What is a Franchise? AUSTRALIAN AND NEW ZEALAND BUSINESS
The essential guide for franchising with all your questions answered by industry experts in buying, owning and running a franchise
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Business FranchiSe Guide
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THE NEW YOU? FRANCHISE TERRITORIES AVAILABLE The Franchise Guide 2023 is published by CGB Publishing Pty Ltd PO Box 17 Pomona QLD 2704 Australia Phone: 07 5485 2704 *** 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 areTO not necessarily those of the publisher. SCAN NOW
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Contents Preface
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Chapter 1: Franchise Council of australia helps business face new challenges......................................................................................................................................... 7 Matthew Monaghan, CEO Franchise Council of Australia
Chapter 2: What Does The Franchising Code of Conduct Really Mean for Franchisees?................................................................................................................................ 11 Jason Gehrke, Director, Franchise Advisory Centre
Chapter 3: Financial Essentials for Franchise Buyers....................................................................... 19 Kate Groom, Franchise Accounting and Tax
Chapter 4: Understanding the Legal Documents........................................................................................ 29 Robert Toth , Special Counsel, Sanicki Lawyers
Chapter 5: Tips to Help You Get Your Tax Right............................................................................................... 41 Emma Tobias, Assistant Commissioner, Australian Taxation Office
Chapter 6: What to be Aware of in Relation to Franchising in New Zealand............ 49 Stewart Germann, Franchising Lawyer, Stewart Germann Law
Chapter 7: Are you About to Buy a Franchise? Your Most Important Question… Where Are my Customers?.................................................................................... 59 Roger Dickeson, Senior Franchise Consultant, Wollermann Franchise Developments
Chapter 8: Financing Your Franchise Business............................................................................................. 65 Phil Chaplin, CEO CFI Finance Group
Chapter 9: The Myriad of Franchise Brands in Australia Today.............................................. 71 Brian and Prue Keen, Founders, Franchise Simply and Systems2Grow
Chapter 10: Franchising in Australia – What Every Franchisor and Franchisee Needs to Know to be Successful...................................................................... 77 James Corne, Founder and CEO, The Franchise Institute
Chapter 11: Choosing the Perfect Location or Territory for your Business................ 85 Peter Fiasco, Head of Franchising, Kwik Kopy Australia
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Chapter 12: Is Franchising Just Buying Yourself a Job? Business Ownership Versus Self-Employment............................................................... 93 Doug Downer, The Franchise Guy™, Franchise Ready
Chapter 13: The Franchiser’s Role in Marketing Success.................................................................. 101 Lauren Clemett, The Brand Navigator, Finding Your Brand True North
Chapter 14: What You Need to Know as a New Franchisee About… Employing and Managing a Team................................................................................................. 107 Carmel Brown, Founder and Director, The Proven Group
Franchise Listings:................................................................................................................................................................................. 114 Professional Services Listings:.............................................................................................................................................. 120 Helpful Organisations:.................................................................................................................................................................... 128
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Preface Vikki Bradbury | Publisher CGB Publishing Pty Ltd
W
elcome to the 16th Edition of Australian and New Zealand Business Franchise Guide.
Franchising has the potential to provide a lifestyle change which can be both fulfilling and extremely financially beneficial. Our working life has undergone a transformation recently with technological advances and working from home increasing our ability to find that work/life balance. Being flexible has become a higher priority for people and choosing to invest in a Franchise is one of the best ways to make this happen. Becoming a Franchisee can be a scary and complicated process, we hope that this Guide can assist you on this journey. Embarking on such a journey requires research and our aim in this Guide is to provide helpful insights, tips and information to ensure your new venture is a successful one. With a plethora of franchise businesses to choose from we have sought advice from a variety of sources including specialised professionals such as Lawyers, Accountants and the Australian Taxation Office. We have also included contributions from leaders in the industry including the Franchise Council of Australia, Roger Dickeson from Wollermann and Doug Downer aka The Franchise Guy™. It is our aim that the wisdom these experts have imparted in this Guide, will help you start your franchise journey well-equipped with information and knowledge to make the right decisions, understand the process and ultimately succeed. As they say, knowledge is power! To get you started we have included some enhanced listings of franchises currently available and professional services that can guide you. Enjoy the Read!
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Chapter 1
FRANCHISE COUNCIL OF AUSTRALIA
HELPS BUSINESSES FACE NEW CHALLENGES Matthew Monaghan | CEO Franchise Council of Australia
About the Author Matthew Monaghan is the Chief Executive Officer of the Franchise Council of Australia (FCA). He has more than 20 years’ experience working in senior leadership roles across private, not-for-profit and public sector organisations. A Fellow of the Governance Institute of Australia and the Australian Institute of Management, holds an MBA, Matthew has recently completed executive studies in business disruption and digital transformation with Saiid Business School at the University of Oxford. He is committed to driving the development of organisational capacity and capability through effective governance, leadership, and sustainable business practices.
ABOUT THE FRANCHISE COUNCIL OF AUSTRALIA (FCA) The FCA is Australia’s peak body for franchising, representing franchisees, franchisors, and service providers to the franchising sector. The FCA is a strong voice focused on raising awareness of the benefits of franchising and on educating governments, regulators, other government decision makers and the broader community on the important economic and social contribution franchising makes in Australia. Membership of the FCA is open to any organisation or individual involved in the franchise sector including franchisors, franchisees, and suppliers to the sector. The FCA adds value to the businesses of its members by advocating on their behalf and by providing education, information, networking services and opportunities to support a prosperous and growing franchise sector. IBISWorld Research’s July 2022 report found that franchising in Australia contributes $172bn annually to the national economy through 94,524 individual business outlets employing 565,251 Australians.
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ngoing staff shortages, rising interest rates, and inflationary pressures in the wake of the COVID pandemic combined to place major pressure on Australian small businesses in 2022, according to FCA research. While the pandemic reshaped the business landscape, there is substantial anecdotal evidence that franchising has emerged from the worst of its impact faster than most of the SME sector. During 2022-23, the FCA’s business “Pulse Check” survey series found that although pandemic trading restrictions have ended, significant new obstacles were hindering the recovery of Australian businesses. These surveys, which included responses from diverse franchised brands comprising thousands of business outlets across Australia, found that finding suitable employees for franchisee outlets (and staff for franchisors’ support offices) was a significant challenge. For the first time since the surveys began in March 2020, rising interest rates and persistent inflationary pressures were also identified as a challenge, alongside supply chain issues and franchisee recruitment. There has never been a greater need for the Franchise Council of Australia and its advocacy, support and assistance to its members, underpinning franchising as the preferred model for small business success.
The role of the FCA The FCA is the peak body for the $172 billion franchise segment in Australia, encompassing franchisors, franchisees, professional advisers, and suppliers. The FCA is committed to building a strong franchising culture in Australia based on the view that meeting legislative and regulatory compliance obligations is a minimum standard: always striving for best practice in franchisor-franchisee relationships and business conduct. The FCA’s support for members and its advocacy during the pandemic earned respect across the commercial and political spectrum and consolidated its reputation for taking a strong stand on behalf of Australian small businesses. The FCA continues to advocate strongly for franchising as the best model for small business by promoting the needs and concerns of all small businesses, whether franchisors or franchisees, and by highlighting franchise network support for franchisees during the pandemic and subsequent recovery in 2022-23. In one of the most difficult economic environments ever experienced by Australian businesses, franchisors and franchisees have demonstrated resilience, adaptability, and determination to successfully steer their businesses through the challenges they have faced in recent years.
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FRANCHISE COUNCIL OF AUSTRALIA HELPS BUSINESSES FACE NEW CHALLENGES
Looking ahead Moving forward, the FCA will continue to focus on two key priorities: • Advocating and representing the interests of its members to all levels of government on the issues, concerns and needs of FCA members and the small business sector more broadly; and • Through media activity, enhancing the standing and reputation of franchising as the preferred model for SME success, including highlighting the resilience of franchise systems in a tough economic environment. The FCA is committed to ongoing engagement with governments and other policymakers to ensure franchising remains the most successful model of small business ownership in Australia. To this end, the FCA will maintain its focus on public policy advocacy and business support on issues that matter to its members. The FCA will continue to provide a dedicated program of education and information through an incisive series of webinars focusing on subjects including industrial relations, taxation, sustainability, wellbeing, and broader business and legal issues. These webinars typically feature industry experts, franchisors and/or politicians who have generously shared their time and knowledge to educate and inform FCA members. The Franchise Council’s annual National Franchise Convention was held this year on the Gold Coast in May, with the consensus among franchisors, franchisees and other participants being that it was the FCA’s best convention yet. The 2024 convention, to be held in Cairns, promises to be bigger and better again. The FCA will also build on its successful webinar program to provide ongoing opportunities for members to meet at face-to-face to events for networking and exchanging information, as well as continuing to offer online events. Regardless of whether they’re based in metropolitan or regional Australia, businesses that belong to franchise networks continue to outperform many other parts of the SME sector. The FCA is optimistic about the future of franchising, and believes the innovation and resilience demonstrated by franchised businesses in recent years, against a backdrop of trying economic conditions, will ensure the franchising sector continues to lead national business recovery in 2023-24 and beyond.
Franchise Council of Australia 1300 669 030 info@franchise.org.au www.franchise.org.au
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Chapter 2
What does
the Franchising Code of Conduct
really mean for franchisees? Jason Gehrke | Founder Franchise advisory centre
About the Author Jason has more than 30 years’ experience in the franchise sector and is the founder of the Franchise Advisory Centre, and publisher of Franchise News, Australia’s leading email news bulletin on franchise trends and issues. He is an experienced non-executive director of franchise brands, as well as past chairman of the World Franchise Council and past board member of the Franchise Council of Australia. Jason is also a longstanding member of the ACCC’s Small Business & Franchising Consultative Committee. He teaches best practice in franchising to both franchisors and franchisees, and has delivered franchise education throughout Australia, as well as New Zealand, the United States, Canada, the United Kingdom and the Philippines.
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What is the Franchising Code of Conduct? The Franchising Code of Conduct (the Code) is the national set of regulations that govern franchising in Australia. It has been in force since 1 July 1998 and has been amended and updated in one form or another nearly a dozen times in the last 25 years. (Even as this article goes to press, the Code is undergoing yet another review.) The original intention of the Code was to regulate the behaviour of franchisors toward potential and existing franchisees, and this is still its primary purpose today, however it also has some elements which touch former franchisees as well.
How does it protect franchisees? The Code seeks to protect franchisees from poor practices by franchisors which are incompatible with a healthy and mutually-beneficial franchise relationship. There are three main elements to the Code which are: 1. Access to specific information about the franchisor and the franchise opportunity that must be provided at least 14 days before a franchise agreement can be signed. This is known as Disclosure, and all franchisors must follow the same template for their disclosure document regardless of how big or small their network, and regardless of how young or old their brand. Since November 2022, franchisors have also had to list certain information about themselves on a government website called the Franchise Disclosure Register (www.franchisedisclosure.gov.au – see more details below). 2. The second primary element of the Code sets guidelines on what franchisors can and cannot do before, during and sometimes even after the franchise relationship has ended to protect franchisees from poor or exploitative behaviours. 3. The third element of the Code are processes for dispute resolution that can help resolve disputes more quickly, often at lower cost, and for generally quicker and more equitable outcomes compared to slow and costly litigation via the court system.
Who is responsible for enforcing the Code? The Australian Competition and Consumer Commission (ACCC) has overall responsibility for enforcing the Franchising Code of Conduct. The ACCC can receive and investigate complaints from potential, existing or former franchisees. It can also impose fines for relatively minor breaches of the Code, or seek more substantial penalties through the courts for serious and potentially deliberate breaches of the Code. The ACCC has produced various information resources for potential and current franchisees and franchisors to help better understand the Code, including a compliance guide (for franchisees) and a free online course for potential franchisees (see below for more details).
What do potential franchisees need to know about the Code? The Code protects existing and potential franchisees from poor behaviour in the franchise relationship. Every potential franchisee should know that the Code exists for
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What does the Franchising Code of Conduct really mean for franchisees?
their protection, but also to focus them on having access to better information about a franchise investment, and a better understanding of franchising more broadly before signing a franchise agreement. The Code does not absolve franchisees of the responsibility to undertake their own due diligence before investing in a franchise. Nor does it absolve franchisees of the obligation to adhere to the terms and conditions of the franchise agreement (assuming it complies with the Code), simply because the franchisee later decides they don’t like certain clauses. The Code does not cover every possible instance of poor behaviour that might cause difficulties in a franchise relationship. Neither does a franchisor’s compliance with the Code guarantee that a franchisee will have a profitable and rewarding business, as the Code only regulates conduct in franchise relationships, and not the commercial outcomes of the relationship itself. There is a risk involved in any business venture, and while a franchise mitigates those risks, it can’t eliminate risk altogether. Early proponents of the Code argued that it would give people greater confidence to invest in a franchise, and that the franchise sector in Australia would grow as a result. While the sector has grown since the Code was introduced, there is no evidence that the existence of the Code has led to the franchise sector in Australia growing at a rate any faster than in countries such as the United Kingdom and New Zealand which do not have any kind of national franchise regulations.
Information overload? There is generally a very low level of awareness of the Franchising Code of Conduct among potential franchisees in Australia. Most only learn about the existence of the Code some time after they have started their search for a franchise, and often only at a very late stage of the process when they receive an Information Statement or a copy of the Code from a potential franchisor along with a disclosure document and franchise agreement for signing. (By law, franchisors must provide a copy of the Code with these other documents). As a result, a potential franchisee may easily feel overwhelmed at the sheer volume of documentation they receive. Although most reputable franchisors will require franchisees to get legal advice before signing a franchise agreement, there is no reliable data to indicate that potential franchisees will actually read the documents for themselves, although anecdotally less than 10% may actually do so. The Code itself is a document of 106 pages from start to finish, but this includes 16 pages outlining the template for a disclosure document (which the franchisee should receive anyway, but filled with relevant information about the franchisor and the franchise offer), plus around a dozen other pages including a table of contents, endnotes, and a table outlining the history of amendments to the Code. Meanwhile, the Disclosure Document might be up to 70 pages, and the franchise agreement itself could run to more than 100 pages, which, combined with the Franchising Code could result in a potential franchisee being confronted with around
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300 pages of information (plus anything else required to be provided, such as a copy of the lease of the premises from which the business will operate). The sheer volume of information provided, plus the legal language in which it is written can be challenging for even the most enthusiastic reader to digest, and has often led to claims that potential franchisees are overloaded with too much information before buying a franchise. Even if this was true, providing potential franchisees with less information upfront is not possible under the Code, and so potential franchisees must make the effort to work through the volume of information they are given.
Start at the beginning and rush slowly The journey to becoming a franchisee will be different for different people. Some people start their journey subconsciously as customers of a brand, then later decide they like the products or services so much that they can see it as a business opportunity for themselves and make inquiries accordingly. Usually this means they focus on just the one brand during their franchise journey. Other people come to franchising in response to a desire to work for themselves in an industry they already know, or a completely new industry altogether. Unlike the enthusiastic customers who may only consider one brand, the potential franchisees driven by a desire to be their own boss may instead look into two or three different brands simultaneously (especially as there are so many different franchises across so many industry segments now operating in Australia). In the first instance, a potential franchisee may visit the website of a franchisor, then perhaps Google additional information about their franchise offer, or visit various online commercial directories. However, since November 2022 another highly useful information resource that allows potential franchisees to compare one franchise against another is the Australian Government’s online Franchise Disclosure Register at www.franchisedisclosure.gov.au
Figure 1: The home page of the Franchise Disclosure Register at www.franchisedisclosure.gov.au
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What does the Franchising Code of Conduct really mean for franchisees?
The Disclosure Register website is a free public information resource developed by the Australian Government to allow potential franchisees to more easily compare franchise offers. It does not have pop-up ads, animated gifs or videos unlike privately-operated online franchise directories. Potential franchisees will need to click on the Search button on the front page of the website, then agree to the Terms of Use before proceeding. The user will then land on a page that might look like the following:
Figure 2: The search page of the Franchise Disclosure Register
The Register lists every business that offers franchises in Australia, even if they are franchisors and master franchisees of the same brand (eg. XYZ Franchisor Australia Pty Ltd, and a state master franchisee - eg. XYZ Queensland Pty Ltd - as the franchisor may offer franchises in states other than Queensland, where another company has the right to grant franchises). Because the Register lists all businesses that offer franchises, there are far more listings on the register (1,719 as at the time of writing this article). After allowing for multiple listings for brands which operate via master franchises, there are about 1,200 different franchise brands listed on the Register. The Register classifies brands according to the ANZIC (Australian and New Zealand Standard Industrial Classification) categories for businesses used by the Australian Bureau of Statistics, with a major classification heading followed by a sub classification heading to help narrow down the search results. (This includes classifications in which no franchise businesses operate, such as Mining). A search for a franchise opportunity can be further refined to include states or territories in Australia where the brand currently operates, or where it intends to grow. Some classifications may not be immediately apparent and need patience to find. For example, a potential franchisee interested in a fitness business would need to select the main industry division of “Arts and Recreation Services”, and then a subdivision of “Sports and Recreation Activities” to shortlist around 85 results.
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The Register also includes the ability to search by brands which have provided their Disclosure Document, however as it’s voluntary for franchisors to provide this document and the document itself often contains commercially sensitive information, only a very small number of franchisors have provided this information (less than 4% of all listings as at the time of writing). Once a user has identified a listing of interest, clicking on it will provide more details about the franchisor and the franchise offer, including: • The number of years it has been operating; • How many franchised and corporate outlets exist; • The states in which it operates or intends to expand; • The anticipated setup cost for a new franchise; • Fees and royalties payable under the franchise agreement; • The length of an initial franchise term; • Contact details for the franchisor and other basic information about the franchise. The listing should also include a link to download the franchisor’s Key Facts Sheet (ie. a template summary of information about the franchise offer to be read alongside the Disclosure Document), and may also include links to download their disclosure document and standard form franchise agreement (if these have been provided to the Register as it is not compulsory to do so).
What is the Information Statement and online course? The Information Statement for Prospective Franchisees is a government-mandated fivepage handout containing generic information about franchising that must be given by franchisors to potential franchisees as soon as possible after receiving an initial franchise inquiry. The purpose of the Information Statement is to alert potential franchisees of the sorts of questions they should explore when considering a franchise, provide an overview of the process, and provide details of additional sources of information such as the free online course for potential franchisees at www.accc.gov.au/franchising-education-program. This free course is an updated version of one launched in 2010, and which had been undertaken by more than 20,000 potential franchisees before its recent relaunch. It takes only 90 minutes to complete but provides vital insights for potential franchisees to consider before committing to a franchise. Australia was the first country in the world to offer a free online course for potential franchisees, and set a precedent which several other countries have since followed.
What next? If you are seriously considering investing in a franchise, be sure to learn as much as you can about franchising before signing on the dotted line. Links to all the resources mentioned in the is article, plus additional resources can be found online here: https://www.accc.gov.au/by-industry/franchising
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What does the Franchising Code of Conduct really mean for franchisees?
Other useful online resources include: www.business.gov.au This is an Australian government website full of tips and tools for new and existing small business owners. www.franchiseadvice.com.au/best-practice-for-franchisees/ The Franchise Advisory Centre has an online library of more than 50 advice articles for potential franchisees. Its regular interactive online course Introduction to Franchising (www.franchiseadvice.com.au/introduction-to-franchising/) is also very useful for potential franchisees to rapidly increase their understanding of franchising and small business, including how to avoid common mistakes.
The last word Finally, just take your time. You should never rush into a potentially life-changing decision. The more effort you put in to researching your proposed franchise investment, as well as franchising and small business more broadly, the more likely you are to avoid unpleasant surprises along the way, and to enjoy a profitable relationship with your franchisor. As a rule of thumb, consider taking up to an hour of your time on research and selfeducation for each $1,000 to be invested. It might feel like this initially slows things down at the start of your franchise journey but it will be worthwhile to know that you have gone into business with your eyes wide open and have given yourself the greatest possible chance of success.
Jason Gehrke MBA CFE | Director Franchise Advisory Centre www.franchiseadvice.com.au
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Chapter 3
financial essentials
for franchise buyers Kate Groom | Co-founder and Director Franchise Accounting and Tax
About the Author Kate Groom is co-founder and director of Franchise Accounting and Tax. She has previously worked for franchisors and as a business adviser. Kate’s focus is on helping clients understand the financial aspects of running a business and on business planning and coaching.
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I
f you’ve never owned or run a business, the financial side of things will be completely new to you when you buy a franchise. As a business owner, you are responsible for the financial aspects of your business and there are rules to follow. Unfortunately, some franchise owners never get to grips with the financial aspects of business. These are often the people who end up in financial trouble. It doesn’t need to be that way! You can learn about the financial aspects of business and be in control of your finances. The key is to get the right information and advice. It’s also important to recognise that however hard you work, you can’t know or do everything. As a business owner, it’s appropriate and necessary to work with experts in accounting, law and human resources, and other areas. Working with the right experts is part of being a savvy and smart business owner. After thirty years working with franchisees, I’ve come to the conclusion that the best time to start learning about the financial aspects of business is before you sign the franchise agreement. But how do you learn about the financial aspects of business? One of the best ways is to start working with an accountant as you assess the franchise. That same accountant or their staff can help you keep good records, understand your financial reports, and stay on top of your Tax Office reporting. The financial side of business can be understood. It just takes a bit of focus in the first few months — and the right type of advice. As the months roll by, you’ll become more confident. You’lll start to understand what your figures are telling you about how your business is performing. And then you can work out what steps you can take to progress towards your business goals. Here are some of the questions we are often asked. They might answer questions you have in your own mind, or help you when you come to talk to a potential accountant to help you in your business. Please note that this is general advice and you should seek advice for your circumstances from an accounting and tax professional.
How can an accountant help me in my business? You might associate accountants with year end tax returns, but in a business the accounting work is ongoing — not just a year end thing. It’s a good idea to establish a relationship from the start of your time in business. That way, your accountant can help you in five important ways. 1. Franchise Due Diligence: Potential franchisees should get advice from a financial and business expert before they sign their franchise agreement. This is a vital part of your franchise investigations. The right accountant can help you assess the franchise. We cover this point in more detail below. 2. Tax and accounting advice that’s relevant for you: The right accountant will be an important source of information and advice as you run your business. There are many
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Financial essentials for franchise buyers
tax and accounting requirements you need to comply with as a business owner. The financial issues will change as your business grows. Your accountant knows how to deal with these issues and the better they know your business, the better they can advise you. 3. Help you achieve your financial goals. The right accountant can prepare quarterly financial reports and discuss them with you. This will help you focus on your financial goals and make progress towards them. Your accountant can also help with cash flow and budgeting, as well as tax planning. 4. Annual financial statements and tax return. Each year your accountant will prepare a set of financial statements for your business. The accountant will also prepare a tax return for your business, and take care of ATO lodgement. Unexciting as these things are, they become stressful and costly if you get behind. Expensive catch up work is never the best start for a relationship with an accountant! 5. Be ‘Finance Ready’. We have found that more businesses need accounting records that are ‘finance ready’. This means having your records up to date not just once a year but at least every three months. This has always been good practice, but it’s now more important than ever, whether you’re looking to get a loan, a mortgage, or expand your business.
How can an accountant help me before I buy a franchise? Many people start thinking about an accountant when their first tax return is due. This is not ideal. The best time to start working with an accountant is before you buy the business. It will cost a bit of money, but the money spent at the start will save you from bigger bills later! Get accounting advice before you buy The best time to find an accountant is when you have identified a franchise you’d like to purchase. This is because buying a franchise is a big financial decision. Whether the franchise costs $50,000, $300,000, or $600,000 (or more), it’s important to understand the money side — and the financial consequences if things don’t turn out as well as you hope. We’ve advised hundreds of franchise buyers over the years. Our clients include people who buy franchises in mobile trade services, health and fitness, food, and business services of all types. When people are thinking about a business they want to understand three important things: • What it costs to run the business, including their own living costs and loan payments. • What sales they need to achieve to cover all these costs and make a profit. • Whether the sales target is achievable and how long it will take to reach it. These questions, and others, form part of your financial due diligence. The process of working through the due diligence with a financial expert will help you
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develop your financial skills. It can also help you avoid an expensive mistake, such as paying too much for a business or buying a franchise that can never provide you with the income you need. Start out with the right business structure for you Once you’ve decided to buy a franchise you’ll need to decide what business structure is best for you. This is not simply a matter of getting an ABN to run a business in your own name or registering a company. To protect your assets and give you the tax planning options it’s best to get expert advice. The right accountant will ask you about your family situation and your plans for the business. They will also ask whether the franchisor has any specific requirements. The accountant will then be able to recommend a business structure that is appropriate for you. For instance, some of our clients operate through a company in which they own the shares. Others have a more complex structure that will support their aspiration to own multiple franchises, property and so on. Ask your accountant what accounting systems you need Accounting systems aren’t the most exciting aspect of running a business but they are really important. The best time to get your accounting records set up is before you start trading. But what accounting records do you need to keep? The best person to ask about accounting records is your accountant. All accountants have a preference for the information they need. The best time to find this out is before you start off in business. If the records aren’t in the right format, your year end tax work will be more expensive than if you’d followed the accountant’s advice in the first place.
What financial records do I need to keep? Ask a qualified expert first There are specific record keeping requirements for business. You will need to know the basics and set up your record keeping to comply with the rules. But how do you learn? A good place to start learning about financial record keeping is the government web site www.business.gov.au. Certified accountants and tax agents are trained to know about record keeping requirements, so it’s worth asking them. Your accountant can tell you what good record keeping looks like and give you tips that help you keep your books in order, save you time, and save you money. Set up your accounting software before you start trading When you set up your business, you’ll need to implement a system to keep track of income and expenses. You do this using accounting software. A few franchises specify the software you must use, but if they don’t, you should follow the advice of your accountant.
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Financial essentials for franchise buyers
It’s best to set up your accounting records before you begin trading. This helps you get into good habits and keep up to date with your accounting. But, you don’t just turn on your accounting software. It has to be correctly set up and that takes a bit of time. You also need to learn how to use it properly. The danger with leaving this to ‘later’ is that you’ll always be playing catch up — and this can be stressful and costly! You also need to establish a system to keep track of bills and receipts. When you run a business, you need a copy of every bill or receipt and they need to tie in to the transactions in your bank account. Thankfully, we have apps that take care of this. Your accountant can advise on the best approach. Keep the right payroll records When you employ people you must comply with some very specific record keeping obligations. These include employment agreements, working hours, and records of leave accrued and taken. You also need to collect tax file number declarations and Super Choice forms. And once you start to pay people you must comply with the laws around pay and conditions. Penalties apply if you don’t pay your staff the correct wages, allowances and benefits. Yes, there’s a lot to this! That’s why we recommend every business owner completes the free online training courses offered by the Fair Work Ombudsman. Once you have done this, talk to both a HR and payroll expert about the record keeping for your business.
What does an accountant do? Your accountant will do the year end work to prepare the financial statements for your business and also the business tax return. But this isn’t all they can do for you. The right accountant can help you in three key areas: 1. Tax planning: This is usually an annual activity that takes place a couple of months before the year end. 2. Financial forecast: A financial forecast is something that every business owner should have. It is a financial model that looks at what you expect sales, costs, profit, and cash flow to be in the next 12 to 36 months. Even at the start of your business life, you should be looking ahead and using the forecast as a way to help you set goals and move towards them. Your financial forecast can also take into account your personal financial needs and the way you expect to use the profit from the business to build your wealth. 3. Business development: An accountant who knows your business can help you develop and grow it. This might involve helping you improve your financial processes, review costs, or create plans for the future. As your business grows, your accountant can help you manage the growth and save yourself time and headaches. Typically, business development discussions take place quarterly or every six months.
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These three services are all about adding value to your business. They are about helping you to get the most from your business, and saving you time on record keeping tasks so you can get on with growing the business.
What costs can I put through the business? Beware the advice of friends and family You might have heard people say something like “Having a company means you get better tax deductions”. But beware! The advice of your friends can get you into hot water with the Australian Tax Office (ATO) The ATO has clear guidelines for what costs you can put through your business. Their website states, “You can claim a tax deduction for most expenses from carrying on your business, as long as they are directly related to earning your assessable income.” The ATO also says that the expense must have been for your business, not personal expenses, and you must have the records to prove it. Some expenses are not deductible even if they were related to your business, for instance entertainment expenses and traffic fines. For instance, travel to your franchise conference is a legitimate business expense, while your kids’ school books, your grocery shopping, or haircut are not. Your accountant or bookkeeper will help learn what is a business expense and what is not. So, don’t ask a friend, as your accountant!
How does GST work? GST is one of the more tricky things for a new business owner to understand. It’s something we don’t have to think about in everyday life. When we but something, we just hand over the money! But it’s not that simple when you own a business. Here are some GST essentials that a new business owner needs to know. Business collects GST on behalf of the government. It’s not your money! GST is a tax. Businesses collect GST from customers and pay GST to suppliers. The difference between the GST collected and GST paid belongs to the ATO. You report GST to the ATO every three months the amount of GST collected and paid. At the same time you pay the ATO the GST you owe them. For instance, if you collect $1,000 of GST from customers and pay $500 to suppliers, you pay the ATO $500. A business needs to register for GST if its turnover exceeds $75,000 or is likely to exceed it. When you commence trading you will then: • Include GST in the price you charge for your goods and services • Claim credits for the GST included in the price of goods and services you buy for your business. GST is not charged on everything Some products and services don’t have GST on them. To see for yourself, have a look at the receipt when you buy groceries. You’ll see items with GST are identified and some have no GST.
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Your franchisor will be able to tell you how GST applies in their franchise. If some of your sales will be GST free, the franchisor should help you set up your point of sale system so it calculates GST the correct way. You can also ask your accountant for information about GST. How do you know whether there is GST on an item you have purchased for your business? The answer is to look at the Tax Invoice. It will show the GST amount. Keep track of GST in your accounting records By now you can see that it’s important to keep track of the GST you charge and pay. Your accounting software and point-of-sale system will be able to do this. When it’s correctly set up, the software will also calculate the GST owed to the ATO each quarter. You also need evidence of the GST you have paid to your suppliers. The Tax Invoice provides this evidence. And with the right accounting system there’s no need to keep paper receipts! You scan a receipt with your phone, or send it to your accounting software directly from your email. Put aside the GST you owe the ATO Some business owners forget that the GST they collect does not belong to them. They might spend the GST they collect on behalf of the government. This means the money isn’t there when the ATO needs to be paid. To avoid a problem paying the GST that you owe, it’s best to put aside the GST. Put it into a separate GST bank account and don’t touch it until it’s time to pay the ATO. Ask your accountant to help you work out how much to put aside. Understand about the Business Activity Statement Your business will need to submit a Business Activity Statement (BAS) to the Australian Tax Office (ATO), usually quarterly. Your accountant will do this for you as part of their service. The BAS shows the sales your business has made, the GST charged to customers and the GST paid to suppliers. It also shows wages paid to employees and the PAYG tax withheld from their wages. You will then pay the ATO the difference between the GST you collected from customers and the GST you paid suppliers, as well as the PAYG withheld from wages. If you paid more GST than you collected, you’ll receive a refund from the ATO. It’s important to lodge and pay your BAS on time, as penalties apply for late lodgement and interest is charged on overdue amounts. The BAS is lodged electronically, and your accountant can do this for you.
Do I need a bookkeeper? Every business needs some bookkeeping help After years of working with franchise owners we have come to the conclusion that every business needs some help with bookkeeping. Even if you do a lot of the record keeping
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yourself, it’s best to have an expert assist with certain aspects and especially with ATO lodgements. Here’s an example of why. The other day a business owner called me. He had been in business for six months but no accounting records had been set up. He is behind with his ATO paperwork and doesn’t know how the business is going. Of course, we can help him get up to date, but it’s more expensive than if the records had been properly kept from the start. A good bookkeeper can help you get your accounting systems running smoothly. This will save time and money later. Once the systems are set up, and depending on your business and your skills, you might be able to do a lot of the bookkeeping yourself. Often it’s simpler to ask a bookkeeper to do all or part of the day to day work. This frees your time to work on the business. Whatever you do, don’t assume that you can just switch on some accounting software and get going yourself. Every time we have seen people do this it has led to expensive mistakes. What does a bookkeeper do? A bookkeeper typically takes care of matching bank transactions to bills, receipts and invoices. They can also help with payroll processing. The best bookkeepers will help ensure your accounting records are in good order for your year end accounting work. Your accountant may be able to recommend a bookkeeper, or they might provide that service from within their firm. If you use your accountant’s bookkeeping services, you’ll avoid the need to recruit, manage and instruct your own bookkeeper. Your accountant should be able to provide advice as to whether a bookkeeper would be helpful in your circumstances.
How can I get money out of the business? “How do I pay myself?” This is one of the earliest questions a business owner asks. We have a simple answer, and also a more complicated one. Pay yourself wages The simple answer is to pay yourself wages. When you work in the business, you should pay yourself for the work you do. This creates a discipline around the business operation, and it also means you have regular income to support yourself and your family. Depending on the franchise, it might take time to build up enough income for you to take a wage. But we generally recommend that the owner should ‘go on the payroll’ once he operating costs are being covered each month. Whatever franchise you buy, your initial investigations should help you identify whether the business can pay you a decent wage for the work you do. This is a bare minimum requirement. For instance, if you are managing a hospitality business, you’ll want to see that the business can generate enough to pay you a manager’s wage. If you’re a
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handyman or pool technician, you’ll want to receive an amount appropriate for your skills and experience. Towards the end of the financial year, you and your accountant can assess whether it makes sense for you to receive additional payments on top of the wages you’ve already received. You’ll need to pay PAYG tax and Super on your wages. Just because you’re the owner of the business doesn’t mean you can just take money from the business and not deal with the tax system. Ask your accountant about dividends and loan repayments As your business progresses, your accountant will help you decide on tax effective ways to repay any money you have invested in the business. This might include loan repayments or dividend payments, depending on the structure of your business and your personal circumstances. These payments have tax consequences beyond regular PAYG tax, so it’s important to get advice before you take money out of the business.
This seems like a lot of stuff to know! As you can see, there is quite a bit to the accounting aspects of running a business. Remember, an experienced business accountant and their advisory team have spent years developing their understanding and skills. Your goal is not to become an accountant but to learn how to work well with your accountant, bookkeeper and advisers. Today’s accounting technology reduces much of the record keeping burden and allows you and your adviser to focus on profit improvement and business growth. And by getting things done right from the start you’ll be well placed to progress towards your goals.
kate groom | Co-founder and Director Franchise Accounting and Tax Ph: 0466 376 386 E: kate.groom@franchiseaccountingandtax.com.au
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Chapter 4
understanding the
legal documents
Robert Toth | Special Counsel Sanicki Lawyers
About the Author Robert is an Accredited Commercial Law Specialist with over 35 years expertise in franchise, license, and distribution law, acting for local and international franchisors and companies, advising franchisees and master franchisees with extensive experience in dispute resolution and mediation. Sanicki Lawyers is a dynamic and progressive law firm based in Melbourne and Brisbane with a talented team of lawyers who advise clients on Intellectual Property, Franchising and a broad range of corporate and commercial matters. Robert regularly publishes articles online and internationally on Franchising, Licensing and Distribution and is a Member of the Franchise Council of Australia (FCA), the International Franchise Lawyers Association (IFLA) and the Global Referral Network a network of specialist lawyers around the world. Robert is highly recognized as a leading Franchise Lawyer in Australia having been named as a Leading Franchise Lawyer in Australia in Who’s Who Legal: Franchise 2021 and nominated again in 2023 and is on the Advisory Board of a number of clients, as well as acting as a resident director for overseas companies.
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N
othing stays the same for long, particularly in the world of business and more so post Covid 2019 which accelerated so much change in such a short period of time. Standing still in business means you are going backwards in respect to your customer’s and your competitors. One of the interesting developments from Covid was the move to innovation and increased interest and activity in the franchise sector. What business has not had to reevaluate their business model, operations and strategy moving forward over the past 2 years? There have been changes in digital marketing, on line sales, social media and technology and the use of artificial intelligence. At the same time employee’s attitudes and expectations have dramatically changed as has pressure on everyone with rising inflation, wage growth pressures and increasing operational costs for business. Many people who were made redundant or tired of being an employee wanting more flexibility in their work see franchising as a way of transitioning out of employment to running their own business.
Transition from worker to boss For anyone looking to establish a business for the first time, it is still the case that starting out as a franchisee is regarded as a safer way to get into business and build experience utilising the training, systems and support of the franchisor. The Franchise sector underwent considerable scrutiny with Parliamentary enquiries and a revised Franchise Code, placing greater disclosure and compliance obligations on Franchisors. For prospective franchisees the process of finding and then selecting a franchise is exciting on one hand and no doubt downright scary on the other. The purpose of the Franchise Code is to provide a franchisee with all relevant information they may need to make an informed decision as to whether to take up the franchise. Franchisees see the franchisors “schmick” (yes that is a word) online marketing and can easily get caught up with the hype, but the devil as they say is in the detail. How can a franchisee make the right decision and really get to understand their rights and obligations before signing on the dotted line? The best way to limit your risk and avoid making the wrong decision is to ensure you have an experienced franchise specialist lawyer on board who can advise you and ensure you have independent financial advice. Do your due diligence on the franchisor just as they do their due diligence on you! Get feedback from other franchisees and don’t be rushed into making a decision as once you have taken up a franchise it is not so easy to exit.
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Understanding the Legal Documents
How to get the right advice Franchising is a specialist field and franchises should seek specialist legal advice from a franchise lawyer or contact the Franchise Council of Australia (FCA) who will recommend a franchise lawyer. Irrespective of how attractive and compelling the franchisors marketing and sales pitch may be, the primary decision should not be emotional, it should be financial. That is, will you be able to take a reasonable wage, pay your expenses and interest on loans and get a return on your investment? Franchise lawyers who are members of the Franchise Council of Australia (FCA) are best placed to give you advice to minimise your risk, as we know what’s going on in the franchise sector, the good, the bad, and the downright ugly! Due to the Franchise Code changes, there are now even more documents for a franchisee to review so seeking specialists advice is even more important and will save you a lot of time and stress!
The Franchise Code regulations On 1 June 2021, the Australian Government made amendments to the Franchising Code following the Government’s response to the Fairness in Franchising Inquiry in 2019. Many of the changes affect agreements entered, renewed, or extended on or after 1 July 2021. Some changes relate to a dispute notified on or after 2 June 2021, even if the franchise agreement was entered into, extended or renewed before 2 June 2021. Most of the regulations deal with further disclosure obligations for franchisors in the disclosure document and apply to disclosure documents given from 1 November 2021. Franchisors have to register their systems on the Franchise Register and also update their disclosure documents required by the 30 October in each year. Franchisors also need to upload their key facts sheet on to the ACCC system . The key fact sheet is a summary of the key terms of the arrangement and highlights important information in the disclosure document. Franchisees can now openly access information on franchisors on the Franchise Register and access the franchisors key fact sheet as part of their due diligence before making a decision. The irony in all this is that franchisees now have more, not less documents to review and absorb before deciding whether to take up a franchise.
Key documents: Franchisors are required to provide a prospective franchisee on enquiry an information statement which is a standard form under the Code and provides franchise a warning of the risks of franchising.
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Franchisors will usually ask the franchisee to sign an NDA or confidentiality agreement before releasing details or any financial or other confidential information about the system to the Franchisee. Once the franchisee is approved a deposit or document fee is paid to the franchisor (or their lawyers) who will then issue the suite of franchise documents which should include: • A disclosure document with attachments including trade mark certificates, copy lease/licences and financial statements and a copy of the Code; • The proposed franchise agreement in the form required to be signed by the franchisee; • Any lease or offer to lease negotiated by the Franchisor or sub-lease or occupancy license; • A receipt for the franchisee to acknowledge they received the suite of documents which starts the 14-day disclosure period; • The legal, accounting and financial advice certificates the franchisee should complete and return with the signed franchise agreement.
The “No Prior Pepresentation” statement The franchisor may ask the franchisee to sign a no prior representations statement. This is a significant document often overlooked by franchisees and their advisors. The purpose of it is for the franchisee to set out in writing in the document any representations, promises or statements made by the franchisor or their agent in the course of the negotiations on which they (the franchisee) relied to enter into the franchise. If the franchisee does not complete it or does not set out any representations in it, then the franchisee cannot later rely on any representations or statements made unless they were specifically set out in the statement. It can be a vital document that can be relied on by a franchisor or franchisee down the track if a dispute arises as a franchisee will often allege, they were verbally promised something by the franchisor before they entered into the agreement. But if those verbal promises or representations are not in writing or set out in the statement (or in the franchise agreement itself ) the franchise will not be able to rely on it. So, franchises should ensure that any promises or representations that are made which are not set out in the franchise agreement (even in the special conditions) are clearly set out in the representations statement.
Seeking legal advice Although the Franchise Code changes did not make it compulsory for franchisees to seek legal, accounting and financial advice before entering into a franchise many
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franchisors are now insisting that their franchisees seek independent advice to protect themselves.
Franchisees lawyer’s role Seeking legal advice from a franchise law specialist is not only good insurance to help you make the right decision, but your franchise lawyer will focus on the important commercial issues and highlight areas of particular concern where there may be room for negotiation, rather than recommending wholesale changes to an agreement which are unlikely to be accepted and which may aggravate the relationship from the very beginning. We often see letters from non franchise lawyers acting for a franchisees asking for a myriad of unnecessary “rats and mice” changes or even asking for fees and charges to be varied which we then have to reject and this can aggravate the relationship between the parties before it starts.
Some basic rules for franchisees Rule one: Whether you seek proper legal advice from a franchise law specialist or not you should still read and become familiar with the documents. The franchise agreement is your contract, so you need to understand your rights and obligations. It will also assist you to identify any issues of concern which you can then raise with your lawyer. Rule two: Do not rely on advice from your suburban conveyancing lawyer, next-door neighbour, your mate at the pub or the sales person at Bunnings! That’s not advice. Rule three: Realise that going into a franchise carries risk like any business decision and once you are in a franchise getting out of it is not so easy. Franchise agreements are typically 50 to 100 or more pages and can be difficult going without a glass of red wine in hand! There are many tricks and traps in the agreement which your franchise lawyer will point out, as well as any unusual or unreasonable commercial aspects in the agreement. Rule four: Franchisors will often say their agreements are not negotiable – that is not always the case and in fact we will often negotiate reasonable concessions for a franchisee that can be included in the special conditions. This is more so where the franchisor is also new and keen to bring franchisees into the system. Things to reasonably negotiate might be a royalty free period while building the business, reduced establishment fees, your minimum performance criteria, options to renew , the restraint of trade provisions, and seeking franchisor contribution to the setup costs. Any concessions offered or negotiated with the Franchisor should be set out in the agreement or in other written form, signed by both parties and dated prior to or on the date the franchise agreement is signed.
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Disclosure Document Under the new Code franchisors are required to provide greater disclosure than previously and provide the franchisee a disclosure document with the key fact sheet at least 14 days before they either enter into an agreement or make a non-refundable payment. The 14-day disclosure period will only start once the franchisor has made the full and proper disclosure required and the key fact sheet is lodged by the franchisor on line with the ACCC.
The key changes to the Disclosure Document are: Lease information The franchisor must provide full details of the lease and occupancy rights with a copy of any lease documents for example - offer to lease - agreement to lease – lease – sublease - occupancy license and lease disclosure statement issued by the landlord. If the franchisor does not provide full and accurate information about the lease rights in the disclosure, the 14-day disclosure period does not start until they provide that information. If the final lease details are different to the information in the disclosure document previously given, the 14 cooling off period only starts when that information is given, so the franchisor risks a franchisee being able to walk away. This means the days of signing up a franchisee without a site or while in negotiations for a site are fraught with risk. Franchisors must also disclose if they have any interest in the lease or freehold and disclose any rent incentives offered. Rebates and financial benefits The percentage of rebates the franchisor receives (financial benefit) from each supplier over the last financial year as a percentage of all purchases by franchisees in the group (this excludes supplies by the franchisor or associate of a franchisor) now must be provided. There is no need to disclose this information if the agreement allows the franchisee to buy from non-approved suppliers or the rebate is paid to a cooperative fund controlled by the franchisor. Rebates do not include payment by a franchise to the franchisor, master franchisor or associate for a wholesale supply and a lease incentive is not a rebate, but franchisors still need to disclose the lease incentives to franchisees. Earnings information Franchisors must if they give earnings information give it in the disclosure (not before or after signing the agreement) and include a statement that the information is correct to the best of their knowledge or state that the information may not be accurate.
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Understanding the Legal Documents
A breach may attract a civil penalty of $66,000 and failing to provide the information means the 14-day disclosure period would commence only when the information is given and attached in the disclosure. Capital Expenditure Franchisors can only require a franchisee to undertake capital expenditure if a majority of franchisees agree where it affects the majority, or the express consent of the individual franchisee is given. Term and restraint Franchisors need to disclose if the franchisee has any right to goodwill at the end of term and if the agreement has a restraint or non-compete clause. The Code has been amended to provide that a franchisor can only rely on a “serious breach” of a breach of a restraint of trade clause (serious breach is not defined and the breach would have to be before the agreement term ends. This sounds the death knock for restraint of trade provisions for Franchisors to a large extent and they will be left with their right to protect their IP, know-how and confidential information however you will still see most franchise agreements contain a non compete clause. Termination Rights The grounds for a Franchisor to terminate for “special circumstances” now require the Franchisor to give a franchisee 7-day prior notice of termination even for special circumstances which then allows the franchisee to raise a dispute. The franchisor cannot terminate the franchisee if the franchisee raises a dispute, and the parties must try and resolve the matter in that period or refer the matter to the ASBFEO for mediation or arbitration. In the meantime, the Franchisor can require the franchisee not to operate the business in the 28-day period. All franchise agreements will need to be amended to comply with these new provisions however, these provisions do not apply to pre-1 July 2021 agreements until they are renewed or extended. Cooling off rights and 14-day disclosure period The previous 7-day cooling off period was extended to 14 days and the 14 day disclosure period gets reactivated from when the franchisee receives the final lease documentation. The 14-day disclosure commences only if all documents and information are included in the disclosure at the time it is given, this includes earnings information and lease details. If lease information is given later or differs the franchisee has another 14 days disclosure period. Neither the franchisor nor franchisee can reduce the 14-day disclosure period, as this is a mandatory period set by the Code.
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Early termination rights for franchisees Franchisees have a right at any time during the term to write to the franchisor and seek an early termination (with reasons) of the agreement. The franchisor must then respond in writing in 28 days stating whether they agree or not. If the franchisee does not agree (which is most likely the case) the franchisor must set out reasons in its response within that 28-day period, why it does not agree to an early termination. There is no guidance as to what “acceptable reasons” for a franchisor are to refuse early termination so we will have to wait until this is tested however the parties can of course seek to take any dispute to mediation or arbitration via the ASBFEO. Legal costs It is now illegal for franchisors to charge franchisees any undetermined and future legal service costs other than an upfront fixed fee set out in the agreement. The upfront “fixed amount of dollars” (fixed fee) can only be for preparing, negotiating, and executing the agreement and is usually charged as an upfront document fee payable by the franchisee once approved for the suite of franchise documents to be issued. Selling a franchise business As franchisees now benefit from a 14-day cooling off period (even after settlement of the business has occurred) a franchisee, when selling a franchise, should be aware that the new franchisee will have a right to exit, so settlement should not take place until that period has elapsed. This should be made a term in any sale contract. Key facts sheet Franchisors must now give franchisees a key fact sheet to with the disclosure document and update it every year as with the disclosure document. The key fact sheet is then lodged with the ACCC online. Marketing funds The Code uses the word marketing, instead of advertising to clarify the Code applies to more than just advertising. It clarifies that marketing fund obligations apply to the fund administrator who could be the franchisor, master franchisor or a third party authorised to administer the fund for the franchisor or master franchisor. Civil penalties apply for breaching the rules for payments to and from the marketing fund.
The operations manual Most franchise agreements include provisions requiring franchisees to comply with the franchisor’s operations manual.
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Understanding the Legal Documents
Franchisees should ask to see the operations manual before entering into the franchise agreement. As it is a confidential document the franchisor may not agree to provide a copy of it until the franchisee signs the agreement. If that is the case, franchisees should ask to review the operations manual within the cooling off period.
The Franchise Agreement This is your contract setting out your rights and obligations, generally weighed in favour of the franchisor with consequences for a failure to comply which may give rights to serve a breach notice and even termination. It is often assumed by franchisees that the franchisor’s obligations are positive obligations, however most agreements will state the franchise “may “not that they “must” do certain things. Therefore, it is difficult to allege a franchisor has breached the agreement where they do not have a positive obligation. Franchisees do have protections under the Franchise Code, the Australian Consumer Laws, unfair contract provisions and can instigate the dispute resolution process and seek mediation or arbitration via the ASBFEO where a dispute cannot be resolved directly with the franchisor.
Fees payable to the Franchisor Franchise Fees The trend is that franchisors are tending to reduce the up-front franchise fee to make their franchise more attractive and affordable. Franchisors will often charge a training fee but again many are rolling this fee into the up-front franchise fee. There are also a number of other fees that must be set out in the disclosure document that cover things such as technology and IT fees and also renewal and transfer fees. Royalty Most franchise agreements provide payment of a service fee or royalty typically paid monthly or weekly, either as a percentage of the franchisee’s gross sales or a specific dollar amount. The point here is that the franchisor receives their royalty based on gross sales or turnover not the profit of the franchise – so make sure the business is viable and you can at the very least draw a wage for your efforts from running the franchise business! It is therefore critical franchisees do objective financial analysis and prepare cash flow projections with their accountant. Tip: If relying on the franchisor’s earnings information, ensure their model makes provision for a salary to the owner /operator before showing a profit.
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Working capital We often find that the working capital requirements are understated by franchisors particularly for a new greenfield site so check with your accountant what would be a reasonable level of working capital to avoid financial stress in the first 6 to 12 months of operation. Also allow a buffer for unexpected costs which may not be included in the Disclosure Document, such as employees, insurances, utility bills and other outgoings and now lockdown events!
Term and renewal It is likely due to the changes to the Code and franchisees right to seek early termination of the agreement during the term that the days of long-term agreements such as 10 or 20 year terms are over and most agreements tend to offer a 5-year term with options.. The capital expenditure must be clearly set out in the disclosure documents so the franchisees can budget for those future costs.
Sites and territories Mobile franchises (such as those providing gardening or cleaning services) will generally be granted for a specific territory – listed as a number of postcodes or marked on a map attached to the agreement. The territory may be exclusive or non exclusive and this should be understood so you are aware if the franchisor or other franchisees can operate in the territory. Retail franchises (such as cafes or gyms) generally are not allocated a territory just a site from which they operate. Social media and on-line sales need to be carefully reviewed and set out in the disclosure document.
Obligations end of term Upon expiry or termination of the franchise agreement, the franchisee will usually be required to cease to use the trade marks, deliver up the premises and lease, return all documents relating to the system to the franchisor, all confidential information including customer details, transfer phone numbers, domain names and social media accounts to the franchisor. The franchisor will often have the right under the agreement to acquire the assets of the business, including a transfer of the lease of the premises (if any) but usually at a nominal written down value and with no regard to any goodwill The Code provides that if the franchisee seeks an extension or renewal of the franchise at the end of the term and the franchisor refuses (provided the franchisee is not in dispute) the franchisor cannot then enforce the non-compete clauses against the franchisee unless the franchisor has offered the franchisee compensation.
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Understanding the Legal Documents
The new Code amendments now make it even more difficult for franchisors to enforce a restraint of trade provision.
Goodwill Most franchise agreements provide that any ‘goodwill’ developed in the franchise business remain the franchisors on the basis that the franchisee has only developed its goodwill by reason of the license given by the franchisor to use its system, brand, and IP and once that ends there is no goodwill that the franchisee can claim. Under the Code disclosure requirements, the franchisor must set out if the franchisee is entitled to retain any goodwill at the end of the term.
Existing Franchisees The Disclosure Document requires greater disclosure of contact details of franchisees so you should use the 14-day disclosure period to contact existing franchisees and gather feedback about the franchise system from a number of franchisees.
Summary Do your due diligence on the franchisor just as they do their due diligence on you! Also, remember it is one thing getting into a franchise, but it can be difficult getting out of one. Deciding whether to enter into a franchise agreement is a huge step emotionally and financially so seek specialist legal, accounting and business advice before committing. The best investment is getting the right legal and financial advice before committing to a franchise opportunity so you can make an informed decision.
Robert Toth Accredited Commercial Law and Franchise Specialist Special Counsel | Sanicki Lawyers Melbourne/Brisbane 0412 673 757 robert@sanickilawyers.com.au Member: Franchise Council Australia (FCA), International Franchise Lawyers Association (IFLA), US Commercial Service, AICD and Global Referal Network
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Chapter 5
Tips to help you
get your tax right
Emma Tobias | Assistant Commissioner Small Business Area of the ATO
About the Author Emma Tobias is an Assistant Commissioner for the Australian Taxation Office in the Small Business line. Her focus is to help support small businesses by leading and influencing their experience across the tax, super and registry systems. Emma collaborates with small businesses, industry partners and government agencies to drive an improved small business experience and digital services. Her area also helps small businesses manage cash-flow and digital readiness, assisting them as they look to recover and succeed after the challenges of the last few years.
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W
e understand that running a business can be hard work. That’s why it’s important to us to make it as easy as possible for you to get your business’s tax and super obligations right. Here are some tips and support to set yourself up for the year ahead.
Identify what’s income and what’s not Besides the usual forms of business income, like cash and digital payments, you can have other forms of income throughout the year you need to report. For you, this might look like income from business investments or online and overseas business activities. It could also include assessable government grants and payments, the value of trading stock you have, payments from insurance claims or non-cash benefits you receive. Some income you receive won’t be assessable. For example, non-assessable nonexempt (NANE) government grants or GST you’ve collected are not assessable. Neither are bona fide gifts or inheritance, or money you’ve borrowed or contributed as the business owner. Make sure you keep accurate and complete records to prove the income you report. Find out more at: ato.gov.au/isitincome
Go for golden (rules of deductions) You can claim deductions for most expenses you incur while carrying on your business, but they must directly relate to earning your assessable income. Claimable deductions can relate to your day-to-day operating expenses, purchased products or services, and certain capital expenses. However, to check what– and how much –you can claim, consider the 3 golden rules for allowable deductions: 1. The expense must have been for your business – not for private use. 2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business. 3. You must have records to prove it. Find out more at: ato.gov.au/businessdeductions
Apportion business and private asset use correctly Most assets you purchase on behalf of your business to help earn its income can be claimed as deductions. However, if the asset is also used for both business and private purposes, the business can only claim the portion related to business use. This also means you cannot claim any deductions against your business income for an asset that has been used entirely for private purposes.
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When claiming mixed-use assets, you will have to keep proper records for your business that can explain all transactions. This includes payments to and receipts from employees, shareholders and associates for their use of the assets. Private use of business assets by company shareholders, employees and associates can have different reporting obligations for both parties. The amounts attributed to the private use of these assets may need to be reported as dividends or fringe benefits. Let your tax professional know how you’re using your assets so they can correctly apportion the relevant income and deductions. It’s important that you review your treatment of business assets each year to make sure you’re apportioning the assets correctly when your circumstances change. Find out more at: ato.gov.au/businessmoney
Follow the five rules for record-keeping Tax time gets a lot easier when you have complete, accurate, and organised records to help you. You or your tax professional will need this information to know what income to report, what deductions to claim and anything else you may need to include on your return. That’s why it’s important to follow these 5 rules to keep your records in order: 1. Keep all records related to starting, running, changing, and selling or closing your business that are relevant to your tax and super affairs. 2. Store records safely to prevent damage and protect information from being changed. You must not change relevant information in your records. 3. Keep most records for 5 years and know which records to keep longer. You’ll need to keep records longer if they’re connected to a future, corrected, or amended return, or records about depreciating or capital gains tax assets. 4. Be able to show us your records if we ask for them. 5. Ensure your records are in English or can be easily converted to English. If your tax records are damaged, destroyed or lost, we can help you reconstruct them. Make sure you have a system for reviewing, updating, and destroying records as required throughout the year. Find out more at: ato.gov.au/recordkeeping Check how well you’re keeping your records using our record-keeping evaluation tool at: ato.gov.au/recordkeepingevaluation
Keep up with crypto assets If you use crypto assets in your business, it’s important to understand their tax treatment. Your business may use crypto assets: • in carrying on a crypto asset business, (including a crypto trading, mining or exchange
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business or a business selling non-fungible tokens), in which case the crypto assets are treated as trading stock, and – the cost of acquiring them is a deductible expense – the proceeds of selling them are assessable as ordinary income • for the purpose of exchanging goods or services in the ordinary course of carrying on a business, in which case the crypto assets are also trading stock. • as an investment, in which case the crypto assets are subject to capital gains tax (CGT) when a CGT event happens, and you need to account for them in the business’s net capital gains or capital losses. Irrespective of how you acquire and use crypto assets, you must keep records of each of your crypto assets and all transactions for tax purposes. Find out more at: ato.gov.au/cryptobusiness
Check for concessions There are a range of concessions available for eligible businesses and industries to help reduce the amount of tax you pay. Each year you should check if any apply to your business. Small businesses can access a range of concessions based on their aggregated turnover. However, before you apply, you must also check that you meet all other extra eligibility conditions. For example, if your turnover is under $5 million, you can access the small business income tax offset. This offset can reduce the tax you pay by up to $1,000 each year. Other turnover based concessions for small businesses include capital gains tax (CGT) concessions and the restructure roll-over. You may also be able to save time by estimating the value of your trading stock instead of doing a stocktake. There are simplified trading stock rules. If the estimated difference between your 2022–23 opening and closing trading stock is $5,000 or less, you don’t need to do a stocktake. Just report the same amount for your opening and closing stock in your tax return. Find out more at: ato.gov.au/concessionsataglance
Stay on top of super When you pay super guarantee (SG), you’re helping to set your employees up for their future. That’s why it’s important to make sure that your payments are received by your eligible employees’ super funds in full and on time. Missed or late super obligations can also cost your business more in the long run. Paying in full and on time means you need to make sure that payments: • are at least 11% of each of your eligible employees’ ordinary time earnings (OTE) – this is progressively increasing to 12% by 2025
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• are received by your employees’ super funds at least 4 times a year by the 28th of January, April, July, and October. Remember, payments must be received by an employee’s fund by the due dates to be considered ‘on time’. If you pay too close to the due date, you might not leave enough time for your payment to be processed and it can end up being late. That’s why it’s best to pay early. If you miss the due date, even by one day, you have to lodge a super guarantee charge (SGC) statement and pay the SGC to the ATO. This is more expensive for your business because : • SGC is calculated on your employee’s salary and wages instead of OTE • you’ll also need to pay interest and fees • unlike SG payments that were paid on time, you can’t claim the SGC as a deduction. If you paid late directly to your employees’ super fund, you’ll be able to claim those late direct payments on the SGC statement as offsets to the amount you owe. We take compliance with superannuation obligations very seriously at the ATO. It’s also important to lodge your SGC statement on time, or you may face penalties of up to 200% of the SGC. We also provide a free online SG obligations course on our website at: ato.gov.au/SGcourse Find out more at: ato.gov.au/superforemployers
Implement cyber security Setting up and maintaining cyber security is important in protecting your business, staff and client information. It can also save you the time and money it would take to recover lost or compromised data – if you can recover it at all. To be cyber secure, you should: • use strong and secure passwords • turn on multi-factor authentication • remove system access from people who no longer need it • monitor your accounts for unusual activity or transactions • do not leave your information unattended • make sure all devices have the latest available security updates • regularly back up your files and devices. Knowing what to protect and how to protect it is your best way to stay safe. Find out more at: ato.gov.au/businesscybersecuritytips You can also find guides and resources, including a Small Business Cyber Security Guide, at: cyber.gov.au
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Fixing a mistake If you forget to report some income, a capital gain, or a deduction, you generally have two years to amend your return, starting from the date you receive the notice of assessment. There’s no limit on the number of amendments you can make within this period. You can easily fix your return through your registered tax agent, Standard Business Reporting (SBR)-enabled software, Online services for business, a letter, or if you’re a sole trader you can use ATO Online services for individuals and sole traders. If you’ve provided false or misleading information to reduce the tax you owe, you can correct this through a voluntary disclosure in the approved form. This generally reduces any penalties that may apply. Find out more at: ato.gov.au/amendareturn
Get deductions to go digital with the tech boost The small business technology investment boost is for businesses with an aggregated annual turnover of less than $50 million. You will be allowed an additional 20% tax deduction to support your digital operations and to digitise your operations. The boost is for business expenses and depreciating assets. It is capped at $100,000 of expenditure per income year. You can receive a maximum bonus deduction of $20,000 per income year. The boost applies to eligible expenditure incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2023. If the expenditure is on a depreciating asset, the asset must have first been used or installed ready for use for a taxable purpose by 30 June 2023. Find out more at: ato.gov.au/technologyboost
Enhance your employees with the skills and training boost The small business skills and training boost is for businesses with an aggregated annual turnover of less than $50 million. You will be allowed an additional 20% tax deduction for external training courses delivered to employees, either in person in Australia or online, by registered training providers. The boost applies to eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2024. Find out more at: ato.gov.au/skillstrainingboost
Energise your enterprise with the energy incentive The small business energy incentive has not yet become law. However, the Australian Government announced that the incentive will be for businesses with an aggregated annual turnover of less than $50 million. They will be allowed a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support electrification and more efficient use of energy.
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The bonus deduction applies to the cost of eligible assets and improvements up to a maximum amount of $100,000, with the maximum bonus deduction being $20,000 per business. The incentive, if it becomes law, will apply to eligible assets that are first used or installed ready for use or the improvement cost incurred between 1 July 2023 and 30 June 2024. Find out more at: www.ato.gov.au/ and search for ‘Energy Incentive’
Watch out for our webinars and workshops Our webinars are live, interactive online seminars presented by experienced tax officers. You can ask questions to help apply the information to your situation. We even have webinars in Chinese, Arabic and Vietnamese, if you need, to help you access the right information. We also have Reach Out a business support program for Indigenous small businesses to understand their tax and super obligations co-facilitated by Indigenous staff. Currently, we have webinars for topics such as managing your business, employing and paying workers and issues for specific industries. Our face-to-face workshops are currently on hold, but you can keep an eye out for when they return. Find out more at: ato.gov.au/SBwebinars
Take your time with toolkits We’ve got lots of resources to help you out at tax time and throughout the year – our tax time toolkits are just one of them. Our toolkit contains lots of useful links and information to help you through tax time. This includes factsheets on home-based business expenses, motor vehicle expenses, digital product expenses, travel expenses, and if you have to pause or close your business. Our toolkits are updated each year. Find out more at: ato.gov.au/SBtaxtimetoolkit
Search for support We have a range of tools and services to make it easier for you to get your tax and super right. Our website has information about our tax time essentials, online services, learning resources and more. If you are having difficulties managing your tax and super obligations, we encourage you to contact us as early as possible so we can help you get back on track. We’ll also check to see what support options are available to you. Find out more at: ato.gov.au/SBsupport
Help your agent help you Help your tax and BAS agents help you – keep source documents, keep all your records organised and up to date, and regularly cross check your records with source documents.
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The less time your agent needs to spend sifting through your paper receipts and other records, the more time they can spend on more complicated parts of your tax affairs. You can also find information yourself, for example through the ATO website and ATO Community, but then contact your tax professional to understand how it applies to you. But remember, you’re still responsible for what you report and claim in your income tax return even if you use a tax agent.
Emma tobias | Assistant Commissioner Small Business area of the ATO
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Chapter 6
WHAT TO BE AWARE OF
IN RELATION TO FRANCHISING IN NEW ZEALAND Stewart Germann | Franchising Lawyer Auckland, New Zealand
About the Author Stewart Germann founded Stewart Germann Law Office (SGL) in 1993 as a boutique law firm at Auckland, New Zealand, specialising in franchising, licensing and business law. SGL is New Zealand’s longest established specialist franchising law firm and Stewart is included in the International Who’s Who of Franchise Lawyers 2022. Stewart Germann has over 40 years’ experience in franchising law and acts for franchisors in New Zealand, Australia, USA and the UK. SGL also act for franchisees and provides legal advice. Stewart has spoken at franchising conferences in New Zealand, Australia, Italy, South Korea and USA and he was on the Board of the Supplier Forum of the International Franchise Association (“IFA”) for 6 years until March 2007. SGL clients include many of New Zealand’s best known national and international franchise brands and Stewart has extensive franchising contacts worldwide and locally. He is actively involved in international franchising and has written many articles which have been published overseas including in the International Journal of Franchising Law. Stewart is a past Chairman of the Franchise Association of New Zealand (FANZ) and wrote the original Franchising Code of Practice for the FANZ. He has also written many published articles on franchising. Stewart is the only person in New Zealand to graduate Certified Franchise Executive (CFE) following an accreditation ceremony held at Australia’s National Franchise Convention and at the IFA in Orlando, Florida in 2020. Stewart is also Adjunct Professor of Law at the University of Auckland Law School and is teaching Franchise Law in 2022.
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N
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.
2021 Survey Some of the highlights from the Franchising New Zealand 2021 Survey results are as follows: • There are 590 business format franchisors in New Zealand • There is an estimated total of 32,300 units operating in business format franchises • More than 156,820 are employed directly in business format franchises • Sales turnover for business format franchises was estimated at $36.8 billion • Sales turnover for the entire franchising sector was estimated at $58.5 billion • 70% of franchise brands originated in New Zealand • Online sales grew tremendously with now almost 80% of brands engaging in online sales • More than 20% of franchisors have entered international markets • 90% of franchise brands return profits back into the community • Almost two-thirds of franchisors identified environmental sustainability and ethical supply chain examples, with the principal examples being enforced recycling of materials, waste minimisation programmes and hybrid car use • Only 18.5% of franchisors were involved in a substantial dispute (with one or more franchisees) in the past 12 months • COVID-19 brought considerable disruptions to trading, greater stress and mental health considerations, adjusted hours of operation, supply chain interruptions, significant sales reductions and many other issues In 2024 there will be a new Survey of Franchising in New Zealand and the latest results will be available later that year.
Legal Position Although there are no specific franchising laws, there are existing laws which protect franchisees; and the three main laws which provide such protection are the Fair Trading Act 1986, the Commerce Act 1986 and the Contract and Commercial Law Act 2017. Those Acts focus in particular on misrepresentations and restrictive trade practices which include anti-competitive behaviour. Once a franchisee has chosen a particular brand and franchise system and wishes to progress further with enquiries, the first question to ask is whether the franchisor belongs to the Franchise Association of New Zealand (FANZ). The FANZ was formed in 1996 and 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
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yet still comply with the Codes. Others may choose not to join and do not comply with the Codes so be aware. 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 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 7 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.
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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.” Consideration should also be given to the definition of a franchise agreement which “means a contract, agreement or arrangement, whether express or implied, whether written or oral, between two or more persons by which one party to the agreement (“the franchisor”) grants, authorises or permits the other party to the agreement (“the franchisee”) the right to operate a franchise. Any contract, agreement or arrangement which purports to be a franchise agreement shall be deemed to be a franchise agreement for the purpose of this definition, notwithstanding that it may lack any or all of the requirements or attributes referred to in the definition of “franchise””.
Code of Practice Prospective franchisees will usually be given a disclosure document and franchise agreement by a franchisor. The Code of Practice states that franchisors must provide the disclosure document to prospective franchisees at least 14 days prior to the signing of the franchise agreement. The disclosure document must provide certain information including the following: • Details of the franchisor and its directors including experience and a viability statement with key financial information of the franchisor; • Details of any bankruptcies, receiverships, liquidations or materially relevant debt recovery; • Criminal, civil or administrative proceedings within the past five years;
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• 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 and according to the Survey, those areas include administration and support services; retail trade (nonfood); accommodation and food retail; transport, postal and warehousing; construction; financial and insurance services; education and training; and rental, hire and real estate services.
Competition Law The Commerce (Cartels and Other Matters) Amendment Act 2017 changed the Commerce Act 1986 by replacing the previous prohibition on price-fixing between competitors with an expanded prohibition on cartel provisions, which extends to market allocations and output restrictions, as well as to price-fixing, by competitors. The New Zealand cartel prohibition is very wide and will have quite an impact on franchise networks. Some additional clauses must be inserted into franchise agreements and there must be explanations, in plain language, as to why certain clauses are necessary. Consideration must be given to cartel clauses in franchise agreements; for example, clauses that set or influence prices, restrict output or allocate markets will be caught. The possibility that alternative arrangements might achieve the same or a similar commercial outcome as a cartel clause should also be considered. Another consideration is whether the collaborative activity exemption or the vertical activity exemption would apply. Expert legal advice should be obtained in relation to this Act. There will not be a cartel arrangement in place where parties are not in competition with each other. In most franchise systems the franchisor will not be in competition with its own franchisees but that is not always the case. For example, a franchisor that owns its own outlet might be found to be in competition with franchisees. Similarly, where a franchisor sells online direct to the end consumer, yet at the same time has franchisees who sell to those consumers, it may also be in competition with its franchisees. There may also be instances where the franchisees are in competition with each other. Where a franchisor is in competition with a franchisee or where franchisees are found to be in competition with each other, there will be a competitive relationship, so the franchisor needs to be cognisant that there may be provisions in its franchise agreements that amount to cartel provisions. The Commerce (Criminalisation of Cartels) Amendment Act 2019 has introduced a new criminal offence for cartel conduct and the criminal sanctions reflect the covert nature of cartels and the harm they cause to consumers and the economy. The Commerce Act 1986 provides a number of statutory exceptions that would not constitute a cartel arrangement and may be pro-competitive. These exceptions relate to collaborative activities (for example, joint ventures or franchise arrangements), joint buying, vertical supply contracts and specified liner shipping arrangements as stated earlier in this paper.
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There are no defences for mistakes of fact relating to the elements of joint buying and promotion and vertical supply contracts. Therefore, it would be possible in the future for a director of a franchisor company to be criminally liable under the Act for a cartel offence. For an individual who commits an offence the penalty on conviction could be imprisonment for a term not exceeding 7 years or a fine not exceeding $500,000, or both. For a company which commits an offence the penalty could be up to $10 million so great care must be taken.
Restrictive Covenants The New Zealand courts have recognised that it is reasonable for a person in the position of a franchisor to impose a contractual restraint upon competitive conduct by a franchisee or an ex‑franchisee, but such restraints must not exceed the boundaries of the court’s notion of reasonableness. The first principle is that it is reasonable for a person to stipulate that if he or she is willing to disclose all secrets of how to establish a particular business enterprise, then the recipient of the information cannot immediately terminate the contract and set up a competitive business using the information received during the course of the relationship. If the courts did not provide protection to franchisors against conduct like this, there would be no incentive for the owners of established businesses to share their secrets with others and enhance their business skills. The second principle is that it is important for the well-being of the community that every individual should, in general, be free to advance his or her skills and earning capacity. The Contract and Commercial Law Act 2017 in New Zealand gives the courts authority to rewrite a restrictive covenant and to allow an excessive covenant to be enforced at a lesser level. Section 83 of the Act states as follows: “83 Restraints of trade (1) The court may, if a provision of a contract constitutes an unreasonable restraint of trade – (a) delete the provision and give effect to the contract as so amended; or (b) modify the provision so that, at the time the contract was entered into, the provision as modified would have been reasonable, and give effect to the contract as so modified; or (c) decline to enforce the contract if the deletion or modification of the provision would so alter the bargain between the parties that it would be unreasonable to allow the contract to stand. (2) The court may modify a provision even if the modification cannot be effected by deleting words from the provision.” The ability of the courts to modify excessive restraints is constrained by the principle that terms that could never have been considered reasonable will not be modified, as to do so would be contrary to the public interest. This is the doctrine of restraints that are in terrorem, which translates into ‘contracts that terrorise a contracting party’. If a franchisor could only ever have reasonably sought a two-year restraint within a 5-kilometre radius of the business in which the person established goodwill, then a nationwide restraint
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for 10 years could never be regarded as reasonable; and in that case the courts would refuse to rewrite the clause to determine that the period of 10 years should be two years and the area of the restraint should be 5 kilometres rather than the entire country. What then is a reasonable restraint? There are two factors – area and time. So the message is clear in New Zealand – for a restraint to be enforceable, it must be reasonable. There have been a number of restraint of trade cases in the franchising sector both in Australia and in New Zealand in recent years. Two cases in 2020 were clients of mine and they are Water Babies International Ltd v Williams & Others and M and L Holdings (2018) Ltd v Whenua Productions Ltd & Kuang. Other cases include the following: Dorn Investments Ltd v Hoover (2016); Mike Pero (New Zealand) Ltd v Krishna and Mortgage Suite Ltd (2016); Mad Butcher Holdings Ltd v Standard 730 Ltd and Wightman (2019); and Mainland Digital Marketing Ltd v Willetts and Meyers (2019). Non-compete and other restrictive covenants need to be included in the relevant franchise agreement to be enforced during the term of the agreement. The type of clause that I often include is as follows: “The franchisee shall not during the term or any renewal period or at any time following the termination of this agreement or its expiration through the effluxion of time except with the prior written approval of the franchisor carry on or be directly or indirectly engaged or concerned or interested whether as principal, agent, partner, shareholder, investor, financier, lender, director, employee, consultant, independent contractor or otherwise howsoever in any business conducted in competition with the business, the franchisor and its other franchisees, or any similar business.” In other words, a franchisor and a franchisee have a relationship for the term of the franchise agreement. During that period the franchisee must not compete with the particular franchise system and must not divulge confidential information to any third party outside the system without the consent of the franchisor. A breach of these covenants will usually give rise to an event of termination allowing a franchisor to terminate the franchise agreement with the particular franchisee plus it will allow the franchisor to enforce the personal covenants given by the directors and shareholders of the franchisee in relation to the restraint.
Unfair Contract Terms The Fair Trading Act 1986 (FTA) which was amended by the Fair Trading Amendment Act 2021 came into force on 16 August 2022. The FTA has new obligations and restrictions relating to unfair contract terms, unsubstantiated representations, extended warranties, shill bidding, unsolicited goods and services, uninvited direct sales and lay-by sales, consumer information standards, product safety and product recalls, internet sales and auctions and auctioneers. The existing prohibition on unfair contract terms has been extended in consumer contracts to small trade contracts worth under NZ$250,000 so this will affect franchising. A contract is a standard form small trade contract if each party is engaged in trade (i.e. two businesses), it is not a contract between a business and a consumer, and the
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relationship between the two parties in trade in relation to the goods, services or interest in land provided does not exceed the annual threshold. Any contract signed prior to 16 August 2022 will not be subject to the new amendments. The Commerce Commission can apply to a Court for a declaration that a term in a contract is unfair. If it is found to be unfair by a Court then that business must not include a term (or is amended with the Court’s approval) or attempt to enforce or rely on the term. A business may also face: • In the case of an individual fines not exceeding $200,000 and a company a fine not exceeding $600,000 • Court orders stopping that business from applying or enforcing that term and or orders directing a refund or payment of damages
Unconscionable Conduct The same Amendment Act introduced unconscionable conduct in trade provisions which are much broader and they apply to all conduct and not just contractual terms. The unconscionable conduct in trade provisions are much broader as it applies to all conduct not just contractual terms. The term unconscionable conduct is not defined but the Amendment Act states that a Court can take the following into consideration: • The relative bargaining power of the parties; • The extent to which the parties acted in good faith; • Whether the affected person was reasonably able to protect their interests; and • Whether unfair pressure or tactics were used. It may be that New Zealand will take guidance from Australian cases but at this stage no guidance or comment has been provided by the Commerce Commission. The Commerce Commission can seek penalties and fines as above. The Commerce Commission could also could bring civil proceedings; for example seeking a declaration from the Court in relation to unfair contract terms. The remedies include damages, injunctions and other Court orders. Whether the new amendments apply to any contract will depend on whether it falls within the definition of a standard form small trade contract. When looking at the annual value threshold this is assessed when the relationship first arises. No definition is provided in the Act. However, the prohibition is intended to address similar conduct as in Australia, where the courts have found conduct unconscionable that is ‘against conscience by reference to the norms of society’. The intention is that New Zealand courts will be able to draw on existing Australian case law.
Franchise Agreements All franchise agreements in New Zealand should contain a robust force majeure clause. The author would go so far to say that if any franchise agreement does not contain a
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force majeure clause then the drafter of the document may be negligent. The type of force majeure clause that the author invariably includes in his franchise agreements states: Neither party shall be liable to the other and neither party shall be deemed to be in default for any failure or delay to observe or perform any of the terms and conditions applicable to the party under this Agreement (other than the payment of money) caused or arising out of any act beyond the control of that party including (but not limited to) fire, flood, lightning, storm and tempest, earthquake, strikes, lock-outs or other industrial disputes, acts of war, acts of terrorism, riots, civil commotion, explosion, malicious damage, government restriction, unavailability of equipment or product, disease and/or virus of epidemic or pandemic proportions or other causes whether the kind enumerated above or otherwise which are beyond the control of that party and where such failure or delay is caused by one of the events above then all times provided for in this Agreement shall be extended for a period commensurate with the period of the delay. The purpose of the above clause is to ensure that neither party will be liable to the other for any events outside their control. Common events are listed in the clause like fire, flood, lightning, storm and tempest and, of particular relevance to current events, the phrase “disease and/or virus of epidemic or pandemic proportions.” No one can predict the future and all parties, especially a franchisor and a franchisee, should be afforded the protection of a well-drafted force majeure clause. COVID-19 is merely a symptom of the greater problem of unexpected or unanticipated events, be they in the form of the next pandemic or some other future disaster. Uncertainty will always pose a risk to interference with contractual relations, and a well-drafted force majeure clause is a necessary component of mitigating contractual risk.
Independent Legal Advice It is essential for prospective franchisees to obtain independent legal advice from a lawyer experienced in franchising as well as independent accounting and taxation advice. A franchisee should have a number of meetings with the franchisor and its representatives and all questions and answers should be written down and carefully kept for future use if required. Prospective franchisees should be able to rely upon everything they are told but be wary of financial projections provided by the franchisor. That is a dangerous area and in my opinion franchisors should not provide financial projections at all but should provide actual financial results with the direction that the franchisee must go to its own independent accountant.
Attractive Market New Zealand is very attractive for franchising and many overseas systems have entered the market including from Australia, USA, Canada and the United Kingdom. International franchising is thriving and New Zealand is very desirable because there is no franchise specific laws.
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The FANZ has been very successful in promoting self-regulation and high standards in franchising, and its Code of Practice is widely understood and accepted by many franchisors in New Zealand. At the end of the day, it is for a franchisee or master franchisee to make the decision whether or not to proceed with the purchase of a franchise or master franchise. Careful due diligence should always be undertaken so that franchisees are fully informed before signing any documentation.
Stewart Germann Franchising Lawyer - Auckland, New Zealand stewart@germann.co.nz www.germann.co.nz
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Chapter 7
Are You About to Buy a Franchise? Your Most Important Question …
Where Are My Customers?
Roger Dickeson | Senior Franchise Consultant Wollermann Franchise Developments
About the Author Roger Dickeson is an experienced franchising professional and has worked in the sector as a consultant, adviser and business planner for over 30 years. Roger’s specialty is business development for small to medium enterprises and as a strategist in the franchising, licensing and capital raising fields. His clients include new start-up ventures, established but expanding companies using franchising, and large corporations with expansion visions, in Australia and internationally. With formal qualifications in Business and Marketing, Roger has been a leading consultant in developing franchising and licensing systems for clients throughout Australia, New Zealand and the AsiaPacific region. As a regular writer and commentator on small business and franchising topics, Roger seeks to inform, educate and challenge ideas in the increasingly complex, but exciting and rewarding world of business franchising.
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uying a franchise, or starting any new business from scratch, is a major commitment in money, time and energy. And it is never a short-term exercise.
A typical franchise term is three or five years, usually with multiple renewal options, which means you are committing to a business venture for the next 5, 10, 15 years or even longer. Your new franchise must be able to sustain you for this length of time, otherwise why would you make such an important investment? By sustain you, I mean provide you with a reliable, hopefully expanding, regular source of revenue, allowing you to pay your expenses, make a good profit and provide you with a worthwhile return on investment. The regular income to provide this comes from only one source – your customers. It doesn’t matter what product or service you sell your sales revenue is generated solely from selling to your customers. Now, you might say that is obvious – it’s what business is all about, and this of course, is true. But are you sure your customers today (when you first commence) will be your customers over the life of your business? Remember this can be ten years or more. We live in a fast-changing world and major forces are shaping our lives and our livelihoods. This can be both good and bad if you are in business. Most franchise opportunities are offered on the basis that the franchisor has a business model with a track record of success, usually over many years. This is partly what you are buying – the franchisor’s brand profile, marketing methodology and proven operating system. When the future is the same as the past, this is a perfect scenario. You simply apply the franchisor’s business model, and you too make money. But what if the customers of this model are changing, shifting in their buying habits, no longer located where they used to be, or are adopting new ways of shopping, buying, browsing and paying for their purchases? If you are not ready or able to change and adapt to their needs and wants, then your business may find itself with a diminishing base of customers who are spending less or spending differently or not spending at all. Let’s look at some specifics and see how social and economic changes are already impacting on how customers make new and different buying decisions.
Changing Patterns of Work If there’s one thing that accelerated rapid change in our working patterns it was the COVID-19 pandemic. Hundreds of thousands of desk-bound workers stopped commuting to a city office and started working remotely from home. Each of these thousands of workers were also customers for all sorts of businesses providing everything from meals and snacks, shopping for fashion, haircuts, entertainment, tech goodies, automotive services, and countless other purchases, often made daily. Since the end of the pandemic, there has not been a return to the previous workplace model of centralised city offices with its accompanying long daily commute. Despite pressure to return to the central office, the WFH model has become mainstream, and CBD’s still struggle to remain viable for many small businesses and service providers. On the other hand, a new business model is emerging and attracting increasing
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numbers of WFH workers. That is, the suburban office hub. Brand new, tech centric, remote working stations with on-site amenities are popping up everywhere throughout the suburbs, providing a ‘halfway’ solution to people who don’t want to work only from home but equally don’t want to commute two hours each day to a city office. Being in the suburbs, the workplace ‘hubs’ are close to home, provide easy, lower cost parking, a vibrant, pleasant working environment and are becoming very popular. They also provide a completely new source of customers to businesses who cater to their spending needs. These hub workers still spend on the same goods and services (food, etc) but they are now located in a different part of the city. By carefully researching and observing the rise of the suburban workplace hubs, your business could be ideally situated to attract these workers as your customers – and keep them for the long term.
The Gig Economy Another emerging trend, spurred on by the pandemic, is the rapid rise of the gig economy – all of it based heavily on tech-centric, online ordering. The gig economy takes many forms, from food delivery to ride share ‘taxis’ to trade services of all kinds. As the industry becomes more regulated, and therefore safer and more appealing, it is attracting more people as operators, and equally importantly, more people as customers. People are increasingly comfortable placing online orders for things, knowing they will be delivered in a safe and convenient manner. Now, let’s say your franchise business is in food service. You have a ‘high street’ shopfront with kitchen, front-of-house counter and you may even have a busy lunchtime trade (from all those hub workers!). In this scenario, let’s see who your customer is and how you might need to adapt to meet their changing buying habits. You have three separate groups of people you need to cater for. There is the increasing number of online purchasers – customers you never actually meet but who respond to your digital marketing and place their order on an App and wait for it to be delivered by a gig worker. To capture these people as customers you must have the necessary software, linked to a mobile App (either your own and/or one of the delivery platforms like Uber Eats or Doordash) and promoted heavily via your website and social media. Then the second group is the intermediaries, the delivery people. Although not strictly your customers, they are an essential link in each sale that you make. Your business will need to efficiently cater to their needs also. That is, be ready with their order in a grab ‘n go manner, so they do not waste time and your staff are not holding things up. Thirdly, your walk-in customers. Your business would serve those customers in the traditional manner. That is, take their order over the counter, prepare their purchase (in this case their meal, coffee or snack), and process their payment in a prompt and friendly manner. They may even occupy a table in your shop if that’s what you offer. Now, in preparing your business for this new mix of customer types, you may look at changes to how you configure your shop front. Your online, App-ordering customer (and their gig worker) will want a quick-in, quick-out prepaid service. But your walk-in customer will probably not like standing in line while some helmeted, motor cyclist
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delivery person with a large backpack jumps the queue while they stand at the counter or sit at their table. In this changing scenario, a shopfront layout that physically separates the in-shop customer from the online (delivery person) customer will not only increase your overall efficiency, it will go a long way to keeping all customers happy. This is turn, enhances your business and demonstrates that you understand the needs of each and are responding accordingly – good for your long-term prosperity!
Low Carbon World Australia, like much of the rest of the world, is moving to a low carbon economy. Fossil fuels are on the way out and renewables are increasingly becoming the energy systems of the ‘new world’. For small businesses, including your franchise, this may have major impacts on not only how you deal with your customers, but in some cases, who those customers will be in the next 10-20 years. Two obvious examples of the transition to a low carbon world are electric vehicles (EV’s) and rooftop solar panels replacing coal-fired electricity and natural gas. Of course, not every small business will be impacted the same, but here’s two examples. If your business is in automotive services, you must be aware that EV’s require very different service and maintenance schedules and the skills required to deliver them, to those of combustion engines that have dominated motor vehicles for the past 120 years. EV sales may not be in the majority just yet (lots of problems with long wait times, charging infrastructure, lack of battery system knowhow) but this is rapidly changing. In the next 10 years, it will be difficult to buy a new combustion engine vehicle as every manufacturer will be pushing EV models. Your customer (the EV owner) will expect you to deliver a high-quality, cost-effective maintenance and repair service and if you don’t you will lose those customers to your more forward-thinking competitors. Likewise, with rooftop solar panels. By February 2023, there were 3.4 million rooftop solar panel systems installed on Australian homes, that’s 31.4% of households. If your franchise business is in home or trade services, here is an emerging opportunity just waiting to be tapped into. Solar panels are not maintenance-free. To operate efficiently, they must be regularly cleaned of dirt, bird droppings, leaves and storm damage. This is not a job for the homeowner. A trade services business whose customers include homeowners would be missing out on a lot of business if they did not offer a suitable solar panel cleaning service. Conversely, your customers’ expectations of your business would most likely include that you can and would supply such a service. In other words, although the actual customer may be the same person, their expectations of the services you provide are changing – and to prosper in your franchise, you will need to adapt, skill-up and promote your changing, or extended, services.
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Conclusion As you contemplate buying your new franchise business, do not solely rely on the sales patterns of the past, no matter how experienced your franchise company may be. Changing and evolving times demand that you, as the small business franchisee, have a clear and in-depth understanding of exactly who your customer is. More importantly, an understanding of how that customer, by their profile, location or buying habits and expectations, may be changing. After all, 10 to 20 years in business is a long time and a lot can, and probably will, change over that time. By all means look back at the track record of your franchisor, but also look forward to make sure you have a relevant business for the turbulent times ahead. And most importantly, stay positive. It’s an exciting and ever-changing world out there!
Roger Dickeson | Senior Franchise Consultant Wollermann Franchise Developments Australia (03) 9999 5488 rdickeson@franchisedevelopments.com.au www.franchisedevelopments.com.au
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Chapter 8
Financing Your Franchise Business Phil Chaplin | CEO CFI Finance Group
About the Author Phil Chaplin the Chief Executive Officer of the CFI Finance Group, a specialist finance company servicing the franchise, accommodation, and fitness sectors as well as small businesses more broadly across Australia and New Zealand. Phil has over 20 years’ experience in providing finance to businesses across Australia and New Zealand and has managed finance companies in the private and banking sectors, he is a former chair of the Equipment Finance division of AFIA.
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tarting a franchise business can be exciting, rewarding, and potentially lucrative. However, like any business venture, it requires careful planning and adequate financing to get off the ground and to thrive. ‘Financing’ can refer to either equity (the cash you’re putting in to start your business), or debt (money you borrow to help fund your new venture). In this article we’ll consider both sides of the financing equation and provide some pointers that we hope will help to set you up for franchising success. Ready to dive in? Let’s go…
What is financing? It’s rare these days for any new business to be funded wholly from equity, and equally rare to be funded from debt alone. Most businesses will be funded from a combination of the two, but before we get into the mix of funds it’s probably useful for us to brush up on what makes up each side of the financing coin. Firstly equity, sometimes referred to as capital or just cash, might come from savings, or money you’ve earned selling an asset, or just about anywhere really. The key thing about equity is that it’s generally not money that you have to pay back. Sometimes you might find that friends or family might be willing to invest capital in your business, perhaps for a share of the business or profits. One thing is certain however, if you are seeking to borrow any money to help start your business it’s pretty much guaranteed that lenders will want to know what capital you’re putting in and where it’s coming from. The other side of the coin is debt. This might be a loan from a bank, a non-bank finance company, or perhaps vendor finance from the franchisor. It could also perhaps be a loan from family or obtained under some other private arrangement. The key thing about debt is that it does have to be paid back and is usually subject to a specific timescale with regular repayments.
When is a loan not a loan? Now that we’ve looked at the simple version of debt and equity, we can consider where it all gets a little bit murky… For example, a landlord contribution might form a significant part of your financing structure. A landlord contribution is common when leasing business premises. Landlords may agree to help cover the upfront costs of making the premises suit your requirements (the fitout), in return for the money they will receive over the lease term. Or perhaps a loan from a family member that has no formal repayment requirements, ‘pay it back when you can’ money as it were. And how for example do you treat money that has been drawn down off your home loan through refinancing or a mortgage redraw facility? Are these things debt or are they equity? Both? Neither? The answer probably depends on who’s asking. Generally, a lender will treat a landlord contribution or loan from a family member as equity, at least from the perspective that the are no debt repayments from the business (of course you still must pay your landlord rent). Likewise, your mortgage isn’t an
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obligation of the business, so it’s not going to be treated simply as debt, however it may factor into determining how much money you need to be able to pay yourself or draw from the business each month.
So, equity can be a bit confusing, but debt is just a loan, right? Right! OK, maybe not, but it would have made for a shorter article. Debt can take many forms and might be viewed differently depending on a range of factors including what sort of debt it is (the financial product such as a line of credit or equipment loan), what’s it’s secured by (your home or specific assets or nothing in particular?) and where it’s obtained from (a bank vs. vendor finance). When it comes to debt, there are two key things to consider: Number one, use the right sort of debt for your specific circumstances. For example, landlord contributions are often only paid after the work is complete, so while you might need a short-term loan to cover costs until the job is done you wouldn’t take out a long-term loan for this. Conversely, if you’re funding business equipment that has a long useful life, you probably don’t want to strangle your cashflow with expensive short-term finance. Number two is to make sure you have a handle on the different types of debt funding your business needs, and to understand how they will work together (or where they don’t). For example, a bank may loan you money for your business secured against your residential property, and a non-bank lender might be happy to provide you funding for your equipment and fitout even though you already have the bank finance. However, in some cases lenders may not be willing to work together as they might perceive a conflict between the finance they’re offering. One of the best approaches is to lay it out in two columns, on one side categorise and write out all the major costs in setting up your business, including franchise fees, legal and soft costs, equipment, fitout, lease bonds, etc. On the other side set out your various source of capital and debt, including savings, landlord contribution, vendor finance, equipment finance, etc. Once you’ve set it out in this way, hopefully all of your costs are less than the total of the capital and the debt, what’s left over is your working capital, the money you need to run the business until you start generating funds to pay bills.
Now that we’ve wrapped our heads around what financing is we can talk about how to get it… Most business ventures require a combination of capital and debt to get underway, and certainty that debt (and maybe some capital) is going to be provided by someone else. So, how do we get those people to make their money part of our financing solution? We can of course try to rely upon our natural charm and charisma, but that will usually only get you so far. Once your winning smile and magnetic personality has opened the door (be it of an investor or a lender) let’s consider what else we can do to close the deal.
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First things first, do your homework! Before diving into any new business venture, it’s crucial to be prepared. Whilst franchise networks can offer a lot of support and to some extent a ‘cookie cutter’ approach, this doesn’t mean all the work is done for you. Thorough preparation not only increases your chances of securing funding but also sets the stage for a successful business future. Most of the items touched on below are elements that you would include in a formal business plan, and indeed, a strong business plan is probably one of the best tools that you can have when it comes to obtaining finance. As part of preparing your plan, or alongside it: 1. Have your house in order. Be on top of your personal finances, understand your personal credit rating and address any adverse history. Pay down personal debts if you can and stay on top of your expenses. Most lenders now will look at your banking conduct and use that information as part of their assessment. Lenders want to know that you pay your bills on time and watch where your money goes. 2. Know your numbers. If you’ve ever watched Shark Tank or the Dragon’s Den, this one should already be etched in your brain. Anybody that goes in front of the camera without a good handle on their key financial metrics is doomed to be eaten alive for our entertainment. At the very least you should have a complete handle on all your costs in setting up the business, as well as a financial forecast that covers the first year or two of operation. This should be both a profit and loss statement, and most importantly a cashflow forecast. It pays to remember that profits (and losses) are not always the same as cash! 3. Be realistic. Whether it’s your financial forecast or any other aspect of your business it’s important to be realistic. Include best and worst cases for things like how long it will take to get up and running. What happens if you’re three months late opening or customer take up is slower than expected? Also consider what costs might move, for example, unexpected costs in fitouts due to labour or materials are quite common. 4. Be thorough. A good business plan will cover everything from the franchise concept and product, to financials, market analysis, competition, marketing strategy, and more. Find a good template and take your time to flesh it out with answers to all the questions a lender or investor might ask. 5. Remember, you’re selling you. Whether you’re dealing with an investor or a lender, it pays to think of yourself as the product you’re selling. What makes you a product they’ll want to buy? Can you easily convey why this business is the right one for you, and how you’ll be able to make it a success? It can be easy to think of all this work as something you’re doing for others, but remember ultimately, you’re doing it for yourself. A realistic and comprehensive plan can help you spot business issues and plan for them before they arise, or better yet you can make sure they don’t ever have the chance to become issues. Take guidance and input from mentors, industry experts, business groups and wherever else you can get it. Particularly ask to talk to other franchisees and pick their brains, ask them what they wish they knew starting out and what they’d do differently if they had their time again.
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Look in the right places If you’re seeking finance, it pays to look in the right places. For smaller businesses, friends and family may be the perfect investors, but for larger business ventures you might need to look further afield. If it’s investment finance you’re seeking then get out there and network, talk to people that have done it before, and don’t be shy about telling your story to people with deep pockets. Likewise, when it comes to loans it pays to go to a specialist where possible. Some banks have specialist franchise teams and there are a few non-bank lenders that have tailored their products and services to the needs of franchisees. Your franchisor will likely have several contacts that they can direct you to rather than running all over town. It also pays to remember that too many credit hits on your file from lending applications may impact your credit score and actually make finance hard to get!
In conclusion Sorting out the finance for your franchise business is a significant step toward achieving your business ownership goals. To succeed, thorough preparation is crucial, and understanding your financing options is equally important. By developing a strong business plan, assessing your costs, and exploring various funding sources, you can navigate the path to franchise ownership with confidence. Whether you choose to leverage property equity, work with non-bank lenders, or explore other funding avenues, careful planning and research will pave the way for a successful franchise venture in these dynamic markets.
australia www.cfifinance.com.au hello@cfifinance.com.au 1300 659 676
new zealand www.cfifinace.co.nz hello@cfifinance.co.nz 0800 456 687
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Chapter 9
The myriad of
franchise brands in Australia today
Brian and Prue Keen | Founders Franchise Simply and Systems2Grow
About the Author Brian Keen has been involved in the franchise industry for more than 30 years and Prue has been involved with systems and business for as long. Together they founded Franchise Simply, Systems2Grow and Microloan Foundation Australia. Brian’s on-the-ground business experience as a multi-unit franchisee, franchisor and consultant helping many of the big names create their own franchise systems and growth over the years combined with Prue’s structured approach has been fed into Franchise Simply, helping today’s SMEs and Franchisors grow their business by franchising.
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ecently the Franchise Council of Australia published The State of Franchise Report, and we are sure everyone is talking about the results shown which are so encouraging. It shows the franchise sector is composed of 94,000 franchise outlets (nearly 10% of the 1 million businesses employing staff in Australia today by my rough calculation), generates $174 Billion into Australia’s economy, and employs almost 600,000 people. This is significant. The thing these stats hide though, is that the sector is not just represented by the big franchise brands everyone knows.
The big players Yes, the big players are very visible – Jim’s Group, 7-Eleven, and Subway take pride of place, each with thousands of outlets and people involved. But this big group includes some surprises too. Metcash, which owns IGA (every IGA store is a franchise) seems to top the list alongside Harvey Norman and then Maccas. The others listed above fall below Maccas. But think about Jetstar Group which is owned by Qantas and has franchised its Singapore, Japan, and Vietnam operations to be managed in those countries. And IKEA which is owned by the Swedes with franchises in Australia. Not to mention Elders Rural Services with about 91 franchised outlets, and virtually all the fuel and car dealerships through Australia.
It’s the smaller players who take up most of the field This is where most of the franchise brands lie, and some are very different. The IBIS World report notes the range is vast from cars to childcare. The FCA report shows that the whole franchise sector is predominantly made up of small business with fewer that 20 employees. 95% of all franchisors and almost all franchisees sit hidden in this group. The IBIS World report also remarks that the past few years have been tough, and we think especially on these smaller franchises. COVID had a big impact and despite a return to ‘COVID normal’ trading conditions, IBIS World notes mounting cost of living pressures have made it difficult for businesses to regain lost ground. We are all feeling the pinch. But it is this sector which is worth a look because it is where the variety and potential sit. The big thing is the diversity. There are a few reasons.
The new growth areas Although still at the top of the list are retail outlets, restaurants, and quick service food outlets, it is the sections called ‘other’ or ‘personal services’ that we think are exciting.
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The reason – COVID again – we see the franchise market changing fast in response to the demand for personal growth, personal service, and escape. Our workshops and enquiries are more and more filled with those in the service industries – beauty, creative arts, home renovation, recreation… Here are some we have come across - some new and some have been around for years. The wellness industry A real growth area is the wellness area encompassing fitness, health food, allied health and many of the art industries delivering art therapy. While food and fitness have been represented as franchises for many years, allied health and the arts are newcomers. The reason, people involved in the industry are not naturally entrepreneurial which makes it tricky to get them to help scale a franchise by becoming business partners. But there are examples which work well. Paint and Sip Studios Paint and Sip is a company which represents much that is going on in the art area. We love this concept where friends can meet up over food and wine (well not for the kids!) and express their creativity with lots of fun and relaxation. They opened in 2018 and today have studios and mobile units. The group is 44 franchisees, and 73 franchisor units. They operate everywhere in Australia except the Northern Territory and have plans to go there too. This growth in just 4 years is remarkable. The thing about these outlets also, is that they grew the enterprise through COVID and are still expanding. Paint and Sip are no orphans, there is a demand we see across all the creative arts to experience this kind of escapist, relaxing, fun activity that gives time away from all normal work and family life. Floatation and Wellness Centre Wellness centres are alive and well across Australia. Recent entrant is LoKAHI Wellness in Melbourne whose Kerry & Scott Thurrowgood have expanded their five-years old flotation tank offering to include vitamin infusion, cryotherapy, oxygen therapy, brain tap and several more options – whose healing therapies are proving very popular, especially with sports people and those with longer term health issues…soon expanding nationally. Another good and fast-growing example is City Cave which aims to increase longevity in our communities through a range of tailored health care. Each site offers a range of Float Therapy, Infrared Saunas, Massage, and specific practitioners. City Cave has been operating in Australia for just 5 years but already has 70 outlets in NSW, NT, QLD and Victoria and is following, the successful pathway of many Australian franchise grouped by establishing themselves in New Zealand and the US..
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NDIS services Then there is the burgeoning NDIS sector. The best groups servicing this sector focus on care of their clients This includes groups such as Nurse Next Door, Just Better Care, Simply Helping, Pearl Home Care, all providing home care options. Day care and specific services such as Blue Tongue Adventure providing day programs and specialist services such as Taking Care Mobile Massage giving remedial massage to the elderly. The list of providers is as wide as the list of services. Allied Health Falling into a similar service sector allied health is a big sector but with a wider community clientele. Physiotherapy, acupuncture, podiatry, chiropractors, dietitians, optometrists and dentists… Talking about dentists, one prominent Melbourne dentist has spread their wings and launched Charlie Wilde, a mobile, same-day teeth whitening service that services their clients in home, office or at an event. Best known is probably Specsavers which now delivers optometry services to the bulk of Australians (over 70% of us when I last looked). They have completely disrupted the industry since they first arrived from the UK because they were able to supply product at such a competitive price. Now not small with close to 900 outlets they show what can be done in the industry…. And their destruction of the market continued last year with the introduction of their audiology services. At the other end of the scale is probably Physio INQ is with 18 franchisees developed in the last 4 years – good going we think. Home renovation Staying home for work and recreation obviously was essential through the COVID years but since, with the economic stress of recovery, people are still wanting to stay home and do up their homes rather than sell and upgrade. Tradies have cottoned on to the fact that they can leave general building industry and build a business in one of these very focused spaces. The result is there is a demand for niche trades that can provide specific services. Outdoor living, kitchen renovation – the list is long. A good example is Refresh Renovations which has developed a software system to help its franchisees manage home renovation with one point of contact overcoming problems with what can often be a disconnected and troubled process for the customer. This is an international brand with 77 franchisees in Australia built over the 7 years they have been operating here which is a great achievement. Other examples we see are niched groups which deal with single issues – prefabricated
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outdoor structures or kitchens for example or groups which specialise in cleaning gutters or roof renovation or house washing. Then there are DIY kits for decks, patios, verandas, etc from people like Queensland Home Improvements. At your local farmers and weekend markets Keep your eyes open and you will be surprised what you can see… as well as popular popcorn trailers, in Brisbane you’ll find Gnocchi Gnocchi Brothers, now matured into restaurants in Sydney and Brisbane. Then, for the kids, they won’t miss Teddy & Co Funland in SE Queensland and show days around the country.
Happy to keep it small We become a little frustrated when we hear consultants advise that a business must have reached a certain size before the business owners can think about franchising. Remember that the FCA report points out, nearly 95% of franchisors have less than 20 employees. There are many who choose to franchise, not because they have great ambitions to build an empire, but to help them better manage business at their own scale. And this is a perfectly appropriate use of this business model. Done properly, franchising does help with managing staff and the daily tasks of delivery and sometimes sales, but it comes with added responsibilities for looking after your franchisees. Keeping the group small reduces the problems that can come with dealing with numerous franchisees. These guys have successfully found their balance and we see a lot of groups happily choosing to not grow enormous. Especially in the regions where this model will help with managing outlets through several small towns for instance while celebrating the local features of the brand. Bakers and local food specialities come to mind. Old Macdonald’s Travelling Farms This is an excellent example of a specialised country franchise group. They bring the farm to you and no event is too small or large – we believe they attend the Easter Shows each year. Key here is the fact they love their animals as much as they love the kids they entertain. And it shows in the cute, cuddly unstressed creatures they take around each year. Established as a franchise in 1991, these guys have been around for years, but they have just 10 outlets. They can be found in the Eastern States and WA. What they show us is that you don’t have to be huge to be successful. It depends on your objectives, and it looks as though here it is the care of the animals that is the priority. We applaud them.
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Sandwich Express Holdings This is such a good example of a small regional franchise where the franchisor obviously is using this model to run a great very specialised business in one town (Townsville) with three franchisees. They only serve sandwiches (well – croissants, muffins, wraps too but you get the drift) and are happy with how this is going. We come across many small family run regional franchises which fit this mould.
New but with an eye to future expansion So many franchises fall into this category today. Just starting out it is tricky to grow the group at the beginning. Franchisors need to check out their model with the first few franchisees who come on board, and this is the time that franchisors learn to move from being boss to becoming the leader of a systemised group. It can be a challenging journey. Those who make it in four years or so are doing well. Here are some great examples we think are worth following. Little Boomer’s Basketball These guys have only been around for two years in NSW and have 4 franchisees with 1 the franchisor outlet which is good going in that timeframe. I love the fact they are focused on the children’s sport market which is a growth area. And their website shows expansion is on the horizon for them and with a clear love of the game and the kids, they will be successful we believe.
To conclude The mind-boggling scope and flexibility of the franchise model is clearly illustrated when comparing two 30-year-old examples: Old McDonald’s Travelling Farms with 10 outlets and Poolwerx who have expanded their model to 550 units and growing. So, there you have it. Is there any other approach to business growth that offers such prospects together with the benefits that franchising affords? It is exciting to see the wide range of businesses that explore franchising as another model to help manage their business and more exciting to see the range expand. Just remember, there is one thing that keeps each of these groups successful – look after your franchisees and they will look after you.
Brian and prue keen www.franchisesimply.com.au www.systems2grow.com www.microloanfoundation.org.au - 78 -
Chapter 10
FRANCHISNIG IN AUSTRALIA
WHAT EVERY FRANCHISOR AND FRANCHISEE NEEDS TO KNOW TO BE SUCCESSFUL James Corne | Founder and Ceo THE FRANCHISE INSTITUTE
About the Author James Corne is The Founder and CEO of The Franchise Institute, Australia’s preeminent franchise consulting business. James has had more than three decades helping small and small/medium size businesses to expand through franchising both here in Australia, New Zealand and Asia. He combine practical experience with industry expertise yielding excellent results for his clients. He began his career as a Marketing Consultant for Oracle Systems, before working for as a Trade Officer with the Canadian Consulate and was also a very successful member of “win-back” team for Telstra. To find out more about franchising visit www.thefranchiseinstitute.com.au
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ranchising has emerged as a dynamic and innovative business model that bridges the gap between entrepreneurship and established business practices. In Australia, the franchising landscape has flourished over the years, providing both franchisors and franchisees with unique opportunities and challenges. This chapter delves deep into the intricacies of franchising in the Australian context, covering its definition, popularity, benefits, risks, suitability, purchasing considerations, keys to success, differences from licensing, and the regulatory framework that governs it.
What is franchising? At its core, franchising is a business arrangement where a franchisor, the owner of an established brand and business model, grants a franchisee the right to operate a business using that brand and model. In return, the franchisee pays fees and royalties to the franchisor for the privilege of using their intellectual property, operational methods, and ongoing support. This collaboration allows for the expansion of the brand’s presence while enabling individuals to become business owners with a proven framework.
Why is franchising popular in Australia? As per the data provided by the Franchise Council of Australia, the franchise sector makes a substantial annual contribution of around $184 billion to the national economy. In Australia, there are over 1340 operational franchise systems, providing vital support to nearly 90,000 small businesses and offering employment opportunities for over half a million individuals. The widespread appeal of franchising in Australia can be attributed to a range of compelling factors: Proven Success: Franchises come with a built-in track record of success. This proven success is particularly attractive to potential franchisees who are looking for a lower-risk option than starting a business from scratch. Lower Risk: Franchises tend to have a higher survival rate compared to independent startups. Some studies have suggested that franchise success rates over a five-year period is 80%, while the success rates for independent startups is 50%. The established systems, operational guidelines, and ongoing support from the franchisor contribute to this lower risk. Recognisable Brands: Australians are drawn to brands they recognise and trust. Franchising allows individuals to tap into the power of established and recognised brands, giving them a competitive edge in the market. There are currently around 1350 franchised business systems operating in Australia. Training and Support: Franchisors provide comprehensive training and ongoing support to franchisees. This is particularly beneficial for individuals without extensive business experience, as they receive guidance in various aspects of running the business. Economies of Scale: Franchising leverages the concept of economies of scale. The collective power of multiple franchise locations allows for more cost-effective purchasing, advertising, and operations, benefiting both the franchisor and the franchisees.
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Benefits and risks of franchising Like all ventures in life, there are both benefits and risks to the franchise model: The Benefits: Established Brand: Franchisees benefit from the credibility and reputation of a recognised brand. This can significantly reduce the time and effort required to build a customer base. Support System: Franchisors offer training, marketing assistance, and ongoing support. This support system helps franchisees navigate challenges more effectively. Standardization: Franchise systems maintain consistency in product quality, customer experience, and operations. This consistency fosters trust among customers and contributes to brand loyalty. Easier Financing: Banks and financial institutions are often more inclined to lend to franchisees due to the track record of success associated with established franchise brands. The Risks: Loss of Autonomy: Franchisees are required to adhere to the franchisor’s guidelines and operational standards. This can limit creative freedom and decision-making authority. Initial Investment: Franchise fees, ongoing royalties, and other associated costs can represent a substantial initial investment. This financial commitment can be a barrier for some potential franchisees. Dependence on Franchisor: The success of a franchise is closely tied to the health and competence of the franchisor. A weak or mismanaged franchisor can negatively impact the performance of franchisees. Market Saturation: The overexpansion of franchises in a specific market can lead to market saturation, resulting in increased competition and potential challenges for individual franchisees.
Is my business suited to franchising? Not every business is well-suited for the franchising model. Businesses considering franchising should possess several key traits: Replicability: The business model must be easily replicable across multiple locations while ensuring a consistent customer experience. Uniqueness: The concept should stand out in the market, attracting both customers and potential franchisees. A unique selling proposition enhances the franchise’s attractiveness. Training System: A structured training system is essential to ensure that franchisees can effectively replicate the established business model. This training promotes uniformity across all franchise locations.
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Buying a franchise: What to look for when purchasing a franchise Potential franchisees should carefully consider several factors: Franchisor’s Reputation: Thoroughly research the franchisor’s history, financial stability, and reputation within the industry. A franchisor with a strong track record increases the likelihood of a successful partnership. Disclosure Document: The franchisor is required by law to provide a disclosure document to potential franchisees. This document contains crucial information about the franchise, including costs, fees, obligations, and legal considerations. Support and Training: Assess the level of training, ongoing support, and marketing assistance provided by the franchisor. Strong support systems contribute to the success of franchisees. Costs and Fees: Understand all costs associated with the franchise, including initial franchise fees, ongoing royalties, marketing contributions, and any additional expenses that may arise.
What are the keys to a successful franchised business? The pathway to success within the franchising model is illuminated by a constellation of interconnected factors that, when harmoniously aligned, lead to the achievement of thriving and sustainable ventures. Aspiring franchisees embarking on this journey must navigate the landscape with a keen awareness of these pivotal elements that contribute to their triumph. 1. Effective Communication: At the core of every successful franchise relationship lies the cornerstone of effective communication. Open and transparent dialogues between franchisors and franchisees create a bridge of understanding and collaboration. The dynamic exchange of insights, concerns, and ideas fosters an environment where challenges are met collectively, solutions are devised collaboratively, and innovation is embraced with enthusiasm. This transparent flow of information ensures that both parties are aligned in their objectives and that the franchise operates harmoniously. A culture of communication extends beyond the franchisor-franchisee relationship to encompass the entire franchise team. Encouraging dialogue among staff members, sharing best practices, and inviting suggestions for improvement can elevate the collective performance of the franchise, resulting in heightened efficiency, exceptional customer service, and an overall positive atmosphere. 2. Adherence to Standards: Central to maintaining the integrity of a franchise’s brand and reputation is the unwavering commitment to adhering to established brand and operational standards. Franchisees act as brand ambassadors, and their consistent dedication to delivering a uniform customer experience across all locations reinforces the brand’s credibility and fosters customer loyalty.
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Franchisees must internalize the core values, quality benchmarks, and operational guidelines set by the franchisor. This disciplined adherence to standards ensures that customers experience the same level of excellence regardless of which franchise location they visit. By upholding these standards, franchisees contribute to building a brand identity that resonates with trust, consistency, and reliability. 3. Strong Leadership: Effective franchisees embody strong leadership traits that extend beyond their role as business managers. These leadership skills are instrumental in guiding the franchise towards success. A franchisee’s leadership style influences the work culture, team dynamics, and overall morale, setting the tone for the entire organization. Strong franchisee leaders inspire and motivate their teams, fostering a sense of camaraderie and shared purpose. By cultivating a positive work environment, franchisees encourage staff members to perform at their best, leading to improved customer satisfaction and operational efficiency. Franchisees who exhibit strong leadership skills prioritize the creation of a positive and supportive work culture. This culture encourages collaboration, creativity, and a shared commitment to achieving business goals. Effective franchisees maintain a clear focus on their business objectives. They set realistic targets, devise strategies for growth, and adapt to changing market conditions with agility. This goal-oriented approach ensures that the franchise remains competitive and adaptable in a dynamic business landscape.
Distinguishing franchising and licensing: unveiling the truth This question frequently arises, shedding light on a common confusion between the terms “franchising” and “licensing.” These terms are often interchanged, leading to misunderstandings. Business owners express their intent to opt for licensing instead of delving into the world of franchising, believing that licensing offers comparable benefits with fewer expenses and regulations. However, this notion is misconstrued. To dispel these myths and offer clarity, let’s delve into a concise breakdown of the facts. Franchise vs. Licensing: The Definitive Distinction While the terms “franchise” and “licensing” may be used interchangeably, the true differentiation lies not in nomenclature but in the very nature of the agreement itself. The crux of the matter lies in the four pivotal criteria that determine the classification: 1. Trade Name and Logo Usage: The primary divergence between a franchise and other forms of agreements involving licensing rights is centered around the usage of the trade name, logo, and established business systems. A franchise agreement explicitly permits the use of these elements, contributing to brand uniformity and recognition. 2. Business Systems: Franchise agreements go beyond mere permission for brand use. They encompass an array of established business systems, operational methods, and
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support mechanisms that contribute to the franchisor’s distinctive business model. Licensing agreements, while offering the use of intellectual property, might not extend to these comprehensive systems. 3. Agreement Nature: Regardless of whether an arrangement is titled a license, an agency agreement, or a franchise, the true differentiation rests within the agreement’s content. If an agreement satisfies the following four criteria, it is classified as a franchise under the law, necessitating adherence to the In the realm of business expansion, distinguishing between franchising and licensing is essential. The terminology might overlap, but the core distinction lies in the intricacies of the agreement itself. Delving into the nuances and comprehending the regulatory implications ensures that business owners make informed decisions that align with their growth aspirations. While the journey of expansion is multifaceted, a firm grasp of the terminology empowers business owners to navigate the intricacies with clarity and confidence.
The franchising regulatroy framework Australia’s robust regulatory framework for franchising is essential for maintaining integrity, transparency, and fair dealings within the industry. At the heart of this framework is the Franchising Code of Conduct, a comprehensive set of rules that govern the relationship between franchisors and franchisees. This regulatory structure is pivotal in ensuring that both parties understand their rights, responsibilities, and obligations, fostering a healthy and mutually beneficial business ecosystem. 1. Disclosure Document: The Franchising Code of Conduct places great emphasis on transparency and the provision of essential information to potential franchisees. Franchisors are legally obligated to provide a disclosure document to interested parties. This document is a comprehensive resource that contains a wealth of information, including financial details, franchise fees, ongoing obligations, territorial rights, and any pertinent legal considerations. The purpose of this document is to empower potential franchisees with the knowledge they need to make informed decisions about investing in the franchise. 2. Cooling-Off Period: Recognising the significance of ensuring franchisees have adequate time to assess their decision, the regulatory framework includes a mandatory cooling-off period. This period allows franchisees to reconsider the franchise agreement without facing any financial penalties. During this time, they can seek legal advice, thoroughly review the terms, and ensure that the franchise opportunity aligns with their goals and expectations. 3. Termination Rights: The regulatory framework outlines the rights and obligations of both franchisors and franchisees when it comes to the termination of the franchise agreement. Clear guidelines are provided for circumstances under which termination can occur, notice periods, and the processes that must be followed. This ensures that terminations are carried out fairly and that both parties are aware of their rights and responsibilities.
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4. Dispute Resolution: Given the complexities of business relationships, disputes may inevitably arise between franchisors and franchisees. To address these conflicts, the regulatory framework incorporates a structured dispute resolution mechanism. This mechanism encourages parties to resolve disputes through negotiation, mediation, or other alternative dispute resolution methods before resorting to costly litigation. The aim is to find amicable solutions that benefit both parties and maintain the stability of the franchise system. 5. Good Faith Obligation: A cornerstone of the regulatory framework is the concept of good faith. Both franchisors and franchisees are obligated to act in good faith towards each other in all their dealings. This principle emphasizes honesty, transparency, and fairness. Acting in good faith fosters a positive working relationship and helps prevent misunderstandings that can arise from miscommunication or conflicting interests. 6. Code Compliance and Penalties: The enforcement of the Franchising Code of Conduct falls under the jurisdiction of the Australian Competition and Consumer Commission (ACCC). Franchisors are legally required to comply with the Code’s provisions, and any violations can result in penalties and fines. The ACCC actively monitors compliance, investigates reported breaches, and takes appropriate action to maintain the integrity of the franchising industry.
Implications for the Franchising Industry: The regulatory framework for franchising in Australia serves as a safeguard against unethical practices, fostering trust and credibility within the industry. By mandating transparency, fairness, and adherence to standards, the framework ensures that both franchisors and franchisees operate with a sense of responsibility and accountability. This not only benefits individual participants but also contributes to the overall reputation of the franchising model. For franchisors, compliance with the regulatory framework demonstrates a commitment to ethical conduct and responsible business practices. By providing comprehensive disclosure documents, adhering to cooling-off periods, and abiding by good faith obligations, franchisors contribute to a business environment that is conducive to longterm success and collaboration. In conclusion, Australia’s regulatory framework for franchising, anchored by the Franchising Code of Conduct, plays a pivotal role in shaping the dynamics of the franchising industry. It provides a comprehensive set of rules that promote transparency, fairness, and ethical conduct, ensuring that both franchisors and franchisees operate within a structured and principled business environment. This framework reinforces the industry’s credibility, fosters trust, and contributes to the growth and sustainability of franchising ventures in Australia.
James Corne | Founder and CEO | The Franchise Institute www.thefranchiseinstitute.com.au - 85 -
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Chapter 11
Choosing the Perfect Location or Territory
for Your Business Peter Fiasco | Head of Franchsing Kwik kopy australia
About the Author Peter Fiasco is a career long franchising professional. Peter started his career in retail and vocational training, where he worked with many large companies in supporting them develop their teams skills to achieve better outcomes. Peter then started his franchising career at Quest Apartment Hotels, where he held several roles, including General Manager Operations and General Manager Establishment. He has also worked in some other iconic Australian franchise brands, including Hairhouse, Australian Skin Clinics, Snap Print & Design and is currently the Head of Franchising at Kwik Kopy Australia. Peter has completed his Diploma in Franchising, Diploma in Business Management, has DISC accreditation and is also a Certified Franchise Executive. He currently serves on the Victorian State Chapter of the FCA.
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electing the right location for your business is a pivotal decision that can significantly impact its success. Whether you’re launching a new business, expanding an existing business, or relocating a well-established business, the choice of location should always be considered. This decision goes far beyond the physical address; it affects access to customers, suppliers, labour, and other resources essential for your business’s operation and growth. When buying a franchise, the business’s location also depends on the franchise business you are buying. There are various types of locations for various types of businesses, and the location is highly linked to the type of business.
The role of location in business success Customer Accessibility: Proximity to your target market is crucial. A prime location can make it easier for your potential customers to find and engage with your business. Visibility and Exposure: Being in a high-traffic area or a prominent business district can increase your visibility, attracting potential customers who might not have been aware of your business otherwise. Competitive Advantage: The right location can give you a competitive edge. Being close to competitors or complementary businesses can drive foot traffic and foster collaboration. Resource Availability: Your location can influence the availability of essential resources such as skilled labour, suppliers, and distribution networks. Brand Image: A prestigious location can enhance your brand’s image and credibility. The ripple effect: how location affects various aspects of your business: Your choice of location ripples through many aspects of your business, including: Marketing and Sales: Location influences your marketing strategy and your ability to reach your target audience effectively. Operations: It affects the logistics of production, storage, and distribution. Costs and Profitability: Your location can significantly impact your operational costs, rental expenses, and ultimately, your bottom line. Talent Acquisition: It determines the availability of a skilled workforce and can affect your ability to attract top talent. Legal and Regulatory Compliance: Different locations come with varying legal and regulatory requirements that can impact your business operations.
Common location-related mistakes & their consequences Choosing the wrong location can lead to a range of problems, such as: Low Foot Traffic: If your business relies on walk-in customers, a poor location choice can result in low foot traffic and limited sales. High Costs: Opting for an expensive location without a corresponding increase in revenue can strain your budget and hinder profitability.
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Legal Challenges: Failure to research zoning laws and obtain necessary permits can result in legal hassles and potential fines. Missed Opportunities: Being in the wrong location can mean missing out on lucrative partnerships, collaborations, and customer segments. In essence, selecting the right location is a strategic decision that should align with your business goals and growth aspirations. To make an informed choice, you must consider various factors, ranging from the type of location that suits your business model to the specific characteristics of the area that will support your venture’s success.
Types of businesses & their location Food or Location Based Franchise If you are considering a food franchise or a location based franchise, it is essential to understand where the business is or will be located. In most cases, location based franchise will be located in a shopping centre of some description. The individual shopping centre will be crucial to the business’s success. Shopping centres typically collect lots of data on centre peak areas, traffic numbers, and area catchment statistics. These all play a role in determining if the centre is the right place for the business that you are looking into. Most franchisor will do a lot of research to determine the best centre to be in as well as the best location within that centre. Depending on the business type, it is vital to assess if the business should be located within the food court, or should be located in an outdoor food setting, in a fresh food area, in one of the entries, or even in one of the strip mall areas. All businesses are different, and to ensure the best option, it is crucial to understand the franchise model you are considering buying into. Most franchise brands will have good historical data that shows where they have the most success. If the business is outside a shopping centre, you can research the area, and traffic flows through simple old-fashioned pavement walking. Go to the location and see how many cars pass, how much foot traffic, etc. See if there is accessible parking. Always do your research. There is a lot of data that you can find online by doing research that gives you some independent information. Very importantly, ask for information on how you, as the local operator of the business, can market the business locally. Ask what areas you can market to and what limitations the franchisor puts on you for marketing. In most cases, a franchisor will provide a franchisee with a Local Marketing Area that they can market into. Get a clear understanding of this area you are provided and ensure that there is enough of your target audience within the marketing area you can use. Much of the statistics of local areas can be found in local councils and accessing Census data. Service-Based Franchise If you are considering buying a service-based business, where you are servicing from no fixed or set location, understanding your territory is essential. Some examples are moving businesses, mobile lending businesses, etc.
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Although a business like this is based from home and is generally designed to be mobile, you will be provided with some sort of Primary Trading Area (PTA). It is essential to understand the area you are provided. How has the franchisor established this PTA? What data are they relying on to set the boundaries of this PTA? What is the market share expectation of the franchisor, and what time frames are established to reach that market share? Check the Franchise Agreement to understand what restrictions are placed on a PTA. Importantly, is the market size of this PTA big enough for your business to achieve the required success levels or sales you are expecting? You should understand the customer profile of the brand you are buying into and then ensure that there are enough of those customer profiles existing in the PTA that you are considering. Also, consider how the leads for that PTA are established and then forwarded to you as the franchisee. Consider the cost of lead acquisition. As a franchise owner, you want to ensure the area you will service has enough potential customers and the right mix of potential customers. For example, if the brand is targeted to home consumers, and the average spend for your service is high, ensure you have enough homes in the area that have the right level of household income for you to be able to target and acquire. Business-to-Business (B2B) Based Businesses If the business is a business-to-business franchise (B2B), this means a whole different approach to your research. In this instance, you would not look at the number of consumers, as this is not your target audience. There is a lot of data that can provide you with the number of businesses that are located within a postcode, and the franchisor should have access to this information and be able to provide you with this. It is essential to break down this statistic. The total number of businesses will not be a good indicator to follow, as that will include any active business names that are registered, and there are thousands of companies registered that are either shelf companies, nontrading or just trusts, or very low spending micro businesses. The better indicator is to know how many employing businesses there are. This gives you a much better indicator of businesses that will most likely be in your target range. To take this another step further, you should ask for the number of businesses and the range of turnovers. These statistics are available from the Bureau of Statistics and provide you with the range that helps you see how many businesses exist within your targeted area. Franchisors should have these statistics readily available to them. The importance of these is that you can narrow down the size of your target clients within a range of turnover. For example, if you are planning to operate a business that has a higher average sale, you want a larger number of businesses that have a higher turnover, as this might be your target audience for your product or service. To take this information further, you should also ask your franchisor if they have done any research into the average spend and demand for the product based on the businesses turnover. This can provide you with the market capacity for your product and you should ask what market share the brand targets, as this will give you a very strong indication
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that the franchisor has really thought through the territory that they are trying to sell you.
Local marketing in your locations/territories Regardless of the business that you are considering, it is important that you understand what Local Area Marketing you can do in your local territory or area allocated to you. Most franchise brands with have a National Marketing Fund of some description, however, this is generally used for the common branding of the brand and is not designed to favour any individual franchisee. It is generally used to increase market awareness of the brand and generate leads where possible. However, as the local operator of the brand, there is a responsibility that as the franchisee you do your local marketing and sales work. The territory or area that is allocated to you to market into is crucial in your being able to build a sustainable long term successful business for yourself. It is important to understand what your target market is, and plan your local marketing accordingly, to target that market. Lots of businesses will do mass drops hoping to get a return, but if you dig deeper into your marketing area, you can get a better understanding and do much more targeted marketing. For example, for consumer brands including food brands, your local marketing area will generally consist of various income volume residents, including those with higher disposable income and less so. If that is the case, break down the areas and do marketing that speaks to your audience. For example, there is no point sending a food offer which is a higher end product to the area that has lower disposable income. Target your message more effectively and the result will be better returns from your marketing. Consider if the brand has the allowance to use social media to target your audience, and ensure that your ads are appearing online to those that it suits. Many of the social online platforms have very sophisticated tools that allow you to target more effectively. For B2B brands, you may need to consider a much more varied approach. Dig into your local marketing area and consider where there is a higher density of the businesses that you should be targeting. In many cases, you may need to go into that area and door knock, leave a small gift and information. Put some time, effort and some deeper thinking into the creation of your Local Area Sales and Marketing plan to ensure that you are speaking to your audience in the right way and that your target audience is actually in the area you are targeting. If you do not do the ground work, spending marketing dollars with blanket campaigns can be an expensive exercise with little return for the amount of money spent.
Key factors about your location to consider Choosing a location for your business is not a one-size-fits-all endeavour. Various factors will influence your decision, and their relative importance will vary based on your industry and business model.
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Here are some key factors to consider when selecting a location: Target market and customer proximity: • Define Your Ideal Customer: Understand your target demographic, their preferences, and behaviours. • Proximity to Customers: Consider how close your location needs to be to your customer base. • Accessibility: Ensure your location is easy for customers to find and access. Competition analysis: • Identify Competitors: Research existing businesses in the area. • Analyse Competition: Assess their strengths, weaknesses, and market share. • Differentiation: Determine how you can stand out from competitors. Accessibility and visibility: • Transportation: Evaluate the availability of public transportation, parking, and major roadways. • Foot Traffic: Consider the volume of people passing by your location. • Visibility: Assess the visibility of your business from the street. Zoning and legal considerations: • Zoning Regulations: Understand local zoning laws and regulations. • Permits and Licenses: Determine the permits and licenses required for your business. • Legal Compliance: Ensure your business activities align with local laws. Infrastructure and utilities: • Basic Infrastructure: Assess the availability of water, electricity, and sewage services. • Internet Connectivity: Ensure reliable and high-speed internet access. • Utility Costs: Consider the cost of utilities in the area. Labour pool and workforce: • Talent Availability: Evaluate the availability of skilled labour in the region. • Education and Training: Consider the quality of local educational institutions. • Competitive Wages: Research local wage rates for your industry. Cost considerations: • Rent and Lease Costs: Calculate the cost of leasing or purchasing property. • Operational Expenses: Estimate ongoing expenses, including utilities and maintenance. • Taxes and Incentives: Research local tax rates and incentives for businesses. Growth potential: • Scalability: Assess whether the location can accommodate your growth plans. • Market Growth: Consider the potential for market expansion in the area. • Economic Stability: Evaluate the region’s economic stability and growth prospects.
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While these factors provide a foundational framework for location selection, it’s crucial to conduct in-depth market research and analysis to inform your decision fully. The above provides a checklist of thinking that should take place as part of your exploration in buying a franchise in a particular location.
Peter Fiasco LinkedIn Profile: http://linkedin.com/in/peterfiascocfe Email: peter.fiasco@kwikkopy.com.au Phone: 0400 225 029
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Chapter 12
IS FRANCHISING JUST BUYING YOURSELF A JOB?
Business Ownership versus Self-employment Doug Downer | The Franchise Guy™ franchise ready
About the Author Doug Downer is The Franchise Guy™ with an impressive 30+ year senior management history in developing and leading businesses within the Franchising sector. Doug and his team at Franchise Ready have helped launch and support over 150 Australian brands grow through franchising by creating everything they need to scale and grow through franchising. Doug currently owns 3 franchises as a franchisee, he is invested in two franchisor businesses, he’s been a franchisor CEO in multiple brands and has been an Australian Master franchisee, so he knows all aspects of franchising. Doug has been recognised in the Top 30 Franchise Executives in Australia for each of the four years that this program has been running and in 2022 and 2023 he was recognised in the Top 100 Global influencers in Franchising.
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“Every business owner is self-employed, but not every self-employed person is a business owner.” - Doug Downer
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round 16% of the world’s eligible working population get into business ownership, and they do this for several reasons: it may be to be their own boss, to take control of their life and future, to be proud to be a business owner and, hopefully, to be more financially independent and successful than they would be if remaining in paid employment. It is estimated that business owners generate an income that is 30% higher than had they stayed in employment. There is a distinction between (1) self-employment and business ownership and (2) entrepreneurship and franchising, and it is important to understand the differences.
Self-Employment and Business Ownership Both options are good, but there are unique differences that the individual needs to be aware of. Quite simply, the difference is encapsulated in the quote, ‘Every business owner is self-employed, but not every self-employed person is a business owner’. Every person that goes into business has made a conscious decision to do something for themselves and to create an income stream to sustain their lifestyle. Self-employment relies heavily on the individual to do the work, generate the revenue and control the costs. If the individual takes time off, typically, the revenue stops, and there is no continuity. The difference with the business owner is the individual is involved in many aspects of the business, but there is a system and resources to ensure the revenue continues if the owner is not there. Simply put, if you can’t take 10–12 weeks away from your business, you may be classified as self-employed. There are excellent franchise opportunities for both self-employment and business ownership. Nevertheless, self-employed businesses are slightly harder to sell because they rely on the owner, and there is no guarantee of continuity of revenue, whereas the business is less dependent on the business owner because they have systems and resources to ensure the revenue continues in their absence, and this results in an easier sale and a higher sale multiple when you choose to sell. The business owner relies on people and needs to lead and manage these people to get results. The self-employed may prefer to work on their own or in a small team without the worry of leading and managing others. It is this evaluation a prospective franchisee needs to make when evaluating which franchise may be right for them. Having said all of that, the premise of franchising is that the business will work better if the owner is actively involved in the day-to-day operations, so this is required with both options.
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A potential franchisee just needs to determine what they want by weighing up the pros and cons of both types of businesses and making sure that It suits their objectives of going Into business.
Entrepreneurship and Franchising In my opinion, not all business owners or franchisees are entrepreneurs. There’s a distinction between an entrepreneur and a franchise owner that needs to be defined. The description of each is not 100% accurate but indicative when we profile the two types of business owners. 1. Characteristics of a Franchisee • Straight-A student • Long tenure with job • Corporate job • Drives a family car • Few speeding/traffic fines • Married • Looking for security. 2. Characteristics of an Entrepreneur • B or C-student • Moved from job to job • Owned businesses • Drives a sports car • Lots of speeding/traffic fines • Divorced • ‘Never saw a rule they didn’t want to break’. This is not to say that franchisees can’t become entrepreneurs. The fact that they have left the safety of paid employment for self-employment shows that they have an entrepreneurial spirit. Franchising just makes it safer, and many franchisees will remain franchisees of single or multiple franchise units. For those that scale their business enterprises and take on multiple units, they have to have a different skill set and be more entrepreneurial. I have seen a lot of franchisees ‘cut their teeth’ on franchising and then go on to create their own business. Traditionally, franchisees are not entrepreneurs in the true sense of the word, but franchising helps them to be entrepreneurial.
The Great Resignation There’s been a lot of talk about the Great Resignation. Originating in the USA, it was coined by Professor Anthony Klotz to signify the change in workplace behaviours of employees in the wake of the pandemic. Continued talk about this has influenced other
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parts of the world for many of the same reasons experienced in the USA. Discussion on this topic has resulted in people reflecting on what it means to them, and this has driven and perpetuated this notion of the Great Resignation and gotten people to consider a change in their own situation. The pandemic and change in working conditions with stand downs, lay-offs, reduced hours and terminations caused periods of uncertainty for employees, but many were protected by government support, particularly lower-paid employees. In most countries, government reaction to employee payments had mixed success but, for the most part, protected employees that were unable to work. In Australia, we had a few different support provisions at each stage of the pandemic and subsequent shutdowns of industry. In retail and hospitality (which represent 60% of franchised business opportunities), we had the unique situation where those employees were unable to attend their workplace but were guaranteed a minimum payment, often significantly higher than what they were receiving for the hours they actually worked before the pandemic. So, we had a significant number of people at home being paid to do nothing. This created a shift in people’s mindset around entitlement and a reconsideration of whether they actually wanted to return to work. This coupled with over 600,000 temporary visa holders leaving our shores created a huge shortfall in talent, as many of these visa holders were employed in retail and hospitality. This created a huge shortfall in retail and hospitality businesses and meant many businesses traded fewer hours or owners and family members ended up working more. For many workers, their employment was made more flexible and those that were not required to be in a fixed location were given the opportunity to work from home and given flexibility, including reduced hours, subsidies from the government, making up the difference in the reduction in hours and with all of this more leisure time at home without a significant impact on lifestyle. People were working less, travelling less and being paid comparably the same, and this caused people to evaluate the way they wanted to work moving forward. Once the marketplace started to get back to normal with travel restrictions, social distancing and other restrictions put in place throughout the pandemic were lifted, people had gotten used to their new work status. For many, it provided them time to re-evaluate what they really wanted from work and life and the role that work played in their lives. The workplace has changed, and many businesses have been forced to change with it by offering more flexibility and acknowledging that people have enjoyed working less and working on their terms, and this has created a shift in the balance of power from employers to employees. Those employers that have not adapted have encountered employees leaving their employ either for better work–life balance or for more salary because the market for talent has become more competitive. In Australia, we haven’t so much seen the Great Resignation; it’s more like the Great Reshuffle. The working landscape has changed, the war for talent is back, and employees hold the dominant position, while employers have to change to keep people.
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In periods of low changing employment, franchising tends to do well because when people can’t find work or want to do something different, they look for opportunities in other places, and that’s where business ownership, self-employment and franchising tend to boom. In some cases, people end up ‘buying themselves a job’. This is not a bad thing; it drives the economy, which creates more jobs, and it enables the business owners to work on their terms and in so doing, it mirrors what is happening with the Great Resignation. Everybody has different expectations of what their working life will look like and what buying into a franchise business means to them. I have spoken with franchisors that both like and dislike the concept of people buying themselves a job through franchising. Some franchisors want a franchisee with more of an ownership mindset than someone simply changing from paid employment to self-employment business ownership. The reality is that when a person invests in a franchise, they have to take on an ownership mindset and approach to the business like an owner otherwise the business will not perform at its optimum. The concern that franchisors have is if someone is satisfied with just taking a wage, they may not optimise the opportunity and have the business reach its potential, which, in turn, drives the franchisors’ revenue through royalty payments. Whilst the concept of buying yourself a job is a sound one, there is a cost to the franchisee to do this, and it is not sufficient to just get paid a wage as the franchisee has to invest capital in establishing the franchise business. This debt or investment needs to be paid back to the business owner on fair commercial terms. Given that most leases and franchise agreements are for five years the franchisee needs to be getting at least 20% more than their wage just to cover the cost of getting into the business, let alone building equity in the business for all their hard work. In summary, it’s OK to buy yourself a job, but you need to make sure that the business has the potential to generate a fair return on your capital and time. This is just as important for the franchisor as they want successful franchisees in their network because that makes it easier to find other franchisees. Now assuming that you do decide to go into business ownership, it’s important to know the difference between paid employment and business ownership, and it comes down to ownership mindset and ownership thinking.
Ownership Thinking There is a significant difference between an employee mindset and an ownership mindset, and there is nothing wrong with either. It’s a personal choice, and quite frankly, as a business owner, we need employees, as they are the lifeblood of our business. The best business has employees who help the owner achieve their goals by taking on responsibilities that the owner can’t, or doesn’t want to, do. Business owners make things happen, they take risks and they think long term, hence the need to be strategic, while the employee waits for direction and to be told what to do. If you’re a business owner, your business typically won’t yield a consistent level of income for a few years potentially. But when it does, it will be significantly higher
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than the income of the majority of employees (with the exception of highly paid senior executives in blue chip firms). In fact, more than 65% of millionaires are business owners. Employees typically think short term, many are risk adverse and yearn for security. They wait to be paid, whereas the business owners get paid when they want. The goal of any business owner should be to encourage an ownership mindset among their employees so that the employees work together with the business owner to achieve goals more quickly. An ownership mindset is where an individual or team takes accountability for the quality and success of both the outputs and outcomes of their work. Both of these are important, as ownership doesn’t mean perfection. It means knowing why you are doing the work (the outcome) and making sure that what you produce (the output) is at the required standard. It means understanding, learning, and challenging rather than following instructions. The franchisee that takes on a franchise needs to shift their mindset from anything they have done previously (unless, of course, they have been a franchisee before) because they will understand the difference between employment and business ownership to some degree. If you own an independent business, you determine what you do and when; if you’re an employee, your employer has expectations that you need to meet; but if you take on a franchise, you’re somewhere in between. That’s because you have to follow rules and you don’t typically get to set them; simultaneously, you’re running a business which means the buck stops with you, but you don’t have that support system or team of resources that you may have had access to when you were in paid employment. Furthermore, you do have some freedom to come and go as you please, but you also have the financial implications of those decisions and the requirements of the franchisor and landlords to be open at certain times. Becoming a franchisee is a unique situation, and you need to be prepared for it. Asking other franchisees will give you the best insight into how this may change your perception of business ownership and the reality of being a franchise business owner. Either way, you have to change your mindset and accept total responsibility for your circumstances. Often, franchisees that still have that employee mindset may point the finger at the franchisor when things don’t go to plan. Here’s the thing that you need to know: if a franchisor has invested in becoming a franchised business, they have invested a lot and they have demonstrated proof of concept. If, for whatever reason, it doesn’t work, this really falls back on the franchisee, their due diligence and the way they operate the franchise system. If you become a franchisee, you must take ownership of the performance and outcomes of your business. The franchisor has given you the tools, so you must put them to work, and the success of your franchise business is 100% on you. If you approach franchising with this mindset, then you have a greater chance of success. This might sound strange, but I had a very successful franchisee in one of the systems I joined, and he said to me, ‘I understand the success of the business is entirely on me, anything I get from the franchisor after I joined was a bonus’. This is a refreshing way
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to look at it, after all, the franchisor has worked hard to establish a successful business model and provide franchisees with the opportunity to leverage their brand and IP, but the best franchisors will also work tirelessly to help franchisees be successful. If franchisees aren’t successful, then franchisors can’t be successful, so whilst the business success is 100% on you as the franchisee, the best franchisor is invested in your success and will do whatever it can to support your success. All too often, I have seen people come out of paid employment and move into franchising but not take ownership for the performance of their business, often blaming the franchisor. It is all about mindset and accountability: if you have done your research and due diligence on the franchisor and the business that you have bought into, the success of the franchise business is on you, you have to take on an owner mindset and accept you are the determining factor in your businesses’ success or failure.
Doug Downer | The Franchise Guy™ Franchise Ready +61 2 8999 1120 doug@franchiseready.com.au www.franchiseready.com.au
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Chapter 13
The Franchiser’s Role in Marketing Success Lauren Clemett | The Brand Navigator Finding Your Brand True North
About the Author Lauren Clemett is an award-winning personal branding expert. Told as a child that she had wordblindness and would never be able to read or write properly, she went on to become a 5 time best selling author and now uses her dyslexia as her greatest asset - helping others understand how the brain sees brands. She has worked at leading advertising agencies and in brand management since before the internet, helping launch hundreds of global brands and appears in worldwide media, as the sought after personal branding specialist. As a keynote speaker, Lauren shares how you can turn distraction into attraction and get a clear direction to stand out from the crowd as a magnetic leader.
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ontrary to expectations, franchising isn’t a ticket to sit back while all the marketing magic happens. Instead, it’s a partnership where both franchisers and franchisees play active roles in promoting and growing the business. As a potential franchisee, understanding what you need to do as a franchiser is crucial. Far from resting on the laurels of the franchise brand, you need to be prepared to work on developing your own personal brand. It’s a myth that as a franchise owner all marketing is done for you and it’s also vital before you even consider franchising to align your personal brand with the right franchise.
Making an aligned decision Your personal brand isn’t something separate from your franchise; it’s an integral part of it. Before you jump into bed with a franchise brand, reflect on your personal values and professional goals. Ensure they align with the franchise’s mission and values. This alignment will not only make you more passionate about your work but also help you convey authenticity and connect effortlessly to your customers. Consider the things you hold sacred, the way you communicate and the values you place on everyday aspects of life as well s business. Are you a clean freak, do you like music on in the background while you work, are you a no-nonsense person who likes to focus quietly? How do you like to dress, behave, communicate? How important is regular, open discussion and feedback to you, or do you prefer to delegate and let people get on with it? What sort of leadership style do you prefer from others? What sorts of brands and businesses do you already like and feel a natural affinity towards? All of these personal traits will help you choose a brand to align with that enables you to effortlessly be the business leader you need to be. It may seem odd to consider your own personal traits, but it will make life a lot easier for you as the owner of a brand and business that you have natural affinity and alignment with. When your heart is in the business it becomes second nature to live the brand and have purpose behind everything you do as a business leader. When you have brand alignment, every step you take is on track with your own personal goals. Making decisions about your marketing and promotion becomes instinctive because you are the brand. As a franchisee it also makes it easier to provide feedback to head office, to provide ideas and to ask for assistance to get your message out there. As the “face” of your franchise it’s up to you to drive the direction of the business though. Whether through community involvement, public appearances, or personalised customer interactions, infuse your personal brand into the franchise’s image. People connect with people, not just brands. So knowing which brand you want to endorse with your personal brand is vital when choosing who to buy into. As the business owner you are also the leader of the business and your team will look to you for guidance and direction. They will follow your lead on how you conduct yourself. How you speak to and treat customers will be duplicated by them. Your staff are your
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marketing and sales team as well, and if you want them to create a steady stream of referrals and recommendations that flow through your business and turn into loyal raving fans, you need to set an example for them. It’s almost impossible to do that if the brand you have aligned yourself with does not fit with your own core values and belief systems. So shop around and ask questions about how the franchise markets and promotes itself, ask to see the latest corporate communications or newsletters, or even better go and chat with an existing franchise owner or visit as a mystery shopper and see how they treat their customers and team. If it fits with your natural way of doing things, then you’ve found the right fit. Action Steps: • Review the brands you are considering buying as a franchise and assess if their values, culture and personality fit with your own • If unsure, ask for the company’s latest annual report, recent newsletter, brand guidelines or check their marketing materials • Take some time to consider the type of business leader you want to be in your community and if the franchise brand you’re looking at can help you achieve that • Go be a mystery shopper at a local franchise or call them to enquire about their services to see if the brand culture is something that resonates with you personally.
Embracing your role in marketing When you become a franchisee, you’re not just buying into a brand; you’re becoming a vital part of its marketing engine. You are where the rubber hits the road and although it’s tempting to assume that the franchisor will handle all marketing efforts, and most head offices do create a marketing plan and provide resources or even advertise for you, that’s only half the story. As a franchisee, you must actively participate in executing marketing strategies. This includes understanding the franchisor’s marketing framework, guidelines, and target audience and how they want you to behave as a representative of their brand. While the franchise provides a proven marketing blueprint, you’ll often need to tailor it to suit your local market. Understanding the demographics and preferences of your community is crucial for effective marketing at a local level. You are the face of the brand and you need to make sure you become recognised as a local business leader. The power of being a franchisee is that you can leverage your unique skills, knowledge, and personal experience to enhance the business brand. When you position yourself as an expert in your field, sharing valuable insights related to your franchise, it not only establishes credibility but also fosters trust among your customers. To be known, liked and trusted is your major marketing goal as a franchise owner. In a noisy digital landscape, social media is a potent marketing tool and depending on what systems the franchise might have in place and level of restrictions on your activity online, you should engage with the franchisor’s social media strategies. Whatever you do, make sure you consider localising and personalising them. Your active involvement
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online can significantly boost your franchise’s visibility and credibility but you also need to build your brand as well as the business brand. Don’t be afraid to put yourself and your team in front of the camera! Sharing stories, providing insight and being real is vital if you want to truly connect with your local audience. And it’s not all online! Don’t think for a minute that if you sit back in your office creating memes or sharing company marketing posts that people will flood to your door and your phone will ring off the hook. Don’t underestimate the power of networking. You can create massive impact and influence over time by attending local business events, joining chambers of commerce, and establishing relationships with neighbouring businesses. These connections can lead to valuable collaborations and cross-promotions that benefit both your franchise and your personal brand. Don’t be afraid to reach out to the local business owners and form partnerships that can create a cascade of influence for you and your business. Word of mouth marketing is still one of the cheapest and most sustainable forms of promotion. One action you can take to create a connection plan is to consider the world of your ideal client and map out the customer journey. Who else do they need services from before and after they come to you? If you clean their pool, who mows their lawn? If you serve them a meal, who drives them home? Consider a day in the life of your ideal client and who they interact with, then go looking for those service providers and create a collaborative relationship with them. And never forget the basics. For example, if you are providing a service in someones home, make sure you use all the resources you can to leverage your time by dropping fliers into neighbouring letterboxes and having an frame sign propped up outside, making sure your well signed vehicle is viewable on the street! Marketing is something that should be built into every aspect of your daily business, otherwise you’ll never get around to it. Action Steps: • Request a copy of the franchise marketing plan and check the brand out online to see what marketing head office provides v what franchisees are doing • Confirm the marketing requirements as a franchisee and the scope you have to create your own marketing activity versus what is provided • Take a drive through the area proposed to see what local community/businesses/ organisations exist to confirm you have a good pool of potential referrals • If you are totally new to business/marketing, ask if training is provided and start upskilling yourself by reading marketing books, listening to podcasts etc.
Part of the family Successful franchising is not about going it alone, and the franchise brands which have become well known over the years are the ones who support everyone in the team. It’s more like being part of a big family than being part of a franchise. Sucess in any business
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requires support and collaboration, so don’t feel you need to go it alone, and certainly be prepared to share your insights and journey with others in the franchise brand - a rising tide lifts all ships! Franchisors typically offer various support services, including marketing assistance which is awesome because most of the time, new franchisees are not particularly skilled in this area. If you’re facing challenges in marketing, don’t hesitate to ask for help. They may provide additional training, resources, or connect you with marketing professionals who specialise in your industry. And if they offer training event, webinars or conferences, definitely go! Not only will you learn from guest speakers abut you’ll also get to chat with others who are in the same boat as you and you never know what ideas might be generated over a cold one at the end of the day. Even if you can’t attend events, connect with other franchisees within your brand and those other franchises in your area. Sharing success stories, challenges, and marketing strategies can be incredibly beneficial. Franchising is a supportive network where you can learn from others’ experiences and adapt successful marketing approaches to your location. Becoming a franchisee involves more than just buying into a brand; it’s about actively participating in marketing efforts, aligning your personal brand, and seeking help when needed. Action Steps: • Ask what ongoing training is available to you to continue improving your personal leadership and business skills • Check the other franchise businesses operating in your area and start connecting with them (on LinkedIn and in person) start using their services! • Look for local business groups to join and consider community events you can participate in as a business leader • Create your own personal support network with key family, friends and business buddies and set a regular date to develop your brand. The major benefit of buying into a franchise is that so much is already done for you, but you can maximise the ROI on your investment and build a successful and fulfilling franchise business if you lean in and learn how to market your self and your business. Remember, while franchising provides a framework for success, it’s your dedication and personal touch that will truly set you apart and lead to long-term prosperity in the wild world of franchising.
Lauren Clemett | The Brand Navigator Finding Your Brand True North www.yourbrandtruenorth.com https://www.linkedin.com/in/laurenclemett/ - 107 -
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Chapter 14
What You Need to Know as a New Franchisee About...
Employing and Managing a Team
Carmel Brown | Founder & Director The Proven Group
About the Author Carmel Brown is The Trusted Authority on Business Culture and Staff Performance. As a human resources expert par excellence, Carmel has grown her People & Culture Consultancy Company ‘The Proven Group’ into an industry powerhouse that delivers HR, Safety, Wellbeing and Training programs throughout Australia, New Zealand, Asia, Europe and Africa. As the Founder of The Proven Group, Carmel has built a reputation for her innovative and creative approach to business, and her unwavering dedication to helping her clients achieve their goals. She believes that building strong relationships and creating a culture of trust and respect are critical to success in business. Carmel is a proud member of the Franchise Council of Australia (FCA) and has accredited an extensive set of training courses through the prestigious Certified Franchise Executive Program (CFE). Carmel’s newest book, “Less Headaches, Happier Team, More Success!” has become an instant best-seller among Franchise Owners Australia-wide. With clients across all sectors of franchising, The Proven Group’s approach to supporting Franchise Owners and Leaders within businesses has enabled a true alignment between business goals, strategies, leaders and their teams. In a day and age where productivity is a real challenge, where there is more to achieve in a day than ever before, as Jenny Boymal can attest, Carmel has been able to break through this noise and develop a system that addresses root causes of problems in businesses and empowers Franchise Owners and Leaders to focus on areas of the business where they really thrive.
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s a new franchisee, one of the most crucial aspects of running a successful business is understanding how to employ and manage a team effectively. In this chapter, we will explore the key elements you need to know about building and leading a team within your franchise. From recruitment to team dynamics and performance management, we’ll cover it all, to help you create a cohesive and high-performing team. Of course, when we talk about employing staff, Human Resources compliance is important. One of the things that keeps business owners up at night, is worrying about whether or not they are ticking all of the boxes when it comes to employment law. You hear the horror stories in the news, “Franchisee sued for underpaying employee wages” or “Franchisee dealing with the fallout from an employee bullying claim” … and many more.
What do we need to know when it comes to HR COMPLIANCE? When it comes to compliance, most franchisees do not have the depth of knowledge to handle all of the complex employment legislation on their own. The unknown is both scary and incredibly stressful. One of the biggest issues is that the regulations are constantly changing. Whether it is a change to Industry Awards, Safety regulations, Fair Work regulations, Bullying, Sexual Harassment or one of the many other regulations that businesses need to adhere to, regardless of their size. Here is a starting point for the questions you would want to be asking yourself when it comes to HR Compliance: 1. Are we compliant with federal and state employment laws? Are you aware of the specific laws that apply to employing staff, both at the federal and state levels? Do you regularly review and update your policies and procedures to ensure compliance with changing laws? 2. Have we established clear employment policies and procedures? Have you developed and communicated comprehensive HR policies, including those related to hiring, termination, discrimination, harassment, and employee benefits? Are these policies consistent with both franchise and local regulations? 3. Do we maintain accurate and up-to-date employee records? Are you keeping complete and accurate records for each employee, including employment contracts, tax forms, and time sheets? Do you have a system in place for securely storing and easily accessing these records? 4. Are we providing proper employee training? Have you implemented training programs for employees on important topics such as safety, harassment prevention, and company policies?
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Do you maintain records of employee training to demonstrate compliance? 5. Are we correctly classifying employees and contractors? Are you classifying workers correctly as either employees or independent contractors, in accordance with legal guidelines? Have you reviewed your workers’ classifications to ensure they align with current regulations? 6. Are we paying employees fairly and in compliance with minimum wage and overtime laws? Do you regularly review employee pay rates to ensure they meet or exceed minimum wage requirements? Are you tracking and correctly calculating overtime pay for eligible employees? 7. Do we comply with workplace safety regulations? Have you established safety protocols and guidelines to prevent accidents and ensure the well-being of your employees? Are you regularly conducting safety inspections and addressing any identified hazards? 8. Are we handling employee complaints and grievances appropriately? Do you have a clear process for employees to report complaints or grievances? Are you investigating and addressing these concerns promptly and objectively while maintaining confidentiality? 9. Are we in compliance with discrimination and harassment laws? Have you implemented anti-discrimination and anti-harassment policies? Do you provide training to prevent and address discrimination and harassment in the workplace? 10. Do we have a plan for handling terminations and layoffs legally and professionally? Are you aware of the legal requirements and best practices for terminating employees or conducting layoffs? Do you document the reasons for terminations and layoffs to protect your business in case of legal disputes?
Common Franchisee Challenges when it comes to Growing their Team In conducting research with hundreds of franchisees, we have been able to compile the core challenges that franchisees have when it come to managing their team. It is clear that employing and managing people is a critical skill to run a successful business. Through the research, what became apparent was that for most franchisees the core challenges were pretty much the same across industry sectors: 1. Staff Drive Me Crazy! 2. Why Can’t We All Just Get Along?
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3. The Business Is Growing, Why Don’t People Step Up? 4. Is The Tail Wagging The Dog? 5. I Know Compliance Is Important - But I Don’t Have Time 6. Why Can’t I Find And Keep Good People 7. What If I Get A Bullying Claim? 8. Why Don’t They See The Work Right In Front Of Them 9. My Staff Member Has Gone Toxic 10. This Person Just Has To Go Most Franchisees nod along with these challenges…. They nod because they can relate. “I am not alone!!” “I am not the only one experiencing these challenges!” It is quite a relief to know that what you are experiencing is not unique and that also makes it somewhat reassuring. However, this does not solve the problems. The question is, what can Franchises do about these challenges when they occur? To be honest, there are many different ways that each of these problems can be solved. It will very much depend on the business, the leadership, what has led to this situation or whether it is a one-off challenge or part of a larger ongoing issue. What we find is that the challenges such as the ones listed above are often symptoms. They are generally what business owners complain about, without considering what has led to the challenges. Often, these situations build over many years, so finding the route cause can be a real challenge. The problem, however, with curing the symptoms that are visible is that the solutions are short lived. They may go away for a short time and then present in other ways. We strongly recommend that if these issues are creeping up in your business, you get a HR Professional to help you get to the bottom of the situation and put a plan in place to solve the larger problem. It can often be embarrassing to get someone in to help you. But remember, these problems are being experienced by hundreds of thousands of Franchisees across the country. You are one of the few who has the determination to address the real problems instead of seeking a quick and easy way out.
Proactively Building a Thriving Team – What do you need to consider? Understanding Your Team’s Needs To effectively manage a team, it is essential to understand their needs and expectations. Begin by developing a clear understanding of your franchise’s specific requirements and the roles you need to fill. This understanding will guide you in the recruitment process and ensure you hire individuals who possess the necessary skills and attributes.
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Once you have assembled your team, take the time to familiarise yourself with their individual strengths, weaknesses, and aspirations. Regular communication and one-onone meetings will provide valuable insights into each team member’s goals and allow you to align them with the franchise’s objectives. By understanding their needs, you can provide the necessary support and motivation to help them thrive in their roles. Effective Recruitment and Onboarding Recruiting the right individuals is vital to the success of your franchise. Start by developing a comprehensive job description that outlines the skills, experience, and qualifications required for each position. That way you’ll know what you are looking for, and not be swept off your feet by a flashy candidate that doesn’t have what it takes where it counts. During the interview process, focus not only on assessing the candidate’s qualifications but also their cultural fit within your franchise. Look for individuals who share your values and align with the franchise’s mission. Once you have selected the right candidates, create a structured onboarding program that introduces them to the franchise’s culture, policies, and procedures. And if your onboarding program does not last longer than one day – you’re likely not doing all you can to ensure your new people have the skills and tools they need to be truly effective in their roles. Fostering Team Dynamics Creating a positive team culture is essential for maintaining a motivated and engaged workforce. Encourage open communication, collaboration, and teamwork by promoting an inclusive and supportive environment. Regular team meetings and team-building activities can foster trust, enhance morale, and strengthen relationships among team members. We’re not talking ropes courses and trust exercises here (though you can try that), but more how you can embed your values into all activities undertaken by the team. It is also important to establish clear roles, responsibilities, and expectations for each team member. By setting clear guidelines and providing ongoing feedback, you can ensure that everyone understands their role within the team and the franchise. Regularly recognise and reward exceptional performance to boost morale and motivation. Effective Communication and Feedback Communication is key to managing a successful team. Establish open and transparent communication channels to facilitate effective information sharing and problemsolving. Conduct regular team meetings to discuss progress, address challenges, and promote collaboration. Provide constructive feedback to your team members to help them improve and grow. Encourage them to share their ideas and concerns and actively listen to their perspectives. By fostering a culture of open communication, you can create a supportive and collaborative team environment. Performance Management and Goal Setting Effective performance management is essential for ensuring that your team is working towards the franchise’s goals. Set clear and measurable goals for each team member,
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aligned with the overall objectives of the franchise. Regularly evaluate their performance and provide feedback to help them stay on track. Recognise and reward exceptional performance to motivate your team members and reinforce a culture of excellence. Offer opportunities for professional development and growth to encourage continuous learning and improvement. Handling Conflict and Resolving Issues Conflict and issues are inevitable in any team environment. As a franchisee, it is essential to address conflicts promptly and professionally. Encourage open dialogue and provide a safe space for team members to express their concerns. Use effective conflict resolution strategies to find mutually beneficial solutions and maintain a harmonious work environment. How do I do all of this? We have explored the key considerations and best practices for employing and managing a team as a new franchisee. By understanding your team’s needs, recruiting the right candidates, fostering team dynamics, promoting effective communication, implementing performance management strategies, and resolving conflicts, you can build and lead a high-performing team that contributes to the success of your franchise. Remember, investing time and effort in your team is crucial for the long-term growth and profitability of your business. The great news is that you do not need to do this alone. An external HR Manager who knows your franchise model, your business and your team, is your expert in helping you comply with employment legislative requirements as well as supporting you and the team to build a culture that not only aligns with the stated organisational values; but assists the franchise to achieve its Strategic Plan. It’s never too early to get a professional involved in supporting you in building a thriving team! To quote Sir Richard Branson, “If you look after your staff, they’ll look after your customers. It’s that simple.”
Carmel Brown | Founder & Director The Proven Group 1300 312 502 info@TheProvenGroup.com.au www.TheProvenGroup.com.au
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What is a Franchise?
Franchise Listings categories: building products & services:.......................................................................................... 110 childrens performing arts and education:.................................................... 111 Courier Services:............................................................................................................................. 112 home services:.................................................................................................................................... 113 Retail:........................................................................................................................................................... 114
Professional Services categories: Consultants:........................................................................................................................................ 116 Finance:...................................................................................................................................................... 118 human resources:......................................................................................................................... 119 insurance:.............................................................................................................................................. 120 Lawyers:................................................................................................................................................... 121
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Business FranchiSe Guide
Building Products and Services
DeckSeal PO Box 4093, Burwood East, VIC 3151 Contact: Danielle | Phone: 1800 332 525 Email: admin@deckseal.com.au | Web: https://deckseal.com.au/
BUSINESS DESCRIPTION:
COMPANY DETAILS:
Now is the time to buy into the home improvement market! Join the largest deck and timber restoration and preservation specialists in Australia. We undertake a wide range of projects including decking, cladding, screens, fences, seats, handrails, posts, outdoor furniture, planter boxes and garden edges and service Residential and Commercial properties.
Date of first franchise: 2018
Low start up cost, mobile business, and a proven established model – it is the perfect opportunity. With common benefits including instant brand recognition in an established market, set supplier contacts and a support network of your franchisor and fellow franchisees, buying into an already established business model is a tempting proposition for many!
FRANCHISE OUTLETS AUSTRALIA:
With a continual flow of enquiries, repeat business and an overwhelming demand for our services, we just cannot keep up. DeckSeal currently has territories available in NSW, QLD, WA, SA and TAS. Franchises offer the independence of small business ownership supported by the benefits of a big business network.
Membership: FCA & AIG Training provided: Training hands on, onsite with DeckSeal Master Franchise 4 weeks. Territories available: QLD, SA, WA, TAS, NSW, ACT
Current: 24
FINANCIAL DETAILS: Initial franchise fee: $10,000 + GST deposit Minimum investment: From $26,000 - $41,000 + GST, plus equipment and vehicle Royalty fee: Monthly royalty Financial assistance: On assessment Advertising/marketing fee: No Fee
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What is a Franchise?
Childrens Performing Arts and Education
Stagecoach Performing Arts 12th floor Export House, 5 Henry Plaza, Victoria Way, Woking, Surrey GU21 6QX Phone: +44 (0)1483 247 400| Email: franchiserecruitment@stagecoach.global Web: https://australia.stagecoachfranchise.com/
BUSINESS DESCRIPTION:
COMPANY DETAILS:
At Stagecoach Performing Arts we are all about performance – on stage, in life and in business.
Date of first franchise: 1988
We are here to inspire children and provide them with the confidence to be themselves. The demand for extra-curricular performing arts opportunities for children continues to increase. Stagecoach’s unique model of running three disciplines (singing, dancing and acting) simultaneously, means its franchisees are well placed to capitalise on this demand. Stagecoach developed Educational Framework which is pinned around skills development for each stage of learning. Stagecoach enriches the lives of 60,000 students worldwide, each week. As a Stagecoach franchisee, you are responsible for driving and growing your business and managing a team of talented teachers. You will not be required to teach any classes yourself, but our model actively encourages you to put your own stamp on the creative process. From marketing to recruiting and retaining teachers, Stagecoach will provide you with the guidance and support you need, when you need it.
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Training provided: Extensive training and ongoing support is provided. Territories available: Across all territories
FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 300+ worldwide, 2 in Australia
FINANCIAL DETAILS: Initial franchise fee: $20,000 Minimum investment: $17,000 Royalty fee: 8%-12.5% Financial assistance: No Advertising/marketing fee: 2.5%
Business FranchiSe Guide
courier Services
Aramex Level 9, 491 Kent Street Sydney NSW 2000 Australia Shed 5, Lever Street, Ahuriri, Napier 4112 Email: recruitment@aramex.com.au | recruitment@aramex.co.nz Web: www.aramex.com.au| www.aramex.co.nz
BUSINESS DESCRIPTION:
COMPANY DETAILS:
We began as Fastway Couriers more than 40 years ago and joined the global Aramex network in 2016. The Aramex network across New Zealand and Australia now includes 40 regional franchises and over 1000 courier franchise partners.
Date of first franchise: 1994
We offer our franchise partners an awardwinning system, world-class technology, training and support to help them run their own rewarding business in their territories. Thousands of Courier Franchisees have succeeded with our proven franchise model in the past 40 years, with local knowledge and the backing of a global brand.
Training provided: Extensive training and ongoing support is provided – no previous business experience required. Territories available: Exclusive territories available across Australia and New Zealand
REGIONAL FRANCHISES AUSTRALIA & NEW ZEALAND: Current: 40
FINANCIAL DETAILS: Initial franchise fee: Available upon application Minimum investment: Dependent on territory. Please visit our website to see current opportunities.
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home Services
Kitset Assembly Services Pty Ltd Level 15, Corporate One, 2 Corporate Court, Bundall QLD 4217 Contact: Grant Nye | Phone: 1300 352 872 Email: grant@teamkitset.com | Web: www.kitsetassemblyservices.com
BUSINESS DESCRIPTION:
COMPANY DETAILS:
At Kitset Assembly Services, flatpack is our business. It’s what we do (we do a lot of it) and we’re really good at it. We’ve assembled thousands of Kitset or flatpack products, generating millions of dollars in sales and creating a legendary reputation.
Date of first franchise: September 2022
We have a strong foundation and partnerships with retailers as well as a world class, direct to customer online booking portal ... which provides quotes on assembly based on the products customers have purchased, so our Franchisees have access to a good volume of work and a steady customer base, from which to grow their own great business.
FRANCHISE OUTLETS AUSTRALIA:
Our business model is extremely simple - we assemble flatpack furniture and other flatpack products, for customers, at their home or office for a fixed fee. No surprises in price means that our customers refer their friends and family to us and we get a lot of repeat business. We also provide all our Franchisees with topnotch training on assembly and treating the customer like royalty - customers love us! You’ll love us too.
Financial assistance: NIL
Membership: FCA Training provided: Yes Territories available: Across Australia
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Current: 4
FINANCIAL DETAILS: Initial franchise fee: $49,500 + GST Minimum investment: $49,500 + GST Royalty fee: $1000 per month Advertising/marketing fee: $250 per month
retail
BEAUMONT TILES National Office - 225 Marion Road, Marleston, SA Contact: Franchise Enquiry | Phone: 08 8292 4440 Email: franchiseenquiry@tile.com.au | Web: www.beaumont-tiles.com.au
BUSINESS DESCRIPTION: Beaumont Tiles are Australia’s largest tile group bringing the best and latest to our Australian customers – we supply more tiles to Australian homes and builders than any other tile retailer. We are proudly unique in what we do and how we do it and each and every person is valued for their contribution and input.
COMPANY DETAILS: Date of first franchise: 1990 Membership: FCA Training provided: In-house training program provided
FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 84 Franchise stores as part of our 115+ strong store network
FINANCIAL DETAILS: Initial franchise fee: $75,000 + GST Minimum investment: Provided on application Financial assistance: NA Advertising/marketing fee: Group advertising and marketing levy 5%
Territories available: Provided on enquiry
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retail
TSG PO Box 4296, Ringwood VIC 3134 Contact: Head Office | Phone: 03 8873 7900 Email: hq@tsgfranchise.com.au | Web: www.tobaccosg.com
BUSINESS DESCRIPTION:
COMPANY DETAILS:
The TSG story began over 25 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
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.
Membership: FCA Training provided: Yes Territories available: All
FRANCHISE OUTLETS AUSTRALIA: Current: > 550
FINANCIAL DETAILS: Application fee: $9,000 Minimum investment: $180K - $300K Royalty fee: Annual fixed fees ($5016) Franchise + $378 IT Support) Financial assistance: No Advertising/marketing fee: N/A
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Professional services - consultants
FRANCHISE READY Unit 2A 87-89 Moore Street, Leichhardt NSW 2040 Contact: Doug Downer | Phone: +61 8999 1120 Email: doug@franchiseready.com.au | Web: www.franchiseready.com.au
BUSINESS DESCRIPTION: FRANCHISE READY helps business owners scale and grow their business into a more valuable asset through franchising. We work with both emerging and established franchisors and help them grow their business to the next level. We have launched some of Australia’s fastest growing brands into the franchise sector, we have launched and supported more than 150 brands, assisting them to grow by becoming franchisors. We assist our clients in developing a complete, successful franchise system, We: • Create the Strategic Development Plan • Assist with International expansion for established franchisors (USA, Asia, India, Europe & MENA region) • Develop all the collateral required - Operations & Training manuals, SOP’s, Launch programs • Complete franchise feasibility reports that include; • Territory mapping • Competitor analysis • Financial modelling for franchisees and the franchisor • Coordinate Marketing collateral - Style & Fit out guides, Advertising, Brochures, Prospectus documents • Support through the documentation process with lawyers and Accountants • Recruit Franchisees and Key Executives for the franchisor • Complete site identification and lease negotiation of new locations • We coach, mentor, and support emerging franchise brands and their key executives • We have a business broking division that assist all business owners with sale of their business Franchise Ready is The One stop shop for everything franchising, proudly supporting over 200 brands. In Business Since: 2012
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Professional automotive services products - consultants & services
WOLLERMANN FRANCHISE DEVELOPMENTS Offices: VIC – NSW – QLD | Licensed: SA – WA – NT – TAS Contact: Colin Crawford | Phone: 1300 249 276 Email: info@franchisedevelopments.com.au | Web: www.franchisedevelopments.com.au
BUSINESS DESCRIPTION: Franchising involves having a reproducible profitable business system that can be taught to keen and enthusiastic franchisees. Sounds simple doesn’t it. But successful franchising involves empowering franchisees with better business strategies, better buying, better marketing and, for the franchisor, better franchise recruitment. With 26 years in the franchise industry, WFD’s role involves putting it all together with better: • Franchise Expansion Planning • Franchise Legal Documentation • Franchise Manuals / Systems • Franchise Recruitment Looking to grow your business? Contact us today. ‘Franchising businesses …Locally, nationally, internationally.’ In Business Since: 1994
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Professional services - finance
CFI Franchise Finance Australia: 1300 659 676 Email: hello@cfifinance.com.au Web: www.cfifinance.com.au
New Zealand: 0800 456 687 Email: hello@cfifinance.co.nz Web: www.cfifinance.co.nz
BUSINESS DESCRIPTION: About Us CFI Finance is a specialist funder to the franchise sector. We have unrivalled knowledge of franchisee’s funding requirements as well as direct relationships with the franchise networks in Australia and New Zealand. Founded in 2014 by directors with a background in franchising, we have remained committed to offering flexible funding solutions that allow franchisees to start a new business or grow their existing business. What Can We Fund? CFI Finance have a solution for all business funding requirements including: • New Store Fitouts • Store Refurbishments • Business Acquisitions • Equipment Purchases • Vehicles, Trailers & Vehicle Fitouts • Refinancing Existing Finance Contracts Why Choose CFI Franchise Finance? • Competitive Rates • Excellent Customer Service • Preserve Precious Capital • Fast Online Application Process • Broad range of products and terms • Repayments Can Be 100% Tax Deductible
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Professional automotive services -products human resources & services
The Proven Group Contact: Carmel Brown or Jenny Boymal | Phone: 1300 312 502 Email: info@TheProvenGroup.com.au | Web: www.TheProvenGroup.com.au
BUSINESS DESCRIPTION:
• Finding and retaining Staff
Did you buy a Franchise to:
• Motivating Staff
• Manage people?
• Conflict within the team
• Listen to their tragic tales of woe?
• Bullying and harassment
• Spend an inordinate amount of time trying to make sure you are doing everything correctly?
• Mental Health amongst the team
Of course not!
• Handling complex communication
That’s where specialists in their field can help, like an accountant, or an External HR/WHS Manager.
• Staffing issues - sick leave, termination, discipline
That’s where we come in. We spend time getting to know You, your Franchise System, your Business and your Team. We become part of your team; assisting you with all the people related things that always appears too difficult.
• Poor Performance and behaviours
We are culture experts – assisting to direct your people to where your business is headed, ensuring the right people, right training and right fit at the right time. Not just placing someone and disappearing, we onboard, work with you through the induction phase, move into performance reviews, team building sessions, compliance to all employment legislation – not just Fair Work, right through the Employee Lifecycle to termination of employment. We are your People Experts; with proactive strategies that minimise disruption to business whilst maintaining compliance and an awesome culture that makes it easy to find new people. If any of these challenges sound familiar, we can help:
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• Time wasting
• Running Performance Reviews • Comply to Fair Work & Awards • Don’t feel under control with my leadership If this sounds familiar, you need a complimentary copy of our Book written specifically for Franchise Owners – Less Headaches, Happier Team, More Success! In Business Since: 2011 Get your complimentary copy of the book here
Professional services - insurance
Shopinsurance.com.au Suite 13, 317 Whitehorse Road, Nunawading, Vic 3131 Contact: Fred Nadde | Phone: 1300 123 300 Email: fred@steadfasteastern.com.au | Web: www.shopinsurance.com.au BUSINESS DESCRIPTION: Shopinsurance has been looking after the needs of franchisees and franchisors for over 15 years. We offer via our website automated business insurance solutions backed by “one on one” personal advice, to ensure all our customers receive a personal level of care. We look after the needs of franchisees such as Just cuts, Hairhouse Warehouse, Gloria Jeans, AFL stores, Michel’s patisserie, Subway and Schnitz. All it takes is one phone call or email and we take the worry out of what insurance coverage you need, how much it costs and best way to structure your insurance for one shop or for a franchisor insurance facility for all. Give our director a call on 1300 123 300 Australia wide. In Business Since: 1999
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Professional services - lawyers
MADGWICKS LAWYERS Level 6, 140 William Street, Melbourne, VIC 3000 Contact: Chris Verebes | Phone: (AUS) 03 9242 4744 Email: chris.verebes@madgwicks.com.au | Web: www.madgwicks.com.au
BUSINESS DESCRIPTION: Franchising in Australia is a regulated environment. When considering establishing a franchise system, entering into a franchise agreement or navigating a dispute with a franchisee or franchisor, it is important that you use a law firm with extensive knowledge of the franchising business model and the Australian legal landscape. Madgwicks is a full service business law firm. Our team of experienced lawyers regularly advise franchisors, franchisees and franchise industry service providers. Our lawyers also have extensive experience advising groups that operate under similar business structures, including cooperatives and strategic alliances. We regularly advise on: Franchise system establishment | Franchise due diligence | Franchising Code of Conduct compliance | Franchise agreements and disclosure documents | Business structures appropriate for franchise systems | Supplier and terms of trade agreements | Commercial and retail leasing, as well as general property advice | Trade practices advice, including ACCC notification/authorisations | Acquisition, disposal, joint venture and partnership advice | Employment and workplace relations | Tax, duty and GST advice | Branding, intellectual property and trade marks | Litigation and dispute resolution Madgwicks’ Franchising team is an active member of the Franchise Council of Australia and has an established network of accountants, business advisors and brokers to assist our clients when required. Madgwicks also provides clients with the benefit of our international affiliation with Meritas, connecting them with member firms across Australia and globally, providing expertise wherever they need it. In Business Since: 1973
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Professional services - lawyers
sanicki Lawyers 9 Regent Street, Prahran VIC 3181 Contact: Robert Toth | Phone: (03) 9510 9888 or 0412 673 757 Email: robert@sanickilawyers.com.au | Web: https://sanickilawyers.com.au/ BUSINESS DESCRIPTION: Sanicki Lawyers is a commercial and intellectual property legal practice with offices in Melbourne and Brisbane specialising in the creative music sector, arts, franchise and licensing and corporate sectors. The firm acts for well known Australian and overseas artists and companies and has expertise in a number of specialised business sectors including online and digital, Intellectual property and copyright, Childcare, Franchising Licensing and Distribution, Hospitality, Medical & Allied health professionals, and New Energy sectors (solar and EV). Sanicki’s is a member of the Franchise Council of Australia (FCA) and the International Franchise Lawyers Association (IFLA) with member firms across the world to assist our client’s overseas expansion. We also have a dedicated Defamation law , Property and private client practise with specialist knowledge in Retail and Commercial leasing, estate planning and business succession. We can assist our business and commercial clients with all aspects of their business needs and provide clients flexible fee options with fixed fees for certain work and realistic cost estimates where the fees cannot be fixed. Robert acts as a resident director for overseas companies and is an Advisory Board member for clients in the solar and franchise sector with a network of allied consultants to assist our clients. We work hard and smart and enjoy finding solutions and strategies to support our clients in their business and being a part of their trusted advisory team! founded in: 2009
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Professional services - 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 40 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. The firm is passionate about franchising and business law. The firm has acted for many Australian franchisors who have brought their systems successfully into New Zealand. Stewart is a recognised national and international guest speaker at franchise conferences (New Zealand, Australia, South Korea and USA) and he is listed in the International Who’s Who of Franchise Lawyers 2023. 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 belongs to the Franchise Association of New Zealand (FANZ), the Franchise Council of Australia and the International Franchise Association (USA). Stewart was instrumental in the formation of the FANZ in 1996 and he wrote the original rules, as well as being a Past Chairman and a current member. Stewart was awarded Life Membership of the FANZ in recognition of his significant contribution
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to franchising. He was also a board member of the supplier forum of the IFA from 2001 to 2007. He is actively involved in international franchising and has published articles in the International Journal of Franchising Law and the Franchise Law Journal (USA). In 2018 the Franchise Council of Australia acknowledged Stewart for his “Outstanding Contribution to Franchising” in recognition of his longstanding legal service to franchising. Stewart is the only lawyer in New Zealand to hold the CFE (Certified Franchise Executive) qualification following an accreditation ceremony at Australia’s National Franchise Convention and at Orlando, Florida in 2020. 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 addition, Stewart is the Managing Director of The Franchise Coach and please visit www.thefranchisecoach.co.nz. He is able to help emerging franchisors and all the services are listed on that website. In Business Since: 1993
Helpful organisations APRA (Superannuation)
FRANCHISE COUNCIL OF AUSTRALIA
GPO Box 9836 Sydney, NSW 2001 Phone: (AUS) 1300 55 88 49 Website: www.apra.gov.au
Level 3, 21 Victoria Street Melbourne VIC 3000 Phone: +61 3 9508 0888 Email: info@franchise.org.au Website: www.franchise.org.au
AUSTRALIAN COMPETITION & CONSUMER COMMISSION GPO Box 3131 Canberra ACT 2601 Phone: (AUS) 1300 302 502 or + 61 2 6243 1305 Website: www.accc.gov.au
AUSTRALIAN FOOD AND GROCERY COUNCIL Locked Bag 1 Kingston ACT 2604 Phone: +61 2 6273 1466 Email: afgc@afgc.org.au Website: www.afgc.org.au
AUSTRALIAN RETAILERS ASSOCIATION Level 1, 112 Wellington Parade, East Melbourne VIC 3002 Phone: (AUS) 1300 368 041 Email: info@retail.org.au Website: www.retail.org.au
FAIR WORK OMBUDSMAN GPO Box 9887 Your capital city Phone: 13 13 94 Website: www.fairwork.gov.au
FRANCHISE ASSOCIATION OF NEW ZEALAND 4 Whetu Place, Rosedale, Auckland 0632 Phone: +64 9 274 2901 Website: www.franchiseassociation.org.nz
OFFICE OF THE FRANCHISING MEDIATION ADVISER Suite 205, Level 2, 370 Pitt Street Sydney NSW 2000 Phone: 1800 472 375 Email: office@franchisingmediation.com.au Website: www.franchisingcode.com.au
REAL ESTATE INSTITUTE OF AUSTRALIA Level 1, 16 Thesiger Court, Deakin ACT 2600 PO Box 234, Deakin West ACT 2600 Phone: 02 6282 4277 Email: reia@reia.com.au Website: www.reia.com.au
SMALL BUSINESS ASSOCIATION OF AUSTRALIA 138 Juliett Street, Greenslopes, QLD 4120 Phone: 1300 413 915 Website: www.smallbusinessassociation.com.au
VICTORIAN CHAMBER OF COMMERCE & INDUSTRY Level 3/150 Collins Street Melbourne VIC 3000 Phone: 03 8662 5333 Website: www.victorianchamber.com.au
WORKPLACE SAFETY AUSTRALIA Westfield Tower, Suite 1303, Tower 2, 101 Grafton Street Bondi Junction NSW 2022 Phone: +61 2 9387 1248 Fax: +61 2 9387 1488 Email: info@worksafe.com.au Website: www.worksafe.com.au
THE NEW YOU? automotive products & services
FRANCHISE TERRITORIES AVAILABLE
SCAN NOW TO FIND OUT MORE TOTAL PACKAGE COST
$49,500*
INCLUSIONS
TAKE CONTROL OF YOUR FUTURE AND MAKE TIME FOR LIFE Join our Kitset Network and put your skills to good use: Backed by our proven business model and systems World class direct-to-customer Online Booking Portal Retail and Supply Partner job referrals Marketing & business-growth programs Ongoing business guidance & advice Customers love us … you’ll love us too!
VEHICLE WRAP
TOOLS
HQ TRAINING
SITE TRAINING
UNIFORM
SOCIAL MEDIA
MARKETING
Customised Wrapping of your approved vehicle, with our Kitset Branding Startup Tools and Equipment, to the value of $2000 One week training at HQ, including your airfares & accommodation Three weeks 'On the Job' training, in the field with Franchise Trainers Startup Kitset Uniform and Identification Badge Social Media set up and launch into your local territory Initial Local Area Marketing collateral & printing and Site Webpage
CALL 1300 352 872 VISIT WWW.TEAMKITSET.COM - 131 -
*Price excludes GST
automotive products & services
Tired of working for someone else? ready To be your own boss? worried abouT going iT alone? this guiDe is your key to financial inDepenDence through franchising
Franchising offers you the opportunity to buy a business with a proven system, business model and brand that people already know and trust. This comprehensive guide will help you on your franchising path to success, utilising decades of experience from experts in the sector, featuring insightful chapters such as:
financial essenTials for franchise buyers
by Kate Groom, Co-founder and Director, Franchise Accounting and Tax. Co-founder and director of Franchise Accounting and Tax, Kate has previously worked for franchisors and as a business adviser. Kate’s focus is on helping clients understand the financial aspects of running a business and on business planning and coaching.
are you abouT To buy a franchise? your mosT imporTanT QuesTion… where are my cusTomers?
Roger Dickeson, Senior Franchise Consultant, Wollermann Franchise Developments Roger Dickeson is an experienced franchising professional and has worked in the sector as a consultant, adviser and business planner for over 30 years. Roger’s specialty is business development for small to medium enterprises and as a strategist in the franchising, licensing and capital raising fields.
along with: Understanding the LegaL docUments Robert Toth, Special Counsel, Sanicki Lawyers tips to heLp YoU get YoUr tax right Emma Tobias, Assistant Commissioner, Australian Taxation Office What to be aWare of in reLation to franchising in neW ZeaLand Stewart Germann, Franchising Lawyer, Stewart Germann Law financing YoUr franchise bUsiness Phil Chaplin, CEO, CFI Finance Group is franchising JUst bUYing YoUrseLf a Job? bUsiness oWnership VersUs seLf-empLoYment Doug Downer, The Franchise Guy™
Don’t miss the listings pages Featuring a selection of leading franchise systems available right now! SUPPLIER FORUM
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$14.95 ISBN 978-0-646-59800-0
51495>
9 780646 598000