VOL 11 ISSUE 06 sept/oct 2017
out with the old, in with the new! actualise your service franchise Don’t buy a job, build a business
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CURRENT TITLES INCLUDE: Business FRANCHISE Australia and New Zealand magazine The Magazine for Franchisees, Bi-monthly publication The Australian and New Zealand Business FRANCHISOR magazine The Magazine for Franchisors, Quarterly publication Australian and New Zealand Business FRANCHISE DIRECTORY Annual publication The FRANCHISE GUIDE Annual publication CGB’s website also provides an additional advertising and information format and complements our publications.
www.businessfranchiseaustralia.com.au
38 Business Franchise Australia and New Zealand
Contents
42
41 What’s New!
Feature news
42 Feature editorial:
Out with the Old, In with the New!
46
46 Profile:
Luxaflex® Window Fashions Don’t Buy a Job, Build a Business
48 Expert Advice:
Actualise your Service Franchise Steve Seddon, Westpac
51 Advertising:
Hitman Professional Pest Control
52
52 Franchisor in Depth:
V.I.P. Home Services Fencing & Home Maintenance A Real Business with a Real Income
56 Expert Advice:
New to Franchising? Your questions answered
George Yammouni, Bathroom Werx Group
60 Have your Say:
A Man on a Customer Service Mission
Jim Penman, Jim’s Group
56
A regular of Business Franchise Magazine, our special supplement in franchising showcases a different industry each issue To share your specific expert industry advice or to feature your franchise in the next issue, please contact: Kathleen Lennox, Sales & Marketing Manager Phone: 03 9787 8077 Email: kathleen@cgbpublishing.com.au
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what’snew! Swim schools wanted to back child safety initiative Swim schools across the country are being urged to throw their support behind a child safety initiative designed to get more young children in the water learning to swim. Running from 23 September to 2 October, Learn2Swim Week offers parents and carers the opportunity to access free swimming lessons for under 5s from partnering swim schools throughout Australia. Major advocate of Learn2Swim Week, Laurie Lawrence from Kids Alive Do The Five, said cost was often a reason parents gave for not enrolling their children in swim classes. “This is a tragedy; that something like cost prevents children getting lessons that could one day save their life,” Laurie said. “We know the ability to swim is one of the most important factors in reducing the risk of childhood drowning, so we need to introduce more kids to swimming lessons as early as possible.”
to back Learn2Swim Week by registering their school on the Learn2Swim Week website and offering free swimming lessons to participating children under 5. “Ideally, offering a 5-lesson intensive course is recommended but even if a swim school can provide one free lesson it might just help prove to a parent how vital learning about water safety is. It’s a great way for swim schools to show their local community they care about saving children’s lives,” Laurie said.
campaign nationally, says “Since we started in 2013 we have doubled the amount of swim schools participating in the safety initiative each year and we are hoping 2017 will be no different. There are over 900 swim schools in this country and we would like every one of them supporting the cause. The more swim schools that partner with us the closer we get to our ultimate goal of zero drownings in under-fives.”
Supported by all the major industry associations, swim schools are being asked
CEO and Founder of Poolwerx, John O’Brien, who’s company initiated and grew the
To register, check out www.learn2swimweek.com.
AFTER 27 YEARS STAIN BUSTERS REINVENTS ITSELF Stain Busters has been around for over 27 years with pretty much the same business model. Franchisor Paddy Sweeney, stepped back from active management fifteen years ago and established a regime of Master Franchisees including an International Master to look after and drive the business. This worked fine for the first three years, then revenue plateaued, travelling along the top for ten year. Then two years ago revenue started dropping, not dramatically, but sufficient to be an indicator as to an emerging trend. Paddy came up with a new franchise model, radically different from what had been the way for twenty five years. He was unable to convince his Master Franchisees to buy into the idea, so he set about assuming control to restructure and reinvent the system. The model involved guaranteed incomes (not revenue), Stain Busters providing the money to cover the lease of new equipment and a new van plus supplying the work, taking the bookings and collecting the money. The new Franchisee would pay zero franchise fees ever. The model has just been launched and no doubt other Franchisors who may also be considering the need for reinvention will follow this with interest.
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OUT WITH THE OLD, IN WITH THE NEW! “Australia’s love of beautiful homes and gardens mean big business. Luckily, there is a vast number of professionals to help us maintain our properties.”
Owning your own home or business is part of the big Australian dream. We aspire to it, plan for it and save for it. Then, once we have achieved it, we take a great amount of pride, and spend a significant amount of money, on cleaning, maintaining and improving our most prized possession. At this time of year - with Spring upon us, the old adage ‘Out with the old, in with the new’ rings true! Whether it is buying and replacing new fixtures and fittings, cleaning, maintenance, putting in a new pool, trimming the lawn, or even fixing the cracks in the garden path – our homes and businesses are in constant need of attention. Australia’s love of beautiful homes and gardens mean big business. Luckily, for the home and business owner and the vast
number of franchises that service these, we often turn to professionals to help us maintain our properties. The domestic and commercial building, maintenance, cleaning and landscape industry has adapted to consumer demand. People are busier today than ever before. They have less time for maintenance and small projects around the home or workplace. It is easier for people to contract out the jobs to capable businesses than spend the time and money trying to do it themselves. This has resulted in a growth market for small business owners, including franchisees, to step in and complete these tasks once done by homeowners and business owners themselves.
Brands you know and trust As the building, cleaning and landscape jobs required usually take place on our property and in our home, we want someone we know and can trust. A franchisee who lives locally and works for a well-respected brand appeals to us. We know the name of the franchise, it has most likely been recommended by a neighbour or friend, and once we take the
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first step and call the local franchisee to install our kerbs or repair our roof, chances are we put their business card on our fridge and call them every time we have a similar project or repair. This is assuming they deliver a high quality product with the best customer service. With so much money being spent on property renovation and maintenance, as well as cleaning, gardening and landscaping, the franchises that offer these services are thriving. If working with your hands appeals to you and you have background in building, construction, gardening or other trade related skills, or you have just decided it is time for a change, the opportunities available in this sector of franchising are nearly limitless. There is a franchise system to cover nearly every area of the building, cleaning and landscape industry. Specific franchise systems include, but are certainly not limited to, kerb installation, building maintenance and safety, home waterproofing, shed construction, pavement crack repair, antenna installation, mowing, fencing, roofing and landscape maintenance. Below is a snapshot of a few of the franchise systems working within this industry who feature within this issue of Business Franchise magazine:
Resurfacing has been recognised as one of the most lucrative businesses in decades. An Aircoat Australia franchise can offer the right person fantastic income potential, an ideal home based service, and an affordable all-inclusive business package incorporating high profits with low overheads, the ability to set your hours for a more flexible schedule and begin your new career without the ‘new business’ startup risks. You’re the boss, making all the decisions for your business yet you are under an umbrella of total support with Aircoat Australia’s experience and guidance. Choose your hours and whether you work solo or hire employees. Using the trusted name and exposure, having access to the continuing support and guidance, your new business can be anything you want it to be. Aircoat Australia has built a strong reputation in the resurfacing industry and prides itself on being an innovative company in multi facet resurfacing and restoration. Aircoat Australia specialise in the renewal of worn and damaged fixtures and surfaces including bathtubs, tiles, porcelain, laminates, fibreglass, vitreous china, appliances, benchtops, floors and timber surfaces.
Chem-Dry Australia Chem-Dry is the world’s largest carpet cleaning franchise, and has been helping Australian’s realise their dream of business ownership since 1986. Their unique, hot-carbonated water extraction method, combined with best in-class products and services, and unparalleled training and support, make it impossible to find a better cleaning franchise opportunity. No experience is necessary, as Chem-Dry provide comprehensive training on all aspects of the business. They are looking for franchise partners that have the drive and
determination to work hard and enjoy their success. The Chem-Dry on-going marketing and operational support will ensure that you are able to enjoy the flexibility and lifestyle benefits that owning your own successful business can provide.
Ecomist Australia Established in 1994, Ecomist Australia is a leading provider of premium quality hygiene products and services, specialising in Odour Control and Insect Control. Their core product is an innovative programmable aerosol dispensing system that won an award for the Best New Product from The Aerosol Association of Australia and New Zealand. Aerosol products are manufactured in New Zealand and Ecomist offer a natural insect killer and over 50 fragrance options with French perfume.
GroutPro Earn between $50 and $200 per hour and get a high return on investment in the booming Home Improvement Industry with LOW SETUP COSTS & little competition. GroutPro specialises in the after-market care of tiles and grout to homeowners and businesses. Offering a range of professional services from stain protection of new tile and grout installations to their flagship grout “colourseal” application which rejuvenates and recolours old grout saving customers time and money without having to re-tile. Specialists use GroutPro’s own branded range of professional quality products including cleaners, sealers, tile Anti-Slip treatments and shower glass restoration and sealer coatings. This is a complete package to get you up and running in your own business fast.
Their ultimate aim is to enhance the environments of our customers through high quality products and excellent after-sales service. Over the last 23 years Ecomist have developed a secure and proven franchising business model. Each Ecomist franchise has its own exclusive territory based on post codes and purchase price is generally 2x the net income of the existing business.
Hitman Pest Control A Hitman franchise is a highly profitable business generating in excess of $100,000 net of expenses in its first year. Clients are generated by Hitman and allocated so franchisees only have to focus on doing an exceptional job for clients. Hitman has been servicing clients in Brisbane, Gold Coast and Sunshine Coast since 1995. The company services approximately 20,000 homes and businesses each year and has a client retention in excess of 80%.
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Aircoat Australia
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The head office staff manage marketing and sourcing of new clients as well as the rebooking of all existing clients. They also manage the day to day scheduling of jobs for each franchisee. The new franchisee receives full training and then starts earning from day one. Franchisees collect money from the client and head office invoices the franchisee on a fortnightly basis.
Hunter Douglas offers an unrivalled partnership to meet specific commercial needs, under our LUXAFLEX® Window Fashions Gallery and LUXAFLEX® Window Fashions Showcase Alliance programs. This includes marketing support, manufacture and production of all products and fabrics, as well as local on the ground sales support. No experience is required to enter the Programs as all training is provided, which focuses on enhancing the customer experience and increasing your profitability.
• #1 place in a niche market, with a unique product range;
Join the Jim’s Pool Care team and Australia’s largest franchise system to build a business that suits your goals and lifestyle.
• Comprehensive, hands-on training, with ongoing business and technical support;
Owning a Jim’s mobile pool shop means you can earn money from multiple streams. You charge for your time and charge for the lucrative pool items such as chemicals, pool equipment and pool accessories. This means your income is not limited by how many hours you can work and gives you scope to grow the business to a level that suits you.
Luxaflex Window Fashions ®
There are over eight million households in Australia – think about how many window furnishings that amounts to! The LUXAFLEX® Window Fashions brand is one of the most widely known and respected window furnishing brands in Australia, having sold its products under the Hunter Douglas Group in Australia for over sixty years – and is currently recruiting entrepreneurs looking for a new venture!
Magnetite franchisees specialise in double glazing existing windows, as the core offering in a product range that includes seals, tint and other complementary window treatments. Magnetite solutions provide all the benefits of double glazing without the cost and mess of replacement windows. Join the team that has: • 18+ years technical and practical experience;
Jim’s Pool Care
Another great bonus is the FLAT franchise fee. Yes, the fee is a flat franchise fee system so you can work hard and earn as much as you like and pay the same at fee with all training and ongoing support included. If you are ready for a change then you need to put Jim’s Pool Care on your list.
results for existing windows, without the mess and fuss of replacement systems that add cost to the customer and waste to the environment.
• National recognition through membership of key industry bodies; and • Average franchisee tenure now over 12 years.
Spray Pave Australia Earn up to $3,300 per week with Income Guarantee. That’s right, up to $170,000 per year!
Magnetite Windows Windows create harmony between inside and outside spaces, as well as being critical to the aesthetic character of a building. While adding healthy natural light to our lives, windows are the weakest link when it comes to energy and acoustic insulation in buildings. As excessive noise and energy efficiency are prominent issues plaguing home owners, now is the perfect time to become part of an expert team who solve these issues every day. Magnetite franchisees create world class
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The Spray Pave service decorates concrete and spray, polish, epoxy and stain. Jobs are inside and outside and customers are domestic, commercial and Government. The license structure allows you to choose when, where and how you want to work! This is a sincere “Be Your Own Boss” system. You genuinely keep all the profits! • Learn a range of new lifelong trades. • Guaranteed work available any time after training. • Head office training plus follow-up on your own job. • Customers contract and interest free finance.
The cleaning services industry expects an increase of 2.2 per cent for the year with expected projections of $4.3 billion, according to IBISWorld
Building towards a brighter future V.I.P. Home Services Fencing & Home Maintenance • Lifelong support from 6 Head Office trainers. • From $7,000 deposit + Support Payment Plan.
Thermawood Thermawood Retro-Fit Double Glazing System is designed to retro-fit double glazing into existing wooden windows. Proven systems and processes with the Thermawood Patented drainage system. Retro-Fitting fitting double glazing into existing wooden windows allows the home owner to retain the character of their windows, be more energy efficient, reduce energy costs and reduce noise. Along with installing double glazing Thermawood installers also fit draft/sound seals to all types of windows including double hung windows, casement windows and doors. Become part of the success story with: • Full Training and ongoing support • Strong industry Growth • Full Advertising & Marketing • Patented product new to the Australian Building industry.
V.I.P. Home Services - Fencing and Home Maintenance is a newly launched division that is part of the iconic V.I.P. Home Services group. You have a choice of owning a Fencing Franchise or Home Maintenance Franchise or why not do both? Affordable Franchise Opportunities NOW available in Melbourne, Victoria and Perth in Fencing or Home Maintenance. • 8 Weeks Paid Training - Fencing • 4 Weeks Paid Training - Home Maintenance • Ongoing coaching and mentoring • Comprehensive Cloud based IT systems • National and local marketing • And much, much more. Regional (Master) Opportunities available! Currently V.I.P. are seeking suitable candidates to take up this excellent but limited opportunity that is available Australia Wide. Husband and wife teams or business partners with integrity, energy and self-motivation should apply! Add to this the professional services of mortgage brokers, real estate agents and property inspectors and there is certainly a wide market appeal.
Growth sectors The $3.5 billion building industry is one that is leading the way. A steady rise in home-building approvals, has led to increased building activity, and outstanding opportunities for construction and design companies to take on franchise partners. The market for home improvements in Australia is also big business. Many of us are feeling the pinch of rising costs of living coupled with uncertainty within the real estate market, and are choosing to renovate rather than move.
One of the biggest appeals toward this type of franchise for many new and potential franchisees is the fact that you get to enjoy the flexibility of making your own hours and you spend a great deal of your time outdoors. Although there is the administration side of things, bills to be paid, marketing strategies to implement and business plans to be reviewed, the majority of your time will be spent on location, helping people to enhance and maintain their homes and their property. In buying a franchise, the difficult side of establishing the business and developing operational procedures has already been done for you. This allows you to get straight to work finding your customers and then delivering top quality products and excellent customer service. This allows you to choose the particular franchise system that most aligns with your passions, knowing that the demand for your product exists and the tools necessary to find, generate and keep your customers are already in place. So in considering a career in the building, cleaning and landscape sector of franchising... remember it is just as important to build relationships, build trust with your customers and build your business with the assistance of the franchisor. Franchising is not a guaranteed path to success, but it is however a solid formula, based upon tried and tested systems, that can pave the way for the right franchisee to achieve success.
Look out for our next special feature: get ready for summer
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Australians have always been passionate about home renovation and improvements, but even the do-it-yourself renovators often require the assistance of professional experts. Recent Australian Bureau of Statistic figures show the trend in home renovations is increasing and that the sector is currently valued at around $550 million.
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pr o fi l e : Lu xaf l e x ® W i n d ow Fas h i o n s
Don’t buy a job, build a business
Hunter Douglas’ flagship brand Luxaflex® Window Fashions has been established in Australia for over 60 years and is currently the market leader when it comes to innovative, technologically superior window coverings. With most of the products still manufactured in Australia, the brand plays to its strengths and brand heritage while constantly innovating and researching, ensuring the brand understands its customers and stays ahead of interior decorating trends.
Offering the most comprehensive collection for Australian homeowners with a vast choice of styles, colours, and patented operating systems, the brand offers a selection of indoor and outdoor products including Blinds, Shutters and Awnings. Numerous patented products such as Luxaflex® Duette® Architella® Shades set the brand apart. Exclusive operating systems also provide market differentiation such as PowerView® Motorisation. This provides motorised control of the blinds by setting ‘scenes’ which operate automatically throughout the day - for example, closing the blinds upon sundown, all through an app or stunning Pebble® Remote Control. The Luxaflex customer experience is personalised to the client offering solutions to their design, heat, light and privacy requirements in state of the art showrooms and in-home consultations. The window coverings are then manufactured to order and sent to the Luxaflex Alliance dealer licensee to provide the installation service. This service, as well as the quality and breadth of product range available, is what sets the brand apart from competitors.
across the country for over 60 years. This partnered, localised support is what drives the continued success of the brand. We do not just offer a range of products, we truly become your partner with ongoing training, networking opportunities and comprehensive marketing support. Initial investment is affordable with no inventory holding required. Key areas are now available nationwide and no previous window covering or interior decorating experience is required. There are two options in the Luxaflex Alliance program. The Luxaflex Gallery program is the premium full-line retailer, with access to the entire range of products and business programs offered by Hunter Douglas while Luxaflex Showcase is a smaller program that still provides retailers with access to a comprehensive range of products within a smaller retail environment that suits generally smaller interior design stores.
Your Luxaflex Gallery Business
The Opportunity
The Luxaflex Gallery is specially designed to display full-size products in the latest fabrics and colours, allowing consumers to envision the product in their homes. The entire Gallery is set up for a superior customer experience, designed to inspire consumers to consider products that they may not have been aware of, leading to a satisfied customer and a higher sale value.
The Luxaflex Window Fashions brand has partnered with independent, local businesses
Marketing support and communication tools that work on both a national and local
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level are provided and can include a mix of television, digital & print advertising, local area marketing, point of sale, direct mail campaigns and printed catalogues. The marketing focus is lead-generation with individualised websites available for all Galleries which contain comprehensive product information and inspirational information for consumers. You will benefit from leads received via the website’s Dealer Locator pages alongside the use of Google Adwords, Social Media marketing, eBrochures, sponsorships and much more. An advanced marketing automation system, Eloqua, is used to promote your business to existing customers and personalise communications to potential customers. There is a dedicated training team that offers in-person and online video training to support your product and installation knowledge. Training is ongoing with support always close at hand. A national annual conference offers networking opportunities with likeminded business owners while a Gala Awards and Travel Incentive Program are designed to reward you for your business success. Luxaflex Window Fashion license opportunities are available now in selected parts of Australia. To find out more about joining this innovative and world leading brand contact Mark Futeran at: 02 9638 8000 mark.futeran@hunterdouglas.com.au www.luxaflex.com.au
Design and Innovation Leaders
Integrated Marketing
Patented Products
Build Yourself a Business With the market leaders by your side, establishing and managing your own Window Coverings business is a highly rewarding experience. Having partnered with small business in Australia for over 60 years, we understand the support behind the products are just as vital for business success. The Luxaflex Window Fashions alliance programs provide comprehensive marketing, training, development, networking, incentives, events and showroom fitouts to support our innovative high yield product range. With opportunities available in numerous prime positions, the time to join our highly successful network of Luxaflex Window Fashions showrooms is now. Contact Mark Futeran on 02 9638 8000 or mark.futeran@hunterdouglas.com.au to discover the possibilities of the Luxaflex Window Fashions alliance programs.
Business Training & Support
Š Copyright 2017 Hunter Douglas Limited [ABN 98 009 675 709]. Ž Registered Trade Marks of Hunter Douglas Limited. C15052_08.2017
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actualise your Service Franchise “With a few exceptions, service franchises can offer a relatively high return on capital invested. When compared to retail business, service franchises tend to have lower stock levels and equipment/fit out requirements.” Steve Seddon | Senior Business Development Manager | Westpac
Service franchises cover a wide range of business types that require different ranges of skill levels, time and investment. Examples of service franchises include: business coaching, domestic cleaning, commercial cleaning, pool maintenance, education services, childcare, travel agency, home care and maintenance, mortgage broking etc.
invested. When compared to retail business, service franchises tend to have lower stock levels and equipment/fit out requirements. Other benefits can include: • The current trend of outsourcing in the business sector where businesses prefer to use a contractor, rather than an employee, to undertake some activities. For example businesses may use contract couriers to deliver goods and documents. The provision of cleaning and security services while once done in-house may be outsourced to specialist providers. • Growth in the outsourcing of domestic activities as large numbers of families become increasingly time poor. These tasks may include, household lawn mowing, house/car cleaning, window cleaning and swimming pool servicing.
Potential Benefits
• Income guarantee by franchisor. A word of caution, buyers must take care to understand these arrangements as any income guarantee will have a number of conditions attached. Also this income will rely on the franchisors capacity/ willingness to pay. Banks are unable to rely on an income guarantee to support a loan.
With a few exceptions, service franchises can offer a relatively high return on capital
• Lower stock levels which may reduce overall investment.
This segment provides franchise business opportunities in a broad range of activities. Buyers will be able to tailor their research depending on their interests, risk profile and financial capacity.
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• Operating hours may be more flexible than the more restrictive nature of retail trading hours. Some franchise systems may even offer weekend or part time opportunities. • Overheads in many service businesses are low. For example, mobile services may not need expensive premises and others have an ability to work from home. This means they may be profitable more quickly than other business segments. • They may offer a good way of using existing skills rather than relying on capital to generate an income. • Service franchises tend to require handson and direct input from the owner. They are best run on an owner-operator basis. • Some mobile businesses have the opportunity to grow through the addition of one or more employees. This will vary depending on the franchise system.
Potential Drawbacks • While returns on investment may be high, many service businesses may offer low absolute profits, particularly when factoring in the franchisee’s time working (personal exertion). • Earnings will be limited by the hours that can be physically worked by the franchisee and their own abilities to compete the tasks. • Some may be more seasonal in nature with lower levels of activity in certain times of the year. • Many require the franchisee to market and sell the service. Although franchisors may provide the tools, processes, and undertake group advertising, the success or otherwise of the business will
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depend on the franchisee’s efforts. This will usually continue for the life of the franchise. The time required to complete this aspect of the business will need to be considered. This is particularly evident in the start-up phase. • Lower entry costs also make it easier for others to enter the market. This may include both competing franchise groups and independent operators. • Business may be highly dependent on the continuing efforts of the owner. This may make the business more difficult to sell unless these skills are transferable to a new operator. • Some may require additional licenses and qualifications. For example franchisees operating in real estate sales or pest control are required to hold appropriate licences. There will be a number of other advantages and disadvantages. It is essential to engage an accountant and a lawyer who has prior experience in the franchise sector.
Funding to Buy a Service Franchise Some of the characteristics of a service franchise as outlined above may make it more difficult to obtain funding. Traditional funding may depend on whether the franchisor has a financing arrangement in place with a bank and/or the financial capacity of the buyer.
“Franchise systems with lower levels of investment tend to be funded using equity in the buyer’s residential property. Banks will generally lend up to 80 per cent of the property’s valuation subject to a demonstrated capacity to repay to loans.”
Franchise systems with lower levels of
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investment tend to be funded using equity in the buyer’s residential property. Banks will generally lend up to 80 per cent of the property’s valuation subject to a demonstrated capacity to repay to loans. The applicant’s full position will be considered. This includes any additional income sources and requirement to meet living costs and repayment of business loans, home loans, credit cards, personal loans etc. Applicants will be required to present a detailed business plan to support their application. This should include the following: • Historical financial results (for the purchase of an existing business); • Cash flow/profit and loss projections (new and existing businesses);
• The Buyer’s own cash, through savings or sale of an owned asset; • Equipment finance to fund vehicles and any major pieces of equipment; • Private loans from family and friends. (Take care to fully document in order to avoid any misunderstandings in the future);
• Assistance from the franchise (this is rare, however some franchise systems may provide a level of assistance).
Free information is available at Westpac’s Davidson Institute. Visit: www.davidsoninstitute.edu.au.
The above may not suit everyone. However, it is important to ensure any loan repayments are taken into account when looking at the financial viability of the business.
• Applicant’s background (prior work experience, industry experience and education);
• The full ingoing cost;
• Franchise term and expiry. Buyers without property may look to other (non-bank) funding sources. These may include one or a combination of the following:
• Seeking good quality advice from an accountant and lawyer (experienced in franchising).
• A vendor loan from the outgoing franchise; and
Summary
• Lease term and expiry (if applicable); and
• Allowing for costs to repay the loan and cover franchise and marketing fees;
Content has been prepared with the assistance and input from Daniel Cloete, National Manager Franchise, Westpac Banking Corporation, New Zealand.
• Applicant’s current financial position (including assets and liabilities, income and expenditure);
• Full details of the business being purchased, ingoing cost, working capital requirements, legal/accounting/training costs, location/territory, local competition;
happened to the video rental industry;
Take care to fully research and understand the business opportunity, consider: • The expected turnover and profit; • How quickly the business will reach a ‘break even’ point (income covering costs); • The time required to earn the income. Don’t forget to include time to complete the actual work task, marketing activity, administration, travel time, training time; • The location and surrounding territory. Don’t forget to research existing and potential competition; • The business’s industry growth prospects and risk of decline. Look at what
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Steve Seddon is Westpac’s, Senior Business Development Manager – Franchising, Western Australia, Queensland and South Australia. He is a CPA and a member of the Franchise Council of Australia’s Western Australian committee. Westpac continues a long-term commitment to the franchise sector in Australia. The bank has a national network of franchise specialist business bankers who are able to deal with the specific needs of the franchise sector. Contact Steve at: 0407 401 892 sseddon@westpac.com.au www.westpac.com.au/business-banking/ industries/franchising/
WOULD YOU LIKE TO BE A HITMAN (OR HITWOMAN)?
BECOME A FRANCHISEE
A Hitman Franchise offers you the opportunity to build a highly profitable business with plenty of room for business growth and development. Hitman currently has 18 franchises across Brisbane, Gold Coast and Sunshine Coast. All franchisees earn a minimum of $100,000 net of expenses in their first year. Hitman is a successful Brisbane based business that has been providing pest management services for 22 years. The key to Hitman’s success is its rigid adherence to systems in all areas of the business. These systems ensure that clients receive exceptional service from the time they first call the office, through the 12 month service period, to when they are rebooked for their treatment the following year. These systems also mean that Hitman is a perfect business to franchise. Hitman Franchises are Unique Hitman franchises are definitely unique. The big difference between Hitman and other franchises is that the bulk of the clients are sourced by head office. This means that the onus is not on you to find work. However, if you do source your own clients your income will be substantially higher. A Hitman franchise is also seasonal which is great for anyone who likes to work hard for 9 months of the year and take it easy for 3 months. Hitman’s expertise is not only in the treatment of pests but also in its ability to acquire clients and retain them. Donna Ross-Teigan cofounder of Hitman with her husband Niels has an extensive background in marketing which has been extremely beneficial to Hitman and its franchisees. $100,000 Earnings in First Year All Hitman franchisees earn in excess of $100,000 net of expenses in their first year assuming they do all work allocated to them. Hitman’s retention rate of clients is 80% which means that the bulk of clients is retained by the office and reallocated to the franchisee. Most of the income is earned between October and May of each year. This is when the pests are most prevalent and clients prefer to
have their treatment. This means that the winter months of June, July and August are the slow months and a minimum of work is done. This is when all holidays are taken over this time. Full Training All Hitman franchisees are new to the pest control industry when they buy a franchise. Once they are trained they are indisputably the best in the industry. The training received includes a certificate course of study as well as five to six weeks practical training. The training program is overseen by Niels Ross-Teigan who has been in the industry for over 20 years. Cash Flow from Day One As soon as the training is completed you begin work. You are given a work schedule of between 4 and 5 jobs per day. You collect the money directly from the client and then invoiced fortnightly by Hitman for jobs supplied. This means that you have an excellent cash flow from day one allowing you to focus fully on the job at hand. Territory Considerations As Hitman sources the bulk of all jobs there are no territories specific to franchisees. All work is allocated in the most geographically effective manner spread across all franchisees in their first year. In subsequent years existing clients will be reallocated to the franchisee that performed the treatment the previous year. Franchise Price A Hitman franchise including comprehensive training, all equipment, start-up chemicals and stationery is $153,000 + approximately $33,000 for the car. These prices exclude GST. Franchisees receive payment from clients on the day. Therefore, income starts day 1 after training finishes. FOR FURTHER INFORMATION CONTACT: Ms Donna Ross-Teigan, Director (07) 3827 5000
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V.I.P. H O M E S ERV I C ES FEN C I N G & H O M E M A I N T EN A N C E
A REAL BUSINESS WITH A REAL INCOME Do you want to own a real business - one that earns you money while you sleep? Becoming a master franchisee with V.I.P. Home Services Fencing & Home Maintenance (V.I.P. F&HM) can set you and your family up for life, with the opportunity to build a real business with a real income ongoing.
National Franchisors Warren Smith and Vea Johnston collectively have over 30 years’ experience within the franchising sector and drawing upon their previous experience, they are steadily building a team of niche operators to become the best in the industry, rather than just the biggest. Franchisees are sought to service Melbourne and Perth’s ever-present customer work requests, and due to their large population size V.I.P. F&HM are also keen to recruit Regional Master franchisees in Sydney, Brisbane and Adelaide – at relative low-cost entry levels. With four tiers of income available to Master Franchisees, V.I.P. F&HM take people that have never run a business before and turn them into successful franchise owners.
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INCOME: Tier One – Operate your own franchise V.I.P. F&HM franchisees offer a range of services, encompassing fencing, home maintenance or both! From paling, picket and Colorbond® fences through to automatic gates and modular wall systems, the fencing services available are extensive. Added to this, are popular home maintenance services including carpentry, painting, plastering, tiling plus many more. With this in mind a Master Franchisee will be assisted by us to operate their own franchise just like any regular franchise owner does and of course derive an income from that which usually entails a six-figure income from doing so.
Clinton Webster-Hill, Franchise Owner in Essendon, VIC, says, “I chose V.I.P. Home Services due to their size and long history of success in Australia. The added appeal was having Warren Smith and Vea Johnston running the Fencing and Home maintenance division. They both have an extensive and successful history in the franchise world.”
INCOME Tier Two- Operation of Your Master Franchise Purchasing the Regional Master rights upfront, the first responsibility of a Regional Master Franchisee (RMF) is – after up to 10 weeks’ paid training - to operate a successful franchise themselves. Once the franchise is running successfully and a full understanding of operating a V.I.P. F&HM territory achieved, RMF’s can then move onto the next step. A RMF seeks to recruit new franchise owners by offering territories within the region and derives an income from that process within their region, although for the more adventurous and top operators there is no geographical restriction, providing that the new franchisees can be trained and supported successfully.
“This opens up a huge growth opportunity for somebody within a city such as Sydney or Brisbane, where there are multiple regions,” says Warren. “RMF’s have a very large paddock to play in for a very modest investment upfront and with the ability to expand beyond, this multiplies their earning potential.”
on, it’s very intense to say the least but you learn a lot during the initial 8-week training package about not only building a variety of fences but just as importantly how to run a business.”
Bryan and Karen Buckley are doing this, as Regional Master Franchisees in Perth. Bryan says, “I have always wanted to work in a business which I felt was fool proof and stable. I have seen lots of new businesses in Perth and Fremantle come and go and didn’t want to be a statistic. We chose to go down the franchise path as there is a support structure with systems and support set in place.
As each new franchisee is recruited, the RMF benefits from the capital gain growth within the region they have developed. Warren says, “The master franchise is a real business, which I define as something that earns you money while you sleep or are on holiday. Everything else – in my eyes – is self-employment, which is fine if that’s what you want only.”
“We are currently building up our franchise business here in the Fremantle area but eventually we will sell this and focus specifically on helping others succeed here in Perth via our Regional Master Franchise Business.”
NEW and INNOVATIVE WAY to help you build your region to its full potential!
INCOME: Tier Three – Ongoing Fees and Royalties Following the allocation of territories to newly recruited franchisees, residual income is earned from ongoing fees, royalties, and training fees if applicable.
INCOME: Tier Four – Capital gain on the region’s value
Traditionally, franchising has relied upon new franchisees being home owners to finance their purchase. But, the truth of the matter is home ownership is at an all-time low, and coupled with non-existent wage growth, it’s a ‘Catch 22’ for young (and older) Australians. If you don’t own a home, it’s difficult to borrow money.
All incoming franchisees receive up to eight weeks’ intensive training, paid. This is either completed by the Franchise Training Manager or the RMF, meaning an additional income is received to cover training fees, adding to this third tier of income available.
Cementing their position as pioneers within the sector, V.I.P. F&HM recognised this, and after a lengthy consultation process with a finance group, and in recognition of the quality training, ongoing support and subsequent franchisees’ success and profitability, they can now offer new franchisees – subject to conditions- up to 100 per cent deposit-free finance.
Training at the highest standard is of utmost importance to Warren and Vea. Ange Sercia, franchise owner in Melbourne confirms this. “Training is something these guys are big
National Franchisor Warren Smith says, “This means a non-home owning individual, who wants to get ahead by owning a franchise now has the means to do so.
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“Franchisees are sought to service Melbourne and Perth’s ever-present customer work requests, and due to their large population size V.I.P. F&HM are also keen to recruit Regional Master franchisees in Sydney, Brisbane and Adelaide – at relative low-cost entry levels.”
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V.I.P. H O M E S ERV I C ES FEN C I N G & H O M E M A I N T EN A N C E
“V.I.P. F&HM do not simply sell franchise territories, but aim to build a team of niche fencing and home maintenance professionals that will fit into the existing culture and this also includes Masters!” Utilising Facebook and their own website landing pages, franchisees have access to a huge library of images and YouTube content, so that customers can see the quality of work being completed across the brand. This has led to a multitude of five-star reviews and testimonials, all of which are validated by Head Office.
LOOKING FOR THE RIGHT FIT AT EVERY LEVEL V.I.P. F&HM do not simply sell franchise territories, but aim to build a team of niche fencing and home maintenance professionals that will fit into the existing culture, this of course also includes Masters. “We’re very honest when people first reach out. We don’t try to sell businesses, we’re trying to find the right people and have rejected quite a few. We’re very fussy about who we bring into the network and franchisees have to be able to fit into our culture. We want to make sure that the culture is right – across the board,” says Vea
“With an abundance of work opportunities but NOT ENOUGH people to satisfy the high level of demand, this innovative finance opens a new opportunity, not only for us but the public; interested in escaping the trap of a low wage environment. “To the best of our knowledge, we’re the only franchise system within this sector to offer this, meaning we can now help new franchisees where others cannot!”
FOSTERING THE RIGHT CULTURE Developing and growing at a steady pace over the last two years, Warren and Vea are consolidating on the great culture that’s been developed with the franchisees. Vea says, “Our franchisees are engaged with the brand, they love the system and they all work together, creating a really happy team environment. They are so supportive of each other; I’ve never seen anything like it before. I’m staggered at how great the culture is! The meetings that we have are so much fun!” Catering to the franchisee’s specific needs and requirements and having tweaked the
training provided over the last few years, Warren says, “When the franchisees leave the training environment, all have a full diary of work waiting for them, from four weeks up to three months’ worth.” Clinton adds, “I received eight weeks paid training that included both practical ‘on the tools’ training and business training. It felt to me like it was six months of training built into eight weeks – it was very comprehensive. I still receive ongoing support whenever I need it.” All accounting and administration systems including appointment setting and quoting are cloud-based, fully live and mobile friendly, that way franchisees have access wherever they are, via their mobile phone or tablet. Vea continues, “All franchisees receive ongoing support and assistance, not just from head office but from the other franchisees within the network. After training, franchisees want to be out in their territory building fences and the last thing they want to think about is marketing; so we do that for them initially.”
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“We don’t kid our prospective franchisees or Masters about how hard it is in the early days, you don’t just rock in and immediately have the freedom you crave and a fullyfledged business. In the early days, it’s all sacrifice and hard work. “We’re honest, direct and firm with the training. When franchisees come out the other side, they understand and ‘get’ why we do it the way we do! The relationship changes because of this ‘lightbulb moment’.” With franchises, currently on offer in Victoria and Perth and Regional Master availability nationwide, V.I.P. F&HM offer fantastic earning potential for both. Coupled with national and local support, work flexibility and unparalleled value for money, V.I.P. Fencing & Home Maintenance are looking for people to take that next step into becoming a business owner. To get further information about joining this exciting and innovative franchise system, contact Australian National Franchisor Warren Smith for more information: 13 26 13 warren.smith@vipfandhm.com.au www.vipfandhm.com.au
Next issue we showcase the
Health, Fitness & Beauty sector - Feel-good franchising Attractive businesses that are guaranteed to make you feel good! Whether you simply want to join these booming industries for the financial returns or you enjoy a healthy lifestyle and keeping fit, then look no further than Business Franchise magazine to provide you with a multitude of exciting business opportunities.
on-sale
If you would like to showcase your franchise within this popular feature, contact Kathleen Lennox on 03 9787 8077 to discuss advertising opportunities available.
Friday 3rd November Business Franchise Australia and New Zealand 55
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NEW TO FRANCHISING?
Your questions answered During my 31 years in business - running a national franchise service operation specialising in bathroom makeovers - I have been asked many questions by people from various backgrounds, looking to get into their first franchise business.
It’s important that they are behind you in this undertaking.
Of course, many are related to our business and the details of the day-to-day operations, however I have selected the most common questions I have been asked over the years and answer them for you below.
Look at the skills you currently have - can you use those skills in your own business? If you can, that’s one less thing to worry about as there are plenty of new things to learn when running your own business. If you are going to be doing something completely different, see if you can go out and work for someone who is already in this business for at least a week. Make sure you like doing this work and enjoy it! Take annual leave from your job if you must; work for free if need be – this will be the most valuable thing that you do and will help you enormously in making your decision.
As you read through this, I hope it provides insight and assistance in your quest for the right business opportunity, for you and your family.
I want to get into business for myself – where do I start? Firstly, make sure you have the support of your partner and family as being in business is going to consume a lot of your time.
Then, start saving money. You want to have at least half the purchase price in cash, this will mean you don’t have to borrow more than 50 per cent which will take a lot of pressure off you. Next, think about what sort of business you are going to enjoy getting up for every morning.
If looking to buy an existing business, then I would recommend a two-week trial shift
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with the current owner. That way you get to determine whether you like the work, confirm the weekly sales of the business, see first-hand how it runs and what is involved on a day to day basis and gain many more valuable insights into the real business. There are lots of websites that you can visit to find out more about the business you want to get into and the industry that it operates in. It is very important you have a good idea of the big picture and how that can impact on the business you are looking at. It’s not that hard. You just have to make the decision and make a start. The more research and preparation you do, the better chance you give yourself of success.
What sort of franchise business would you like? To find the franchise business for you, ask yourself the following questions: • Can I see myself getting up every morning and running this business? • Does it excite me?
FE ATUR E : ou t w ith the o l d, in w ith the ne w • Does my family support me in my decision to buy this business? Getting into business is a serious undertaking that is going to consume a lot of your waking hours. So, it is a good idea that the business is something that you enjoy doing. You will be putting a lot of hours into your business, especially in the first few years, so having the support of your family is very important.
Do you have control over decisions in a franchise? Franchising is about the synergy that develops from two people combining their entrepreneurial spirit to grow and develop their mutual business - the aim of this synergy is to create wealth for both. This means that in running the business you will have certain functions to perform to make sure that you are successful and your franchisor has certain responsibilities to ensure that the value of the brand, and therefore your business, continuously increases in value. If you look at franchising this way you will soon realise that you are getting into business with a lot of people – they all have a stake in the business, they all want to be
“The way you run your franchise business has an impact on every other franchisee in the system and them on yours.” George Yammouni FCPA, B.Bus.| CEO | Bathroom Werx Group
involved in decisions and outcomes that affect them. The way you run your franchise business has an impact on every other franchisee in the system and them on you. You can start to see how important the franchisor’s role of keeping everyone ‘singing from the same hymn sheet’ becomes crucial to the success of the brand. So back to the question, of course you have a say. You control the day-to-day and the interaction of your customers with your employees and with the brand. Every day you should always ask yourself how you can run things better, so that your customer is the winner. These are the sort of answers that your franchisor is always searching for and this is where you have a big say in the business. The other side of this is that you are one
part of a big team… your brand - and that requires discipline from you to play your part on that team. There is nothing to be unsure about in running a franchise business. The functions that determine the success of your business have been identified and systems are in place to help you carry them out. All you have to do is follow the SYSTEM. In general, this is one of the most important factors that makes franchising more successful than small business.
How much of the purchase price should I borrow to buy a franchise? My recommendation is to have at least 50 per cent in cash, which means you will not need to borrow more than 50 per cent and the reason for this is simple.
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“It makes a lot of sense to use the knowledge you’ve gained in running your new business and leverage that into two, three, four or more stores inside your franchise system.” your own resources – not borrowings against other assets. Business loans are generally short-term loans of five to ten years (usually they will match the term of your franchise agreement), and have higher interest rates and fees. This means that your loan should be repaid over this time period therefore increasing the monthly repayment amount. Can the business afford to pay that each month? In this example $50,000 must be repaid over five years which is $1,100 per month (at a 11.5 per cent interest rate). Can the business afford this each month? If it can, will it leave you with enough money to live? These are simple enough calculations which I would highly recommend doing first when deciding first how much you should borrow. There are plenty of challenges in running a business – why burden yourself with the extra stress and worry of borrowing too much.
Becoming a multi-unit franchisee You’ve made the decision, you’ve done all your homework, organised your finance, finished the training and now you’re there… running your own franchise business. Life sure has changed a lot since you started in business – it’s exhilarating and you love every minute of it. So, what happens next?
Before you go and buy a house, you have already determined what price range you can afford. You know how much you have saved up and you have already been advised the maximum amount you can borrow – this is based on your level of income which determines your repayment which then determines the maximum amount you can borrow. So, armed with this information you now have a budget for the maximum amount you can spend to buy a house. The result is that you are going to end up with a house that you can afford to pay off each week based on the income that you earn. You should follow a similar process when buying a business.
Most accountants would advise you to never borrow more than 50 per cent of the capital required to get into that business and I have to agree with that. For example, if you are buying a business that has a total purchase price (including all the costs of acquisition of $100,000, my rule of thumb is never borrow more than 50 per cent of the annual net profit of the business (before interest, tax and owners’ wages), or 50 per cent of the purchase price of the business, whichever is the smaller figure. Don’t forget that loan repayments have to come from the profit that the business makes. The rest of the money should be in cash from
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One of your options for the future is to expand your business by opening another store in your franchise network i.e. become a multi-unit franchisee. This option is being explored by more and more franchisees now as they grow their businesses to the next level. It makes a lot of sense to use the knowledge you’ve gained in running your new business and leverage that into two, three, four or more stores inside your franchise system. It also makes more financial sense to do this rather than put your money into other investments - whose returns you have no control over. Plus, your business has a much higher rate of return that most investments in the market place. Isn’t that why you got into business in the first place?
It also gives franchisees the opportunity to develop and grow substantial businesses, which not only add value to the brand but also become huge wealth generating assets for the franchisee. Here are some things to think about before you go down that road:
1. Learn the business first It is critical that you have a very good understand of the key drivers of your business. Concentrate on developing your skills in the key areas of the business: • managing and developing your team, • establishing a management structure, • ability to delegate, • local marketing and customer service, • continuously reviewing your performance, • business and financial planning. As a multi-unit franchisee, your focus must change from operational to more strategic. You are going to have to develop your financial skills, as well as staff recruitment and management skills. If you have these skills from your previous work life experiences, you are ahead of the game already. Measure your performance against other franchisees in the system. This way you can start to gauge whether you are achieving good market penetration in your current store before you move on to your next one.
2. Organise your finance to ensure you have enough working capital to finance another location You are going to need money in the bank or credit facilities to finance your expansion. This can include the following: • franchise fee, • store fit out, • stock, • staff recruitment and training, • management team to run new location, • opening marketing promotion, and • working capital. Take the time to do this as going into your second store highly leveraged is a recipe for
disaster. If you had to borrow a lot of money to start your first store then make sure that you have paid a good part of that off before starting your next store. Sit down with your accountant and do some serious financial modelling, making sure that you understand the cash flow implications of a second store. I also recommend breakeven analysis so that you know what sales levels are required in the second store and the impact it can have on your overall profitability. Running a profitable first store is crucial to your success, as its cash flow will be very important in the early months of your new store. That is why it is crucial to have a profitable business before you start your expansion.
3. Do your market research again Choosing the location of your next site is just as important as the decision you made to choose the location for your first store. This time you know more about your business and your customers and this knowledge is going to help you enormously in analysing and choosing your next location. Thoroughly research your site selection, and work with your franchisor to ensure you have chosen the right site. There are a lot of factors to consider and sometimes you just have to be patient as you wait for the right site to come up. If it’s not right, don’t jump in - there is no hurry to jump into a second-rate site. Don’t forget you already have an existing business to run. Your franchisor is going to be an enormous help to you here, as they are going to have their own research in this area and will be able to provide you with some very important information.
4. A strong management team and infrastructure Building a strong management team and an administration infrastructure to run your business is critical as you move into the next phase of your business growth. This will enable you to add a third, fourth, or fifth location. This structure can easily be leveraged to grow your business and add even more stores. It provides pathways for your staff where you can offer rewarding careers for your most talented staff members, offering them a variety of different roles at different locations. This will help you retain and attract great staff.
This is probably the most expensive part of running your business but the good news is that this infrastructure can handle multiple stores and it is this leverage that will make you serious money in the long term. The management system and infrastructure you run is the backbone of your business. Make sure that you are using the latest technology available to keep your administration costs down. It is vital that it gives you the leverage to grow the business without having to resort to increasing your staff numbers to cope with the growth.
5. Talk to your franchisor As soon as you start thinking about expansion, talk to your franchisor. They will have the experience of helping other franchisees that have followed this path and will be able to provide you with a checklist of all the things you have to do. There will also be clauses in your Franchise Agreement that govern this and you will have to check whether your Franchise Agreement allows you to do this and that you are eligible for a multi-store franchise operation. The good news is that franchising is about replicating success… in many locations. Somebody else has already done all the hard work in working out the best systems that will run a multi-location franchise – following the model is a recipe for success that reduces the risk of expansion and helps you generate more wealth for you and your family. George Yammouni is CEO of the Bathroom Werx Group - a national franchise system specialising in quick and affordable bathroom makeovers and renovations. He is a 30 year CPA veteran by profession and started his business as a franchisee in 1986 after a career in merchant banking. He acquired the franchisor in 1988 and began franchising in 1990. Bathroom Werx renovates over 200 bathrooms every month around Australia for Customers, including the world’s leading Hotel groups and Government Housing Departments. George is one of Australia’s leading exponents of service franchising and is a Past Chairman of the Franchise Council of Australia. To contact George directly, email: george.yammouni@bathroomWERX.com
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A lot of franchisors are now encouraging this trend, as it makes a lot of sense to encourage existing franchisees to expand and grow their businesses. It keeps top performing franchisees in the system and gives them the opportunity to set goals which form part of their long-term business plans.
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have your say
Jim Penman:
A man on a Customer Service mission When franchising Jim’s Mowing back in 1989, I had very little idea of what I was doing. I had no system to check on work quality, no formal training, and no way to monitor vehicle or trailer signage. I badly wanted my franchises to be successful, and to give better service than my existing subcontractors, but few ideas on how to go about it. It was only gradually, over the next three decades, that we began to work out how this could be done. One thing I did get right from the beginning was to only take on franchisees I was convinced would succeed, a bold policy when only a fraction of the size of my nearest competitor! That was not only because I wanted my customers to be looked after, but because I knew from past experience that contractors who gave poor service tended to fail. So, I made a point of sending all prospects out for a trial with people I trusted. Those who did not measure up were knocked back, and that was quite a few. The next stage, sometime later, was to change the way we charged fees. I was frustrated that franchisees were taking leads but not following them up, leaving customers in the lurch. After a few experiments, we began a trial of charging a small fee for each lead provided, balanced by reducing the base fee. A customer survey found that this made a dramatic difference. Not only were franchisees charged lead fees far less likely to neglect clients, but we were picking up 50 per cent more work from the same number of leads! Franchisees stopped asking for work when they were busy, because they didn’t want to pay the lead fee. Instead, the leads went to franchisees who really wanted them. This then became our standard system.
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The proper recording of complaints showed that we still had serious problems with customer service, even if it was much better than in pre-franchise days. So, I talked with my franchisors and we came up with the idea of asking the franchisor to phone a franchisee following each complaint, judge whether it was justified, and counsel them on how to avoid such problems in future. The next step was to deal with the relatively small number of franchisees getting far more than their share of complaints. We set up a system of steadily more serious warning letters, up to and including a breach notice, retraining, and termination. Becoming more rigorous with time, this system had a dramatic impact. Even though we terminated relatively few people, most letters caused a swift change for the better. This became even more effective once we started surveying customers by email, with any sort of negative answer treated as a complaint. About this time, we began a more formal training system, with all prospective franchisees brought to Melbourne for at least three days. I launched and still launch the first session by talking at length about customer service, both what we expect and the system behind it. I also made sure that the rest of the course carried on this theme. Not only did these courses lead to a clear drop in attrition over the first year, but they left franchisees in no doubt about our views on customer service. I began to take a more personal and direct role in service issues, asking call centre staff to send to me any complaint where the customer had called a second time. I would follow up the complaint with the customer, franchisee and franchisor until it was resolved, if necessary paying the client out of a special fund and back-billing the franchisee. If the franchisee had left the system, we simply paid the cost from the fund. This also allowed me to counsel and discuss customer service problems with franchisee and franchisor. I also became directly involved with the warning letters being sent out, and set myself as the only
“What is the lesson from our experience? That customer service matters more than anything. It is far more powerful than advertising, or social media, or the slickest PR campaign.” person who could actually delete a complaint if wrong. Daily involvement strengthened my motivation and also to bring about changes to the system, such as asking franchisees to SMS a client if they could not get through on the phone (since people rarely listen to their voicemails). All of these changes together led to a steady decline in complaints, which are now less than a third of what they were when we started recording them properly, and with an ongoing decline year by year. But this is still not good enough. More radical measures are needed. About a year ago we began to ask clients to star-rate their service, making clear to franchisees that these and any client comments would be placed online. That way, customers would be able to check out ratings before booking the job (though unlike Hi-Pages and other systems, they could only book one person). This gives an extra incentive for good service, and also to fix problems with the service since clients could be asked to change their rating once this was done. And it helps clients to avoid the small minority of franchisees who give poor service but tend to take a lot of leads, because they don’t enjoy the referrals and ongoing regulars that most of our people get. This system has yet to be launched at the time of writing, but it works very well in another venture that we are developing. Future plans include setting up franchisees with software that measures how quickly they respond to a lead, as well as giving cast-iron evidence when they have done the right thing (unfair complaints can be very demoralising). And we want to make it much easier for clients to respond to surveys, so that many more will reply. Measures such as these sometimes cause discontent, over issues such as paying lead fees when jobs do not work out, or for what may be regarded as unfair complaints. But the effect on work coming through has been huge. Twenty years ago, most franchisors overspent their advertising budgets and we had canvassers knocking on doors to find work. These days, many franchisors cannot even spend the advertising levy and must give it back, or use it to pay costs such as trailer stickers. There is simply no point to advertising when almost all franchisees in
the area are flat out. And the proportion of franchisees reporting good income has risen steadily. In fact, unserviced leads have become a major and growing problem. Over the past twelve months alone we have knocked back more than 143,000 leads, and the number continues to rise. The number of our franchisees is growing steadily, and will likely pass 4,000 next year, but we simply cannot keep up with the public demand. There is a HUGE demand for prompt and reliable service, almost regardless of cost. We teach our franchisees not to compete on price, and yet surveys suggest that about 75 per cent of our leads turn into jobs. Over-supply does not apply to all divisions in all areas, since in our system each division and each franchisor controls their own advertising, but it has become in itself a major issue of customer service. As a result, we are setting up a system where such leads can be sold to carefully vetted independent contractors, with money steered back into the system to get our people more work when they need it. What is the lesson from our experience? That customer service matters more than anything. It is far more powerful than advertising, or social media, or the slickest PR campaign. Our aim must be to not only satisfy but delight our customers, to exceed their expectations, and that we must always strive to do better. Poor service to customers upsets and offends me. Even one unhappy customer is one too many. Jim Penman launched Jim’s Mowing with a $24 investment in 1982, franchising in 1989. He now has over 3,700 franchisees in four countries, the largest franchise chain in Australia. He is happily married, with three children still living at home. His hobby and passion is scientific research into the epigenetics of social behavior, which he sees as having real potential for the treatment of depression, anxiety and drug addiction. His books, including Every Customer a Raving Fan can be downloaded without charge from his websites: www.jims.net www.biohistory.org.
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Another change came as a result of me taking a turn answering phones in the call centre. Though taking only about 2 per cent of calls, I found myself recording 10 per cent of complaints. It was clear that other staff were taking a ‘generous’ view of complaints, only marking them as such when really serious. I began asking them to record ALL complaints as such unless obviously wrong, such as complaints about over-charging (which is not poor service in my view, since we encourage franchisees to quote on the high side).