author George Yammouni is CEO of the Bathroom Werx Group - a national Franchise System specialising in quick and affordable bathroom makeovers and renovations. He is a 30year CPA veteran by profession and started his business as a Franchisee in 1986 after a career in merchant banking. He acquired the Franchisor in 1988 and began franchising in 1990. Bathroom Werx renovates over 200 bathrooms every month around Australia for Customers, including the worldâ&#x20AC;&#x2122;s leading Hotel groups and Government Housing Departments. George is one of Australiaâ&#x20AC;&#x2122;s leading exponents of service franchising and is a Past Chairman of the Franchise Council of Australia.

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Business FranchiSe Guide

uring my 31 years in business - running a national franchise service operation specialising in bathroom makeovers - I have been asked many questions by people from various backgrounds, looking to get into their first franchise business. Of course, many are related to our business and the details of the day-to-day operations, however I have selected the most common questions I have been asked over the years and answer them for you below. As you read through this, I hope it provides insight and assistance in your quest for the right business opportunity, for you and your family.

I want to get into business for myself – where do I start? Firstly, make sure you have the support of your partner and family as being in business is going to consume a lot of your time. It’s important that they are behind you in this undertaking. Then, start saving money. You want to have at least half the purchase price in cash, this will mean you don’t have to borrow more than 50 per cent which will take a lot of pressure off you. Next, think about what sort of business you are going to enjoy getting up for every morning. Look at the skills you currently have - can you use those skills in your own business? If you can, that’s one less thing to worry about as there are plenty of new things to learn when running your own business. If you are going to be doing something completely different, see if you can go out and work for someone who is already in this business for at least a week. Make sure you like doing this work and enjoy it! Take annual leave from your job if you must; work for free if need be – this will be the most valuable thing that you do and will help you enormously in making your decision. If looking to buy an existing business, then I would recommend a two-week trial shift with the current owner. That way you get to determine whether you like the work, confirm the weekly sales of the business, see first-hand how it runs and what is involved on a day to day basis and gain many more valuable insights into the real business. There are lots of websites that you can visit to find out more about the business you want to get into and the industry that it operates in. It is very important you have a good idea of the big picture and how that can impact on the business you are looking at. It’s not that hard. You just have to make the decision and make a start. The more research and preparation you do, the better chance you give yourself of success.

What sort of franchise business would you like? To find the franchise business for you, ask yourself the following questions: • Can I see myself getting up every morning and running this business?

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NEW TO FRANCHISING? YOUR QUESTIONS ANSWERED

• Does it excite me? • Does my family support me in my decision to buy this business? Getting into business is a serious undertaking that is going to consume a lot of your waking hours. So, it is a good idea that the business is something that you enjoy doing. You will be putting a lot of hours into your business, especially in the first few years, so having the support of your family is very important.

Do you have control over decisions in a franchise? Franchising is about the synergy that develops from two people combining their entrepreneurial spirit to grow and develop their mutual business - the aim of this synergy is to create wealth for both. This means that in running the business you will have certain functions to perform to make sure that you are successful and your franchisor has certain responsibilities to ensure that the value of the brand, and therefore your business, continuously increases in value. If you look at franchising this way you will soon realise that you are getting into business with a lot of people – they all have a stake in the business, they all want to be involved in decisions and outcomes that affect them. The way you run your franchise business has an impact on every other franchisee in the system and them on you. You can start to see how important the franchisor’s role of keeping everyone ‘singing from the same hymn sheet’ becomes crucial to the success of the brand. So back to the question, of course you have a say. You control the day-to-day and the interaction of your customers with your employees and with the brand. Every day you should always ask yourself how you can run things better, so that your customer is the winner. These are the sort of answers that your franchisor is always searching for and this is where you have a big say in the business. The other side of this is that you are one part of a big team… your brand - and that requires discipline from you to play your part on that team. There is nothing to be unsure about in running a franchise business. The functions that determine the success of your business have been identified and systems are in place to help you carry them out. All you have to do is follow the SYSTEM. In general, this is one of the most important factors that makes franchising more successful than small business.

How much of the purchase price should I borrow to buy a franchise? My recommendation is to have at least 50 per cent in cash, which means you will not

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Business FranchiSe Guide

need to borrow more than 50 per cent and the reason for this is simple. Before you go and buy a house, you have already determined what price range you can afford. You know how much you have saved up and you have already been advised the maximum amount you can borrow – this is based on your level of income which determines your repayment which then determines the maximum amount you can borrow. So, armed with this information you now have a budget for the maximum amount you can spend to buy a house. The result is that you are going to end up with a house that you can afford to pay off each week based on the income that you earn. You should follow a similar process when buying a business. Most accountants would advise you to never borrow more than 50 per cent of the capital required to get into that business and I have to agree with that. For example, if you are buying a business that has a total purchase price (including all the costs of acquisition of $100,000, my rule of thumb is never borrow more than 50 per cent of the annual net profit of the business (before interest, tax and owners’ wages), or 50 per cent of the purchase price of the business, whichever is the smaller figure. Don’t forget that loan repayments have to come from the profit that the business makes. The rest of the money should be in cash from your own resources – not borrowings against other assets. Business loans are generally short-term loans of five to ten years (usually they will match the term of your franchise agreement), and have higher interest rates and fees. This means that your loan should be repaid over this time period therefore increasing the monthly repayment amount. Can the business afford to pay that each month? In this example $50,000 must be repaid over five years which is $1,100 per month (at a 11.5 per cent interest rate). Can the business afford this each month? If it can, will it leave you with enough money to live? These are simple enough calculations which I would highly recommend doing first when deciding first how much you should borrow. There are plenty of challenges in running a business – why burden yourself with the extra stress and worry of borrowing too much.

BECOMING A MULTI-UNIT FRANCHISEE You’ve made the decision, you’ve done all your homework, organised your finance, finished the training and now you’re there… running your own franchise business. Life sure has changed a lot since you started in business – it’s exhilarating and you love every minute of it. So, what happens next? One of your options for the future is to expand your business by opening another store

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NEW TO FRANCHISING? YOUR QUESTIONS ANSWERED

in your franchise network i.e. become a multi-unit franchisee. This option is being explored by more and more franchisees now as they grow their businesses to the next level. It makes a lot of sense to use the knowledge you’ve gained in running your new business and leverage that into two, three, four or more stores inside your franchise system. It also makes more financial sense to do this rather than put your money into other investments - whose returns you have no control over. Plus, your business has a much higher rate of return that most investments in the market place. Isn’t that why you got into business in the first place? A lot of franchisors are now encouraging this trend, as it makes a lot of sense to encourage existing franchisees to expand and grow their businesses. It keeps top performing franchisees in the system and gives them the opportunity to set goals which form part of their long-term business plans. It also gives franchisees the opportunity to develop and grow substantial businesses, which not only add value to the brand but also become huge wealth generating assets for the franchisee. Here are some things to think about before you go down that road:

1. Learn the business first It is critical that you have a very good understand of the key drivers of your business. Concentrate on developing your skills in the key areas of the business: • managing and developing your team, • establishing a management structure, • ability to delegate, • local marketing and customer service, • continuously reviewing your performance, • business and financial planning. As a multi-unit franchisee, your focus must change from operational to more strategic. You are going to have to develop your financial skills, as well as staff recruitment and management skills. If you have these skills from your previous work life experiences, you are ahead of the game already. Measure your performance against other franchisees in the system. This way you can start to gauge whether you are achieving good market penetration in your current store before you move on to your next one.

2. Organise your finance to ensure you have enough working capital to finance another location You are going to need money in the bank or credit facilities to finance your expansion.

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Business FranchiSe Guide

This can include the following: • franchise fee, • store fit out, • stock, • staff recruitment and training, • management team to run new location, • opening marketing promotion, and • working capital. Take the time to do this as going into your second store highly leveraged is a recipe for disaster. If you had to borrow a lot of money to start your first store then make sure that you have paid a good part of that off before starting your next store. Sit down with your accountant and do some serious financial modelling, making sure that you understand the cash flow implications of a second store. I also recommend break-even analysis so that you know what sales levels are required in the second store and the impact it can have on your overall profitability. Running a profitable first store is crucial to your success, as its cash flow will be very important in the early months of your new store. That is why it is crucial to have a profitable business before you start your expansion.

3. Do your market research - again Choosing the location of your next site is just as important as the decision you made to choose the location for your first store. This time you know more about your business and your customers and this knowledge is going to help you enormously in analysing and choosing your next location. Thoroughly research your site selection, and work with your franchisor to ensure you have chosen the right site. There are a lot of factors to consider and sometimes you just have to be patient as you wait for the right site to come up. If it’s not right, don’t jump in - there is no hurry to jump into a second-rate site. Don’t forget you already have an existing business to run. Your franchisor is going to be an enormous help to you here, as they are going to have their own research in this area and will be able to provide you with some very important information.

4. A strong management team and infrastructure Building a strong management team and an administration infrastructure to run your business is critical as you move into the next phase of your business growth.

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NEW TO FRANCHISING? YOUR QUESTIONS ANSWERED

This will enable you to add a third, fourth, or fifth location. This structure can easily be leveraged to grow your business and add even more stores. It provides pathways for your staff where you can offer rewarding careers for your most talented staff members, offering them a variety of different roles at different locations. This will help you retain and attract great staff. This is probably the most expensive part of running your business but the good news is that this infrastructure can handle multiple stores and it is this leverage that will make you serious money in the long term. The management system and infrastructure you run is the backbone of your business. Make sure that you are using the latest technology available to keep your administration costs down. It is vital that it gives you the leverage to grow the business without having to resort to increasing your staff numbers to cope with the growth.

5. Talk to your franchisor As soon as you start thinking about expansion, talk to your franchisor. They will have the experience of helping other franchisees that have followed this path and will be able to provide you with a checklist of all the things you have to do. There will also be clauses in your Franchise Agreement that govern this and you will have to check whether your Franchise Agreement allows you to do this and that you are eligible for a multi-store franchise operation. The good news is that franchising is about replicating successâ&#x20AC;Ś in many locations. Somebody else has already done all the hard work in working out the best systems that will run a multi-location franchise â&#x20AC;&#x201C; following the model is a recipe for success that reduces the risk of expansion and helps you generate more wealth for you and your family.

George Yammouni CEO Bathroom Werx Group george.yammouni@bathroomWERX.com

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Chapter 4

How to Conduct Due Diligence when Buying a Franchise DC Strategy

About the Author Building the foundations of successful businesses for over 30 years, DC Strategy is Australasiaâ&#x20AC;&#x2122;s only end-to-end consulting, legal, recruitment and brand and marketing firm. Working with retail, food, industrial, financial, community, IT, professional, trade and service organisations, DC Strategyâ&#x20AC;&#x2122;s multidisciplinary approach ensures that the appropriate talent and experience are applied at every stage and that clientsâ&#x20AC;&#x2122; business needs are served professionally and cost effectively under one roof. DC Strategy have advised over 200 networks and established over 2000 franchised locations in Australia alone, creating well over $2 billion worth of enterprise value for clients.

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hree specialist franchise experts – a business consultant, a lawyer and a recruiter each provide practical advice to guide you through the due diligence process of assessing a franchise purchase. Even the phrase ‘due diligence’ can be intimidating especially when you know so much rests on getting it right when you’re buying a franchise business. Accountants and lawyers often use it to mean simply the investigation or appraisal of a business undertaken by a prospective buyer to evaluate its commercial potential. Here the financial consultant, the lawyer and the franchise recruiter each examine why this is important and explain what you need to consider and do during this vital process.

Assessing and containing risk For each of our three panelists, this is all about managing risk. The statistics tell the story: 4 out of 5 independent small businesses fail in the first five years and about half of them in the first year. In contrast, just less than 1 out of 5 franchise businesses fail in that period. So although that is definitely a significant decrease in risk – how do you reduce your chance of being one of the almost 20 per cent who fail? Most franchisees buy into a proven business network rather than establish their own business because they want to improve their chances of being successful. However simply buying a franchise doesn’t ensure you will be! Even in profitable networks, there are franchisees who thrive and others who struggle. So you need to gather as much information as you can to assess the opportunity, weigh up the variables and understand how YOU will manage the risk to the very best of your ability. Yes, there are specific characteristics and concerns associated with certain sectors and industries. But whether it’s a retail, quick service restaurants (QSR), financial services, trades, professional, hospitality, IT, health and beauty, mobile or bricks and mortar, B2B or B2C business, our advisors will tackle the key issues to guide you through. They will show you how to evaluate the quality and value of the franchise you are considering, what processes you should follow and who to turn to for professional advice to best protect yourself when buying a franchise business.

A BIG Decision! RECRUITER: With about 1400 franchise systems in Australia, the first question is probably: “which franchise is the right one for me?” Typically franchisees invest around seven years of their lives and many borrow quite heavily - often against the family home - to invest in their franchise. So there’s a lot on the line here. CONSULTANT: I agree, so let’s look at commercial considerations in deciding first what kind of business you should buy and then, whether the business you are looking to purchase meets the criteria.

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How to Conduct Due Diligence when Buying a Franchise

How much will you need to invest? RECRUITER: Your investment will be your time as well as your money. QSR franchises can operate 12 or more hours a day, seven days a week. And here’s the most important thing: to be successful, franchising is an owner/operator proposition. So you need to be aware of how much time it will take to operate the business properly and whether this fits in with your other commitments - family and other obligations. CONSULTANT: How much you can really afford? Work out the total investment including operating capital for rent, staff and operational costs until the business is profitable. Include interest on loans, your wage as an owner operator and the period it will take to recover your capital costs. Can you service your existing home, car, credit card or other loans and still maintain your lifestyle if you buy into a franchise business? It may take several months to build up enough turnover to make a profit or match your current income.

How do the financials stack up? CONSULTANT: First up you will want some kind of business plan that includes financial data or a financial model, preferably a Profit & Loss statement (P&L) to figure out if the business is a sound financial proposition. RECRUITER: Ask the franchisor what the numbers are based on – preferably other franchisees’ and/or corporate store performance. CONSULTANT: Does the financial data you’ve been given make sense? Break the numbers down so that you know how many products or services you need to sell, how many clients you need to service per day, and what would they have to spend on average to break even, after meeting all your overheads. If you don’t have the information, ask the franchisor for the average ticket price (ATP) or the number of clients they service a day. And ask for the average unit volume (AUV) or turnover of a range of businesses. This will allow you to see if the financial assumptions in the data add up, and also whether the franchisor has a good understanding of their own business. RECRUITER: You also need to figure out if a site will generate enough revenue. Let’s say you’re thinking of locating in a retail shopping strip or mall. Thursday night would be very different to Sunday morning, so visit at various times during the day and the week. Even the best franchise business concept won’t work if there is not enough passing foot traffic to make sufficient sales. And yes, that could mean sitting in a shopping centre and literally counting the number of people that walk past your intended site at different times of the day and on different days of the week. CONSULTANT: Next you need to get a good understanding of the operating costs. As a rule of thumb, rent should not be more than 10 per cent of sales; cost of goods (COGS) about 30 per cent and wages no more than 30 per cent of turnover.

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How do you figure out how much operating capital you will need? CONSULTANT: This will vary from business to business. Operating capital is the amount of money you will need to cover your overheads such as rent, wages, utilities, cost of goods, loan repayments, franchise fees etc until the business starts to be profitable. And don’t forget your salary during that time so you can meet your rent/ mortgage, school fees, etc and maintain an adequate standard of living. A QSR (fast food business) in a busy mall may only take a month or two, but in the financial services sector where revenue may be commission based – it may take 9-12 months. Be realistic about what the business can return, factoring in all the outgoings for as long as it will take to return a profit ensuring you can survive that period. RECRUITER: Ask other franchisees in the network how long it took them to be profitable and estimate how long you could survive if the business didn’t turn a profit as quickly as you may have anticipated.

How will you calculate your return on investment (ROI)? CONSULTANT: The next consideration should be the ROI. In simple terms, working on the numbers you have obtained and verified as closely as possible, how long will it take you to get back all the money you have invested? This includes any interest you may be paying on the loans you have taken to fund the investment in your franchise and the operational capital you put up. And remember the business will need to pay you a reasonable and fair salary during this period. Generally the larger the investment, the longer the period to realise the return will be. As a very rough guide businesses under $100K should return the investment in 12-24 months. Businesses from about $180-400K should see the return in 2.5 to 3.5 years. Businesses from $500-$850K or so may take over four years and investment over the $1M mark may take five or more years. But the higher the investment, the higher you would generally expect your reward to be on an annual basis. An investment under $100K may return a $50-70K annual return whereas a $1.2M business may see annual returns of $250-400K. RECRUITER: But be realistic! If you can service the debt, pay your interest and a reasonable wage, by the end of the first year – great, you have the foundation of a good business. Typically your business should grow most rapidly over the next 3-4 years and your ROI will maximise as your business becomes fully established. CONSULTANT: That’s right. The aim is to pay down residual debt more quickly from this point and to be debt free in five years. So long as you understand the period and ensure the term of your franchise agreement (and your lease) are sufficient, not only to give you time to get your initial investment back but hopefully to build some capital as well as the eventual goodwill you will achieve when you sell. LAWYER: Ideally the term of the lease should line up with the term of the franchise agreement which in retail or QSR is generally five or six years.

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How to Conduct Due Diligence when Buying a Franchise

CONSULTANT: So if we take an average of about 3.5 years to see the return on the capital investment and franchisees average about seven years in any system, You should get the initial investment (plus your annual salary) back in your first average five year term. LAWYER: So definitely look for a second five year term option in your franchise agreement as you’ll be a couple of years into that term when you may want to exit and crystallise the capital gain that is the reward for your hard work.

How much time can you truly commit? RECRUITER: The successful franchise requires an owner/operator to be truly profitable. So be real about much time you have to invest and the amount of time that will be required in the business. Is this a seven day a week business, such as a quick service food business when you may be required to work public holidays and nights? Will you need to employ staff; will members of your family work in the business or be giving up a job to work with you? Running your own business impacts not only your lifestyle but also the lives of your family and may not work if you have a young family and a seven day business. Or are you looking for a part time opportunity to fit with children at school or a semi-retirement plan? There are many franchises, such as work from home and mobile opportunities that allow greater flexibility as do many B2B businesses that only require a Monday to Friday commitment. CONSULTANT: However, if you are looking for a part-time opportunity, be sure that the numbers you are working on to assess your returns relate to the amount of time you intend to work. For example, operators in a mobile food concept might be earning good revenue because they work on weekends and Friday evenings at sporting events and markets. But if you’re only looking to work on weekdays then break down the potential earnings from the financial data to calculate exactly what can earn in the hours you intend to work, and what proportion in the period you don’t, and still see if that is enough income for you.

Look for possible trading cycles and seasonality CONSULTANT: Is the business seasonal; do sales vary significantly throughout the week/year? Are sales consistent throughout the day or are they focused on specific times? Knowing this will govern how you staff the business, the hours that you should work and also whether the franchisor has considered a product or service offering for all parts of the day or month or year. RECRUITER: Yes, like ice cream and frozen desserts. In warm climates, revenue will not fluctuate as much from summer to winter as in a cold climate where there can be a significant drop off in winter sales. But provided the summer trading is profitable enough to cover the lower income months then the numbers should average out for the year to create a profitable business.

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Business FranchiSe Guide

CONSULTANT: Or in some cases, the business may offer say a hot beverage range which may form 25 per cent or more of revenue in the winter months. So break the numbers down to each of the revenue streams and understand whether the fluctuations in trading still create an overall profitable business model.

Location, location, location RECRUITER: The location of your franchise business will obviously affect the profitability and there can be significant variation between sales in units in the same network. This includes mobile as well as bricks and mortar businesses. Go to the site or suburb where you want to operate. Are potential customers in the area? LAWYER: Do you have an exclusive operating or marketing territory in your franchise agreement? CONSULTANT: Who are your competitors? Look carefully at the factors that have made the most successful operators profitable and what may be the factors for those who are less so. Is being in a mall or the high street, or near another high volume business or a seasonally based tourist attraction part of any business’ success? RECRUITER: If it is a shop or premises, how far will you have to travel from your home? A couple of hours travel a day on top of your labour commitment could be a deal breaker after a few years. See if you can get an outlet in your district which also has advantages of being part of the community and market you know.

Always assess the documentation LAWYER: A critical part of your due diligence is to examine every piece of information the franchisor provides as this should outline what you are purchasing and the terms. More on this later.

Check out the Operations Manuals CONSULTANT: The Operations Procedures and Training Manuals should tell you exactly how to run your business with all the systems and procedures clearly explained. How will training be delivered; will there be an additional cost; what about training your staff and what ongoing support is offered? What marketing will the franchisor do; what marketing collateral is provided and how will you be able to use that to market your business locally? LAWYER: What are your responsibilities to the franchisor regarding financial reporting, attendance at conferences and minimum performance criteria? Assess and consider whether all the tasks required match your skills and whether you can outsource the tasks that you are not good at, or don’t want to do. Ensure you have access to the Operations Manual and read every line as your ability to comply with the Operations Manual is generally part of your compliance with the Franchise Agreement. You may find that a breach of the Operations Manual may also be a breach of the Franchise Agreement and could potentially lead to the termination of your franchise. So it’s really important that you read the Operations Manual very carefully.

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How to Conduct Due Diligence when Buying a Franchise

RECRUITER: Franchisors are often reluctant to provide you with a copy of the Operations Manual before you sign the Franchise Agreement because it contains confidential information. However, you should be able to look at the Operations Manual at head office and note the sections relating to performance criteria and legal obligations

Assessing the brand and cultural fit RECRUITER: Does the business match your experience and skills? Are you passionate about the industry, service and products? You need to be, as you are not only stumping up some serious money, you’re potentially committing seven years of your life! You need to believe in what you are doing to be really successful. Cultural allegiance drives performance so it’s important that you support and believe in the company’s values and are aligned with the founder’s vision. CONSULTANT: Your genuine commitment to the brand will drive your employees’ commitment, your customers’ loyalty and ultimately your profitability. This applies to the franchisor and to the other franchisees - you want to work with competent people you respect and who are as dedicated to the brand’s success.

Assessing your own compliance RECRUITER: A franchise is not a democracy. Yes, you have an opportunity to run your own business, but the reason you are buying into a franchise is to reduce the risk of establishing your own business. LAWYER: You are buying access to franchisor’s intellectual property; their operational systems and procedures; brand and marketing; proven products, services and supply; and training and support. Your success is dependent upon your willingness and ability to comply fully with every aspect of the franchise business as outlined in the operations manuals and the franchise agreement. So understanding what that requires entirely and being prepared to comply operationally, legally and personally is fundamental to your success.

Get verification of everything you can RECRUITER: The core of your due diligence is to ask questions and get answers! Speak with the franchisor (or recruiter) with any concerns and see what independent verification you can get for everything they tell you. Research the business on the internet, look up old press releases and stories, visit several outlets and watch how the staff and customers interact. Most importantly, speak with other franchisees, former franchisees (and even competitors of the franchise you are considering), to gain as much information as possible. CONSULTANT: Other franchisees can tell you how training was provided when they joined and if it was sufficient. They can confirm whether it was available for their employees, at whose cost the training was provided and what ongoing access and support is available. They may verify financial performance: how long it took to

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become profitable, how much operating capital they needed, about seasonality, rents and staffing. RECRUITER: Ask other franchisees about the franchisor (or recruiter) - what they are like to deal with for support and how responsive they are to individual franchisees. Speaking to a range of franchisees is useful as franchisees’ experiences can differ greatly and you want to get a balanced view of the franchise network.

The Franchise Agreement LAWYER: You may get a stack of documents 10-12cm thick (seriously!), so let’s break them down and examine them one by one. It’s imperative that you (and your business partner/s) read every line in every document. Don’t be intimidated by the language. Get a highlighter and highlight anything you do not understand or agree with. Make notes on the margins with questions to ask your accountant or lawyer as you’ll get the best response from your advisors by being as proactive as you can in gaining that understanding.

The Disclosure Document (DD) RECRUITER: The DD is legally required under the Franchising Code of Conduct and will give you important information about the franchise you are thinking about buying.

Franchisees LAWYER: The DD has a list of current and previous franchisees as well as their contact details. You should contact at least three current franchisees and a number of franchisees who have left the network and ask the questions outlined in the ‘Get Verification’ section above.

Litigation LAWYER: The DD will also let you know about any litigation or disputes past or present so you will know if there have been any serious issues between any of the franchisees and the franchisor.

Experience of directors LAWYER: Look at the experience of the directors and officers of the franchisor. A franchise system whose operators have management skills and years of experience in their chosen or a related business is more likely to be secure than a business that has been operating for a short period of time or where the directors do not have much experience in management or business. You need to exercise your judgement as every system starts out small and sometimes even well-established networks can experience difficulties, retraction or in some cases, collapse.

Intellectual Property and Trade Marks LAWYER: The intellectual property (IP) of a franchise business is fundamental to your due diligence as you are essentially ‘renting’ access to use the brand for the term of your

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How to Conduct Due Diligence when Buying a Franchise

franchise agreement. A trade mark is a key piece of the franchisor’s IP and you need to be certain the franchisor owns the trade mark in the relevant jurisdiction, especially if the franchise is not yet well established. It is important to check that any registered trade marks appear in the DD, and that you review the scope of protection which has been sought. If a trade mark has only been applied for but is not yet registered, this could mean a number of things. If this is the case, it is important to obtain legal advice as you want to be sure that the system you invest in has exclusive ownership of the trade marks and can grow the brand and the value of your (and their) investment.

IP Licence Deed LAWYER: This document gives you the right to use the franchisor’s IP, so taking legal advice will ensure the trade marks and any other IP (for example any patents, designs or copyright) are in order.

Franchising Code of Conduct LAWYER: You will also receive a copy of the Franchising Code of Conduct (commonly referred to as the Code). This document outlines all of the measures, guidelines and procedures the government regulator ACCC (Australian Competition and Consumer Commission) has provided that govern the way in which franchisors and franchisees conduct their business and their franchise relationship. You should read this document as well as it is important to understand your obligations and what recourse you and the franchisor will have in the (hopefully unlikely) event of a dispute.

Information Statement RECRUITER: This is a mandatory document also provided with the agreements that gives some broad information about franchising in general. It will be part of your learning journey as you decide whether a franchise business is for you.

Leases CONSULTANT: If you are purchasing an existing franchise, you need to check the details of any lease or licence agreement to make sure there is enough time left on the lease to get a reasonable return on your investment. LAWYER: Yes, I’ve seen a number of cases where franchisees have purchased existing franchise businesses without realising there may be only 1-2 years left on the lease. When buying an existing business, you may need to arrange for the lease to be transferred (or negotiate a fresh new lease) and will also need to consider negotiating a further option term. Ideally the term of the lease should line up with the term of the franchise agreement which in retail or QSR is generally five or six years. If the franchise is an existing mobile business with a vehicle lease – check the terms of the vehicle lease and any renewal options for the same reasons. CONSULTANT: It is also important that you make sure there is no plan for demolition or redevelopment by the landlord as relocating your premises for redevelopment even

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temporarily could be highly disruptive and possibly even permanently damaging to your business. It may reduce access to your customers and therefore your sales; it may incur large unexpected fit-out costs and ongoing operational costs such as re-printing brochures, modifying your website etc with your new location. LAWYER: The person selling an existing franchise should also give you a Lessor’s Disclosure Statement which should have information about any plans for demolition or redevelopment. However it’s a good idea to contact centre management personally and confirm there are no plans for redevelopment that will impact your business for the duration of the lease. And if you do proceed with a lease in a centre where redevelopment is scheduled, be certain you, the franchisor, a leasing agent or your lawyer have negotiated adequate compensation and that the franchisor is party to that understanding.

A Head Lease and a Licence to Occupy LAWYER: In many cases (such as large shopping malls) where a lease on premises will be required, the landlord (also referred to as lessor) does not lease directly to a franchisee. Instead, they require that the franchisor takes the (head) lease and grants occupancy rights to the franchisee. This may be in the form of a Licence to Occupy or a Sublease. In these circumstances, the franchisee will be responsible for the franchisor’s obligations to the landlord (for example, bonds, guarantees, payment of rent which the franchisee provides directly to the landlord). You should take professional advice that this is in order and your rights and obligations are clearly explained.

A Lease and a Step-in Deed LAWYER: This is another lease arrangement you may encounter when leasing a premise to operate a franchise business. In this scenario the landlord grants a lease directly to the franchisee. Franchisors may request that the landlord enters into a stepin-deed with the franchisee and the franchisor. The deed provides that the franchisor has the right (but not the obligation) to have the lease transferred to the franchisor (to take over or ‘step-in’) in the event that the franchisee abandons the business or their franchise agreement expires or is terminated. Again, take professional advice so that you understand your rights and obligations.

Fit Out Costs CONSULTANT: Fit out costs are often overlooked in the due diligence phase and can lead to a major fall-out between the franchisor and franchisee before the business is even launched. Check with the franchisor whether the fit out costs are fixed or just rough estimates that could change at any time during the fit out period. If the costs are only estimates (as they often are), contact the fit out contractors directly to either pin them down to a contractual arrangement for the fit out or manage how the costs could change and ensure you have enough money to deal with any possible increase. Some franchisees have been left with very large unexpected invoices during the fit out period which has seriously impacted their financial capacity to launch and operate the business as they did not have access to more funds.

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How to Conduct Due Diligence when Buying a Franchise

LAWYER: It is a good idea to check the Disclosure Document (DD) in relation to Establishment Costs and see if this is broadly aligned with the fit-out costs quoted. The DD may have a range (as there may be different layouts depending of the franchise location) but try and pin the franchisor and their contractors down contractually on costs, the time frame and who will be managing the process.

What happens at the franchisor interview? RECRUITER: Your interview with the franchisor (or recruiters) should not just be one where you answer questions about your background and ability to run the franchise. It is also a chance for you to ask the franchisor questions about their business plans, the level of support they give franchisees and the details of training, including where it will take place and what expenses may be involved. It is also an opportunity to understand their vision for the brand and the culture of the network to see if your values are aligned.

Protection under the Franchising Code of Conduct LAWYER: The Franchising Code of Conduct requires franchisees to seek independent advice from a legal adviser; a business adviser; or an accountant. Franchisees are required to provide a signed statement to the franchisor prior to entering into the franchise agreement confirming that they have sought the advice from the relevant advisers (either signed by the advisers or signed by the franchisee). If you choose not to engage any of these adviser(s), the Code requires you to provide to the Franchisor a signed statement that you have been told to seek that advice but have decided not to. This underscores the serious nature of the relationship between you and the franchisor. CONSULTANT: But you wouldnâ&#x20AC;&#x2122;t buy a house without professional input such as a building or pest report or without engaging a professional conveyancer/lawyer to handle the contracts. Buying a franchise is no different â&#x20AC;&#x201C; it is simply common sense to pay the relatively small amount to engage professionals to assist and protect you. Be certain to get the commercial and legal advice in writing and try to negotiate a fixed fee for the services.

Understanding and Managing Risk CONSULTANT: The commercial, legal and screening processes outlined above give you systematic guidelines about how to conduct your due diligence from the period where you are considering buying a franchise to the final execution of the legal documentation. It is quite simply gathering and assessing as much information as you can to evaluate the risk of going into that business and deciding if it acceptable or not. RECRUITER: Although buying a franchise is less risky than starting up a business on your own, there is no guarantee that your franchise business will be a success based solely on the fact that it is a franchise. LAWYER: The Franchising Code of Conduct is there to protect you so speak to a lawyer and an accountant/business advisor who specialise in franchising. Not only could it save you thousands of dollars in potential litigation, it will assist you in negotiation of

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the Franchise Agreement and give you the peace of mind that youâ&#x20AC;&#x2122;re making a legally informed and commercially sound decision.

DC Strategy 1300 682 657 www.dcstrategy.com

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Chapter 5

FUNDING YOUR FRANCHISE James Scurr | Founder and Managing Director Cashflow It

About the Author James Scurr is the Founder and Managing Director of Cashflow It, a specialist equipment finance company and the only equipment-funder focused solely on the Australian franchise industry. He has almost 20 years’ experience in the franchise industry having spent time as a successful multi – unit franchisee for companies including Boost Juice Bars and other independently owned businesses. James has extensive franchising and small business experience and has an acute understanding of a franchisee’s requirements. James holds a Bachelor of Business, majoring in Management and Accounting from Queensland University of Technology, he is a member of the Franchise Council of Australia and is a Certified Franchise Executive.

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or most franchisees, finance is going to be a necessary requirement in their life as a small business owner. Whether you are just about to commit to buying your first franchise business or you are a seasoned franchisee opening your tenth location, securing finance is probably going to be a critical step in your journey. Having a greater understanding of finance will put you in a better position and make securing finance a less stressful process.

WHAT TYPE OF FINANCE DO YOU NEED? You can broadly categorise all types of funding into two categories – equity and debt. Equity finance is using funds in exchange for a share in the ownership of your franchise, and includes your own cash savings that you will be putting towards the cost of the business. Equity partners become an owner along with you and will enjoy the potential upside through profits and capital growth, but they will also suffer the potential downsides should the business fail. Sources of equity funding may include cash savings, business angels, family and friends, venture capitalists or even crowdfunding. In the case of an existing business it may also include your retained earnings. Debt finance is typically made up of funds borrowed from a source outside of the business and will be paid back with interest over time. It usually comes from banks and other financial institutions, or it could come from family or friends, and in some cases vendor finance with the franchisor. It would be quite rare for a franchise to be completely funded with only equity or only debt, it is usually a mix of both. Let’s delve more into debt finance.

HAVE REALISTIC EXPECTATIONS From time to time I see franchisees expecting to be able to debt finance 100 per cent of their business. In some very rare cases this might be a reasonable proposition, but generally this is a recipe for disaster. Being overburdened with debt is one of the fastest ways to becoming another business failure statistic. Working out what a safe and responsible level of debt to employ in your business doesn’t have to be a guessing game. We will cover this shortly, but essentially the key message here is have a realistic expectation of what the right mix of debt and equity should be in your business. If you don’t have enough to contribute on the equity side, then maybe you should be looking at a franchise with a lower cost of entry, or sourcing more equity partners.

GET ADVICE Before you start the formal process of applying to banks and other financial institutions it’s a great idea to get some professional advice. This may include accountants, lawyers and business advisors who can assist with determining what structure you own and operate the business in, understanding your obligations as a business owner, reviewing agreements, tax planning, GST obligations, pointing out the potential risks and helping with business plans to name a few.

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There are also various state government departments that provide small business assistance at no charge. Consider making an appointment with one of these agencies to see how they can assist you. Getting the right advice before you start your business can save you a lot of stress and money in the future and save you from making mistakes that you may not have even considered.

APPLYING FOR FINANCE This is where we need to get organised. Not understanding what lenders want to see and not being well prepared can potentially kill your chances of securing funding. Lenders want to support sound and viable businesses. Showing a lender why you are or will be a sound and viable business, and how you are going to repay the debt is critical to a successful application. What you need to provide to a finance company is also going to differ from lender to lender, and based on the amount of funding you are applying for. The requirements for a $50,000 application are going to be different than applying for $250,000. And the requirements from a specialist equipment finance company is going to be different to what a bank will require. After your initial application, you should ensure you get a very clear indication from your lender of what supporting information they want to see, then set about to provide exactly what has been requested. Not only does this ensure a smooth application process, but it should mean you get your approval in a more timely manner. The most common requirements from lenders may include: • Application Form • Forms of Identification • Trust Deed if you operate through a trust • Business Plan • Personal Asset & Liability Statement • Commitment Schedule • Financial Projections • Accountant Prepared Financial Statements • ATO Portal and / or Business Activity Statements • Personal and / or Company Tax Returns • ATO Notice of Assessment. Whatever information you are asked to provide, it is important that you make sure it is accurate. If there are errors in your information it can quickly erode your credibility. On the other hand, providing information and records that are all up to date will enhance your application. Let’s go into a little more detail on a few items from the list above.

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Business Plans A lot of franchisees underestimate the value of a great business plan. They think that because they are joining a franchise that a business plan is not relevant. Whilst the lender may have a good understanding of the franchise system, the business plan is your opportunity to sell yourself. A good business plan has many aspects, including: • Explaining the critical functions of the business and how these functions will ensure you succeed. • Communicating all the objectives of the business to financiers, business partners, investors and possibly employees. • It can be a point of reference, once you are trading, for monitoring your progress against the goals or targets you have set. As a starting point, for new and small businesses, a plan should include the following: • The business - include the entity name, trading name, legal structure of ownership, ABN, trading location, franchise information, shareholders, and a summary of what the business does. • The market - discuss your target market, what products you offer, a little about the industry you will operate in and your competitors. Prepare a SWOT (strengths, weaknesses, opportunities and threats) analysis, market demographics and trends. • Marketing strategies – discuss what advertising and marketing strategies you will undertake to ensure you reach your projected revenue targets. Some franchisors offer assistance with Local Area Marketing plans which may be a good place to start. • The management team - outline your experience as the owner as well as your key personnel that will be employed in the business. Include prior business experience, education and training that may assist the business, as well as any awards or recognition. • Financial information - this should include financial projections for the business as well as current financial statements in the case of an existing business. For a new business, you should also include a summary of the total cost to set up the business and clearly show how the total purchase is going to be funded. • Goals - you may have particular goals relevant to your business and these can be a great way to engage your staff in the business plan. You may have broad business goals like aiming to be a multi-site franchisee and opening more locations. You could also outline your exit strategy here too. Including your exit strategy in your business plan may seem strange, but I doubt very much you plan to work in your business for the rest of your life. At some point you are going to want to sell and hopefully realise the growth in value of the business you have started. In franchising it’s also not uncommon for some franchisees to adopt a strategy

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focused on opening new locations, growing them and selling. Documenting some ideas about your future plans to exit the business will ensure you plan for this event. Keep in mind when preparing your business plan to be concise. Quality over quantity is what you want in a business plan. Lenders, investors and other stakeholders don’t want to read long business plans. Be realistic with goals and projections. Get the numbers right; if you are unsure where to start with your financial projections, you can try and seek some guidance from your franchisor, speak to other franchisees, search for industry benchmarks, or seek professional advice.

Asset & Liability Statements Be honest about your financial position. Bank account balances can be verified, assets can be valued, liabilities can be seen by lenders through credit reporting agencies. The asset and liability statement should be used to compile a list of what you ‘OWN’ and what you ‘OWE’. Obvious assets may include property, vehicles, furniture and cash, but don’t forget about superannuation and shares. Your liabilities will include loan balances on properties, personal loans, vehicle lease and credit cards.

Financial Projections Make them realistic and make sure you include the repayments of the finance you are applying for so the lender can see how the business can service the debt. This is what I was referring to earlier about how to determine what a safe and responsible level of debt might be that your business can employ. The projections are a great place to start to determine this. Don’t forget, if numbers aren’t your strong point then seek assistance from an advisor or accountant. Stress test your projections. What if revenue was 30 per cent lower, what if wages were 5 per cent higher, is the business still profitable and can it still afford the finance repayments.

HOW DO LENDERS ASSESS APPLICATIONS? When assessing the supporting information provided with a finance application, lenders typically do this whilst being guided by a set of credit principles known as ‘The 5 Cs of Credit’. The 5 Cs of Credit are: • Character – this is all about you, the borrower, your reputation, and your willingness to repay the debt. Not only will lenders use traditional methods like credit reporting agencies but increasingly online searches can be a source of information in this respect as well. • Capacity – to differentiate from character, this principle is about your ability to repay. This may cover income, expenses, and other debt obligations. • Capital – your overall financial position. This means your net asset position and how liquid those assets might be. That is, if things started getting difficult can those assets be turned to cash to either continue servicing your obligations or pay out your obligations.

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• Collateral – this refers to the security that you may be able to put up to secure your finance. Most commonly this can be your home or property, although this is more typical of a bank loan. Many specialist equipment funders won’t take security over personal assets and instead use the assets being financed as security for the debt. It is also important to consider the implications of providing Director’s Guarantees and Personal Guarantees as a commonly requested form of security as well. • Conditions – this relates to all of the terms upon which the finance may be offered to you and may include the interest rate, fees, and length of the contract. When preparing your business plan and providing other supporting information, keep these principles in mind. Depending on the franchise system you are buying into, you may find that a relationship exists with one or more financiers. This relationship is commonly referred to as Franchise Accreditation. If your franchise system is accredited with a lender, then this should make the process of seeking funding easier and less stressful. You will typically have access to franchise lending specialists and you should enjoy a more seamless approval process. All the major banks have accreditations with various franchise systems and some smaller specialist lenders like Cashflow It do also. Your franchisor would be able to provide you with this information.

COST OF DEBT Do you know how to work out your cost of debt? No, I am not referring to the actual equation you learn in Finance 101 involving the risk premium, the risk-free rate and tax. Let’s look at something much more simple. You should have an idea of what it is costing you to borrow funds for your business. If you are unsure about how interest rates work, then the easiest way to compare loan products is to compare what is paid back over the life of the loan. Simply add up all of the repayments due over the term of the loan, add any application fees, payout amounts at the end of the term and any other fees or charges. Then deduct your original loan amount, this will give you the amount you have paid the lender for the privilege of using their money over the term of the contract. To express this as an annual cost, then just divide it by the loan term. If you are going to compare lenders, then make sure you compare like for like products over the same term.

BEWARE OF FINANCE TRAPS Getting stuck in a finance contract that you didn’t fully understand can be a very costly mistake. The only advice I have for you is to make sure you read your contract in full before you sign it. It’s simple advice, but very few people read their contract terms and conditions. If you don’t understand what the terms and conditions mean, then ask your lender to explain them or seek legal advice.

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Here are a few common traps to be aware of: • Repayment Free Periods – being offered a 1, 2, 3 or even 6-month repayment free period may look great on the surface, but they are rarely free. The cost of the lender forgoing any income from your loan for that period is costed into your total contract. Refer back to my comments on Cost of Debt and work it out for yourself. Typically, the longer the repayment free period, the higher the real cost of the contract will be. • Contracts Without a Fixed Term – you might see your contract say ‘Minimum Term’ or it may actually state a term but when you refer to the terms and conditions, you will see that your obligations continue after the term. These aren’t necessarily a trap, but you need to be aware of it. In the case of a rental or operating lease, the reason it is structured this way is for the tax benefits you get from this type of finance. The contract will be written in accordance with tax legislation. • Paying Out Your Contract Early – if you decide that you want to pay out your contract earlier than its full term then make sure you know how the payout is calculated. There are numerous ways that finance companies can calculate payouts, some of them fair and some of them not so fair. Any reputable lender should be able to provide you with an Amortisation Schedule for your loan and this document should also include the payout amount due each month throughout the term of your contract. Make sure you also check if there are any other early payment fees or penalties. Hopefully now you have some more tools to help you secure the funding required in your franchise business. Good luck.

James Scurr Founder and Managing Director 1300 659 676 james@cashflowit.com.au www.cashflowit.com.au

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Chapter 6

UNDERSTANDING THE LEGAL DOCUMENTS Raynia Theodore | Principal, Corporate Advisory & Franchising Team MST Lawyers

About the Author Raynia is a Principal in the Corporate Advisory and Franchising Team at Melbourne based law firm MST Lawyers. Raynia has been practising in franchising law since 1998 and acts for a number of well-known national and international retail chains and franchise brands in a variety of industries. Raynia dedicates her practice to advising franchisors and franchisees in all aspects of franchising, including: • the setup of new franchise networks, including the drafting franchise documents for Franchisors and advising on Franchising Code of Conduct compliance • advising in relation to structuring, restructuring and joint ventures, in particular advising on structuring and asset protection for franchise networks; • acquisition and disposal of franchise networks and franchises; • advising franchisees, in particular master franchisees relation to the acquisition or sale of franchise businesses and review of franchise documentation • Consumer Law compliance, specifically in relation to pricing and supply issues, misleading or deceptive conduct and unconscionable conduct claims and dealing with the ACCC. • Franchise dispute resolution. Raynia is a regular contributor of articles for a variety of franchise publications on topical issues in Franchising.

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INTRODUCTION Buying 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 appropriate advice. This guide is designed to help you navigate your way around the key franchise documents. It is important to note that: 1. there is no such thing as a ‘standard’ Franchise Agreement. Each franchisor will have its own template Franchise Agreement. These documents are not bought ‘offthe-shelf’. Whilst there will be common provisions in every franchisor’s Franchise Agreement, there is no prescribed form or standard Franchise Agreement; 2. Franchise Agreements are weighted very much in favour of the franchisor and although many of the provisions in the Franchise Agreement will be 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 such changes are necessary to suit the special circumstances of a transaction or the Franchise Agreement contains a manifest error; 4. the Franchising Code of Conduct (‘the Code’) governs the documents that franchisors must give to franchisees and the processes that franchisors must follow in entering into a franchise relationship with a franchisee; 5. recent amendments to the Competition and Consumer Act 2010 (Cth), which came into effect on 12 November 2016, have extended unfair contract protections to standard form small business contracts, which may include Franchise Agreements. These new laws provide a mechanism for unfair contract terms in standard form small business contracts to be declared void. This offers franchisees added comfort and protection against unfair terms in Franchise Agreements.

KEY DOCUMENTS If you are buying a franchise, the franchisor will provide you with the following key documents: 1. 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; and

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

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 or makes a non-refundable payment to the franchisor or an associate of the franchisor in connection with the proposed 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, even after the end of the disclosure period. 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 transfer or renewal of an existing Franchise Agreement or to an extension of the scope or term of an existing Franchise Agreement. If you exercise your cooling off right you will be entitled to a refund of monies paid to the franchisor less the franchisor’s reasonable expenses provided these expenses or the method of calculating the expenses were set out in the Franchise Agreement and 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 details: • contact details for the franchisor and its associates, directors and officers; • the franchisor’s business experience and that of its associates, directors and officers; • litigation involving the franchisor, its associates and their directors; • existing and past franchisee details; • the intellectual property of the franchise network, details of who owns it and details of the agreement between the franchisor and the owner of the intellectual property; • details of the supply of goods and services to franchisees; • details of what goods and services franchisees can supply; • the franchisor’s territory and site selection policies; • details of how any marketing fund or co-operative fund operates and is administered;

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• set up and ongoing costs and expenses of the franchise; and • details of the franchisor’s financial position. The Disclosure Document should also contain a copy of the Code and a copy 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 – updated within four months of the end of the franchisor’s last financial year?

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

3. Is the franchisor or any associate or director of the franchisor or an associate currently involved in any litigation of the type described in the Code?

Current litigation should be disclosed in Item 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 an associate of the franchisor or a director of the franchisor or an associate of the franchisor regarding the following must also be disclosed: a. a conviction of a serious offence within the last ten years; b. final judgments in relation to civil proceedings for the matters set out in Item 4.1(a) of the Code within the last five years; c. bankruptcy or insolvency within the last ten years.

4. How do franchisees currently in the system feel about the franchisor and the network?

Item 6 of the Disclosure Document should set out contact details of current franchisees. You should seek to contact 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 Item 6.4 of the Disclosure Document. 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 their franchise ceased to operate.

6. Is the territory an exclusive territory?

Item 13 sets out the franchisor’s policies for site and territory selection and will

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detail whether a franchised business previously operated in the territory or from the site that your business 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. 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 Item 14 of the Disclosure Document. 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 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. 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 franchised 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); 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

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the Franchise Agreement or failure to meet any minimum performance obligations (such as minimum sales) set out in the Franchise Agreement; and

5. whether the territory is clearly defined in the Franchise Agreement, either 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 â&#x20AC;&#x2DC;good behaviourâ&#x20AC;&#x2122; 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 negotiate the lease terms themselves even if the franchisee is to hold the lease of the premises.

3. What are the terms of the lease? The Code requires that the franchisee be provided with a copy of the lease, or at the very least written details of the conditions of occupation as well as details of any incentive or financial benefit that the franchisor or an associate of the franchisor may receive. Leases and ancillary documents such subleases and occupancy licence agreements are usually complex, difficult documents which require the assistance of a lawyer to be understood.

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4. Who holds the lease – the franchisor or the franchisee? Some franchisors prefer to lease the premises and grant the franchisee a sublease or a licence to use or occupy the premises. Other franchisors allow the franchisee to lease the premises.

The decision about who leases the premises is usually one that the franchisor makes.

If the franchisor leases the premises, 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 in writing.

If the franchisee leases the premises, the Franchise Agreement may contain provisions about what is to happen in the event of the Franchise Agreement coming to an end. Franchise Agreements generally provide that the franchisor has the option of requiring the franchisee to transfer the lease to it. However, the franchisor may choose not to require a transfer of the lease which would mean that the franchisee finds itself in a situation where the Franchise Agreement has come to an end 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, the costs will be borne by the franchisee.

Franchisee Obligations Franchise Agreements will set out your obligations which will no doubt include: • complying with the franchise system; • following the franchisor’s policies and procedures; • marketing the franchise system and the franchised business; • undertaking initial and ongoing training; • using the franchisor’s intellectual property as specified by the franchisor; and • selling only approved products and services and using approved suppliers.

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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 whenever 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 specify the suppliers from whom goods or services can be purchased. To ensure consistency of supply and quality franchisors require goods and services to be purchased from the franchisor or approved third party suppliers. However, franchisors cannot, without authority from the Australian Competition and Consumer Commission, force their franchisees to purchase from third party suppliers. Franchisors may receive rebates or financial benefits from suppliers for the supply of goods and services to franchisees. The names of the suppliers that provide rebates or financial benefits must be disclosed in the Disclosure Document. Where franchisees are required to purchase goods or services from the franchisor, the franchisor’s terms of trade will need to be examined. Such trading terms are also likely to vary during the term of the Franchise Agreement. You should make inquiries to confirm that the goods or services are competitively priced.

Fees Franchise Agreements generally provide for the payment of the following fees: • One off fees such as an initial franchise fee for the grant of the franchise, an initial training fee for the initial training provided by the franchisor, a renewal fee payable on renewal of a Franchise Agreement and a Transfer Fee payable on the sale of the franchised business to a new franchisee. • Recurring fees such as royalties payable for the ongoing right to use the franchisor’s intellectual property or business system or for the ongoing services provided by the franchisor, marketing contributions (where the franchisor maintains a marketing

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fund) which are used to market and promote the franchise system as a whole and technology licence fees for the use of the hardware/software/intranet/point of sale systems which the franchisor supplies. • Other costs such as initial fitout costs (where the franchised business is conducted from premises), refurbishments costs for upgrades to premises that may be required during the term of the franchise, the franchisor’s legal costs associated with the franchise documents, ongoing training costs and fees for any permits or licences required to operate the franchised business.

Sale of franchise Another standard provision in a Franchise Agreement is a provision allowing the franchisee to sell the franchised business. Under the Code 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 and sign new franchise documents with the franchisor.

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. The franchisor can only terminate a Franchise Agreement immediately on the following grounds if such grounds are also set out in the Franchise Agreement: • 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 is a company and becomes deregistered by the Australian Securities and Investments Commission; or • where the franchisee voluntarily abandons the franchised business or the franchise relationship; or • where the franchisee is convicted of a serious offence; or

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â&#x20AC;˘ where the franchisee operates the franchised business in a way that endangers public health or safety; or â&#x20AC;˘ where the franchisee acts fraudulently 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. Following the end of the Franchise Agreement (e.g. due to expiry of the Franchise Agreement or termination) you should be aware of your post termination obligations. The Franchise Agreement usually requires the franchisee to stop operating the franchised 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 franchised 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 post expiry 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 complaining party (Complainant) issuing a notice of dispute on the other party. The notice will need set out the nature of the dispute, the outcome desired by the Complainant and the action the Complainant believes will resolve the dispute. The process then requires the parties to make 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 terms with the franchisor (that is, terms specific to your circumtances), you should ensure that these are accurately represented in the Franchise Agreement by way of special conditions. You should also take care to ensure that any promises or representations made to you by the franchisor or its representatives, on which you are relying in entering into the

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Franchise Agreement, are also accurately represented in either the Franchise Agreement or in a Prior Representations Deed, which is a document specifically designed for that purpose.

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 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 qualified financial and legal advice from an accountant and a lawyer who each have significant expertise 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 terms of the Franchise Agreement. A Franchise Agreement is a legally binding agreement and is generally binding for a long period of time so it is important to obtain advice and to thoroughly understand your obligations under the Franchise Agreement.

Raynia Theodore Principal, Corporate Advisory & Franchising Team MST Lawyers 03 8540 0242 www.mst.com.au

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Chapter 7

What to consider before you buy Nathan Hood Carbon Group

About the Author Holding a Bachelor of Commerce in accounting and finance as well as a CPA, Nathan Hood has been pushing to shape the accounting industry from a young age. Buying into a business at the age of 23, Nathan grew the business to operate at full capacity by offering services beyond the standard tax accounting services. In 2014, he merged with local bookkeeper Jamie Davison to launch Carbon Group. They then added divisions in cloud integration, insurance, finance and financial planning, with the vision of providing a one-stop shop for core business needs. Nathan assists small businesses with cloud-based solutions to enable them to run their business more efficiently. Teamed with expert strategic advice when it comes to tax accounting and structure, Nathan provides businesses with the tools to reach their goals and achieve growth. Carbon Accounting are Xero platinum partners, and have recently been awarded as Boutique Firm of the Year at the Australian Accounting Awards. Nathan plans to continue challenging the accounting industry with the aim of pushing accountants to provide a much more holistic and full service to their clients to strengthen the SME footprint in the Australian market.

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uying into a franchise is becoming an increasingly popular choice for many Australians who wish to fulfil their dream of working for themselves. The flexibility of choosing what hours you work, seeing your company grow, and having the opportunity of potentially uncapped earnings is something that the majority of us would love to be doing! There are hundreds, if not thousands of franchise groups across Australia in pretty much all industry sectors, meaning there is probably a franchise opportunity that would suit most of us. Sounds great, doesn’t it? Before you get too excited at the idea of buying into a franchise group, there are numerous considerations that your accountant would want you to weigh up. Many people buy into a franchise with little to no business ownership experience, but instead sign up straight from working for an employer. Working for someone else, you typically have a specific role with a bunch of tasks that you’re responsible for but once you become a business owner, you will be wearing hundreds of hats! You’ll have to start thinking about sales, marketing, HR issues, profits and rent, just to name a few. The list could be endless. So whilst the idea of joining that franchise group sounds like an opportunity not to be missed, we’ve highlighted a few areas to get you thinking before you embark on your business owner journey.

What can the franchise group do for you? With an ever-growing list of franchise groups out there, it’s important to consider the benefits that each has to offer. A simple point to start with is their brand name. How strong is it both locally and nationally? A strong brand will already have an established reputation, and should make launching your business easier; attracting customers straight away and kicking off sales to a good start. A less known brand may take more time to get noticed, and you may be left doing more work to chase customers. What internal software does the group provide for running the business? Look out for fresh and new systems that make running your business more efficient, with minimal manual work required. If there are multiple systems, do they speak with each other and therefore remove the need for double data entry? For example, if the franchise is in the retail industry, ensure the POS system can be integrated with the accounting system to automatically import sales figures. In terms of the accounting software, ensure they are using a cloud-based system. Something like Xero or MYOB. As mentioned previously, one of the perks of owning your own business is flexibility. Cloud-based systems allow this, since they provide access to your accounts 24/7, from any location, and on any device, giving you the freedom to work at a time and location that suits you. Avoid any system that requires an internal server to run it, as this generates higher IT costs. From an accountant’s perspective, the advantages of using a cloud-based accounting program goes above and beyond the flexibility of convenient accessibility. You can provide your accountant with logins, which means they have access to realtime data at the touch of a button, removing any guess work associated with looking at

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historical data. This allows the accountant to provide you with accurate advice based on actual figures, meaning you can make better business decisions to help reach your goals. How strong is the growth of the franchise? If growth is on the cards for you, which would be a no-brainer for a business owner, ask for historical evidence of the speed of growth of business turnover, especially if it’s a new franchise where this is not easily visible to the public. Can you run multiple sites if you wish to continue growing? What are the associated costs with running multiple sites? Do they offer a discount for each additional location? Is there a cap on how big one location can get, and if so, will that provide you with what you are looking to achieve financially? Do they offer a guarantee of income? Look for a franchise group that will assist you with growth. There are many groups out there who cover the fixed costs whilst your business is growing and expanding. Choose a franchise group that thrives on growth and who will support you in building your business empire. If you are spending $1,000s on growing your business, it may be a good few years before you can sit back and enjoy the financial benefits of running your own business.

Hidden Fees and Costs When weighing up the cost of a franchise, people often only consider the initial royalties and set up costs, such as shop fit-outs or the purchase of equipment. It’s important to note what these fees include, and what is expected to be paid going forward on top of this amount. If you’re just starting out, do they offer a first year discount to help get your business up and running? Once your business is up and running, what are the ongoing costs? Do franchise fees range depending on your business performance and how much revenue you’re bringing in, or is it a fixed number regardless of sales? Similarly, if the group decides to increase the fees, how much notice do they give? These points impact your profits, so should be a question that you ask straight away. As a new business, you need to get your business known in your local area. This is where marketing comes in. Usually, a franchise group will have a marketing team that works on a national level to promote the brand nationwide. They are there to provide marketing support to their franchisees, and often have brand style guides, templates and other resources that can be utilised. But if you’re looking to promote your business locally, that’s down to you, and it comes at a cost. Think local promotions, community events, and sponsorships. These are all great ways to promote your business, but you would be responsible for the cost. You’re part of something bigger when you’re a franchisee in a franchise group so there are often strict guidelines for what can and can’t be done in terms of marketing. National marketing teams work hard to ensure brands remain strong and consistent to keep it recognisable, so if you have some crazy marketing ideas on the cards, it’s probably best to check how flexible the franchise is in terms of what they will allow. They may put

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barriers in place to protect the brand’s reputation that they have spent years building and maintaining. Although marketing is a tax deduction, it can be easy to rack-up big bills when you’re trying multiple avenues to promote your business. There may come a time when you want to sell your business. How much do the franchises typically sell for? Have a look at other franchises in the group. Assess their average performance within the group, and see what that would equate to in a sale value. You want to feel assured that your years of hard work will be worth it financially.

Tax and Finance Considerations Buying into a franchise group can have a big initial outlay that you may or may not have the funds readily available for. If you need to borrow finance, it’s worth checking to see if the franchise group has any agreements with existing banks or lenders to assist in funding the purchase. Some franchises have a connection to certain providers to provide funding for up to half of the upfront franchise costs, making funding easier to achieve. Otherwise, that’s another one of the business hats you need to wear; assessing interest rates and terms of getting the financial assistance you need. What support is offered in terms of an accountant or bookkeeper? Are you able to source your own or is it a requirement to use an approved service provider? If you have existing connections with service providers, you may wish to use them, but some franchise groups prefer to use from their pool of suppliers. If this is the case, it may restrict the independent advice you are given if the group is already aligned with a service provider. The advice and service given from both accountants and bookkeepers is invaluable to business success, so it’s important that you’re comfortable with this. Further, it’s a good idea to look for a service provider who can do both your day to day bookkeeping, as well as end of year accounting work, or at least someone who has a great partnership that can take care of the work between them. Without this, you or your management team end up being the middle-man providing information to each party as requested by the other. It makes it much easier if you can avoid this and trust that the accountant and bookkeeper can work together and simply provide you with the end result. These days, accounting services go above and beyond basic services such as completing tax returns at the EOFY. When choosing an accountant to work with, look for someone who offers tax planning services. They will work with you to develop strategies and implement plans to minimise your tax and increase business returns. Proactive advice ensures that your business growth is phased for maximum benefits, while also reducing the likelihood of EOFY shocks. This will help put your franchise in a better financial position, whilst also reducing your stress! Does your tax structure enable you to minimise tax amongst the family group? Some structures are better than others depending on the industry, so it’s important to seek advice before you jump into making any decisions. If being your own boss is one of your goals, buying into a franchise group could be one of the quickest ways to do so. However, as with everything, it can come at a risk.

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Itâ&#x20AC;&#x2122;s important to consider all of the points outlined above, and ensure you have a full understanding of everything involved. Speaking with an accountant is an excellent place to start; seek one that offers more than just tax compliance because getting the advice you need at the early stages of your business life is the difference between a good business and a great business. Look for an accountant that has a proven track record of growing and expanding a business themselves and is willing to share their knowledge with you to build a long term relationship.

Nathan Hood Carbon Group nathan@carbongroup.com.au 08 9446 8588 carbongroup.com.au

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Chapter 8

HOW NOT TO BE AN ‘UNHAPPY FRANCHISEE’ Mike Irving | Business Coach and Communication Expert

About the Author Mike Irving created his first business - an outsourced sales solutions company - at the age of 21. While building the company Mike sought to improve his skills in training, interviewing and leading/managing his staff. However, the long hours took their toll, forcing Mike to work with different coaches to get the business to a point where it would run itself. These coaches offered only cookie-cutter solutions, which lead Mike to evolve a style that worked for him and one that changed his own life. So successful was his approach to training and management Mike switched gears completely. He shut down his sales enterprise and focused all his resources (time, money and attention) on understanding that experience and what it would do to others. During the last ten years Mike has worked with hundreds of business and franchise owners, accumulating 10,000 hours of experience. He’s created Advanced Business Abilities as a tool to help clients develop their skills in business ownership, communication, leadership and human resources.

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ne of the saddest corners of the internet is a website called Unhappy Franchisee. It is the go-to digital destination for disgruntled and distressed franchisees seeking the company of others who feel they’ve been badly done by their franchisor. Undoubtedly, some of the complaints documented on the website are legitimate. Businesses are run by humans and humans are flawed so the system is never going to be perfect. However, the very existence of Unhappy Franchisee means one of two things: franchisees have not done due diligence on the business they’ve purchased; or franchisees have not grasped one of the fundamental principles of this kind of business arrangement - that the owner is responsible for their failure or success. The second point is the subject of this chapter. It lays out the personal qualities and core character that’s necessary to be a successful franchisee and the procedures to have in place if you don’t want to end up airing your grievances on the internet. There’s no mystery to being a successful franchisee. The principles are the same for a business of any size. The good news is that these skills, abilities and character traits can be acquired and the principles learned. They are also the characteristics and codes that will serve you just as well in the private realm as they do in the professional. Indeed, a heightened level of self-awareness and an understanding of the principles upon which a successful business is built is so crucial that even top-drawer managers constantly strive to improve their practice. They work to improve their facility for co-operation and delegation, their ability to foster and manage relationships and, most importantly, their attention to the quality of their business’ products and services. Of course, it is impossible for anyone to be perfect. That concept doesn’t exist in real life. All too often we work on the wrong problems and get the right answer to the wrong problem. This doesn’t help us grow, and is a waste of time. The best way to prevent this from happening is to develop your self-awareness. If you have a grasp of the personal and professional qualities essential for a franchise to succeed, whether it be communication and leadership skills or understanding finances, a self-aware person will know what their weaknesses are and what is to be done to turn things around.

WANTED: INTRAPRENEURS, NOT ENTREPRENEURS During the digital age we hear a lot about entrepreneurs, those visionaries who created the great companies that changed the way we live, such as Bill Gates, Steve Jobs, Mark Zuckerberg and Jeff Bezos. However, there’s another kind of captain of industry who is just as dynamic, innovative and effective as these tech-era titans; the intrapreneur (the term was coined in 1985 in an influential book by Gifford Pinchot III).

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Combining traditional entrepreneurial spirit – fierce independence, lack of deference to established views and conventional wisdom, willingness to take risks – with the resources of a large corporation, the intrapreneur deserves to be studied as closely as Jobs, Zuckerberg and co. The most celebrated intrapreneur of all is General Electric chairman Jack Welch, the chemical engineer who took over the American giant in 1981 and ran it as if he was starting his own small business. Welch eliminated much of GE’s bureaucracy because it slowed down decisionmaking (he fired the bottom ten per cent of his managers every year regardless of their performance), he made the workplace less formal and warned the staff to expect the unexpected. This is the first thing to remember when you buy into a franchise. You are not an entrepreneur. You are an intrapreneur. You are not starting your own business but working within an existing structure with its own procedures, relationships, branding and marketing machine. So, before you take on a franchise it’s important to know if you are happy to work within this existing system. Certainly, Welch shook up GE but he did it within the parameters of major company instead of leaving to start his own business. Are you a Steve Jobs or a Jack Welch - a maverick or a team player?

TIME – YOUR MOST PRECIOUS ASSET Time marches on relentlessly and you can feel as though you’re struggling to keep up. It’s our truly limited resource. In fact, time’s forward march means that time management is a crazy concept – so crazy that I have coined the term “The Great Time Management Hoax”. You cannot manage time, how much you have in a day doesn’t change. All you manage are the events that take place during your day. Good businessmen manage events well. As a result they get more done. They prioritise effectively in order to ensure they allocate time for family, exercise, friends, and themselves. They are very aware of where they are spending their time, meaning they don’t spend time on something that could be easily delegated to someone else. Focus on what you can influence now – the events that occur, your reaction/response to those events, and what you can do to handle them differently. Put your focus on event management rather than time management.

CO-OPERATE OR CRUMBLE Co-operation in a business environment is vital for success. If it’s not there your franchise will not sustain itself.

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However, co-operation is much more complicated than the simple act of people working together. It is a complex set of attitudes, arrangements, and actions that, without each of them in place, there can be no co-operation. There are three essential ingredients for co-operation: 1. A Shared Brightness of Future

Very early in the business it’s important that you share your vision and invite everyone to climb on board. If your management and staff are not heading in the same direction they will work against each other, forcing the business to veer off course and, without correction, crash. It is about agreement. Everyone is in agreement about what the future is going to look like and everyone agrees to work towards that future together.

2. Frequency of Interaction

Co-operation doesn’t mean meeting and talking once a year. It’s about keeping open the channels of communication. Interact frequently and genuinely (don’t just go through the motions). And during these frequent interactions you will check that the Shared Brightness of Future is still in place.

3. Provoke-ability

This isn’t about being a pain in the backside. It is about creating a company culture in which every staff member feels free to speak his or her mind without fear of retribution. Here’s an example: An organisation holds a company wide meeting everyone from the CEO to the janitor is there. As part of the discussion everyone mutually agrees that there will be no smoking in the workplace. When a janitor taking out garbage comes across the CEO smoking at the back of the building, provoke-ability is about the janitor’s willingness to say to the CEO, “We all made an agreement there’d be no smoking on company grounds. How did you make it okay to break the agreement that you made with yourself and with us?” It’s important to note that this isn’t about attack or accusing someone; so the tone you’re using matters. It’s simply about bringing it to their attention that they’re not keeping an agreement they made, and asking what’s going on for them. Provoke-ability is also then about the CEO’s willingness to openly receive that feedback, acknowledge it and handle it. Something like “You know what, you’re right, I apologise” and then put his cigarette out and get back to work. Provoke-ability doesn’t only travel from the top down. It goes from the top down, the bottom up, sideways and diagonally when true co-operation occurs.

DELEGATE OR YOUR DECLINE WILL BE RAPID If you want your team to flourish – to innovate, to increase their responsibilities, to prepare to step up when you’re called away or on holidays – then it’s important to allow them to make mistakes. A successful owner does not have the belief “If you want something done right you have to do it yourself”. In fact, a great businessman actively seeks opportunities to delegate.

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Often, they’ll make a list of the things that they are really interested in continuing to do themselves, and then actively delegate everything not on that list. Further, they hire people who are better than they are in a particular role and give them the power to make decisions. However, there is a world of difference between delegation and dumping. To know whether or not you have delegated well, or simply dumped something on someone else’s lap, ask yourself these questions: 1. Have you thought about the task again after you handed it off?

If you have, it means you’re concerned about the task being done the way you want it to be done. If that’s the case then it’s likely because you weren’t clear on the instructions, so you’ve probably dumped it.

2. Has it been done on time?

If not, there is a problem. It means that you have not delegated or that you have delegated to someone that is not able to do the job.

3. Is the job done to your standard?

If not, effective delegation has not occurred.

DEFINE YOUR GOALS AND NEVER LOSE SIGHT OF THEM Every franchise owner has a goal but unless it is objective you will find yourself chasing your tail like a hamster on a wheel.

For example, if your goal is to be successful you have placed being successful in the

future. You can only have the goal to be successful if you feel you are not successful now. Because you’ve placed that target in the future, you’re actually creating being

not successful now. It is a subjective goal. If you ask ten different people what the definition of success is you will get ten different answers. This means that the goal can be a moving target. You might get the car you want, but then see another car that is better six months later.

You will forever be chasing a goal that can never be achieved because you haven’t defined success clearly. This creates compulsive behaviour and is a recipe for unhappiness, none of which is good for the running of a franchise.

A successful businessman doesn’t set goals around buying new cars, or having millions of dollars. He sets a target to get something done.

The car or the money is the result of what they have created. Every objective that they set has a clearly defined end action. An end action is the thing that does or doesn’t occur which indicates you have achieved the objective or not.

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UNDERSTANDING THE LAWS OF EXCHANGE If you go into a business with the sole aim of making money you’re doomed to fail. This is because you are not paying attention to the Laws of Exchange. The Laws of Exchange cover the relationship between your business and your client or customer. If you put your attention on your outflow of service, focusing on the quality and integrity of the product or service being delivered, your client will see the value you’ve given them and will have no problem paying you what you’ve asked for. By focusing on your outflow of service you will also be increasing your confidence and self esteem. You will know that you have delivered the best quality product or service you can and you’ll feel good about that. The result is that you’ll find it much easier to ask for the reward that you want and they will be willing to pay it. The problem comes when you shift your attention from the service to the reward; when you start focusing on your income. If less attention is on the quality of your service, the quality drops. You know this, so your self-esteem is impacted. Your client can also tell. They can sense something is off and may be less willing to pay the reward you’re asked for. In the worst cases you will have customers unwilling to pay for your service. They will perceive they’re not getting value. This is why I recommended franchise owners place their attention on service delivery, knowing that revenue and income will then be taken care of by default. I’m not saying that it’s a good idea to completely ignore your financial data. It’s always important to know what’s happening in your business. Just be aware of the tendency to get caught up in “I want more money” or “How much more revenue can we get coming in?” That can easily and quickly cause you to lose focus and see a drop in quality of service, and therefore income. It is where you place your attention that will determine the ease with which you get the Laws of Exchange working for you and ultimately your level of income and revenue.

YOUR BUSINESS IS AS STRONG AS YOUR RELATIONSHIPS Business is about relationships – with your clients and customers, with your staff and, in the case of a franchise, with those responsible for steering the overall business. If you don’t foster and manage those relationships your customers will quickly abandon you, the staff you have spent so much time and expense recruiting will move on and your franchisor will not be the enthusiastic partner you’re looking for. In the end, business relationships are no different from relationships in life. They’re built on a foundation of affinity, shared reality, communication, and understanding. This is the reason I’ve held the belief, that communication is the key to success for over 15 years. Without it we cannot foster strong and meaningful relationships in life or in business.

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HOW NOT TO BE AN ‘UNHAPPY FRANCHISEE’

CONFRONT, DON’T BE CONFRONTATIONAL Facing up to and dealing with a difficult situation is one of life’s great challenges. We all want things to go smoothly without our intervention but in life and in business this is not always possible. There are going to be times where if we don’t step in, we will cause even greater damage. For example, if you discover one of your trusted employees has been stealing money, it might be painful and uncomfortable, but it’s still vital that you confront that person. To do nothing would obviously jeopardise the soundness of your franchise. But confrontation does not always mean butting heads or being aggressive. It’s not about beating your chest and berating in order to get your way. Another definition for ‘confront’ is simply “to face up to and handle with ease”. So it can also mean your willingness to present the facts and calmly point out the problem so that a solution can be reached. In the example above of an employee who has been stealing, confronting that situation could be as simple as calmly telling them that you’ve been made aware of what’s going on (present facts/proof you have that they’ve been stealing), let them know that behaviour is in breach of their agreement and as a result their agreement is terminated, effective immediately. Notice that that scenario lacks any yelling and screaming of “You’re a horrible employee, how could you do that?!” It’s just presenting the facts, what the problem is, and what your solution is. In this case, it’s their termination. Business owners who struggle to face potentially upsetting situations would be advised to inspect that behaviour, and seek to improve their abilities in that area.

HIRE PEOPLE WHO ARE BETTER THAN YOU Your business will only be as good as the people you hire. You can have the drive, the smarts and the acumen of a Jeff Bezos or an Elon Musk but if the people you surround yourself with are not in the same league, your franchise will lag and eventually fail. Indeed, successful franchise owners make hiring profitable staff a priority. This means finding people who solve problems, not create them. Often times people appreciate when someone points out a problem within their business; they see it as that person giving them a ‘heads up’. If you have staff that do this though, that can be just as damaging as someone who creates the problem in the first place. Ideally you’re looking to hire people who solve problems. Meaning if they spot a problem they come to you after already coming up with possible solutions, as opposed to coming to you just to point it out. If all someone does is point out the problem, then really they’re giving you the problem as opposed to giving you a solution.

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People unwilling to jump in and solve a problem have the effect of destabilising the business. They undermine the confidence of other employees, they cause friction, they question management priorities and style and generally come across as disgruntled. It also means that you wonâ&#x20AC;&#x2122;t be able to delegate because they will not be able to handle problems that emerge. Successful franchise owners refuse to solve problems for their staff. They get them to solve the problem. This is much easier when you hire competent and capable people with great attitudes. Many of the topics covered earlier will become more effortless when youâ&#x20AC;&#x2122;ve hired well. Communication, co-operation, and delegation will flow naturally through your organisation when you hire great staff who fit in with the company culture and have similar character traits and competencies.

Mike Irving Business Coach and Communication Expert 1300 955 923 Mike.Irving@advancedbusinessabilities.com.au www.advancedbusinessabilities.com.au

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Chapter 9

Payroll Basics for New Franchise Owners Kate Groom Franchise accounting and tax

About the Author Kate Groom works with franchises to help them get the financial aspect of business under control. She loves finding ways to take away record keeping headaches and free up time for the owner to work on business improvement. You can find her online at www.franchisepayroll.com.au. She is also part of the team at Franchise Accounting and Tax www.franchiseaccountingandtax.com.au.

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ayroll has become a hot topic in franchising. Throughout 2017 there was lots of publicity around underpayment of wages by franchisees. Perhaps you have heard about action by the Fair Work Ombudsman who inspect wages records, and identify and correct non-compliance with the law. As a result, several franchises have been penalised for non-compliance with the Fair Work Act and other legislation. Payroll is one of the more complicated aspects of running a franchise. Payroll management is also an aspect that’s unfamiliar to most new business owners. If you’ve been an employee you will know about getting paid (hopefully you have been!), but you’re unlikely to have been responsible for actually making pay happen. Running a franchise isn’t just a matter of following the franchise manual. A franchise owner also needs to comply with the laws and regulations that apply in business. These include employment laws and regulations. Once you decide to start a business you’ll need to find out about your obligations. You should then implement systems that will help you comply. So, before you start your franchise it’s a good idea to become familiar with some payroll basics. This article will give you an overview of what to be aware of and where to look for help. But before we get into the detail, let’s think about why the people side of business is so important.

Employees are the heart of your business A little thinking helps us see that employees are vital to a business. After all, you can’t run the business without them. Even if you have a great product and location, poor service will let your business down. Not sure about that? Think about the times you’ve decided not to return to a business because of the service you’ve received. Perhaps you’ve even walked out of a shop or cafe because they didn’t serve you promptly. You don’t want this to happen in your business! No doubt you’ve heard lots of talk about how important it is to treat people well. It is. Time after time we see that staff who are well paid, well trained and effectively managed are at the heart of productive, profitable workplaces. One of the fundamentals of treating employees well is to pay them correctly. This includes complying with wages legislation and national employment standards. It also includes managing people effectively so you get the best from them.

What are your responsibilities? Before you start to learn about the detail of paying people, spend some time thinking through what’s involved. For example, when you were an employee, the payroll function was probably managed by the accounts people. Someone (other than you) took care of recording employment agreements, calculating pay, issuing payslips and paying you. They also handled ATO payments and reporting, and Superannuation payments.

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In your own business all this is your responsibility. You’ll need systems that ensure people are paid the correct rate for the hours worked and that payroll record keeping complies with the legal requirements. It also involves getting entitlements and leave allowances right, and paying tax and super as required by law. You don’t have to do it all yourself though. Good payroll software and the help of an accountant who is ‘payroll friendly’ will help things run smoothly and cost effectively.

Learn about the basics You don’t need to be a lawyer to get an understanding of workplace relations basics. The government makes a lot of information available online. It’s free, and available 24/7. A good starting place is the Fair Work Ombudsman’s website. The Fair Work Ombudsman (FWO) provides a single point of contact for reliable and timely information about Australia’s workplace relations system. www.fairwork.gov.au On the FWO website you will find information about employee entitlements, minimum wages, the records you are required to keep, and other important matters. Information is available in English and several other languages. You’ll also find plenty of video guides and checklists. For specific questions, there’s a help desk you can contact. When it comes to working out what to pay your employees, a good rule of thumb is Don’t guess. Check first with the Fair Work Ombudsman or a Workplace Relations expert!

Five foundation stones Here are five basics to have in mind. Knowing these will help you navigate through more complicated details of what to pay your people and the terms under which you can employ them. You can find more details at www.fairwork.gov.au.

1. National Employment Standards & National Minimum Wage

The National Employment Standards (NES) are 10 minimum employment entitlements that have to be provided to all employees. The National Minimum Wage is reviewed and set each year by the Fair Work Commission. A copy of the NES must be provided to each employee.

2. Modern awards

Modern awards are industry or occupation based minimum employment standards which apply in addition to the National Employment Standards (NES). Most industries have a modern award, which covers all employers and employees in that sector.

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3. Minimum Wages

Each year the Fair Work Commission reviews the National Minimum Wage and pay rates under awards. You can calculate the minimum pay rates, penalties and allowances under an award using the Pay Calculator on the Fair Work Ombudsman’s website.

4. Maximum weekly hours

There are rules about maximum weekly hours and requests for staff to work overtime. Under some awards it’s possible to average the hours of work over a period greater than a week.

5. Weekend and overtime pay rates

Employees often get a higher rate of pay for working overtime, nights or at weekends. Some may be entitled to allowances, which are extra payments specified in the relevant award.

Know which Award applies Your franchisor should be able to tell you which Modern Award applies in the business. Once you know this, you can find out the minimum pay rates and employment conditions by checking at www.fairwork.gov.au.

Document your employment agreements Employment agreements can be verbal or in writing. However, we recommend a written agreement as this helps avoid misunderstandings. It’s well worth the time taken to put things in writing; this can save a lot of headaches later. The franchisor may be able to provide job descriptions and employment agreements for roles in your business. However, it’s a good idea to ask for confirmation of when the documents were last updated and which law firm did the work. This will give you a sense of whether the documents are up to date. If the franchisor doesn’t provide employment documentation, you can download copies from the Fair Work Ombudsman’s website. Alternatively, you can ask an HR consultant to produce the necessary documents for you. Build this cost into your initial budget.

Understand your Superannuation obligations The ATO website states that “Super is money you pay for your workers to provide for their retirement. Generally, if you pay an employee $450 or more before tax in a calendar month, you have to pay super on top of their wages.” It’s important to know that there are rules relating to Super payments. These include rules about which funds you can pay into, and when and how Super must be paid to employees’ Super funds. Penalties apply if you don’t make the payments in time. You can read about Super for employers at the ATO website: www.ato.gov.au/business/super-for-employers/

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Check with your accountant Some employment related questions might fall within the expertise of your accountant. If your accountant is used to working with business clients, they should be familiar with ATO reporting for wages and with superannuation. However, your accountant is not (usually) the best person to ask about wage rates and employment conditions. For these matters it’s better to turn to the Fair Work Ombudsman’s website, or get a referral to a workplace relations specialist.

Payroll Systems Good systems are a great help when it comes to payroll management. They mean you don’t have to rely so much on remembering stuff, because the ‘system’ takes care of the routine parts of a repetitive task. The basic idea is to reduce the amount of human involvement in the payroll process. For instance, your employees enter a change of address via a self-service portal in the payroll system rather than telling you (or emailing) about it. And instead of typing employee hours from a spreadsheet into your accounting software you can use software that automatically takes hours from a time recording system and uses them to work out the pay. Payroll should not be a time consuming task that gives you a weekly headache. It’s perfectly suited for automation and using smart technology. When we work with clients we help them choose a payroll system that is appropriate for the business needs, works with whatever requirements the franchisor has, and is affordable. We also like systems that handle ATO and Super reporting.

people skills This article has focused on the technical and operational sides of getting pay right. But there’s one other aspect we think is also important and worthy of some thinking time before you get started in business: people management. These days, businesses that treat their staff badly attract criticism, while ‘best places to work’ are in the limelight because people want to work there. This is true whether you’re a large or a small business. How you treat people will make a huge difference to your business. Providing people with a great place to work will help you attract good staff and keep them. Good staff morale will help productivity and boost sales as your team deliver remarkable service. This doesn’t happen by accident or without effort, which is why I believe that learning to manage people well is one of the most important things for a franchise owner to master. And even if you’ve previously managed people, it’s a good idea to think about what it will take to create a productive, happy workplace in your franchise. Here are six things you can do to help this along:

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1. Express gratitude - say thank you.

2. Communicate clearly what is expected.

3. Listen effectively. You’ll find lots of articles online that cover this topic. 4. Give them freedom. Don’t treat people as robots.

5. Be helpful to them. Help your people do their job well by doing what you need to do.

6. Set a good example. Your team will take their lead from you, so make sure it’s a good one!

check your understanding • What are the National Employment Standards?

• Which Modern Award applies in your workplace?

• What are the minimum wages for the various job roles in your business?

• What other conditions apply, such as minimum hours, overtime and penalty rates, and allowances. • Which Super funds can be used as the ‘default fund’ for the relevant Award? (Hint: check the Award) • Do you have written employment agreements and job descriptions?

• Who or what are your resources for advice when you don’t know the answer to a question?

Key Points to note As a franchisee, it’s your responsibility to comply with workplace legislation. This includes complying with minimum pay and conditions, maintaining appropriate records and paying tax and Superannuation as required. The rules are complicated and it is always best to seek expert advice if you aren’t sure. A good place to look is the Fair Work Ombudsman and ATO websites. Allocate time to learn the basics before you start off in your business. Implement a system to help you with your record keeping. Use technology to help you minimise errors. Ask your franchise accountant for advice in this area, or contact us. Have a think about the type of workplace you would like to run. Consider what will help your team be productive and happy at work! Disclaimer: This article provides general information to help potential franchise owners understand their obligations and make plans to meet them. It is not a substitute for advice on specific employment terms or wage rates. Please seek advice from your franchisor and relevant workplace relations experts. We also suggest using a payroll solution which helps you meet record keeping and other compliance requirements.

Kate Groom Franchise Accounting and Tax www.franchisepayroll.com.au www.franchiseaccountingandtax.com.au - 76 -

Chapter 10

Marketing and Social Media for Franchisees Katherine Grace | Director Elemental Solutions Marketing

About the Author Beginning her career with the Jimâ&#x20AC;&#x2122;s Group, Katherine has over 20 yearsâ&#x20AC;&#x2122; experience in franchising. She has worked with many brands, been a successful ActionCOACH franchisee (#14 in the world) and was runner-up Franchise Woman of the Year in 2010. She is also the marketing trainer for the HIA in both Victoria and for national webinars. Elemental Solutions is a marketing company specialising in lowcost and local area marketing. They offer one main service, which is creating a user-friendly six month marketing plan for small business, franchisees or entire brands.

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ne of the main reasons that franchises work is the team effort franchisees and franchisors can bring to marketing. Today’s marketing is all about the dual potential of both real people, and technology. Our digital age creates the perfect environment for franchising, because it allows us to be both global and personal in our approach. • Global (mostly by the franchisor) – reaching wide: creating a national or world-wide brand that is seen by everyone via their computer, tablet or phone, while driving their car, reading the paper or magazines, watching TV or listening to the radio. Then making it easy for those people to interact with your company, via your website. • Personal (mostly by the franchisee) – going deep: connecting with lots of people in your local area or who are specifically interested in what you do, building a human reputation both in-person and via technological means.

Global Marketing – How Your Franchisor Markets Your Brand For a small fraction of what it would cost on your own, most franchisees are able to have their brand exposed through mainstream media and by professional advertising agencies, both of which are well out of reach for the standard SME business owner. Franchisors should be good at two things – brand exposure and promotions. Combined with some efforts on your behalf at the local level, the end result is an ‘attack from all angles’ where potential customers will know you from brand marketing, trust you from local marketing and then be inspired to buy from you by way of a ‘call to action’ or special offer. The first and biggest responsibility of the franchisor’s marketing is to increase awareness (and fondness) for your brand. This is usually (but doesn’t have to be) done via mass media such as television, print advertising such as newspapers or magazines, radio, billboards, online advertising and social media posts, all leading back to the group’s website. These mediums are ‘oneto-many’ – that is, one message is seen by many people regardless of whether they fall into your target market or not (though many invariably will, especially if you are in fast food or general retail). Mass media advertising is a big benefit to you as franchisee – in small business there would be no way you could afford to promote yourself via these channels, so the bulkbuying factor is a big help in getting your name out there. Generally it is thought that customers need to ‘see’ you at least six times before buying, so this exposure greatly increases your chances of customers. The other big advantage of being part of a franchise is what is called best practice – that because there are so many people essentially running the same business, it is easier than usual to figure out the best possible way of doing everything (think of your business being run in slightly different ways in multiple parallel universes and you get the idea – one will be best at sales, one best at managing their team, etc). In this way, everyone benefits from the others.

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Franchisors may take best practice and use it to share promotional offers amongst the group, that have been known to work in the past or for other franchisees. Again this removes your need to try and try again to get it right – you can simply put a great offer out there and reap the rewards with new business.

About the Marketing Fund Since marketing on behalf of the franchisees is one of the biggest responsibilities your franchisor has, the Franchising Code regulates this by having a set portion of your franchise fees (called the Marketing Fee, Advertising Levy or similar in your franchise agreement) go into an audited Marketing Fund that must only be spent in the promotion of the brand. You will see any marketing fees as a separate entry on your franchisee fees invoice each month. However it is important to note that the franchisor is not obliged to spend your marketing contribution in promoting your specific business in your area – only that they need to promoting the franchise business as a whole. You will be able to see a statement of the Marketing Fund for the last financial year in your Disclosure Document (which you will receive alongside your franchise agreement). Section 12 of the Disclosure Document will also outline a few key points about the marketing fund, such as whether the franchisor has to contribute if they own a ‘company-store’, what sort of things the fund is used for, and if anyone such as suppliers also contribute to the fund. There will also be an independent Auditor’s Report verifying the fund’s statement has been audited, unless more than 75 per cent of the franchisees that contribute vote to not bother with the audit (this usually indicates trust on behalf of the franchisees as to what their marketing money is spent on, and/or a desire to see marketing funds only go to advertising and not on auditor’s fees). You should absolutely note that just because you are paying a marketing fee to your franchisor, this does not mean that all your marketing will just “be taken care of”. You have a big responsibility to spend time and money on top of this fee in promoting your business locally, if you really want to do well.

Personal Marketing – How Franchisees Can Market Themselves Often, the biggest frustration that franchisors have is that their franchisees aren’t doing much in the way of local area marketing - that is, building up the business name close to home in support of the brand promotion done in mass media. At the end of the day, a franchise is a small business with the added bonus of a brand and support system to give you everything you need to succeed. However it is still your business (and probably your family’s business) and with so much on the line it is important that you do everything you can to have people lining up at your door. Local Area Marketing, sometimes called Self Promotion, is anything you as the franchisee can do to help bring new customers into your business. Usually, it involves working at a local level or with the community, as these things are specific to your

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business site as opposed to the whole franchise group. Where mass media is ‘one-tomany’, local area marketing can be closely targeted to only your ideal clients and is ‘one-to-a-few’. Some examples of types of low cost local marketing that are usually allowed within a franchise system (noting you should always get franchisor approval) include: 1. Networking with local businesses and people.

2. ‘Giving back’ or sponsoring local schools, kinders, sporting clubs or community groups. 3. Appearing at fetes, festivals, markets, council events, home shows or trade expos. 4. Joining your local BNI chapter, rotary group, chamber of commerce, etc.

5. Leaving business cards for your services in other businesses, on bulletin boards, etc.

6. Advertising your services within key employers in your area (such as council, hospitals, large manufacturers etc).

7. Running promotions or sales specific to your outlet and distributing (franchisor approved) flyers to letterboxes. 8. Thank you letters to customers for using your services or to the top ten referrers in your client base.

9. Host beneficiaries with other local businesses such as gift vouchers or free trials for their clients. 10. Appearing in local directories, school newsletters or discount booklets (NB: advertising copy must always be approved by the franchisor first). 11. Offering your team (and customers) incentives for referrals. 12. Going to the bank, post office and school pick up wearing your uniform. 13. Working with the franchisor in their social media campaigns.

Why Online Reviews are Important Usually from personal experience, we all know the daily influence that Google has on people’s lives. And lucky for us, Google loves connecting people with the best, most local small business that can help the customer get what they need. Over the years they have geared their set up to support businesses that offer genuinely helpful information, are local and look after their clients. And, lucky for us, franchises are inherently local, small and family-owned businesses. They just have the added backing of a franchisor. Today’s marketing is about harnessing the power of word of mouth and the local community. But that this word of mouth is massively amplified by the power of the internet. Searching for a business online is no longer a one way street – customers won’t just look at your brand’s website and decide if they like you. They’ll be immediately presented with the actual experiences of past clients via online reviews, testimonials, social media and even website forums dedicated to this task.

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People are gathering in tribes via social media and forums, by the area they live in, interests, passions, what food they eat, their kids, their pets and where they shop. Look up ‘Buy Swap Sell’ groups for your suburb on Facebook and you will see what I mean. Often these groups have well over 20,000 members, all right in your target market. It’s so much more than a central website now. What’s happening in the real world is being captured and amplified via the internet, and reaching new people who for whatever reason (they’re considering using your business, for instance) care about those happenings. The most important job of franchisees in relation to online reviews is to service customers so well they want to tell others. Raving Fans by Kenneth Blanchard is an excellent book to explain how to deliver just that 1 per cent more. In this day and age they won’t just tell a friend when they receive raving fan service, they’ll leave a glowing review for you online where hundreds of people they don’t even know will see it. To amplify your chances of good reviews, you should actually train your staff to say to clients who are happy “Hey thanks for the feedback, I’d love it if you left a review for us on Google or (insert name of your industry’s most popular review site)”. This will help your brand as a whole but will also directly impact bringing many new customers into your individual store.

How Franchisees Can Contribute to Social Media Social media is most often run by your franchisor; however in this case it is very much a situation needing combined efforts to do well. So after reviews, the second most important thing you can do – that your franchisor really, really needs you to do – is provide social media content. Lots of content. Lots of valuable, interesting, engaging and relevant content. To gain followers and keep them on board, social media needs to give these followers information that helps them in their daily lives, without constantly pushing your product or service. Franchisees are easily the best people to provide this as they have the insight and opportunity to get this stuff together every single day. To give you some examples, I looked at the most popular type of content in both social media and online newsletters for my clients, some of whom are national brands with 350,000+ subscribers (making it really easy to see slight changes in interaction depending on the type of content). Here are some ideas of what types of things most people would find valuable. • Home hints and tips – anything related to your business that gives away enough to be of value but not all your trade secrets. How to clean something, fix something, repurpose something, care for something etc. • Advice – design advice, family advice, health advice, etc. • Recipes (people literally cannot get enough of these).

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• Five minute things – Five minute workout, brain training, meditation, etc. • Translating your topic for the layperson – explaining how the financial system works, what’s going on with your computer, the new spam laws – anything you know that they don’t. • ‘Good news stories’ or testimonials from clients. • Photos of work that you’ve done that are awesome or interesting. • Photos of interesting places you’re working. • Pictures and news about community or charity events that your business is a part of. • Stories and pictures of your team, especially helping clients. • Industry news – repost an article from any bodies or suppliers that support your industry. To provide content to your franchisor, simply send them an email with some words and at least one photograph (a video is even better).

The Franchising Team Belonging to a franchise is a great way to leverage off some expensive brand exposure being done on your behalf, and to partner with a company that has a proven history of marketing themselves. Be a team player. You’ve joined a franchise system which has team principles at its centre. Love your brand. Be proud of it. If you or your staff wear your uniform with disdain or embarrassment, you are damaging the very thing that makes your business succeed (or not). Your chosen system may have its flaws, but if you don’t focus on and spruik the benefits…. customers won’t come. Remember that no amount of money or brand exposure can replace local marketing. What we are looking for is a powerful combination of the global and the personal – mass media and the local engagement working simultaneously to give you the most impact. Marketing is all about being in control of your own business and how busy you are. This responsibility is yours – it doesn’t go away just because you belong to a franchise system, but it does get much easier thanks to the power of a team.

KATHERINE GRACE Director Elemental Solutions Marketing 0400 865 277 katherine@elementalsolutions.com.au www.elementalsolutions.com.au

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Chapter 11

Employing staff â&#x20AC;&#x201C;

a new age of accountability

Joe Murphy | Director, Workplace Relations Australian Business Lawyers & Advisors (ABLA)

featured expert Joe Murphy has seen the full gamut of employer pitfalls over the past 15 years. As a key member in the leadership team of Australian Business Lawyers & Advisors (ABLA), Joe plays a vital role in guiding the workplace expertise of the award-winning law firm. He has advised and represented employers on award interpretation, negotiations for enterprise agreements and with industrial disputes before Fair Work Australia and the NSW Industrial Relations Commission. When he is not responding to both private and public sector clients, the lawyer is assisting ABLA perform a role of advocacy on behalf of business and the Australian Chamber movement. This takes the shape of major industrial litigation where the goal is to promote a fairer workplace system for both employers and employees. Joe and the team work tirelessly behind the scenes; whether supporting members of NSW Business Chamber through the Workplace Advice line, or underpinning the comprehensive compliance-focused services of Workplace Assured.

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mployers in the franchise sector have been put on notice by the Fair Work Ombudsman.

Currently, the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 is before Federal Parliament that will, if passed, result in amendments to the Fair Work Act 2009, introducing a new era of accountability for franchisors and franchisees alike. How has this come about? The proposed legislation is a direct response to a number of prominent cases where franchisees were found guilty of deliberately or systematically underpaying employees – many of whom were migrant workers and deemed ‘vulnerable’. In the new world order, parent companies and networks of franchisees will be expected to interact on compliance. On one end of the scale, franchisors may engage legal services to audit their franchisee network, identifying hotspots of risk and taking the lead on implementing solutions. A fair-minded compromise may see franchisors write compliance measures into franchisee contracts, effectively sharing associated fees of compliance-related services between both parties. For the small business operator, the minutiae of employer obligations can be overshadowed by the daily bustle of running the store. Failing to meet the pay rates of modern awards, or skipping processes when managing employees, can ultimately land employers in hot water with the Fair Work Ombudsman if a claim is lodged by an employee. What’s more, the penalties for non-compliance are set to rise, with the Bill proposing to increase the maximum penalty from $10,800 to $108,000 per contravention for individuals, and from $54,000 to $540,000 per contravention for corporations. So where should you focus your attention? This chapter identifies the nine most common mistakes made by employers, as relayed by experienced workplace relations specialists.

Mistake 1: Forcing an employee to work on a public holiday An employer may not be entitled to direct employees to work on public holidays. The type of contract you have with your employees will determine whether or not you can enforce leave. There are different entitlements for both you and the employee based on the contractual agreement that you have in place with them – it could be based on an award, an enterprise contract or an outright contract. A modern award is a legally-binding instrument that determines the minimum arrangements you have with your employee. That means you need to check your governing award or contract to deem what entitlements staff can access.

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Mistake 2: Not paying penalty rates because you already pay above the required award rates Don’t assume that paying above-award hourly rates cancels out penalty rates that align with the award. Employers often make this mistake. How the over-award payments are defined in your contracts is important. If you are paying staff above the award rate on purpose and plan to offset the amount of overpayment against penalty rates you would otherwise pay (on public holidays, for example), it’s important to safeguard the business by including a clause in the employment contract outlining how the overpayment offsets any penalty rate payments. You need to have the employee’s agreement for the contract to be binding – you can’t just force it on them. Where you do implement new contracts, it is important that you do so in a way that ensures not only the contract is binding, but that it doesn’t sour the relationship you have with your employees.

Mistake 3: Failing to update employee contracts It’s common for employment contracts to collect dust once they’ve been signed by the employee and employer. Frequently, the only time the contract is seen is when an issue arises between the employee and employer. But contracts have a nominal expiry date, meaning that the pay the employer agreed to is strictly bound, even after the contract expires. Failing to renew your contract will open you up to potential liability. Well-written employment contracts help the employee and employer know what is expected from them and what they’re entitled to. It’s vital you review your contracts every few years. Unless someone does something to try and terminate that contract, or replace it after that date, the contract will continue on forever and remain binding for both yourself and your employee.

Mistake 4: Underpaying employees You may not be aware that staff are being paid incorrectly. However, once you find yourself facing an underpayment claim, it can go to the Fair Work Ombudsman. The Ombudsman will investigate and may send you compliance notices requesting payments to rectify the error, plus a fine for a breach in complying with your obligations as an employer to pay the right rate of pay to employees. If you have rectified the error because you’ve understood that it was wrong and you’ve paid the short-fall in payments quickly, then that will mitigate against penalties. According to Fair Work, employees have up to six years to make a claim in respect to underpayment. For that reason, employers are obliged to maintain payroll records, and keep them for a period of seven years.

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It’s very important to have the right wording in your contract – pay the amount under the contract and be very specific about what that payment is for.

Mistake 5: Accidentally overpaying your employees Perhaps there’s been a clerical error, incorrect data has been entered into your payroll system or perhaps a misinterpretation of the industrial instrument has occurred (e.g. the award, contract, enterprise agreement). Either way, if you’ve overpaid an employee you can’t later deduct money per week from their pay for a certain number of weeks. The Fair Work Act prohibits deductions. So just check the payment status of employees with your workplace advisor for dollars-andcents clarity on whether you’re paying above the award rate, or below (and therefore underpaying).

Mistake 6: Letting staff go because they’ve had a ‘big night out’ Over a public holiday weekend, you often have a higher risk of employees turning up to work after a big night out, according to Murphy. For example, a VicHealth study1 found significant increases in alcohol-related incidents in the lead up to the majority of public holidays, particularly Good Friday, Australia Day, ANZAC Day, the days before New Year’s Day as well as the last working day before Christmas. There are some increased risks of employees turning up to work in circumstances where they’ve been out the night before, especially if you have a young, casual workforce with an active social life. This increases health and safety risks with employees who are enjoying the holiday period (alcohol and illicit substances). The absence of a testing facility makes it hard to determine whether someone has been affected by drugs or alcohol. If you don’t have solid evidence it’s difficult to take disciplinary action like dismissal.

According to Workplace OHS², implementing drug and alcohol tests in the workplace may result in more problems than benefits for employees. Rather, they suggest

investing in management training and systems to create a safe and high-performing environment.

Mistake 7: Failing to consider a reasonable refusal from an employee to work on public holidays If an employee is asked to work on a public holiday, but requests not to work, then an

employer needs to consider whether their refusal is reasonable, take that into account and work towards a mutual agreement.

Perhaps an employee has family obligations due to child care centres being closed on

public holidays. Another scenario might be if an employee refuses to work on Easter because of their religious practices (e.g.“I have to go to church”).

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Employing staff – a new age of accountability

One of the base provisions around public holidays is reasonable refusal – the employer has to consider whether or not that is reasonable and determine whether or not they can accommodate that. Equally, as an employer you cannot simply roster on all your non-religious staff on a religious holiday, for example – then you would be making a decision based on religion which is discriminatory. Employers should seek advice to ensure they have the appropriate industrial arrangements in place.

Mistake 8: Incorrect leave payouts Many employers aren’t aware of long service and superannuation entitlements, and find themselves in trouble as a result. Tracy Angwin, CEO, Australian Payroll Association stated in a recent webinar: “Small to medium businesses don’t understand that long service leave (LSL) applies to them. They can get a shock when they see what their liabilities are when someone has worked for them for – normally – more than 10 years,” says Angwin. “Depending on the reason for termination, long service leave may have to be paid out before 10 years.” The main issue with LSL is that it is always measured in weeks and not in days or hours. “If you’ve an employee who starts part-time, goes to full-time, then perhaps takes time off for parental leave, and then returns as part-time, [the employee] might have had 10 years of working for you, but that LSL is based on what is considered a week on the time of taking it. If you work nine years part time, and the tenth year full time, those weeks are actually at your full time rate,” she says. Employers also need to be aware that all eight states and territories have different LSL rules. “When you’re looking at your LSL liability, be aware of what state legislation you’re using as this will form the basis of your accrual amount and what your obligations are to pay up that leave prior to the LSL being an entitlement. Check what the termination reason is and if there is any implications on LSL based on termination reasons.”

Mistake 9: Using a payment system that calculates the wrong pay cycle per modern award entitlement It’s an easy and harmless mistake to make, but some employers don’t realise that some of the awards that apply to their employees have restrictive payment arrangements. For example, some awards may have provisions that entitle employees to receive their pay every week or fortnight (known as a pay cycle). Some businesses make the mistake of investing in HR systems and processes that only enable monthly pay cycles without having the flexibility to change the pay cycle.

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This may sound rudimentary but if you are not paying staff by the pay cycle they are entitled to, this is considered a breach. If an employee was to complain, or the Fair Work Ombudsman conducted an investigation, they would fine the organisation for the breach itself plus the breach made per employee. For a company, those penalties can cost up to $54,000 per breach. Large businesses have payroll systems that are geared towards a monthly payroll and cannot adjust them in any way. Therefore they’re stuck with a monthly payroll and every month they’re in risk of compounding this breach. The breach is the mistake itself times the number of employees the breach impacts. If an organisation has four employees who are covered by the award, the company will be penalised four times over. Take this example: If you have five staff who are supposed to be paid fortnightly and you are paying them monthly, you would be fined $54,000 for the breach, then $54,000 for EACH employee who was affected – so: Cost of the breach itself: $54,000 x 1 = $54,000 Cost of each staff member impacted by the breach: $54,000 x 5 = $270,000 Total cost of the breach to your business = $324,000

Where to go for help Workplace Assured is a complete workplace relations solution for employers. One fixed fee provides unlimited phone access to expert advice, legally-compliant templates and policies, legal representation in courts in event of a claim, and insurance cover for up to $2 million for any resulting claims and legal fees. Powered by credible expertise, Workplace Assured’s employment relations advice is delivered by Australian Business Lawyers & Advisors – named Employment Team of the Year at the Australian Law Awards and Finalist for Employment Law Specialist Firm of the Year 2017. The service is delivered and endorsed by the State Chambers of Australia; mission-based organisations that focus on societal prosperity through the support and representation of business. www.workplaceassured.com.au. Franchisors seeking advice on compliance at a corporate and operational level are encouraged to contact Australian Business Lawyers & Advisors, https://www. ablawyers.com.au 1 2

https://www.vichealth.vic.gov.au/search/drinking-cultures-and-social-occasions http://workplaceohs.com.au/hazards/drugs-and-alcohol/drug-testing

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Chapter 12

franchising in AUSTRALIA the Franchise Council of Australia

About the Author The Franchise Council of Australia Limited (FCA) is the peak body for the $146 billion franchise sector in Australia, representing franchisees, franchisors and service providers to the sector. The FCA provides a strong voice for franchising and is focused on raising the awareness of the benefits of franchising and educating governments, regulators and key decision makers, as well as the broader community, on the important economic and social contribution that franchising makes within Australia. Membership of the FCA is voluntary, and open to any organisation or individual involved in the franchise sector, including franchisors, franchisees, and suppliers to the sector. The FCA strives to add value to the businesses of its members by advocating on their behalf, and by providing education, information and networking services and opportunities that support a prosperous and growing franchise sector.

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he Franchise Council of Australia Limited (FCA) is a nationally incorporated notfor-profit association and the peak body for the $146 billion franchise sector in

Australia, representing franchisors, franchisees, service providers and advisors to the sector.

The FCA aims to support, promote and develop Australian franchising to drive economic and entrepreneurial success within the sector.

These goals underpin the FCA’s core activities, which focus on the major themes of: • A commitment to promoting the highest industry standards and best practice within the sector; • Providing the education and other services necessary to ensure a healthy sector constantly striving to lift its own standards; and • Building strong and productive relationships with governments, core regulators and stakeholders to ensure that the voice of franchising is being heard.

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.

The FCA is closely affiliated with franchising associations around the world, including

the International Franchise Association (IFA), 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.

Major services and initiatives The FCA delivers a comprehensive suite of services and initiatives in order to support, promote and develop a vibrant and prosperous Australian franchising sector. The

Association’s program of activities and services is focussed on raising the awareness

of the benefits of franchising and educating key decision makers, with core functions including:

• Providing proactive leadership for Australian franchising, and Australian franchising internationally; • Representing and advocating for the needs of members and the wider franchise sector to governments, regulators and other key decision makers; • Providing quality education suited to the needs of members and the franchising community; and • Building a strong sense of community through networking and events programs that foster the sharing of ideas, knowledge and information

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franchising in australia

Representation of Franchising Sector Perspectives to Government The FCA provides a strong voice for franchising and is focussed on raising the

awareness of the benefits of franchising and educating governments, regulators and key decision makers.

The FCA advocates for policy and legislative responses and decisions that ensure the

ongoing prosperity of franchising in Australia and that protect the robust business model that underpins the economic success of Australian franchising.

In doing so, the FCA represents the interests of the whole franchise sector â&#x20AC;&#x201C; franchisees, franchisors and suppliers.

The Franchise Council of Australia co-ordinates member feedback for the compilation and representation of submissions to governments on relevant franchising issues.

Members save time, energy and money making representation to government by channelling their feedback through the FCA.

Education â&#x20AC;&#x201C; Certified Franchise Executive program The FCA facilitates specialist franchising education through the Certified Franchise Executive (CFE) program, which 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.

The FCA, in association with the American-based Institute of Certified Franchise Executives (ICFE), delivers the CFE program in Australia. 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.

Since launching in Australia in 2012, 43 franchise professionals have so far gained CFE accreditation and more than 50 Australian franchise professionals are currently participating in the CFE program, representing over 35 franchise businesses.

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

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coverage. It can boost company morale and help attract the best talent to companies. Preparing award nominations can be an excellent business ‘health check’ with applicants

self-evaluating and thinking about how they can best work on their business, not just in it, as they consider the key business success criteria.

The Excellence in Franchising Awards ceremony is held in conjunction with the National Franchise Convention and is the pinnacle of the franchising year. Past winners include 2016 Australian Established Franchisor of the Year, Poolwerx; 2016 Australian Emerging Franchisor of the Year, JUMP! Swim Schools; 2016 Franchise Woman of the Year, Natalie Brennan of Foodco; 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 ground breakers, 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.

The 2016 Hall of Fame inductee is Murray d’Almeida, founder of Retail Food Group Australia.

The National Franchise Convention The FCA hosts the annual National Franchise Convention (NFC). The NFC provides

an invaluable opportunity to gain information and inspiration from industry leaders and keynote speakers. The three-day event also provides ample opportunities to network and visit the bustling trade exhibition, where suppliers to the franchise sector can showcase their products and services.

The Convention brings together the Australian franchise community – including successful business people, CEOs, government officials and industry advisors – to enjoy education, networking and business development opportunities.

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.

The 2017 Convention (NFC17) will be held on the Gold Coast in October. For more

information contact info@franchise.org.au or visit www.nationalfranchiseconvention. org.au

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franchising in australia

NextGen in Franchising NextGen in Franchising is a global competition for young entrepreneurs with businesses

suitable to scale using a franchise business model. The competition offers young entrepreneurs the opportunity to gain mentoring and direct engagement with some of the most successful franchisors in Australia and the USA.

The FCA, in partnership with the International Franchise Association, launched the

global NextGen in Franchising competition in Australia in 2015. In 2016, the FCA launched the NextGen in Franchising Australia competition, where three finalists were selected to compete against each other in a â&#x20AC;&#x2DC;FranSharkâ&#x20AC;&#x2122; competition, pitching their

business concept in front of a judging panel of FCA Hall of Fame members and a franchising audience at the National Franchise Convention.

The 2016 NextGen in Franchising Australia competition winner â&#x20AC;&#x201C; and one of three

Australian representatives in the 2017 NextGen in Franchising Global Competition was David Lindsay, founder of Salts of the Earth.

Women in Franchising Committee 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.

Membership 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.

Members of the Franchise Council of Australia are part of a unique association where business lessons, experience and information are shared freely. Just as franchising is

being in your own business but not on your own, membership of the FCA broadens your support ecosystem and network.

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, satisfied and happy franchisees.

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Membership benefits Membership benefits with the FCA are both tangible and intangible. The FCA’s strong foundations stem from our members and key benefits of membership include: Credibility – maintained through the FCA member standards and the Franchising Code of Conduct; Professional support and development – through education programs, networking opportunities and regular events; Information – shared insights and experiences about what is happening in the sector, what sector leaders are thinking and doing, and new initiatives and opportunities that can help grow businesses; and Representation – ensuring members’ voices are heard by governments, regulators, opinion-leaders and other important groups and individuals. FCA members belong to an association where their peers work together for the betterment of the sector; a shared purpose and common foundation for doing business; brought together by shared goals and a regulatory setting applied to very different and individual businesses. For this reason, franchisors, franchisees and suppliers can freely exchange ideas without fear of losing their competitive edge. Industry peers and colleagues can be the best pathfinder for addressing business challenges and embracing opportunities, a source of inspiration and innovation or simply an experienced different point of view. All members have equal voting rights and all members are eligible to become committee members or office bearers of state chapters, as well as direct election to the national board. FCA members have an effective say in the future of franchising in Australia.

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 ofconduct. 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

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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.

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 operatethe 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. The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously. The FCA works consistently to ensure all activities directly benefit the membership, while staying true to the main strategic objectives of the Board of Directors – enhancing the public reputation of franchising in the wider business sector, and ensuring Australia remains the most attractive market for both franchisors and franchisees in which to franchise in the world.

Franchise Council of Australia 1300 669 030 info@franchise.org.au www.franchise.org.au - 95 -

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Chapter 13

FRANCHISING IN NEW ZEALAND Stewart Germann | Franchising Lawyer Auckland, New Zealand

About the Author Stewart Germann who is acknowledged as New Zealand’s leading franchising lawyer with over 35 years experience in this area, is a recognised national and international guest speaker at franchise conferences in New Zealand, Australia and USA. Stewart Germann Law Office (SGL) is New Zealand’s longest established specialist franchising law firm and Stewart is included in the International Who’s Who of Franchise Lawyers for 2017. SGL’s clients include many of New Zealand’s best known national and international franchise brands and Stewart has extensive franchising contacts worldwide and locally. Stewart Germann is actively involved in international franchising, has published articles in the International Journal of Franchising Law and has attended and participated in many FCA conferences.

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ew Zealand is one of the most deregulated countries in the world to conduct small to medium-sized business. There is no specific legislation controlling the operation of franchising in New Zealand and other countries like New Zealand include Singapore and the United Kingdom. Prospective franchisees who are looking at buying into a franchise must tread carefully and do their homework. New Zealand is an exciting and fast developing market which contains over 350 franchise systems.

Legal Position Although there are no specific franchising laws, there are existing laws which protect franchisees; and the three main laws which provide such protection are the Fair Trading Act 1986, the Commerce Act 1986 and the Contractual Remedies Act 1989. Those Acts focus in particular on misrepresentations and restrictive trade practices which include anti-competitive behaviour. Once a franchisee has chosen a particular brand and franchise system and wishes to progress further with enquiries, the first question to ask is whether the franchisor belongs to the Franchise Association of New Zealand (FANZ). The FANZ was formed in 1996 and publishes the Code of Practice and the Code of Ethics which all members must comply with. Many franchisors belong to the FANZ but some have chosen not to join yet still comply with the Codes. Others may choose not to join and do not comply with the Codes and they should be described as renegade franchisors, in my opinion. The Code of Practice has four main aims which are as follows: 1. To encourage best practice throughout franchising. 2. To provide reassurance to those entering franchising that any member displaying the logo of the FANZ is serious and has undertaken to practise in a fair and reasonable manner. 3. To provide the basis of self-regulation for franchising. 4. To demonstrate to everyone the positive will within franchising to regulate itself. The Code applies to all members including franchisors, franchisees or affiliates such as accountants, lawyers and consultants and all prospective new members of the FANZ must agree to be bound by the Code before they can be considered for membership.

What does the Code cover? 1. Compliance - all members must certify that they will comply with the Code and members must renew their certificate of compliance on an annual basis. 2. Disclosure - a disclosure document must be provided to all prospective franchisees at least 14 days prior to signing a franchise agreement. This disclosure document must be updated at least annually and it must provide information including a company profile, details of the officers of the company, an outline of the franchise, full disclosure of any payment or commission made by a franchisor to any adviser

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or consultant in connection with a sale, listing of all components making up the franchise purchase, references and projections of turnover and possible profitability of the business. 3. Certification - the Code requires franchisors to give franchisees a copy of the Code and the franchisee must then certify that he or she has had legal advice before signing the franchise agreement. 4. Cooling Off Period - all franchise agreements must contain a minimum seven day period from the date of the agreement during which a franchisee may change its mind and terminate the purchase. This is very important and the cooling off period does not apply to renewals of term or re-sales by franchisees. 5. Dispute Resolution - the Code sets out a dispute resolution procedure which can be used by both franchisor and franchisee to seek a more amicable and costeffective solution. The Code requires all members to try to settle disputes by mutual negotiation in the first instance. However, this process does not affect the legal rights of both parties to resort to litigation. 6. Advisers - all advisers must provide clients with written details of their relevant qualifications and experience and they must respect confidentiality of all information received. 7. Code of Ethics - all members must subscribe to the Code of Ethics which sets out the spirit in which the Code of Practice will be interpreted. All franchisor members of the FANZ must have a franchise agreement which contains a dispute resolution clause and a cooling-off provision. In order to resolve disputes, mediation is the favoured method and it has a high success rate in relation to franchising disputes. However, if mediation does not work then there is always litigation which is certainly at the divorce stage of the relationship.

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

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

The disclosure document Prospective franchisees will usually be given a disclosure document and franchise agreement by a franchisor. The Code of Practice states that franchisors must provide the disclosure document to prospective franchisees at least 14 days prior to the signing of the franchise agreement. The disclosure document must provide certain information including the following: • Details of the franchisor and its directors including experience and a viability statement with key financial information of the franchisor; • Details of any bankruptcies, receiverships, liquidations or materially relevant debt recovery; • Criminal, civil or administrative proceedings within the past five years; • A summary of the main particulars and features of the franchise; • A list of components making up the franchise purchase; • Details of any financial requirements by the franchisor of the franchisee; and • Other information as listed in the Code. Franchising in New Zealand covers goods and services in many areas including general retail, leisure and education, business and commercial, food and beverage, health and fitness, computer and technology, home and building services.

Checklist In undertaking due diligence a franchisee will learn a lot about the franchise system from the disclosure document. If such a document is not provided then the franchisee will have to ask many questions to find out important information. Such information should include the following: q The company’s financial health and history q How long it has been franchising q Details of pilot operation results q Long term viability of product/service q Type and level of head office support q Full details of the training provided

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q Whether training is an extra cost q Total cost of taking up the franchise q Realistic working capital needed q Permission for bank references and other referees q Territorial practices and exclusivity terms q Types and amounts of advertising support q Any need to buy products from the franchisor q Target obligations q Realistic profit and loss figures q Management services or royalty payments q Operating restrictions q Launch assistance q Sample franchise agreement. The franchise agreement is a comprehensive legal document which will set out many obligations of both franchisor and franchisee. It must cover the following: • Geographical area and types of customers to whom you may sell; • Nature and extent of your obligations to the franchisor, including buying supplies and services; • Rights to renew or extend contract beyond the original term; • Terms and conditions under which you may terminate the contract; • Description of exact training and support the franchisor must provide; • Precise definition of price, commissions, rental fees, leases needed to own and operate franchise; • Precise boundaries of the territory awarded to you; • Your rights to sell or transfer ownership of the franchise; and • Description of your heirs’ rights in the event of your death. In undertaking due diligence a franchisee should be wary if a franchisor does any of the following: • Promises huge profits with thin investments • Says “act now to get in on ground floor” • Fails to give statistics on sales/profits • Promises ‘easy sales’ • Fails to identify directors or principals • Tries to ‘trade you up’ to a higher fee

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• Says “act now, it’ll cost more later” • Promises profits by sub-franchising

• Has a name similar to a well-known business • Promises large income from ‘work at home’ • Demands large up-front franchise fee • Has a very short term contract

• Provides no data on track record or financial strength • Cannot give plans for future development • Has vague territories

• Is ignorant of competition

• Has incomprehensible contract

• Is vague about support and training • Has weak advertising

• Is vague about financial obligations for the franchisee • Has poor head office premises • Tries to meet in a hotel

• Is evasive about access to existing franchisees. The results of the latest survey of franchising in New Zealand for 2017 have just been released and it confirms that New Zealand has one franchised unit for every 124 people. The survey highlights are as follows: • There are an estimated 631 business format franchisors in New Zealand in 2017, compared with 446 in 2012 being the date of the previous survey. • There are 37,000 franchise units, an increase of 14,600. • The overall turnover of the franchise sector is estimated at $27.6 billion (up from $15 billion in 2012) – equivalent to 11% of New Zealand’s GDP. If motor vehicle sales and fuel retail are added in, the figure comes to $46.1 billion. • Franchised businesses employ 124,200 New Zealanders. • 72% of the franchises are home-grown brands. • The median length of time that a franchisee remains in a franchise system is 8 years. • The percentage of franchisees involved in disputes has dropped from 4.0% in 2012 to just 1.9% in 2017. • Almost half of all franchise disputes are now handled through mediation rather than litigation. The Franchising New Zealand 2017 survey was conducted by a research team from Massey University business school and Griffith University’s Asia-Pacific Centre for Franchising Excellence and the response rate from participants was 26.8% which is high for a business related survey.

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CHANGES TO THE COMMERCE ACT The Commerce Act 1986 is concerned with anticompetitive behaviour and restrictive trade practices. The Fair Trading Act 1986 is concerned with representations made by any party that amount to misrepresentations that may be innocent, negligent or fraudulent. There are monetary penalties in relation to breaches of both Acts. The Commerce Act prohibits agreements that substantially lessen competition, that exclude competitors, that take advantage of a substantial degree of market power for an anti-competitive purpose, and arrangements which specify a minimum price at which goods can be sold by someone else (often called resale price maintenance). The new Commerce (Cartels and Other Matters) Amendment Bill which should become law within the next 12 months would have caught franchising in a number of areas but, in particular, it would have made restraints of trade illegal per se and unenforceable. I have recently been involved in submissions on that Bill which will now be changed to protect franchising. The proposed legislation will introduce a new cartel provision that replaces the existing price-fixing prohibitions of the Commerce Act 1986. It is essential for prospective franchisees to obtain independent legal advice from a lawyer experienced in franchising as well as independent accounting and taxation advice. A franchisee should have a number of meetings with the franchisor and its representatives and all questions and answers should be written down and carefully kept for future use if required. Prospective franchisees should be able to rely upon everything they are told but be wary of financial projections provided by the franchisor. That is a dangerous area and in my opinion franchisors should not provide financial projections at all but should provide actual financial results with the direction that the franchisee must go to its own independent accountant. New Zealand is very attractive for franchising and many overseas systems have entered the market including from Australia, USA, Canada and the United Kingdom. International franchising is thriving worldwide as it is such an excellent way to expand the brand and the system. New Zealand is a sophisticated market and New Zealand brands like Esquires Coffee and BurgerFuel are doing well overseas and are in many countries. The FANZ has been very successful in promoting self-regulation and high standards in franchising, and its Code of Practice is widely understood and accepted by many franchisors in New Zealand. At the end of the day, it is for a franchisee to make the decision whether or not to proceed with the purchase of a franchise. Careful due diligence should always be undertaken so that franchisees are fully informed before signing any documentation.

Stewart Germann Franchising Lawyer Auckland, New Zealand stewart@germann.co.nz www.germann.co.nz - 103 -

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Chapter 14

Want to franchise your business? What you need to know Timothy Mak | Practice Leader LegalVision

About the Author Tim is a Practice Leader at LegalVision with a broad range of legal experience in franchising and commercial law. Prior to his role at LegalVision, Tim was Managing Partner of the franchise specialist law firm DCS Lawyers. Tim was also General Counsel for Gloria Jean’s Coffees International and Fastway. With over 10 years’ experience leading the legal departments within successful international franchise businesses, he has a unique expertise in guiding the growth and expansion of Australian-based franchise networks. Tim’s experience gives him a commercial perspective on the law. He sees this as a crucial element of the way that he provides legal advice and expertise to his clients.

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Business FranchiSe Guide

f you own or operate a successful business and are looking for an avenue for rapid growth, franchising can be a great way to achieve that goal. Put simply, franchising your business means ‘leasing out’ your business model via a franchise agreement which will allow separate individuals or companies to purchase the right to run that business model under your brand for a given period. Franchisees get the benefit of a proven model to generate profits and cash for that period. As a franchisor, you receive an income from franchisee fees as well as benefit from the growing of your business’ goodwill and brand presence in the market. This chapter will step you through the options to expand your business and describe the advantages of franchising.

FRANCHISING V LICENSING Franchising isn’t the only option to grow your business. You can also license others to use your brand. Whether you should franchise or license your business largely depends on the amount of control you wish to have over your business network and the level of ongoing responsibilities you are willing to commit to. A licence agreement is a contract that involves a business (the licensor) giving another person or company (the licensee) the right to use something it owns (such as a trade mark, or a particular product or service). These licences often don’t contain detailed requirements and stipulations regarding how the licensee should operate the business. These licences simply give the licensee the right to use the brand for a fee with little in the way of guidance and compliance requirements regarding how the business should operate under the brand. By contrast, a franchisor exercises a significantly greater level of control over franchisees than a licensor. Franchise agreements contain clear directions on how the franchisee must operate the business and give detailed specifications on the level and type of marketing that each franchisee must carry out when selling to customers.

KEY CHARACTERISTICS OF A FRANCHISE AND A LICENCE Although a franchise system provides you with a much greater level of control than a licence, it also comes with greater ongoing obligations as franchisor (such as annual financial reporting and support and training of franchisees). If you opt for a licence agreement, keep it simple. It’s tempting to include clauses in your contract relating to the branding and appearance of the licensee’s business. However, doing so risks bringing your licence agreement into the realm of a franchise. The Franchise Code of Conduct (the Code) sets out specific elements that must exist for a particular arrangement to be considered a franchise. If those elements exist, you will have a franchise agreement, even if that is not what you intended. You should speak to a lawyer to understand whether your arrangement is a franchise or a licence as each arrangement differs in terms of legal obligations and level of control.

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Want to franchise your business? What you need to know

Criteria

Franchise

Licence

Marketing

Common marketing plan for all franchisees.

Licensees determine their own marketing activities.

Systems

The franchisor dictates the exact methods and systems (such as uniforms, fit-out and location) that the franchisee adopts.

Licensees are free to develop their own system for operating their business (e.g. fitting out their storefront as they please).

Performance Monitoring

The franchisor monitors performance, such as through stipulating minimum performance criteria/quotas.

No requirement to comply with performance criteria.

Fees

Franchisees pay certain fees, Licensees pay certain fees. which could include payments The licensor does not operate to a marketing fund. a marketing fund.

Intellectual Property

Franchisees use the trade marks and intellectual property of the franchisor.

Licensees use the trade marks and intellectual property of the licensor.

HOW TO PREPARE A FRANCHISE We have developed a checklist to help you answer the question, “Am I ready to franchise my business?” This checklist will also describe the preparatory steps required to be franchise ready. 1. Have you registered a domain name and trade mark? It’s difficult, if not impossible, to recruit franchisees without a website. Your domain name should be easy to remember. If your business name is already registered as a domain name and the domain is not being used, consider approaching the domain registrant to negotiate a purchase price. If there is an active website on the domain you want to use, you may need to consider alternative top-level domain names or choose a new business name with an available domain. Businesses commonly mistake their domain or business name registration for brand protection. However, a business must apply for and register a trade mark to secure exclusive rights to use their name and logo. If you don’t and later discover another business in the same state or territory has registered the same name as a trade mark, you may infringe on their intellectual property rights. 2. A Well-Developed Business Model To ensure you are ready to franchise your business, you need a proven and successful business in place that others can replicate. To transfer your skills and your business model to others you must have systems in place and a comprehensive operations manual and training program to communicate that model to others. Although a young business can franchise, to be successful you must have a committed team willing to

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Business FranchiSe Guide

devote sufficient time and attention to refining systems, preparing operations manuals and ensuring the model works over a sustained period. 3. Operations Manual One of the main reasons franchisees buy a franchise is because it’s a ‘business in a box’ - a turnkey operation with proven systems and processes. To that end, you should ensure that you have in place the following to assist prospective franchisees: • a clear list of suppliers and/or a clear description regarding how to order supplies and the expected prices/costs; • IT systems (including Point of Sale); • proven accounting and reporting systems; and • easy to use ordering systems. You will also need to provide franchisees with an operations manual. An operations manual is the blueprint of the franchise — it details how a franchisee should operate the franchise day-to-day and helps ensure consistent standards and service delivery across the network. Importantly, an operations manual forms part of the franchise agreement and as such, can form the basis of a franchisee’s breach. If the manual does not explicitly include a particular standard, you may have difficulty enforcing an act of non-compliance. The manual should then be sufficiently detailed and descriptive.

Typical Sections in an Operations Manual Section

Description

Technology

What software or accounting system must the franchisee must adopt? How are they to be set up, run and updated?

Client/Customer Interaction

How should franchisees instruct employees to greet customers, offer upgrades and handle complaints?

Presentation

How should franchisees fit-out their shop’s interior (e.g. design, layout and colour schemes)? Do employees have uniforms?

Suppliers

Franchisors typically have a list of prescribed suppliers to maintain consistency across the network. You should list the details of the suppliers and supply arrangements in the operations manual.

Pricing Structures

Recommended prices or required prices (depending on the type of product or service and your legal ability to set prices as the franchisor).

Day to day operations

How to carry out the service or deliver the product.

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Want to franchise your business? What you need to know

4. Resources for Recruitment, Training and Support Studies of the industry have shown that the quality and intensity of the initial training of franchisees is one of the most significant factors that determine the success of a franchise network. Don’t overlook the quality of the initial training. You will never have a more enthusiastic and receptive franchisee than when they first join the network. After you have recruited and trained franchisees, regular contact is important both to encourage the franchisee and continue monitoring their performance. Some franchisees will need more ongoing support and guidance than others. It is important to provide this support for the long term benefit of the network. This does not necessarily require a long on-site visit, but it does require more than an occasional invoice or email. Ensure you have the time and resources to devote to training, otherwise, this will negatively affect the growth of your franchise network. How to to Ensure Ensure Quality Quality Training Training How • Get feedback from your employees and those that have undergone the initial training continually improve your systems based on their feedback. • Hire an external consultant to review your training programs. • Remember the adage - train hard, fight easy. In other words the quality of the initial training is crucial to arming your franchisees with the tools to succeed. If they feel lost in the first few months, this drop in confidence could affect them for a long time. • Develop a mentor program where good franchisees are allocated to new franchisees and new franchisees know that they can contact their mentor over any issue in the first few months. Often franchisees are reluctant to contact the franchisor for fear of looking bad. • Make sure the training materials are available online or in written form. Often franchisees can be overwhelmed and need to refer to material when the operate the business on their own. Do not assume merely because you have shown them how to do something that they can do it themselves. Photos and videos in training programs and the operations manual can greatly assist a franchisee understanding what is required regarding presentation or systems and processes. 5. Franchise documentation After you have worked through the above list, you will be in a position to engage a franchise lawyer to help prepare the appropriate franchise documents, including: • the Franchise Agreement; and • the Disclosure Document. These agreements should follow the guidelines set by the Franchising Code of Conduct and set out the terms and conditions of the particular franchise. The agreement should be drafted flexibly to account for changes to the business occurring over time. Franchisors are under strict obligations to provide a disclosure document to potential

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Business FranchiSe Guide

franchisees before they enter into the franchise agreement. Details of what the franchisor needs to disclose are included in the Code, and include such information as the following: • Background and experience of the officers/directors of the business; • Number of franchisees in the network;

• What intellectual property the franchisor owns or how that intellectual property is licensed to the franchisor company (if it is not owned by the franchisor).

QUESTIONS TO ASK BEFORE ROLLING OUT A FRANCHISE MODEL • Have you obtained appropriate tax and accounting advice on your business structure and limited your personal liabilities? • Have you registered (or at least applied for) your trade marks?

• Do you have an operations manual that can be used as a basis for franchising and training franchisees? • How will you carry out training for franchisees?

• What fees and charges can you sustainably allocate to franchisees?

• Have you done the financial analysis to ensure the fees you charge will still allow franchisees to obtain a reasonable return on investment? • How will you allocate territories? Will they be exclusive or non-exclusive?

KEY TAKEAWAYS Franchising is a powerful tool that can accelerate your business’ growth. It not only reduces the risks commonly associated with rapid expansion, but also simultaneously builds a community of like-minded franchisees around your brand. A key ingredient to franchising success is building a motivated team of business owners and brand advocates that are aligned to your systems and processes. Many great Australian brands have built their success on the franchise model. With the right training, support and guidance, you could join the ranks of Coffee Club, Just Cuts, Battery World and Gelatissimo. If you have a successful business, there’s no reason why you shouldn’t consider franchising today. So what are you waiting for?

Timothy Mak Practice Leader LegalVision 1300 544 755 timothy.mak@legalvision.com.au www.legalvision.com.au - 110 -

What is a Franchise?

Franchise Listings categories: Automotive Products & Services.................................................................................. 112 Beauty Products & Services............................................................................................... 113 Building & Construction........................................................................................................ 114 Business Services........................................................................................................................... 115 Cleaning Services........................................................................................................................... 117 Courier Services.............................................................................................................................. 118 Financial Services......................................................................................................................... 119 Food â&#x20AC;&#x201C; Takeaway.............................................................................................................................. 120 Health & Wellness. ....................................................................................................................... 121 Mobile Services................................................................................................................................. 122 Retail. ........................................................................................................................................................... 123

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Business FranchiSe Guide

Automotive Products & services

Snap-on Tools 80 Holbeche Road, Arndell Park NSW 2148 Contact: Alan Moon | Phone: (AUS) 1800 762 766 Email: sota.franchise@snapon.com| Web: www.snapontools.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Snap-on Tools is a mobile franchise operation putting high quality tools and equipment into the hands of mechanics, engineers and technicians across the country. Snap-on Tools Australia & NZ is a wholly owned subsidiary of Snap-on Inc., a developer and manufacturer of innovative and technologically advanced tools with over 4,500 franchisees worldwide.

Date of first franchise: 1988

After 30 years in the Australian market, Snap-on Tools continues to grow with an increasing number of franchisees reaching the million dollar club and new growth opportunities available for existing franchisees such as sales assistants, multi-units and specialised tool storage and diagnostic sales programs. Initial training occurs in Dallas, USA and ongoing support is provided - no previous mechanical experience required. Snap-on offers an exclusive finance package to assist new franchisees.

Membership: FCA, FANZ Training provided: 1 week training provided in the US, plus 2-6 weeks when onroad, plus ongoing training and support provided. Territories available: Territories available across Australia and New Zealand. FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 180 (AUS/NZ) 4500+ (INT) FINANCIAL DETAILS: Initial franchise fee: $40,000 ex-GST Minimum investment: $55,000 Financial assistance: Snap-on Finance Packages Available

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What is a Franchise?

Beauty products & services

Hairhouse Warehouse Level 1, 605 Doncaster Road, Doncaster Vic 3108 Contact: Peter Fiasco | Phone: (AUS) 0451 370 060 Email: franchising@hairhousewarehouse.com.au | Web: www.hairfranchise.com.au BUSINESS DESCRIPTION:

COMPANY DETAILS:

As a franchisee, no hair or beauty certification is required – just a passion for success.

Date of first franchise: 1998

With over 20 years of experience in the hair and beauty industry, Hairhouse Warehouse is one of Australia’s leading retail franchise brands. Hairhouse Warehouse’s vision is clear and simple. Offer quality products at a reasonable price, whilst providing exceptional customer service. This mission is clearly on display in each and every one of our locations by simply looking at our franchisees and the teams they work with. As Hairhouse Warehouse continues to dominate the hair and beauty industry in Australia, the brand and franchisees are seeing amazing results. To continue our brand domination Hairhouse Warehouse is planning to expand to over 180 stores over the next three years.

Membership: FCA, HBIA Training provided: Intensive workshop and in store training, as well as ongoing training and support in-store Territories available: NT/Darwin Metropolitan and Regional NSW Metropolitan and Regional SA/Adelaide Metropolitan and Regional WA/Perth Metropolitan and Regional QLD Metropolitan and Regional FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 140+ FINANCIAL DETAILS: Initial franchise fee: $66,000 +GST Minimum investment: $250,000 to $350,000 for Greenfield sites Royalty fee: 6% of gross sales +GST Advertising/marketing fee: 3% of gross sales +GST

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Business FranchiSe Guide

Building & Construction

V.I.P. Home Services â&#x20AC;&#x201C; Fencing and Home Maintenance U9/35 Progress Street, Mornington VIC 3931 Contact: Warren Smith | Phone: 13 26 13 Email: joinus@vipfandhm.com.au | Web: www.vipfandhm.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

V.I.P. Home Services expanded in late 2015 into the Fencing and Home Maintenance division with Warren Smith and Vea Johnston, this was a natural progression as the services offered align perfectly with lawn and garden services V.I.P. have been offering customers over 35 the past years.

Date of first franchise: 2016

Collectively with over 30 years of experience Warren and Vea franchise offer is exciting and innovative, contact Warren to find out more about our franchise opportunity or if you would like to invest in a larger business then talk to us about the Regional Master franchise offer we have.

Membership: FCA and MBA Training provided: 8-Weeks Paid Training for Fencing, 4-Weeks Paid Training for Home Maintenance, 10-Weeks Paid Training for Regional Master Franchises. Territories Available: Franchises available Perth, Melbourne and Victoria. Regional Master Franchises available Adelaide, Brisbane, Canberra, Sydney and Tasmania FRANCHISE OUTLETS AUSTRALIA: Current: 15+ FINANCIAL DETAILS: Initial franchise fee: POA Minimum investment: POA Financial assistance: Yes (T.A.P) Advertising/marketing fee: Nil

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Business Services

INXPRESS 1/26 Flinders Parade, North Lakes QLD 4509 Contact: David Wilkinson | Phone: 0412 692 052 Email: sales.au@inxpress.com | Web: www.inxpress.com

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: As one of DHL’s largest shipping partners, InXpress provide heavily discounted shipping to SME’s by leveraging small orders into large volume discounts.

Current: 40 Nationally and over 300 Globally

With massive global buying power and an international network we’re passionate about our service and our customers. With an expanding National brand, InXpress Franchisees leverage the savings to build a business with long term residual income and lifestyle.

FINANCIAL DETAILS: Initial franchise fee: $74,950 + GST Minimum investment: $74,950 + GST Royalty fee: 30% of gross margin

COMPANY DETAILS: Date of first franchise: 2002 Membership: FCA and BFC Training provided: Business development in successful model, with sales training and ongoing support. Territories available: National opportunities across all capital cities and metropolitan areas - contact us for more details.

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Business Services

MOBILE APP CITY PO Box 303, Parkwood WA 6147 Contact: Richard Giannini | Phone: 0487 896 061 Email: richard@mobileappcity.com | Web: http://MobileAppCity.com

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Profit from one of the world’s highest growth industry – Mobile Apps and Digital Media Services for businesses.

Date of first license: 2012 Membership: Training provided: We tailor the training to suit your vision and plan, including one on one training sessions on how to use our powerful online systems to process apps, websites, SEO packages, graphic design and other custom services, along with coaching and ongoing support.

We set you up with your own business so you can provide mobile app and other digital media business solutions to businesses. We manage the design and development teams and wholesale the services to you. Businesses used to need only their own website, now they also need their own mobile app. The biggest benefit a business gets from having their own mobile app is to dramatically increase their income by getting a lot more repeat business from their existing customers- without them having to spend money on marketing.

Territories Available: All – no territory restrictions.

You’ll also have a range of Digital Media services you can provide to businesses, all helping business either get more customers or reduce expenses in their business through technology. Having a range of services means you have the ability to earn multiple streams of income from each client.

Initial license fee: 15,000

LICENSEE OUTLETS: Current: 50 FINANCIAL DETAILS: Minimum investment: $15,000 Royalty fee: NO Royalties or any ongoing fees Advertising/marketing fee: NO advertising or marketing fees - 116 -

Cleaning Services

Chem-Dry Unit 3 / 30 Park Road, Mulgrave NSW 2756 Contact: Alan Biddle | Phone: 1800 243 637 Email: info@chemdry.com.au | Web: www.chemdry.com.au

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: Chem-Dry is the worldâ&#x20AC;&#x2122;s largest carpet cleaning franchise with over 3,500 individual franchises currently operating worldwide. Chem-Dry has been operating in Australia since 1986.

Current: 140 FINANCIAL DETAILS: Initial franchise fee: $14,000 + GST

Our unique, hot-carbonated extraction cleaning method, combined with best in-class products and services make it impossible to find a better carpet and upholstery cleaning business opportunity.

Minimum investment: $39,950 + GST Royalty fee: Fixed Monthly Royalty of $686 + GST per month Financial assistance: Finance packages available to approved purchases Advertising/marketing fee: Nil

COMPANY DETAILS: Date of first franchise: 1986 Membership: IFA Training provided: Franchise partners receive a comprehensive 3 Day training course, plus initial on-road training. ChemDry also provides ongoing training and dedicated 24/7 support. Territories available: Franchises available in all Metropolitan areas and regional centres.

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Courier Services

FASTWAY COURIERS Level 9, 491 Kent Street, Sydney, NSW, 2000 Australia Shed 5, Level 1, Lever Street, Ahuriri, Napier, NZ Contact: (AUS) Fastway FSO or (NZ) Fastway FSO Phone: (AUS) 1300 FASTWAY or (NZ) 06 833 6333 | Email: (AUS) fso@fastway.com.au or (NZ) recruitment@fastway.co.nz | Web: www.fastway.com.au or www.fastway.co.nz BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA

Established in New Zealand in 1983, Fastway Couriers’ global network includes 63 regional depots and 1,500 Courier Franchisees across Australia, New Zealand, Ireland and South Africa.

Current: AUS over 800 Courier Franchisees NZ over 300 Courier Franchisees FINANCIAL DETAILS:

Through its industry-leading franchise system, Fastway Couriers has developed a reputation for providing fast, friendly and cost-effective service to its customers – an achievement which has earned the franchise over 50 industry accolades.

Initial franchise fee: From $25,000 + GST ($AUS) and from $15,000 ($NZ) Minimum investment: From $25,000 + GST ($AUS) and from $15,000 ($NZ) Royalty fee: N/A Financial assistance: N/A Advertising/marketing fee: N/A

COMPANY DETAILS: Date of first franchise: 1984 Membership: FCA and FANZ Training provided: Ongoing training and support is provided to our franchise partners. Territories available: Various territories are available throughout Australia and New Zealand.

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Financial Services

The Interface Financial Group â&#x20AC;&#x201C; IFG 50/50 Level 32, 8 Exhibition Street, Melbourne VIC 3000 Contact: David T. Banfield | Phone: (AUS) 1300 957 900 Email: ifg@interfacefinancial.com | Web: www.interfacefinancial.com.au/franchise

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: Interface franchisees provide short-term working capital for expanding businesses through a unique and proven invoice discounting programme.

Current: Australia 6 Canada 6 U.S.A. 46 UK & Ireland 10

COMPANY DETAILS: Date of first franchise: 2014

FINANCIAL DETAILS:

Training provided: Extensive initial training (5 days) covers both theoretical and practical aspects of the business. Ongoing regular training and coaching is also provided.

Initial fee: $34,500

Territories available: Single units are available in all territories.

Advertising/marketing fee: N/A

Minimum investment: Franchise fee+ working capital of $50,000+ Financial assistance: All funding is done together - franchisee and franchisor

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Food - takeaway

Sandwich Chefs® Suite 1, Level 11 636 St Kilda Rd, Melbourne VIC 3004 Contact: Chris Ferguson | Phone: 03 9856 4400 Email: chrisf@pnfm.com.au | Web: www.sandwichchefs.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Thirty years ago, three mates walked into a Sandwich Bar. Driven by the desire to make the kind of sandwiches people can’t make at home, they embarked on a delicious partnership that focused on making sandwiches properly.

Date of first franchise: 2001

Today, this means ensuring that each Sandwich Chefs® store is able to source freshly baked artisan bread, has fresh local produce delivered daily, and makes as many fresh fillings from scratch including our 14-hour slow-roasted beef and crackling pork.

Territories Available: Locations across VIC, NSW, QLD and SA

Training provided: 4-6 week training program, we cover all aspects of the business prior to the store opening, including a mix of in-store practical and Head Office administration.

FRANCHISE OUTLETS: Current: 48 FINANCIAL DETAILS: Initial franchise fee: Refer Disclosure Minimum investment: Between $200,000 and $380,000 Royalty fee: 9% Financial assistance: Available

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Health & Wellness

Peak Physique Hot Yoga Head Office - Noosa Heads QLD Contact: Suzanna & Michael Calava | Phone: 0477 706 832 Email: peakphysiquefranchise@gmail.com | Web: www.peakphysiquehotyoga.com.au

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS:

Profitable Yoga. The fastest growing health industry in Australia, Yoga. Invest in Peak Physique Hot Yoga, maximising profits, whilst improving the health of others.

Current: QLD, NSW, SA, VIC. Opening soon: Woolloongabba (QLD), Morphett Valley (SA) & Noosa (QLD).

Our studios are open 25 hours a week, giving you the lifestyle and opportunity to have more time with you, family & friends.

FINANCIAL DETAILS: Initial franchise fee: $33,000 Minimum investment: $66,000 Financial options: Payment plans & Finance options available.

COMPANY DETAILS: Date of first franchise: 2015 first opened started in 2010

Free initial consultation, no obligation required.

Membership: Yoga Alliance Australia Training provided: Business Training & Master Yoga Certification Training Territories available: VIC, NSW, QLD, WA

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Mobile Services

BARK BUSTERS AUSTRALIA Head office: 136 Bong Bong Road, Dapto NSW 2530 Contact: Val Edwards | Phone: 02 4262 0783 Email: office@barkbusters.com.au | Web: www.barkbusters.com.au

Territories Available: NSW: Central Coast | Mid North Coast | Northern NSW | Albury/Wodonga/Wagga

BUSINESS DESCRIPTION: Self-motivated, a great communicator, have patience, enthusiasm and are looking for a business which provides great work satisfaction, flexible hours and the opportunity to work with manâ&#x20AC;&#x2122;s best friend on a daily basis? Then a Bark Busters Franchise may just be for you. Join our Bark Busters network of dog trainers and reap the rewards of being your own boss.

COMPANY DETAILS: Date of first franchise: 1989 Membership: PIAA

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

Training provided: Full in-house training is provided at Head Office, NSW.

Current: 46 in Australia & New Zealand (300 Worldwide) FINANCIAL DETAILS: Initial franchise fee: From $20,000 Minimum investment: $20,000 Royalty fee: 13%. There is no royalty on equipment sales. - 122 -

Retail

7-ELEVEN STORES PTY LTD 357 Ferntree Gully Road, Mount Waverley VIC 3149 Phone: (AUS) 03 9550 0600 - VIC, (AUS) 02 9798 1200 - NSW, (AUS) 07 3291 9400 - QLD Web: www.7elevenfranchise.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

7-Eleven is a global success story with more than 59,000 stores world-wide. 7-Eleven Australia is growing rapidly and you can be a part of the growth opportunities by becoming a 7-Eleven Franchisee.

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

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

Territories available: VIC, NSW, QLD, ACT, WA FRANCHISE OUTLETS AUSTRALIA: Current: 657+ FINANCIAL DETAILS: Initial franchise fee: Site specific Minimum investment:

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

$400,000 - $1,000,000 (site dependent) Royalty fee: Gross profit split, determined progressively. Other income stream profits, such as commissions, are also shared.

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Retail

Amber Group Aust P/L 37 Bessemer Street, Blacktown Nsw 2148 Contact: Greg Lynch | Phone: 02 9621 0400 Email: glynch@ambertiles.com.au | Web: www.ambertiles.com.au

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA:

Established in 1973, Amber is Australia’s largest network of paving and tile retail franchises. Amber has over 40 years’ experience in providing hard flooring advice, service and solutions to customers in the core business areas of floor tiles, wall tiles, natural stone, pavers, retaining walls and associated products. Strong brand and strap line – Amber has the answer…

Current: 24 Franchise stores plus 3 Company owned stores – total group 27 stores. FINANCIAL DETAILS: Initial franchise fee: Nil Minimum investment: $150 K Royalty fee: Average 3.75% Advertising/marketing fee: 3.25% Metro + 1% Local

COMPANY DETAILS: Date of first franchise: 1996 Membership: FCA Training provided: Initial and & ongoing training and support in business & product. Territories Available: NSW, ACT & QLD

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Retail

Beaumont Tiles NSO: 225 Marion Rd, Marleston SA Contact: Trevor Dixon | Phone: 08 8292 4444 Email: franchiseenquiry@tile.com.au | Web: www.beaumont-tiles.com.au

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA:

Beaumont Tiles are Australiaâ&#x20AC;&#x2122;s largest tile group bringing the best and latest to our Australian customers - we supply more tiles to Australian homes and builders than any other tile retailer. We are proudly unique in what we do and how we do it and each and every person is valued for their contribution and input.

Current: 76 franchise stores as part of our 114 strong store network. FINANCIAL DETAILS: Initial franchise fee: $45,000 + gst which includes opening promotion and advertising costs. Minimum investment: Indicative Range $265,000 - $335,000 + gst

COMPANY DETAILS:

Royalty fee: 4%

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

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

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

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Retail

BRIGHTEYES franchising PTY LTD 36 Cessna Drive, Caboolture QLD 4510 Contact: Ralph Edwards | Phone: (AUS) 1800 178 251 Email: enquiries@brighteyes.com.au | Web: www.brighteyes.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Searching for true work-life balance in a fun and friendly retail environment focused on enhancing Australia’s active outdoors lifestyle, then look no further than BrightEyes.

Date of first franchise: 1985 Membership: FCA Training provided: Full training provided & ongoing support Territories available: Australia wide

If you like the idea of simply opening the shutters when you arrive in the morning, with no early morning preparation or late night clean-up, this is the franchise opportunity for you.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 48

Established in 1985, BrightEyes is Australia’s largest privately-owned retail sunglasses network and is eyeing new store opportunities throughout the country for Franchise Partners to share in its bright future.

FINANCIAL DETAILS: Initial franchise fee: POA Minimum investment: $120,000 Royalty fee: 5% Financial assistance: No

Owning and operating a BrightEyes franchise can be the most satisfying and fun way to earn a living that you’ll ever know. At BrightEyes, we are not simply selling sunglasses – we are selling an enhanced way of life.

Advertising/marketing fee: 1.5%

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Retail

Clark Rubber 254 Canterbury Road, Administration Bldg, Bayswater VIC 3153 Contact: Dirk Heinert | Phone: 03 8727 9999 Email: dirk.heinert@clarkrubber.com.au | Web: www.clarkrubber.com.au

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS:

Clark Rubber is one of Australiaâ&#x20AC;&#x2122;s most iconic retail brands, with a proud history spanning the past 70 years, we now have 60 stores nationally.

Current: 60 FINANCIAL DETAILS: Initial franchise fee: $60,000

Our award winning franchise model commenced in 1995 and offers a vibrant product range covering Everything Pools, Foam and Rubber. All stores operate mobile pool service and cleaning vans to service the pools and spas in their local area.

Minimum investment: $460,000 + GST Royalty fee: 5% Advertising/marketing fee: 5% + 1.5% Local Area Marketing

COMPANY DETAILS: Date of first franchise: 1995 Membership: F.C.A., SPASA Training provided: 3 week prior commencement Territories Available: VIC, NSW, QLD, SA, TAS, WA

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Retail

Dr Boom Communications Unit 2, 56-58 Buffalo Road, Gladesville, NSW 2111 Contact: Jack Zervos | Phone: 1800 DR BOOM (1800 37 2666) Email: franchising@drboom.com.au | Web: www.drboom.com.au

BUSINESS DESCRIPTION:

FRANCHISE OUTLETS:

Since 1994 Dr Boom have set the standard in the sale of Premium and Exclusive Mobile Phone and Tablet Accessories; On the spot repairs of mobile phones and tablets and the sale of Premium portable Audio devices; headphones, Bluetooth speakers and hands free devices.

Current: 5 FINANCIAL DETAILS: Initial franchise fee: $75,000.00 Minimum investment: $195,000.00 Royalty fee: 7% of annual sales Financial assistance: Vendor Finance up to 50% of total investment subject to approval and security

COMPANY DETAILS: Date of first franchise: 2014

Advertising/marketing fee: 3% of annual sales

Training provided: 4 weeks Territories Available: On application

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Retail

TSG PO Box 559, South Melbourne VIC 3205 Contact: Head Office | Phone: 03 8698 9600 or 1800 777 079 Email: enquire@tsgfranchise.com.au | Web: www.tobaccosg.com

BUSINESS DESCRIPTION:

COMPANY DETAILS:

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

Date of first franchise: 1996 Membership: FCA Training provided: YES Territories available: ALL

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

FRANCHISE OUTLETS AUSTRALIA: Current: > 400 FINANCIAL DETAILS: Initial franchise fee: $1000 - $3000 Minimum investment: $150K - $200K Royalty fee: Annual fixed fees ($4200 Franchise + $360 IT Support) Financial assistance: No Advertising/marketing fee: N/A

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Professional Services categories: Accountants. ...................................................................................................................................... 132 Financial Institutions. ............................................................................................................. 133 Lawyers..................................................................................................................................................... 134 Point of Sale........................................................................................................................................ 137 Support Services & Consultants.................................................................................. 138

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Accountants

babo group pty ltd Level 1, 12 Cramer Street, Preston VIC 3072 Contact: Mr Pat Soldo | Phone: (AUS) 03 9466 0200 Email: pats@babo.com.au | Web: www.babo.com.au 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 driven service is individually tailored to your specific requirements and 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? 10. Is your advice objective and independent? Please call us to assist you with the proposal.

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Financial Institutions

CASHFLOW IT® Level 1, 349 Coronation Drive, Milton QLD 4064 Contact: Dan Toms | Phone: 1300 659 676 Email: customerservice@cashflowit.com.au | Web: www.cashflowit.com.au BUSINESS DESCRIPTION: Cashflow It® are the franchise finance experts. We specialise in equipment finance solutions only for the franchise sector. With competitive rates and flexible terms from 12 months to 5 years, Cashflow It can provide the funding that franchisors and franchisees need today. We offer flexible rental, traditional leasing solutions and business loans tailored to your requirements. What Can We Fund?

Why Choose Cashflow It®?

• New equipment

• Competitive rates

• Used equipment • Fit-outs

• 24 hours a day / 7 days a week Customer Service

• Store refurbishments

• Preserve your precious capital

• Re-financing

• Simple, manageable, low weekly payments

• Buying an existing franchise

• Terms start from just 12 months

• National equipment roll-outs

• Repayments are 100% tax deductible • Flexible end of term options • Experts in franchising • Fast online application process

Cashflow It is a division of Thorn Group Ltd. Thorn Group is a leading Australian provider of financial services, meeting the needs of niche consumer and commercial markets. They are an ASX 200 company and have over 80 years’ experience in the finance Industry. Franchise Accreditation Cashflow It Accredited Franchise systems enjoy pre-approval and other exclusive benefits. Talk to us today about getting your franchise system accredited. Why spend your hard earned capital when you can simply… Cashflow It! In Business Since: 2014 - 133 -

lawyers

MADGWICKS LAWYERS Level 6, 140 William Street, Melbourne, VIC 3000 Contact: Chris Verebes | Phone: (AUS) 03 9242 4744 Email: chris.verebes@madgwicks.com.au | Web: www.madgwicks.com.au BUSINESS DESCRIPTION: Franchising in Australia is a regulated environment. When considering establishing a franchise system, entering into a franchise agreement or navigating a dispute with a franchisee or franchisor, it is important that you use a law firm with extensive knowledge of the franchising business model and the Australian legal landscape. Madgwicks is a full service business law firm. Our team of experienced lawyers regularly advise franchisors, franchisees and franchise industry service providers. Our lawyers also have extensive experience advising groups that operate under similar business structures, including cooperatives and strategic alliances. We regularly advise on: Franchise system establishment | Franchise due diligence | Franchising Code of Conduct compliance | Franchise agreements and disclosure documents | Business structures appropriate for franchise systems | Supplier and terms of trade agreements | Commercial and retail leasing, as well as general property advice | Trade practices advice, including ACCC notification/authorisations | Acquisition, disposal, joint venture and partnership advice | Employment and workplace relations | Tax, duty and GST advice | Branding, intellectual property and trade marks | Litigation and dispute resolution Madgwicksâ&#x20AC;&#x2122; Franchising team is an active member of the Franchise Council of Australia and has an established network of accountants, business advisors and brokers to assist our clients when required. Madgwicks also provides clients with the benefit of our international affiliation with Meritas, connecting them with member firms across Australia and globally, providing expertise wherever they need it. In Business Since: 1973

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lawyers

Marsh & Maher Lawyers Level 2, 100 Wellington Parade, East Melbourne VIC 3002 Contact: Robert Toth | Phone: 03 9604 9400 Email: rxt@marshmaher.com.au | Web: www.marshmaher.com.au BUSINESS DESCRIPTION: Wow, what a year in franchising in 2016! Our franchise group have been extremely busy advising new Franchisees, establishing Franchise Systems and advising Overseas Franchisor’s and Companies. Our Franchise, Licence and Distribution Group has over 30 years experience and industry knowledge. Members of the Franchise Council of Australia (FCA), the International Franchise Lawyers Association (IFLA) and the US Commercial Service. We can assist clients with: • Development and Advice on establishing Franchise Systems, • Company structures; • Master Franchising; • Advising International franchisors; • Code Compliance • IP and Trade Marks • Leasing • Dispute Resolution and Mediation We provide clients with fixed fees based on scope of service.

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lawyers

Stewart Germann Law Office Ground Floor, 2 Princes Street, Auckland PO Box 1542, Auckland 1140, New Zealand Contact: Stewart Germann | Phone: (NZ) +64 9 308 9925 Email: stewart@germann.co.nz | Web: www.germann.co.nz BUSINESS DESCRIPTION: Stewart Germann is acknowledged as New Zealand’s leading franchising lawyer and has over 35 years experience in this area. Stewart Germann Law Office (SGL) is New Zealand’s longest established specialist franchising law firm and has won multiple awards in franchise law both nationally and internationally. Stewart is a recognised national and international guest speaker at franchise conferences (New Zealand, Australia, USA) and he is listed in the International Who’s Who of Franchise Lawyers 2017. SGL’s clients include many of New Zealand’s best known national and international franchise brands and the firm has extensive franchising contacts worldwide and locally. SGL has been selected by Best Lawyers in New Zealand in the area of Franchise Law for 2017/2018. The firm won Boutique Franchising Law Firm of the Year in New Zealand at the 2017 Global Law Experts Awards. SGL also won Law Firm of the Year – Franchise – New Zealand in the Global 100 – 2015 rankings and Boutique Licensing Law Firm of the Year in New Zealand 2015 – Corporate INTL Legal Awards. The firm is Law Firm of the Year – Franchise – New Zealand in M&A Global Awards 2016. SGL belongs to the Franchise Association of New Zealand, the Franchise Council of Australia Limited, the IFA (USA) and the International Franchise Lawyers Association. Stewart was instrumental in the formation of the Franchise Association of New Zealand in 1996 and he wrote the original rules, as well as being a Past Chairman and a current member. Stewart has been awarded Life Membership of the Franchise Association of New Zealand in recognition of his significant contribution. He was also a board member of the supplier forum of the International Franchise Association (IFA) from 2001 to 2007. He is actively involved in international franchising and has published articles in the International Journal of Franchising Law. Stewart is a Notary Public and can witness documents for use in overseas jurisdictions and he is also a qualified mediator. Stewart regularly advises international clients on legal issues relating to franchising in New Zealand and welcomes enquiries from overseas. In Business Since: 1993 - 136 -

Point of Sale

redcat pty ltd Level 2, 70 Park Street, South Melbourne VIC 3205 Contact: Lawrence Pelletier | Phone: (AUS) 1300 4 REDCAT (1300 473 322) Email: hello@redcat.com.au | Web: www.redcat.com.au BUSINESS DESCRIPTION: Redcat is a specialist provider of an integrated end-to-end Hospitality management system. Redcat Polygon is a fully integrated POS, Accounting and Business Management software solution that helps you run your business more efficiently, freeing you to focus on delivering great food, drink and service. Redcat Polygon helps Restaurants, Cafés, Bars, Franchises and Multi-Site Venues by providing real-time reporting and full visibility of every aspect of the business, along with round the clock support designed for the rigours of hospitality. And Redcat Polygon is delivered via the cloud, so you don’t need complex infrastructure or in-depth IT skills to run it. As your business grows, Redcat Polygon will scale up with you, leaving you free to do what you’re good at – offering great food, drink and service to your customers. We’re passionate about hospitality – we love the business and we love the people who run the businesses. Every person in Redcat has worked in hospitality. That puts us in the unique position of being able to see the world through your eyes and understand the pressures of keeping customers happy and coming back for more. That’s why some of Australia’s best hospitality venues rely on our systems: multi award-winning restaurants, restaurant groups, cafés, bars, franchises, QSRs, and fast casual restaurants. We’ve provided thousands of businesses with the real-time visibility and control they need to make effective decisions and grow their business. We’d love to help you too. OUR CLIENTS Multi-Site & Franchise Venues Redcat supports informed business decisions, across all your venues. Combine the management of your multiple outlets into a single system – a system that is scalable as your business grows. Redcat Polygon gives you the manageability and visibility you need to effectively manage multiple sites. Our clients range from small aspirational operators to some of the largest franchise groups in the country – Huxtaburger, Jimmy Grants, Fancy Burgers, Chatime, Biggie Smalls, Nando’s, Boost Juice, Salsa’s, MAdE Establishment, Adelaide Food & Wine Collective, and Grill’d, to name a few. In Business Since: 1991, Redcat has offices in Melbourne, Sydney, Brisbane, and Canberra, with representatives nationwide.

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Support Services & Consultants

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

BUSINESS DESCRIPTION: FC Business Solutions is a multi-discipline franchise consultancy with a dedicated team of professionals focusing on the development of franchise businesses. Established in 1999, FC Business Solutions has the experience and expertise to empower franchisors to grow their business and become market leaders in their chosen field. With services including documentation standards; marketing, communications and PR; action based training; executive recruitment; system development; business operations and HR solutions, FC Business Solutions have the team and resources to assist you in all aspects of your franchise business. The team are actively involved members of the Franchise Council of Australia (FCA), regularly attending events, participating in committees and ensuring their skills and knowledge remain cutting edge and current. With a solid reputation based on relationships and results and a dedication to raising the profile of franchising in Australia, FC Business Solutions stand by their motto of â&#x20AC;&#x153;We help businesses growâ&#x20AC;?. System Development: Franchise systems development | Operational support | Strategic planning | Business Health Check Business Operations: Strategic and business planning | Multi-site ownership programs | Franchise recruitment systems | Mentoring and coaching Marketing, Communications and PR: Marketing, communications and brand strategy | Local area marketing | Franchise launch strategies Training Solutions: Training development and facilitation | Franchise focussed and operational public programs | Induction program development HR Solutions: Executive recruitment | HR audits | HR Helpdesk Standard Operating Procedures: Online operations manual platform | Franchise operations manual | Head office department procedures

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Helpful organisations FRANCHISE COUNCIL OF AUSTRALIA

FRANCHISE ASSOCIATION OF NEW ZEALAND

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 Web: www.franchise.org.au

PO Box 33-676 Takapuna New Zealand 0622 Phone: +64 9 274 2901 Fax: +64 9 274 2903 Email: contact@franchise.org.nz Web: www.franchiseassociation.org.nz

SPECIALISED EVENTS Level 1, 578 Malvern Rd Prahran VIC 3181 Phone: +61 3 9999 5460 Fax: + 61 3 9999 5461 Email: info@specialisedevents.com.au Web: www.specialisedevents.com.au

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 Web: www.accc.gov.au/franchisingcode

AUSTRALIAN TAXATION OFFICE

OFFICE OF FRANCHISING MEDIATION ADVISER Suite 205, Level 2, 370 Pitt Street Sydney NSW 2000 Phone: (AUS) +61 2 9267 0167 Fax: +61 3 8660 3399 Email: office@franchisingmediationadviser.com.au Web: www.franchisingmediationadviser.com.au

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GPO Box 9990 (In your relevant Capital City and State) Phone: 13 28 66 Web: www.ato.gov.au

Index of franchises & services 7-Eleven Stores............................................................................................................................................................................................123 Amber Group..................................................................................................................................................................................................124 Babo Group. ....................................................................................................................................................................................................132 Bark Busters Australia............................................................................................................................................................................122 Beaumont Tiles. ...........................................................................................................................................................................................125 BrightEyes Franchising...........................................................................................................................................................................126 Cashflow It. .....................................................................................................................................................................................................133 Chem-Dry..........................................................................................................................................................................................................117 Clark Rubber...................................................................................................................................................................................................127 Dr Boom Communications...................................................................................................................................................................128 Fastway Couriers........................................................................................................................................................................................118 FC Business Solutions.............................................................................................................................................................................138 Hairhouse Warehouse.............................................................................................................................................................................113 InXpress.............................................................................................................................................................................................................115 Madgwicks Lawyers................................................................................................................................................................................134 Marsh & Maher............................................................................................................................................................................................135 Mobile App City...........................................................................................................................................................................................116 Peak Physique Hot Yoga. .......................................................................................................................................................................121 Redcat....................................................................................................................................................................................................................13 Sandwich ChefsÂŽ........................................................................................................................................................................................120 Snap-on Tools................................................................................................................................................................................................112 Stewart Germann Law Office.............................................................................................................................................................136 The Interface Financial Group - IFG 50/50. ...............................................................................................................................119 TSG. ......................................................................................................................................................................................................................129 V.I.P. Home Services - Fencing & Home Maintenance.....................................................................................................114

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Tired of working for someone else? Ready to be your own boss? Worried about going it alone? this guide is your key to financial independence through franchising Imagine buying a business with a proven system and business model and a brand that people already know! This comprehensive guide will help you on your franchising path to success, utilising decades of experience from experts in the industry featuring topics such as:

HOW DO YOU CHOOSE THE RIGHT FRANCHISE? By Prof. Lorelle Frazer, Asia-Pacific Centre for Franchising Excellence | Griffith University Lorelle is one of the world’s leading and most highly respected franchise researchers.

UNDERSTANDING THE LEGAL DOCUMENTS Raynia Theodore, MST Lawyers Raynia is a Principal in the Corporate Advisory and Franchising Team at Melbourne based law firm MST Lawyers.

Along with: NEW TO FRANCHISING? YOUR QUESTIONS ANSWERED | George Yammouni, Bathroom Werx HOW TO CONDUCT DUE DILIGENCE | DC Strategy Funding your franchise | James Scurr, Cashflow It WHAT TO CONSIDER BEFORE YOU BUY | Nathan Hood, Carbon Group PAYROLL BASICS FOR NEW FRANCHISE OWNERS | Kate Groom, Franchise Accounting & Tax MARKETING & SOCIAL MEDIA FOR FRANCHISEES | Katherine Grace, Elemental Solutions Marketing WANT TO FRANCHISE YOUR BUSINESS? | Timoth Mak, LegalVision

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

SUPPLIER FORUM

ISBN 978-0-646-97957-1

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