Franchising July/Aug2014 by Octomedia Pty Ltd

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FRANCHISING

Franchising YOUR ESSENTIAL GUIDE TO BUYING A FRANCHISE | WWW.FRANCHISE.NET.AU | JUL/AUG 2014 VOL.27/NO.4

JUL/AUG 2014

SECTOR REPORTS, WHAT YOU NEED IN YOUR LEASE, LOCAL AREA MARKETING TIPS

Sandwich THE

AUS $6.95|NZ $7.95

PR I N T P O S T A PPR OV E D 10 0 0 0 8121

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SPECIALIST HOME ADVANTAGE: WAYS TO WORK AND SUCCEED AT HOME P.54

WHERE IS THE PROFIT? EVALUATING THE FRANCHISE OPPORTUNITY P.28

SPACE PATROL: HOW SECURE IS YOUR TERRITORY? P.66

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CONTENTS

COV E R STORY

18 TOOLS AND TRADES

The latest handymen and tradesmen report

24 WHAT IS A FRANCHISE?

HOW TO ENSURE YOU GET THE MESSAGE Are you listening? Communication is key in a franchise network.

Franchising provides incentives to both franchisees and franchisors

80 COFFEE, THE CAFE

28 WHERE IS THE PROFIT?

What’s happening in the cafe market?

42 HOME ADVANTAGE

A snapshot of the travel arena

How to evaluate a business opportunity

INDUSTRY’S FUEL

87 SLEEP TRAVEL SPEND

Tips for working from home

52 WHAT’S IN THE PACKAGE?

A guide to what franchisors can provide to a franchisee

54 HOW TO SET UP A BUSINESS Consider the steps you need to take

102

THE SANDWICH SPECIALIST

59 3 STEPS TO BUYING AN ESTABLISHED BUSINESS

What you need to look out for

62 10 THINGS YOU MUST HAVE IN YOUR LEASE

An essential read for anyone looking to rent premises

5 6 136 138 140 142 144 146 130

WELCOME INSIGHTS LEGALISE THE SKETCH PEOPLE RESOURCES

How going green can help save costs

94 EXPO TALK: SPOTLIGHT

Franchisors need to protect franchisees’ exclusive areas

Previewing the Brisbane and Melbourne franchising events

HOW SAFE IS YOUR FRANCHISE TERRITORY? REGULARS

90 THE ECO DEBATE

70 YOUR OWN SPACE What you need territory planning

know

ON OPPORTUNITY

about

GLOSSARY

110

SHAKING UP PRINT AND SIGNAGE Signwave’s strategies to stay ahead

114 HUNGRY FOR SUCCESS: NOODLE BOX

What CEO Ian Martin is bringing to the food chain

132

TURNING A NEW LEAF: SUMO SALAD

CHECKLIST

How a new food court approach will serve the healthy eating business

ADVERTISERS INDEX JUL/AUG 2014 | 3 | WWW.FRANCHISE.NET.AU

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OVER 500 FRANCHISE CONVENIENCE STORES AND GROWING! You may not be aware that Caltex Australia operates one of the largest convenience retail networks across the country, with both company and franchised stores operating predominantly under the ‘Caltex Star Mart’ brand. Caltex is a well-recognised and reputable brand with outstanding systems and tools to enable operational success. New franchisees entering the business will be provided structured training and support on all key operational elements to set them up for success in their venture. The franchise community is strong and supportive with organised franchise councils and regular communication meetings, to ensure franchisees contribute to the brand success. Caltex has also held international conferences every 2 years with significant franchisee attendance, in locations such as China, Mauritius, Vegas and the most recent event was held in Dubai. This conference rewards high performers and is a highly anticipated event on any franchisees calendar. To find out more about our Franchise Opportunities, visit www.caltex.com.au and click on ‘Franchising at Caltex’.

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( WELCOME )

taying relevant. It’s an essential driver for any franchise business and equally for our publication. We’ve taken note and applied the principle to our magazine to better reflect through content and layout the needs of today’s franchise buyer.

SARAH STOWE EDITOR

The franchising industry in Australia is a significant contributor to the nation’s economy, an employer of more than 400,000 people, and a conduit for individuals to step into their own business. Our State of Play feature on p12 will give you further insights into this burgeoning sector which provides the potential franchisee with about 1000 different business brands and systems from which to select a model that will serve their personal requirements. What can be challenging is finding ‘the one’ amidst the array of opportunities, and that’s where Franchising magazine and its online companions [www.franchise.net.au and www.franchisebusiness.com.au] can assist. Information, knowledge, data: the ability to make the appropriate decision has to be informed by more than a passion for a brand, however vital that heart-felt conviction. And that’s where this publication steps in, bringing to you the latest research, sector surveys, pertinent advice, legal issues and case studies, as well as informed opinion from pre-eminent franchisors and experts. The components of a franchise search are similarly shaped, whatever the sector considered, the size of the budget

PUBLISHER Raffael Fernandes P: 02 8484 0754 raffael.fernandes@cirrusmedia.com.au EDITOR Sarah Stowe P: 02 8484 0900 sarah.stowe@cirrusmedia.com.au JOURNALIST Brea Carter P: 02 8484 0661 brea.carter@cirrusmedia.com.au ART DIRECTION & DESIGN Rizwan Nawaz P: 02 8484 0622 rizwan.nawaz@cirrusmedia.com.au Michael Bevan P: 02 8484 0757 michael.bevan@cirrusmedia.com.au

available, the individual skills, personality and passion driving each franchise buyer: investigate and consider the benefits of franchising, conduct a personal audit to ensure the demands of running a franchise will suit, research sectors and business opportunities, understand the ramifications of investing in a particular business, seek legal and accounting advice, pursue access to funding, undergo thorough due diligence. This magazine will deliver these constituent parts in a format that suits today’s reader: considered and committed, ambitious, focused on financial and lifestyle outcomes and willing to spend time understanding the nuances of the franchise relationship. The team at Franchising is thrilled with the publication’s fresh look. And we’ve given the same visual boost to our popular supplement The Profiler, free with this edition at newsagencies.

The ability to make the appropriate decision has to be informed by more than a passion for a brand, however vital that heart-felt conviction

Franchising aims to provide essential advice but to be a source of inspiration too; we hope you find it a worthy companion in your franchise journey.

NATIONAL SALES AND MARKETING MANAGER David Strong P: 02 8484 0905 david.strong@cirrusmedia.com.au ACCOUNT MANAGER Ben Smith P: 02 8484 0740 ben.smith@cirrusmedia.com.au ACCOUNT MANAGER Mitchell Greenway P: 02 8484 06 96 mitchell.greenway@cirrusmedia.com.au CLIENT SUCCESS MANAGER My Do P: 02 8484 0927 my.do@cirrusmedia.com.au

PRODUCTION CO-ORDINATOR Tracy Engle P: 02 8484 0707 tracy.engle@cirrusmedia.com.au For subscription enquiries call customer service: 1300 360 126 ISSN: 1321-408X

CIRRUS MEDIA Tower 2, Level 3, 475 Victoria Ave, Chatswood, NSW 2067, Australia Locked Bag 4700 Chatswood Delivery Centre, NSW 2067, Australia P: 02 8484 0888 F: 02 8484 0633 ABN 80 132 719 861 www.cirrusmedia.com.au

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Average Net Distribution Period ending Mar ‘14 - 7,142 PRINTED BY: BLUESTAR PRINT 83 DERBY STREET, SILVERWATER NSW 2128 P: 02 9748 3411

ALL FRANCHISING MATERIAL IS COPYRIGHT. REPRODUCTION IN WHOLE OR IN PART IS NOT ALLOWED WITHOUT WRITTEN PERMISSION FROM THE EDITOR. OPINIONS EXPRESSED IN FRANCHISING ARE NOT NECESSARILY THOSE OF FRANCHISING OR CIRRUS MEDIA. © COPYRIGHT CIRRUS MEDIA, 2014

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INSIGHTS

ACCORDING TO OUR ONLINE POLL, BUDGET RULES YOUR PLANNED FRANCHISE INVESTMENT 1. Under $50,000 – 34.55% 2. $50,000 to$100,000 – 22.15% 3. $100,000 to 200,000 – 13.41% 4. $200,000 to $350,000 – 16.26% 5. More than $350,000 – 13.62% [POLLDADDY/FRANCHISE.NET.AU]

$4.95

is the magic number Domino's and Pizza Hut have offered greater value to their customers and announced price deals for their everyday pizzas. Domino’s extended its $4.95 cheap deals from Mondays and Tuesdays to Cheaper Every Day, and Pizza Hut revealed it will charge just $4.95 for its Classics pizzas every day of the week with the most expensive range capped at $8.50.

BUSINESS CONFIDENCE FALLS ✱ 34% of SMEs believe the economy is slowing ✱ 15% of SMEs believe the economy is growing ✱ Performance indicators fell for sales, wages, capital expenditure and profitability ✱ Accommodation, café and restaurant sector = strongest sales + profit [SENSIS BUSINESS INDEX]

Australia’s first franchise registry launches A new Australian franchise registry has been launched to assist prospective franchisees in their search for a business, improve franchisor compliance and enhance the credibility of the sector. The former national manager of franchise banking at NAB Darryn McAuliffe is heading up the Australian FranData business which is administering the online

registry that is based around compliance and documentation. “An information gap exists between the positive economic performance of franchising and the way people view individual franchise brands but the publicly accessible registry gives responsible franchisors the opportunity to strengthen the credibility in franchising,” he said.

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SCREEN INSET: FRANDATA. COM.AU

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INSIGHTS

WHAT’S HAPPENING OVERSEAS? IN THE US:

If you make the decision to take on the franchise, accept that you have full responsibility for your business. The franchisor will help you to overcome problems but, at the end of the day, they are your problems Trampoline Gelato franchisee John Hall

A frozen yogurt franchise is turning to a form of crowdfunding, seeking funds for 12 more outlets in exchange for ownership stakes in the business [WALL STREET JOURNAL].

IN THE UK:

FRANCHISING 101: WHAT TO CONSIDER BEFORE INVESTING What’s the first thing a potential franchisee should do when considering buying into a business? Raynia Theodore from law firm MST addresses the issues in a two part video.

FIND A FRANCHISE WWW.FRANCHISEBUSINESS.COM.AU When you’re ready to source a franchise, why not check out the www.franchisebusiness.com.au site for the most comprehensive selection of franchise opportunities, searchable by price, location and type? You’ll find company news and videos there too.

LA PORCHETTA FRANCHISEE FINED MORE THAN $330,000

ASK YOURSELF...

IN BRAZIL:

La Porchetta franchisee Ruby Chand has been fined $55,803, and his two companies, Bound for Glory Enterprises Pty Ltd and Zillion Zenith International Pty Ltd have each received $139,507.50 fines for underpaying staff.

WWW.YOUTUBE.COM/FRANCHISEAU DID YOU KNOW FRANCHISING MAGAZINE HAS A YOUTUBE SITE? Visit www.youtube.com/franchiseau to view all our on-screen interviews and advice. What’s popular right now? Is the outlook positive for small businesses in Australia?

It was found they gave 111 mostly teenage employees half-price pizza and soft drink instead of their correct wages. They had been underpaid a total of $258,000 between 2009 and 2012 when they worked at La Porchetta franchises in the Melbourne suburbs of Pakenham and Berwick.

Kumon named brand of the year by the British Franchise Association for transforming its business in the digital landscape.

THE TOP QUESTIONS IN SOCIAL MEDIA This month the LinkedIn group Future of Franchising, Trending Forward ✱ Why do people invest in a franchise system? ✱ Why do people buy franchises and then fight against using the systems and tools provided?

JUL/AUG 2014 | 8 | WWW.FRANCHISE.NET.AU

Forget the World Cup! Latin America’s biggest franchise fair took place in Sao Paulo mid June with about 60,000 visitors attending the ABF Franchising Expo.

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INSIGHTS

THE COFFEE CLUB LAUNCHES SHIPPING CONTAINER STORES The first franchised shipping container stores in Australia have been unveiled at Brisbane Airport. The Coffee Club outlets have opened just outside the Virgin and Qantas terminals at Brisbane Domestic Airport, as well as at Brisbane Airport Service Centre. The two recycled shipping container stores, which will be the first installation of their kind in Queens-

land, also feature sustainable green rooves. These integrate vegetation on top of their industrial build to convert the conventional concrete rooves into environmentally friendly structures.

7-ELEVEN’S AUSTRALIAN FRANCHISOR ACQUIRES STARBUCKS The Withers Group, which owns petrol and convenience chain, 7-Eleven in Australia, has acquired the local Starbucks

licence from its US parent. The deal will see the company take over the nation’s 24 remaining Starbucks stores, and company-owned as opposed to franchised stores are on the cards, at least to begin with. The Withers Group’s initial plan is to open company-owned stores in close proximity to its 7-Eleven outlets within CBD areas, reports The SMH.

Being patient and waiting for the right site, brand and opportunity is really critical. You’ve really got to be careful because to be honest it costs the same amount of money to create a site in a bad location as it does in a good location

DIVISIONAL MANAGERS TAKE A STAKE IN JIM’S Neil Walsh and James Jacka, the divisional managers of the Jim’s Group’s safety arm, Jim’s Test & Tag, have become shareholders in the business. This marks the first time the group’s founder and major shareholder, Jim Penman has established a partnership of this nature, and it will see the Jim’s Group take back ownership of the Test & Tag division. “My decision to take on partners has been based purely on Neil and James’ outstanding contributions to the group over the past eight years,” said Penman.

BAIN CAPITAL ACQUIRES RETAIL ZOO US-based private equity firm has acquired Retail Zoo, the parent company of Boost Juice, Salsa’s Fresh Mex Grill, Cibo Espresso and Hatch Chicken Shop. The company was previously owned by private equity firm The Riverside Company, along with founders Janine and Jeff Allis. It is believed the couple, along with CEO Scott Meneilly, will remain heavily involved in the business, meanwhile Bain Capital will support Retail Zoo’s growth opportunities.

Janine Allis, Boost Juice founder

While an official press release on the Bain Capital website states the financial terms of the acquisition remain confidential, media outlets including Reuters and SmartCompany state the deal is rumoured to be worth around A$185 million. F JUL/AUG 2014 | 10 | WWW.FRANCHISE.NET.AU

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GLOBAL

TREAT

YOURSELF

TO SUCCESS!

BRAND LOCAL OPPORTUNITIES FOR OVER 69 YEARS BASKIN-ROBBINS™ HAS BEEN CREATING IRRESISTIBLE TREATS TO MAKE YOU SMILE AND FEEL GOOD INSIDE AND OUT. WE’VE PERFECTED THE COMBINATION OF DELICIOUS TREATS AND A FUN ATMOSPHERE.

Baskin-Robbins™ is looking for people with drive, creativity and passion. We believe that people are the most important ingredient in a successful business. Ideal key qualities for prospective Franchisees include: • The ability to make people smile • Excited to be a part of a team and the Baskin-Robbins™ system • Ambition to succeed and grow your business • Outstanding guest service focus • Passion for the Baskin-Robbins™ brand We’re confident that once you get to know our product you’ll be in love with Baskin-Robbins™, just like we are.

For further information, please contact Michael Payne on 0417 077 633 or michael@palmoasisventures.com or visit www.baskinrobbins.com.au

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THE

STATE OF

PLAY JUL/AUG 2014 | 12 | WWW.FRANCHISE.NET.AU

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hat does the franchise sector look like to an investor? There are plenty of statistics thrown into the pot when it comes to dishing up an industry profile. ^

That franchising is a multi-billion dollar business is beyond dispute. Whatever the figures used to create the final industry revenue count (does it include fuel retail and vehicle sales as in the often quoted $131 billion total?) the contribution of the franchising sector to the Australian economy is significant. As Michael Paul, chairman of the Franchise Council of Australia (FCA) explains, “Along with a contributing a sizable portion of the country’s GDP and export income, franchising serves a much more important purpose to the Australian business sector and economy. Not only is it a space where entrepreneurial people can grow national (in some cases multi-national) businesses without the help of foreign investment, it is also a space where anyone with the desire to work for themselves can build something. Regardless of whether you sit on the franchisor or franchisee side of an agreement, the sector supports an incredibly strong small business sector in Australia.” Naturally the sector is a microcosm that’s happening across Australia, both economically and culturally. Note the challenges of consumer spending, the costs of doing business and the increasing importance of technology not just in back-office operations but in the business to consumer relationship. The Federal Minister for Small Business, the Hon Bruce Billson, believes the franchising sector has an advantage when it comes to harnessing technology. “The research that we’ve seen from Microsoft, from Deloitte, from a range of sources shows us that smaller businesses that are making full use of the internet and have a high digital engagement enjoy much more positive business outcomes, generally have a higher revenue trajectory, better growth prospects, a more diversified source of revenue and a bigger customer base,” he said. “It’s something I know many in the franchise sector are well placed to make use of because you can get all that technology horse power, it might be with the JUL/AUG 2014 | 13 | WWW.FRANCHISE.NET.AU

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franchisor, and they can do a lot of that work and steer a path for the franchisee and make sure they’ve got an online presence and are making full use of the digital technology that is around.” But there are also issues specific to franchising, and legal complexities that ignite frustration at both franchisee and franchisor levels. In our last issue, the May/June 2014 edition, we ran an article outlining some of the changes expected to be adopted in the industry’s regulation, the Franchising Code of Conduct. As yet there is no clarity about what, if anything, will be actioned from the responses provided by the industry to the Government’s draft document.

Coffee, pizza and home services are three markets that have strong representation across a number of franchise brands

However, Billson told Franchising “We are now polishing legislative changes and JUL/AUG 2014 | 14 | WWW.FRANCHISE.NET.AU

adjustments to the code itself that should continue to see franchising as a real engine room in our economy and a real bright spot for people looking to get involved in their own enterprise. “Whether you’re a franchisor or a franchisee the overwhelming feedback is how positive and timely these changes are." From the FCA’s perspective, Paul says “The changes to the Code will have little impact on systems that were already operating effectively and ethically under the current Code. After a period of transition, they will benefit from reduced compliance and administrative costs. The changes will also give the ACCC more power to act in the sector’s best interests. The ACCC will now be able to penalise those few who don’t comply – thus strengthening the credibility of the sector for the vast majority who do the right thing.”

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THERE ARE TRENDS SPECIFIC TO THE FRANCHISE SECTOR, SUCH AS: ✱ The growth of multi-unit operations that mirrors what we have seen in the US, albeit on a small scale, fuelled by the ambition of a new generation of franchisees; ✱ The risks for a franchise network of taking Australian brands overseas or for franchisees, investing in a foreign brand starting out over here; ✱ The perennial question of how to best fund a franchise purchase and its expansion; ✱ Understanding the roles and responsibilities in the franchise relationship. As other articles in this edition attest, there are plenty of opportunities across a whole spectrum of skills – the areas of business that are not yet franchised, whether that’s

service oriented or retail, are minimal. Australians have embraced the franchising model, and there are consistently new brands entering the arena. Although that doesn’t mean there are a whole host of fresh concepts, though these do pop up. However a franchise doesn’t have to have the first-mover advantage; coffee, pizza and home services are three markets that have strong representation across a number of franchise brands. But points of difference really count. Oversaturation in some markets is almost inevitable – the taste for frozen yogurt for instance has tempted many entrepreneurs into the arena but the highly competitive landscape and the fact that no key players have emerged to dominate the market are two pointers indicating the challenges of operating in this sector. JUL/AUG 2014 | 15 | WWW.FRANCHISE.NET.AU

SO WHAT IS THE HEALTH AND WEALTH OF THE FRANCHISE INDUSTRY OVERALL? A regular bi-annual overview of the franchise sector entitled Franchising Australia is conducted by the Griffith University’s Asia-Pacific Centre for Franchising Excellence and the 2012 version has been quoted in this article. Look out for the 2014 update later this year. In addition market research firm IbisWorld has published its own report, drawing partly on the Franchising Australia information and a PwC publication and we have highlighted some of the findings. Our own survey conducted online through www.franchisebusiness.com.au in 2013 has also indicated certain trends which we can share with you here. »

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FRANCHISING REPORT FROM IBISWORLD FRANCHISING IN AUSTRALIA Unchained stores: Demand for service-based franchises helps industry return to growth. Author: Claudia Burgio-Ficca The state of the industry as recorded by IbisWorld indicates growth is likely to come from the service based franchises, and from the online retail market. As we have heard before the health and community services are forging a place for themselves as the country’s population ages and needs childcare assistance. And the franchisees who are driving the sector are falling into two categories, according to the report: generation Y individuals funded through parental investment, and former corporate executives trying out their skills in a business-ownership environment.

LEVEL OF COMPETITION

TOUGH: food retailing

EASIER: niche areas - day spas and beauty

MARKET SHARE

According to IbisWorld the top three players combined have less than five percent of market share

WHAT BRINGS ABOUT POOR PROFIT LEVELS?

KEY SUCCESS FACTORS FOR FRANCHISING ● Loyal

customer base ● Strong position in the market ● Franchisor’s business expertise ● Stock control ● Established brand names ● Knowledgeable employees

HOW TO ACHIEVE GROWTH The new age economy, which includes recreation, personal services, health and education, is LABOUR INTENSIVE. The way forward: brand awareness and skills. A traditional service economy - think wholesale and retail - is also LABOUR INTENSIVE. Growth comes from IT or staff training. In the CAPITAL INTENSIVE investment economy (finance, real estate, communications) good debt management, stable macroeconomics and a solid investment plan will help build business.

● Assuming

the business will run itself ● Failure to follow systems and procedures ● Over-capitalised expansion

THE RISE OF THE SUPER FRANCHISE

TRENDS IN MOTIVATION FOR FRANCHISE INVESTMENT*

Aggregated businesses boost profit levels

Greater income & wealth building potential

Greater job satisfaction

27% Have greater control of how I do things

42%

29.8% 34.8%

MOST POPULAR SECTORS* ● Food and beverage ● Coffee franchises ● Fast food ● Home based business

McDonald’s Australia [est share 1.2%]

Retail Food Group [est share 1.2%]: Donut King, Brumby’s Bakery, Michel’s Patisserie, Esquires Coffee Houses (in bb’s café), Pizza Capers Gourmet Kitchen, Crust Gourmet Pizza Bar, The Coffee Guy.

More flexibility & lifestyle balance WHO ARE YOU GOING INTO BUSINESS WITH?*

32%

39%

Yum! Restaurants Australia [est share 1%]: Pizza Hut, KFC

SOURCE: INFORMATION IBIS WORLD EXCEPT *FRANCHISE BUSINESS INDUSTRY SURVEY 2013

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TOOLS &

TRADES:

MARKET REPORT

andymen franchise systems are hammering home their brand advantages and showing strong growth across Australia according to a report released by market research firm IbisWorld. ^ Over the past five years, the sector has benefited from the lack of available time

and skills among the general population wanting to complete manual tasks around the home. As a result, the industry has grown at an annualised 3.2 percent over the five years through 2013-14 to total $881.9 million. The steady rise in the number of households over the past five years has helped drive this growth. IbisWorld industry analyst Ryan Lin says “As more house-

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holds take up residence in new dwellings, demand for industry services to make alterations or perform maintenance work is likely to increase.” Australian homeowners have also boosted their capital expenditure in their houses, and this is forecast to be significantly higher in 2013-14 than in 2008-09. Industry revenue is forecast to grow by 3.3 percent in 2013-14 as a result of stronger demand. »

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THE HANDYMAN SECTOR The tradesman and handyman sector shows a moderate level of market share concentration according to IbisWorld Industry Report Tradesman and Handyman Franchises in Australia, May 2014. The established systems Jim’s Group Pty Ltd, VIP Home Services Pty Ltd and Hire A Hubby account for a significant portion of industry revenue between them. But outside these recognised brands the industry is highly fragmented, the report indicates.

KEY SUCCESS FACTORS

Many of the franchised systems do not operate nationally and are confined to regions or trade within a single state.

SOURCE:IBISWORLD INDUSTRY REPORT OD5522 TRADESMAN AND HANDYMAN FRANCHISES IN AUSTRALIA, MAY 2014

1. A good reputation 2. A clear market position 3. Qualified workforce 4. Ability to compete on tender 5. Ability to judge demand according to market conditions

competition, the internal rivalry will heat up, pushing the profit levels down and causing many tradesmen and handymen to broaden their skill bases so that they can provide a wider range of services for prospective clients. In 2018-19 the profit level for the franchise handyman sector is expected to drop to 46.7 percent of revenue.

Industry operators are typically sole traders undertaking jobs such as gardening, building maintenance, plumbing, fencing and painting. Increasingly they are turning to franchised brands to give themselves a competitive edge. IbisWorld expects the handyman and tradesman franchises to continue their growth over the next five years, and for yet more systems to enter the franchise arena. Over the past five years, the number of handyman businesses has grown to 7,787. Many of these are conducting their franchise operations themselves, with little growth in employee numbers. In fact, wages only account for about 4.3 percent of revenue in 2013-14.

INDUSTRY OUTLOOK IbisWorld predicts a continued growth in this sector for the next five years with revenue forecast to reach $981.8 million (annualised growth of 2.2 percent). But while the analysts anticipate the sector will remain protected from external

Over the next few years home-owners are expected to stay put and to increase their spend on refurbishing, renovating and maintaining their properties; and because of the focus on lifestyle balance, these consumers are more likely to turn to tradesmen to complete the jobs.

power tools and sophisticated machinery and depreciation costs are forecast to reach 3.7 percent of industry revenue this year.

FRANCHISES IN THE FIELD THE JIM’S GROUP MARKET SHARE 30.9% Jim Penman, founder of the Jim’s Group, disagrees with the $272.1 million revenue estimated by IbisWorld for the business over the 2013-14 period. “Jim’s Group does not have precise figures on the turnover of different Jim’s divisions, but the total figure would be closer to $500 million,” Penman says. “The growth has been far greater than four percent in recent years, with the establishment of entirely new divisions such as plumbing and electrical, now Australia-wide. “Saturation is certainly not an issue for the Jim’s Group. In the past year, Jim’s Group turned away 81,645 requests for work (unserviced leads) because we were unable

WHAT TO WATCH FOR The importance of business building through personal recommendations will be highlighted, particularly in those less-populated areas where an individual tradesman with a strong profile in the neighbourhood has a stronger hold than a franchised business. Increasing competition between franchised brands will mean each system will require a competitive edge and will also become more demanding in franchisee selection to ensure brand image and operator skills are maintained. “A battle of branding, marketing and advertising is likely to occur as a result, with franchise operators incurring larger marketing expenses in a bid to out-promote their rivals,” the report reads. As a consequence, franchise fees are expected to rise. On the costs side, this sector is dependent on JUL/AUG 2014 | 20 | WWW.FRANCHISE.NET.AU

CREDITS: LEFT - MRDOOMITS, RIGHT - JOHNNYSCRIV, ZDRAVKOVIC (THINKSTOCK)

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SWEET REWARDS of becoming a Gelatissimo franchisee To change your lifestyle through investing in a business that is fun, flexible and rewarding contact Karen at Gelatissimo on (02) 8845 0100 or email franchise@gelatissimo.com.au.

gelatissimo.com.au

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THE INDUSTRY

● LOW LEVEL ENTRY ● LOW REVENUE VOLATILITY ● LABOUR INTENSIVE OUTDOOR SERVICES:

BUILDING STRUCTURE: brick laying, concreting, roofing, steel structure erection [increasing]

SERVICES

BUILDING COMPLETION: plastering, tiling, carpentry, painting, decorating, glazing [staying stable]

brick paving, excavation work, fence building, garden maintenance, lawn cleaning and mowing [declining]

CUSTOMER BASE Households Residential builders/property managers Non-residential builders/property managers SMEs

SOURCE:IBISWORLD INDUSTRY REPORT OD5522 TRADESMAN AND HANDYMAN FRANCHISES IN AUSTRALIA, MAY 2014

“Advertising costs per franchisee have gone down in recent years. Some franchisors, especially in divisions such as fencing and mowing, find it near impossible to spend the franchisees’ advertising contribution because of the large volume of work, and must spend the money in other ways, such as by providing replacement stickers for trailers/ vehicles. “Franchise fees have not been increased at Jim’s Group for more than 20 years, apart from the addition of a 'branding fee’ of approximately $6 per month to help with national campaigns. Jim’s Group has no intention of increasing the fees, and our contracts actually make it impossible to increase fees on current franchisees.

“The limit to the growth at Jim’s Group is the lack of suitable franchisees. Jim’s Group has a number of strategies that we are investigating to combat this issue.”

V.I.P. HOME SERVICES MARKET SHARE 10% Bill Vis, co-founder of VIP Home Services concurs with the findings that more people are looking to renovate and enhance the appearance of their home. “This does generate more opportunities for our franchisees. In order to stay relevant in a competitive market we provide customer service training and skills training in various areas such as systematic cleaning, pruning and landscaping to ensure our franchisees can do more than just mow lawns. The company

extends its offer to services such as carpet, window and computer cleaning. “It’s making sure that as a franchisee, you can provide a range of services that the customer needs. It’s easier for a customer to deal with one person for all services. This helps to build strong customer relationships and customer loyalty,” says Vis. “Having a strong brand that customers can trust to be reliable is paramount in getting the customer to pick up the phone to book the job. We were the first to franchise in home services. We have been in this sector for a long time and have worked hard to build a brand based on solid foundations of trust, reliability and honesty. “In a competitive and saturated market place these values need to come through strongly to customers and also need to be

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lived by our franchisees across everything they do,” he adds. “While we do have over 1,100 franchisees across Australia and New Zealand, there is still a great deal of potential for us to expand our franchisee base across the country. We are focusing on our core areas being home cleaning, commercial cleaning and lawns and gardens to ensure that we have a superior product offering from our marketing, through to our franchisee support and customer service. We believe there is still a huge amount of potential in our sector.” F SOURCE: IBISWORLD INDUSTRY REPORT OD5522 TRADESMAN AND HANDYMAN FRANCHISES IN AUSTRALIA, MAY 2014

CREDITS: ILLUSTRATION - MICHAEL BEVAN

to service them. In the fencing division alone, around half of our leads went unserviced.

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? WHAT IS A

FRANCHISE

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hile Wikipedia describes franchising as 'the practice of leasing for a prescribed period of time the right to use a firm’s successful business model and brand’ if you are poised to invest in a franchise the definition needs to go deeper. ^

A franchise is a way of structuring a business, writes Felix McKnight. Generally, it involves the owner of a business (known as the franchisor) licensing to a third party (known as the franchisee) the right to operate a business or distribute goods and/ or services using the franchisor’s business name and systems (which varies depending on the franchisor) for an agreed period of time, in return for a fee. The franchise fee may be an upfront payment by the franchisee to the franchisor, an ongoing fee (e.g. an agreed percentage of revenue or profit) or a combination of the two. Franchising is an alternative to the franchisor building a chain of stores. Franchising has grown rapidly in Australia in recent years, particularly in the small business sector. Annual revenue from franchising exceeds $100 billion and franchises employ over 500,000 people. Its success can be attributed to the fact that franchising provides incentives to both franchisors and franchisees, as they both share in the success of the business operated by the franchisee.

WHY WOULD YOU BUY A FRANCHISE? There are many reasons why someone would choose to invest in a franchise business. Each individual will have their own incentives for buying a business in a franchise network but the key drivers for franchise investment are common. There are incentives to the franchisee in owning and operating its own business. Monetary rewards are directly related to the efforts of the franchisee. In some respects, it is easier for the franchisee than starting up their own business. A franchise should have a brand that is well established. In Australia, franchises are regulated by the Franchising Code of Conduct, which is administered by the ACCC. This provides legal protections to franchisees, in particular it requires the franchisor to make disclosures to prospective franchisees (e.g. financial information) and allows a franchisee to change its mind and walk away within seven days of signing the initial franchise agreement. The franchisor generally provides assistance in identifying suitable business locations, which should

CREDITS: DHSAJKDHAS (IMAGE 1)

FELIX MCKNIGHT Legal practice director of LegalVision. He has more than 15 years of experience in corporate and franchising law and provides commercial and legal advice to small and medium sized enterprises.

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The franchise fee may be an upfront payment by the franchisee to the franchisor, an ongoing fee (e.g. an agreed percentage of revenue or profit) or a combination of the two

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minimise the risk of the franchise not operating successfully, and setting up so that it is ready to open for business. The term can be flexible, it could be as short as one year or have no fixed term and last forever. The franchisor generally provides ongoing support, training and knowledge (including of their past mistakes). This may be specific to their business model or general business training in areas like marketing, merchandising and accounting. Buying one is generally cheaper than starting your own business. If the franchise sells goods, the purchase price of the franchisee is generally cheaper than if it

You have to abide by your agreement, which could include onerous terms. Review it carefully, and if necessary seek legal advice

were a stand-alone business as the franchisor should have access to bulk discounts. The franchisee indirectly benefits from advertising by other franchisees.

Franchisees may be protected from competition (certainly within the group), depending on the terms of their franchise agreement.

5 THINGS TO CONSIDER When you are conducting due diligence, make sure you address the following: 1. The franchisor may impose restrictions as to how their business may be operated. 2. You have to abide by your agreement, which could include onerous terms. Review it carefully, and if necessary seek legal advice. 3. The franchisee generally has to make ongoing payments to the franchisor. This is an important issue for small

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business, particularly during the early stages of operations. 4. You may have to make an upfront payment to the franchisor, with no guarantee of success and no refund. How do you assess the likely prospects of a franchise? If you receive information from the franchisor about past successes, how do you know it’s true? It can be difficult. 5. What happens if the franchisor goes bust? This is always a risk.F

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Love Photography. Love Real Estate. It’s time to own a Top Snap Franchise! You don’t have to be a professional photographer or have owned a previous business to become a Top Snap franchisee. Our franchisees come from all walks of life with different sets of skills and experiences. If you love photography, we provide all the training you need to become a Top Snap franchisee. With all retouching done in-house, all you need to focus on is the photoshoot and building relationships with your clients.

Simon Draper, franchise owner in Geelong, says, “I was looking for a business that satisfied my interest in real estate and enabled me to work locally. The fact that the Top Snap business model is primarily B2B and in my opinion almost ‘recession-proof’ made the opportunity even more attractive. Whilst having my own company, I do feel a great deal of support from the Sydney office and indeed other franchise owners. Being part of a team allows me to focus on growing my business and learning from those who have experienced the same process in the past. Whilst new to the industry, I do feel that I have an advantage over much of my competition with the diverse product range Top Snap can offer its customers.”

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NAOMI MITCHELL Partner of leading Western Sydney accountancy and business advisory practice YCG

WHERE IS THE

PROFIT? H

ow can you make a profit out of your franchise investment? Here are some tips on what to look for before you buy. Franchising can be a great way to own and run your own business while tapping into the security provided by a proven franchise system. The backing of a strong brand name, established systems and knowledgeable advisors could be the difference between your businesses’ success or failure. ^

CREDITS: DIGITAL VISION (ALL IMAGES)

However, it is still important to approach franchise opportunities cautiously because ultimately you will still be responsible for running the business – hiring staff, handling customer complaints and ensuring continuous profitable operation. My first question to clients exploring a franchising opportunity is simple – do you understand the nature of a franchise? This is because the nature of franchising means that the franchisor will provide most of the initial design specifications, such as store décor, signage, uniform and product range and

as a result, most of your focus will be channelled towards the day-to-day management of the business. However, these restrictions probably won’t be suitable for individuals with a more entrepreneurial or creative streak who’d prefer to exercise a greater degree of individual control over their service offerings. While this first assessment is an important indicator of your suitability for owning and operating a franchise, several other points should be examined before signing any agreement to ensure you’re entering into a profitable opportunity. »

Where businesses are negatively-geared, budgeting for the costs of financing should additionally be stress tested to take into account any interest rate fluctuations and their potential impact on your bottom line

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CHECK YOUR FINANCES A common misconception among potential franchisees is that the franchisor will provide the financing to establish the franchise. However, it’s unlikely that the franchisor will provide capital to assist you with setting up what will ultimately be your business. This doesn’t negate the benefits of partnering with a franchise to establish your business, however, it means you will need to account for the probability of financing the majority of your operation – including upfront payment of any franchise fees and associated establishment costs.

It should also be of concern if your budget is showing profitability too early

ment (ROI) your franchise will generate. As a rule of thumb, I generally recommend your business plan show profitability after two to three years. If profitability within this timeframe appears unlikely then it’s possible that the eventual return on your investment will fall below what you may be able to find elsewhere. It should also be of concern if your budget is showing profitability too early. This may indicate the franchising system is underpriced and that it might be worth examining the value provided by this system over establishing your own independent operation. Finaly I suggest examining your budgeted trading profit separately from overheads such as interest, franchise fees and rent. By separating this trading profit from your routine overhead costs, you’ll be able to make a more informed decision on the business's underlying profitability. By conducting this analysis, you may find that the underlying trading profit your business generates is small and as such, could easily be wiped out by environmental factors or a downturn in the economy.

THE FRANCHISE DISCLOSURE STATEMENT

Financing is likely the first serious barrier that any potential franchisee will run into and may require drawing down on personal savings or taking out a small business loan. Where businesses are negatively-geared, budgeting for the costs of financing should additionally be stress tested to take into account any interest rate fluctuations and their potential impact on your bottom line. I also recommend critically evaluating the Return on InvestJUL/AUG 2014 | 30 | WWW.FRANCHISE.NET.AU

The franchise disclosure document is a key starting point which contains a wealth of knowledge, pertaining to initial fees, royalties, start-up costs, working capital and, importantly, raw material costs. It’s common practice for a franchisor to insist the franchisee purchases raw materials directly from themselves or a preferred supplier, due to special relationships allowing franchises access to special pricing. Though most of the time this will result in savings for your business’s bottom line, it’s still important to

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ascertain whether individual suppliers will, in fact, result in cost-savings. When you’re examining these arrangements, it may be worth conducting a profit analysis product line by product line as this will be useful for identifying any potential unprofitable products which might be increasing or reducing the potential profitability of your business. At this point (if not earlier) it is also worth engaging a lawyer, accountant and possibly a

business adviser to guide you through the fine points of this document and form the basis of a guiding team to assist with the establishment of your business.

WHAT ARE THE ROYALTIES? Another important aspect of the franchise arrangement discussed in the franchise disclosure document pertains to the royalty fee structure. Royalty fees are charged for ongoing support provided by the franchisor, and for the continued use of their intellectual property including brand and systems. It’s usually calculated as a percentage of the franchisee’s total turnover or as a set amount for the term of the franchise with an allowance for inflation. As a result, there will often be substantial pressure on franchisees to increase their turnover, a measure that doesn’t necessarily lead to increased profitability. This is primarily because as turnover increases, so does the amount of inventory on hand, wages and other associated business inputs. Because increased turnover doesn’t necessarily lead to an increase in profit, it’s important for prospective franchisees to forecast for the potential

activity levels of their business and evaluate the net profit at each different activity level. When modelling this activity it can be worthwhile examining useful data sources, such as the Australian Bureau of Statistics, who supply information which can inform the budgeting process such as the average gross profit, average turnover and average labour cost of businesses in your industry. I also recommend being particularly careful when modelling the first year of businesses’ operation, especially for franchises in the food industry. This industry typically experiences high wastage in the first year of operation due to a lack of understanding of the flow of business and other seasonal factors. Even if you’ve previously worked at or managed a similar business, it’s important to add this margin of safety as operating conditions and the flow of business varies from area to area and street to street.

CONTROL YOUR TERRITORY Of equal importance is the assessment of territory control. Ideally, the franchisor will give you exclusivity over a broad

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It’s important you make yourself familiar with the legal and commercial ramifications in relation to territory locations and your ability to enforce exclusivity rights

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territory, ensuring you only have to worry about dealing with competition from other local businesses and franchises. However, the size of this territory is heavily dependent on the franchise’s business model, as some large franchise systems depend on operating as many locations as possible to minimise local competition from other franchise systems. It’s important to be aware of any restrictions and conditions when it comes to territory control. Some franchise agreements specify a first right of refusal to existing franchisees if an application is received to open a franchise in their territory. This option should be carefully considered when evaluating a franchise opportunity as you may need to exercise this option at relatively short notice, so it’s important you make yourself familiar with the legal and commercial ramifications in relation to territory locations and your ability to enforce exclusivity rights. Finally, I’d like to stress the importance of knowing your F RThe 0 1quality 1 4 _ of 0 the 0 0 location _ LI S area.

could be potential customers for the site. Information on surrounding truck stops and their facilities will also be of tremendous advantage, as you’ll be able to identify competitors (both direct and indirect).

of a franchise is an important factor and can be the difference between profitable or marginal operation. A demographic survey is an effective tool for evaluating whether your proposed territory contains enough target customers.

Opening a franchise can be an exciting journey for everyone involved. However, as with any business endeavour it’s important to begin this journey with open eyes and critically evaluate the opportunity, associated costs and long term viability of your investment. By drawing on the experience and expertise of an accountant or business advisor you’ll have another pair of knowledgeable eyes to help ensure you give your business the best chance of success.

It is worthwhile examining historical records to discover the types of businesses which have previously succeeded or failed in the area to further your understanding of the territory’s demography and demand. Demography will typically be one of the biggest influences on the profit you’re able to derive from your territory, as establishing the wrong type of franchise in the wrong territory will likely result in substantial losses. Don’t forget to evaluate the value of each information source for your specific franchise type. For example, the demographic data for a location for a truck stop food outlet might indicate a lack of population in the surrounding area.

FOUR PLACES TO FIND YOUR PROFIT

However, a traffic survey would be a much more useful information source in this case as it would indicate the number of 1 (and 2 0 1passengers) 3 - 1 1 - 2who 7 T vehicles

1. Find out what’s happening: you’ll likely have systems in place already to analyse your business’s performance. These systems can be used to identify which products or product lines are profitable, and reduce or eliminate production of unprofitable items, providing you 1 with 6 : 4additional 1 : 3 1 +cash 1 1 flow. : 0 0

Thinking of becoming a Franchisor or Franchisee? Franchising is an exciting business opportunity but requires specialist legal advice. MST Lawyers is widely recognised as one of Australia’s leading franchising law firms. We advise franchisors, franchisees and suppliers to the franchising sector throughout Australia and internationally on all aspects of franchising. Our dedicated team practices exclusively in franchise law. We offer fixed fees for a variety of franchise work.

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2. Pay-down debt: by transferring your cost savings into paying down debt, you’ll multiply their effect. Debt can be a hidden drag on a business’s profitability and, in most instances, minimising it should result in further cost savings and, eventually, increased profit. 3. Compare yourself: information providers such as the Australian Bureau of Statistics provide some interesting, relevant insights into business’s financial performance, such as the average cost of labour and cost of goods sold for a range of industries. While these won’t necessarily directly apply to your business, they are useful starting points to compare against your budgets to see if you’re over (or under) spending in any area. 4. Check your budget: for some business owners, budgeting is a ‘set and forget’ exercise, however I firmly believe it shouldn’t be. By comparing your actual results to your budget, you’ll be able to identify over expenditure (and associated cost savings) which could help your business’s profitability. F

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F OCUSONWHA TY OUDOBE STANDGE TT RADI NGF AST E RWI T HUST ODAY!

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HONESTY TRANSPARENCY COMMITMENT

an you afford your dream business? Dreams can turn to nightmares for people who buy a business they can’t afford or that can’t support their lifestyle. That’s why it’s important to be completely honest with yourself about the money side - even when you’ve set your heart on getting into business.

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KATE GROOM Co-founder of The Franchise Accountantâ&#x20AC;&#x2122;s Network and Smart Franchise. Together with her business partner, Peter Knight, she helps franchisees learn how to make wise financial decisions

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BUYING A BUSINESS INVOLVES FINANCIAL RISK At some stage, most people have bought something expensive and taken out a loan to pay for it - such as a car or a house. It might have been a stretch to make the repayments at first, but as years go by their salary increases and loan repayments consume less of their income, even when the interest rates rise. With this type of purchase the costs tend to be fixed. There might be an occasional repair bill but from the outset most people have a clear idea where they stand financially. But it’s different when you start a business. There is greater uncertainty about the financial aspects. For instance, the start-up costs tend to vary (even in a franchise), first year sales are quite likely to be different from your initial plan, and the costs of running the business may prove to be higher (or lower). On top of that, your personal financial needs may change.

is part of being in business. But the prudent business owner will seek to identify and manage financial risk. They are honest about the numbers with themselves, their spouse or partner, and the franchisor.

THE DANGERS OF OPTIMISM When anyone is considering a business opportunity, there are three areas in which they might be tempted to be optimistic about the numbers: 1. The amount of their own money they can afford to put in to the business 2. How much they can afford to borrow 3. How much income they need to live on

We’ve seen people who are financially stretched and make significant financial sacrifices yet end up very satisfied with the choices they made. There’s no doubt that some people who take a chance do very well indeed

For anyone to start a franchise search without a clear understanding of their financial position leads them closer to disappointment: it’s possible to discover the business they have set their sights on is out of their league financially and they could decide not to go ahead. However, a little extra thought about the process early on could steer them in the direction of more appropriate and R 0 5dealing 1 4 _ with 0 0 0uncertainty _ BRI 1 2 0affordable 1 4 - 0 business 4 - 1 7 T 1 0 : 5 4 : 0 7 + 1 0 : 0 0 opportunities. Of F course and risk

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BUT NOT EVERYONE: SOME PEOPLE STRUGGLE

The start-up costs tend to vary (even in a franchise), first year sales are quite likely to be different from your initial plan, and the costs of running the business may prove to be higher (or lower). On top of that, your personal financial needs may change

The bigger problem comes when somebody becomes so committed to a franchise that they proceed regardless of the financial picture. They might even feel so confident that they don’t look carefully at the financial side of the business during due diligence. The passion for the brand and their excitement about the opportunity override the need to stand back and review the business with a F R 0 eye. 9 1 3 _ 0 3 9 _ CAF 2 2 cautious

Somehow they find the money to get started. They might budget for a lower income than they are used to, at least for a little while, but in their mind they expect rivers of gold to flow in the future. Sometimes it works out. We’ve seen people who are financially stretched and make significant financial sacrifices yet end up very satisfied with the choices they made. There’s no doubt that some people who 0take 1 3a -chance 0 8 - do 1 5very T 1well 5 : indeed. 0 5 : 2 0 + 1 0

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They may begin to resent having less money to hand, unable to fund the lifestyle they have set as a goal. Perhaps they work very long hours to save on staff wages, or hold back on marketing and sales efforts to save money. Cost saving measures can be good for a business, but sometimes cutting back has an impact on the effectiveness of the operation, it can eat away at the confidence of the team and the franchisee. This can lead to a feeling of dissatisfaction with the franchise, even if the financial results are in line with what was learned during the due diligence process. These things can also have a significant impact on family relationships. All this can turn into a downward spiral.

BE HONEST WITH YOUR FRANCHISOR It’s also essential to understand the level of commitment the franchisor expects from the franchisee. Each system varies – some : franchisors 0 0 quite happy to let franchisees

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set their own pace and work the hours that suit; others more focused on benchmarking the network and driving franchisee results. Clarification about expectations on both sides will only improve the decision making process and lead to a more fruitful franchise relationship. And that applies equally to the focus a franchisee will give to the new business. For many people the opportunity to build a franchise business is the complete goal and all their energies and resources will go into achieving this. For others, a franchise might be part of a portfolio of investments that might include stocks and shares and property. For them, the financial aspects of the business will be off-set by whatever else is happening in their investments, and their attention may be spread across the portfolio. A hands-off approach will work in some franchise systems, not so in others. An honest appraisal of how much effort can be directed at the franchise will pay off; transparency of intent will help match the right franchise to the franchisee.

BE HONEST WITH YOURSELF We’re all for people 'having a go’ in business; we know from our own experience that it can be very rewarding. But before you get too far down the track of investigating a franchise, it’s a good idea to think carefully about how much you can afford to invest and how much profit you really need to bring in; this will help you assess the financial side of the franchise.

FIVE WAYS TO REVIEW YOUR FINANCES 1. Add up your assets (what you own, for instance your house) and your liabilities (what you owe, for instance your mortgage). The difference is your net worth. Ask the franchisor if this is within their guidelines for approving a prospective franchisee. 2. Work out how much cash you can invest in a business. Even if you are able to borrow some of the money for a franchise you’ll also need to invest some of your own cash. Just like a deposit for a house, this is an important part of reducing risk for you and supporting a loan application.

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3. Consider how you will repay any loans you take out. This might be from the business, if a bank will lend on that basis, or perhaps your spouse or partner has a job that can allow you to borrow against your home. 4. Understand your personal cost of living. What is fixed (mortgage, school fees, regular bills) and where there may be flexibility (food, holidays, entertainment). Work out what you’re prepared to sacrifice in order to support the business and for how long. 5. Engage an accountant to prepare a budget and cash flow forecast for the business. This should take into account high, low and average sales and costs so you can see how the financials look if business doesn’t go as well as you hope at first. You can also ask the accountant to assess the financial risks of the business, so you can work out how to address them. F CONTACT KATE GROOM WWW.FRANCHISEACCOUNTANTSNETWORK.COM WWW.SMARTFRANCHISE.COM.AU

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The Alternative Board

Tax Assist

Outstanding ROI, consistent, outstanding revenue stream, shared best practices with worldwide network of master franchisees. Proven marketing & sales systems, low working capital, great work/life balance.

Award winning franchisor that provides training, marketing & support to master franchisees internationally, with a strong, robust brand & business model in the market place, TaxAssist Accountancy & taxations services target to SME.

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Featuring...

Franchising Expo!

See you in Brisbane and Melbourne!

Providing Invoice Finance Services to its customers. Invoice Finance is a financing facility provided to businesses who have outstanding invoices but they can’t wait for those invoices to be paid. $50k

Sergios Cake Shop

Sydney’s Premier Cake Shop chain now available for franchising. Exceptional profit opportunity. Simple to run with all products delivered fresh into your store so no baking experience or equipment required. $300k

Monkey Mania

Indoor Children’s Play Centre, with state-of-the-art play equipment for ages 1-12. Proven and Tested formula with 3 main revenue streams.Strong brand and established training. $500k+

Taste of Europe

European Bakery, Patisserie and Cafe. Australian owned, simple yet rewarding franchise opportunity. Artisan breads and pastries baked daily on site, yet no baking experience required. Enquire now! $220k

Handyman Now

‘Be your own trade boss’ Handyman Now for trades of all sorts. A safe, trusted and competitive business with a very strong focus on customer service and satisfaction. $30k+

Shihlin Taiwan Street Snacks

A Shihlin Taiwan Street Snacks franchise offers an excellent business model in the retail food industry. Established and loved by many in Singapore, Malaysia & Indonesia now available in Australia. $250k+

$30k

FIFO Capital

$70k

Exceptional branding, centre design , marketing & management skills. Brand leader of children’s indoor play in Melbourne. Great cashflow and profits, franchising Auswide. $350k+

$50k

Croc’s Playcentre

$75k

$15k

Medical Industry. Expanding across Australia with a fantastic franchise offer. Looking for doctors or practice managers to become clinic franchise owners. $95k+

An exciting, fresh opportunity! Providing fresh food, juices, coffee and smoothies, and serving it in a fast and funky environment. Franchisees Wanted! P.O.A

$60k

Sun Spot

Raw Energy

$50k

$130k

eated for Sport Clips® ur owing rketing siness.

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HOME adVaNTage

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id you know you can claim for cleaning costs and wear-and-tear on your furniture at your home business? Chris Ridd, managing director of small business accounting software company Xero, explains what you can and can’t deduct. ^

As the name suggests, a home-based business is one where you operate the business at, or from, home. That said, you don’t have to do your work at home to be a home-based business. For instance, a house painter would do most of their work elsewhere, but if they didn’t rent or own premises other than the home, they would count as a home-based business. Generally speaking, a homebased business can claim all the deductions any other SME can; yet there are also some specific deductions to be aware of. There are broadly two types of expenses you can claim related to your home business area: occupancy expenses and operating expenses.

PARTS OF THE HOME YOU USE FOR BUSINESS Occupancy expenses include rent or mortgage interest, council rates, land taxes and home insurance premiums.

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Before you can claim occupancy expenses, you have to pass the Australian Tax Office’s interest deductibility test. This means you must have an area of your home set aside exclusively for your business activities, such as an office or workshop. When assessing this test, the ATO will consider factors including whether you have a sign identifying your business at the front of your house; whether or not the business area is also suitable for domestic purposes; and whether it is used regularly for client visits. If you pass the test you can claim the proportion of your home mortgage or rent which corresponds to the amount of space you use for your business. For instance, if the floor area of your home office or workshop is 15 percent of the total area of your home, you could claim 15 percent JUL/AUG 2014 | 43 | WWW.FRANCHISE.NET.AU

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aside for home use only, you’ll have to use another method and you must be able to show how you calculated your deductions. If you get audited, the ATO will want to see that the claim is fair and reasonable and excludes the expenses associated with normal living costs. It’s a good idea to keep a diary for a four week period to demonstrate how use of your work-at-home office has increased your expenses, particularly your phone bill. Another alternative is to claim a deduction of 34 cents for every hour you work at home. This method, however, covers only heating, cooling, lighting and furniture depreciation, and you will have to work out other expenses such as phone and internet usage separately.

DON’T FORGET WEAR AND TEAR

There’s a potential sting in the tail you need to be aware of before you start deducting a portion of your mortgage. You might have to pay capital gains tax on the sale of your home if you pass the interest deductibility test. This can apply if you ran a small business from home, even if you never claimed; the issue is how much you transformed your home into a place of business.

OPERATING EXPENSES: THE COSTS OF DOING BUSINESS You can claim a deduction for any expenses in running your home business that are above the costs you would have

incurred by living in the home. Running costs include electricity and gas for heating, cooling and lighting; phone and internet costs; the decline in value of plant and equipment like chairs, bookcases and computers; as well as the decline in value in furnishings like curtains, carpets and light fittings. Cleaning costs are also deductible. Like claiming the mortgage or rent, you can only deduct these expenses for the portion of your house that you actually use for your home business – and there are different ways of working this out.

floor area of your home office is 10 percent of the total area of your home, you can claim 10 percent of electricity costs. This is the simplest method, but if you don’t have an area set

As with other deductions, you can only claim the proportion used for business, so you should also record business and non-business use of these assets in a four week diary. »

You might be able to claim a deduction for the decline in value of some of the assets used for your business

You can calculate this figure using the floor area of your home office. For instance, if the JUL/AUG 2014 | 44 | WWW.FRANCHISE.NET.AU

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of your rent or mortgage interest, council rates and insurance.

You might be able to claim a deduction for the decline in value of some of the assets used for your business, such as computers and other office equipment, electrical tools and motor vehicles, as well as furnishings, carpet and curtains.

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If the floor area of your home office or workshop is 15 per cent of the total area of your home, you could claim 15 per cent of your rent or mortgage interest, council rates and insurance

them have managed their time and it becomes their default diary that enables them to build their businesses effectively.

Working from home requires discipline, determination, and a good system. WENDY HIGGINS, HOME LOAN SPECIALIST, MORTGAGE CHOICE “Always make sure you get up and get ready and dressed for work, have your shower, get dressed professionally, have breakfast and then “go” to work into your office area, hopefully a separate area from the rest of your home. “Try and have the office area away from the home area so that your home life is not distracted by the work telephone ringing or faxes coming in. Make work hours rules and stick to them. “I didn’t do either of these very well to start with and had business development managers knocking on my door and I hadn’t done my hair or makeup and was embarrassed - I quickly learnt to be “ready” for work.”

Joe PioVeSaN, CEO OF NATIONAL BOOKKEEPING FRANCHISE FIRST CLASS ACCOUNTS “A home-based business is a great way to establish a healthy work-life balance, however on top of having a basic understanding of marketing and business principles you must possess the right attitude, dedication and commitment to be successful. “With a home-based franchise, it’s important you treat it like a real business and not confuse it with your domestic responsibilities.”

TraCey VoyCe, DIRECTOR, BLOOMTOOLS “Our franchisees often start their business with us by working from home as it enables them initially to minimise the expenses until they build up their residual incomes and are ready for an office, adding additional staff, and taking their franchise to the next level. “But like any business owner, it is important they keep focused, cover all areas of their business, and give priority to important areas without any distractions from home or within their businesses. “To do this, we give our franchisees an idea of a typical week; this has been modelled on how franchisees before

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“Each day has blocks of times dedicated to common headings such as client calls, sales, marketing, learning, operations, admin, weekly HQ business/sales coaching sessions - but also provides for time slots dedicated for things they may put off such as accounting: these we add to the beginning of a day to ensure they get done. “Because our new franchisees initially spend a majority of their time on sales and building up networks we block out at least three days for this, so they are solely focused on this aspect of the business on these days. “Overall our franchisees love their default diaries as it is a powerful guide that still gives them the freedom to do what they want to do and when. But it keeps them focused, shapes their days, enables them to be more efficient in their working weeks and they spend their time on things that have made other franchisees successful.” F

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GETTING IT RIGHT

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GOOD HAIR HAS ITS REWARDS JOIN THE LEADING HAIR AND BEAUTY BRAND

HAIRHOUSE WAREHOUSE is Australia’s leading hair & beauty brand, with plans to expand its network by 20% over the next 3 years, across the nation. We are looking for passionate people with a desire

Do you have what it takes to be successful?

to strive for results and take control of their own destiny. Whilst hairdressing experience is not required,

Franchisees are able to own their piece of one of

strong work ethic and drive is essential.

Australia’s largest retailer, and build their business

What sets us apart from the rest?

faster. So if you want to start achieving your goals, now is the time to join, with Hairhouse Warehouse

• A proven profitable turnkey operation

offering up to 30% reduction in the entry costs for

• Multiple revenue streams, including retail,

all new stores. Locations are available in all states

hair salon, piercing and beauty services

and territories in Australia.

• Extensive training and support from

a dedicated team of professionals

• Exclusive stockists of world leading brands

and the most lucrative merchandising terms

CONTACT PETER FIASCO for a confidential discussion on 0451 370 060 www.hairhousewarehouse.com.au/franchising

www.hairhousewarehouse.com.au/franchising

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hy local area marketing matters and how to do it right. By Samantha Roach. Getting the support of a recognisable brand is one of the significant benefits for a franchisee. Successful franchisees understand marketing and know how to leverage the brand awareness that comes with the franchise, and are able to turn this into successful marketing, at least at a local level. ^

Local area marketing (LAM) involves identifying and implementing marketing opportunities in local communities by engaging positively with individuals, groups, organisations, businesses and local media. A pro-active and sustained LAM program will increase the individual franchisee’s own profile as a dynamic member of their community and will increase overall brand awareness of the franchise system and its role in the community. Far too often though, franchisees believe their marketing finishes when they contribute to the national fund. While the national fund is certainly used to promote the brand, it is also used to pay marketing costs such as creative design, website, online media, national sponsorships, print and electronic media.

HOW FAR CAN A FRANCHISEE GO WITH THEIR OWN MARKETING? The great majority of franchise agreements stipulate that no local area marketing can be conducted by franchisees without the approval of the franchisor. This should be standard across all agreements. A lot of money is invested by the franchisor to develop, promote and maintain the integrity of their brand. Your franchisor may provide you with some guidelines and recom-

SAMANTHA ROACH mendations for conducting your own local area marketing. A lot of good franchises have local area marketing portals which allow all franchisees to utilise artwork, ideas and campaigns that have been created and have worked successfully for other franchisees. If potential franchisees consider altering logos, creating different themes and colours, changing tag lines and USPs, then they should ask themselves whether they want to be part of a franchise or create their own business.

General manager, marketing, comunications and PR at FC Business Solutions

The success of a franchise is the brand, how that brand is promoted, how that brand engages and how that brand drives sales. The LAM program must complement the system’s national marketing plan and all LAM activities should be consistent with the system’s over-riding marketing plan.

GET ACTIVE IN THE COMMUNITY However, it is also vital for a franchisee to form a relationship with the local community and local media to help generate local loyalty to their business. By actively and consistently engaging in the local community and with local media outlets, you will not only help drive the success of your own business, but will contribute to the overall success of the brand. JUL/AUG 2014 | 48 | WWW.FRANCHISE.NET.AU

T L A L

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However, it is also vital for a franchisee to form a relationship with the local community and local media to help generate local loyalty to their business

HOW TO DEVELOP YOUR LOCAL AREA MARKETING 1. COMMUNITY RESEARCH When developing a local area marketing plan, your first step is to get to know your community. If you’re lucky, you will already know the local area quite well, you may even live nearby. If this is the case you will be well prepared to develop your local area marketing plan. However, if your franchise is located in an unfamiliar area, it’s important that you do your research and find out more about the community your business serves. 2. WHO WILL BE YOUR CUSTOMER? You will need to consider the nature of your business. Do you need to target your marketing towards businesses, or does your business service customers walking in off the street? Are your customers likely to be: ✱ Tradies ✱ Mothers ✱ Home-owners ✱ Tech-savvy ✱ Sporty Importantly, you will need to consider the age group of your core target market.

The answers to all of these questions will allow you to build a profile of your customer base. There may be one or two, or more, distinct groups to which you need to target your local area marketing. Once you have clearly established your customer profile you will be able to more easily recognise the best locations and methods through which to communicate with your customers.

services, and may even serve as a call to action to customers to re-employ your services.

There are many ways you can communicate with your target audience; here are just a few ideas which could be applied to most business types.

Support your local community by agreeing to offers of sponsorship, or donations of prizes. Most organisations will reward your contribution by displaying your business name in promotional activities for their event or club, and your business is likely to gain a better reputation as one that cares about the local community.

3. BUILD A CUSTOMER DATABASE Communicating directly with your existing customer base is a fantastic way to encourage repeat business; encourages word of mouth; and ensures your business remains in the minds of your target audience. Do you plan to collect your customer’s email addresses? If so, you may like to consider developing a regular e-newsletter to your customers. An example of this may be a handyman business, which produces a newsletter for each season reminding customers about the appropriate household maintenance required for the season (cleaning gutters, checking smoke alarm batteries etc.). It’s a great way to provide customers with added value from your

Newsletters are a great way to communicate special offers, new products or services, and are also a fantastic way to encourage click through visitation to your website. 4. geT aCTiVe iN THe COMMUNITY

Look out for opportunities in your community where you can donate goods or services to those less fortunate than you. The local paper is a good source of potential opportunities. Word will soon get around about your community mindedness. Offer to present a talk to your local community group/chamber of commerce/local radio – you can talk about small business, your particular industry, the challenges you have overcome to get where you are – by doing so you will be engaging with your local community and informing people about yourself and your business while building the franchise brand.

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5. JOIN FORCES WITH OTHER LOCAL BUSINESSES Does your business provide goods or services which go hand-in-hand with other businesses in your area? These businesses are likely to share a similar customer base with yours. There may be an opportunity to create a joint venture with these businesses, which aims to provide a benefit to both parties. For example a tanning salon may have an opportunity to partner with a gym, as these customers are likely to share the similar trait of taking care of and enhancing their appearance. 6. DON’T FORGET ABOUT PR If your business is doing great things in your community then don’t forget to tell people about it. Get to know your local newspapers and media outlets; they are always looking for great stories to tell. Have you had any interesting customers lately? Done any unusual jobs? Does your business support any major events currently happening in your area or beyond? Do you have a heartfelt story of success or have you overcome a battle to get where you are? Try to capitalise on any opportunity to positively promote your business, to support your local community and communicate with your customers, and you are more likely to be rewarded with a community that will support your business in return. F

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WHAT’S IN THE

PACK-

AGE?

WHAT ABOUT THE FUTURE? WHAT ARE YOUR FRANCHISOR’S FUTURE PLANS? ✱ Expansion ✱ Diversification ✱ Sell out ✱ Grow

WHAT ABOUT YOU? Will you be prepared to spend much of the remainder of your business life with this franchisor? Or is this a stepping stone? If so, how? What will you need to do to step into the next stage of your career?

WHAT DISPUTE RESOLUTION FACILITIES ARE IN PLACE? Franchise Advisory Council, mediation process or none? Find out the mechanisms that are in place should a dispute arise; legal action is to be avoided where possible. Consider such potential problems before signing.

WHAT DOES YOUR FRANCHISOR OFFER THAT YOU CAN’T DO OR GET FOR YOURSELF? ✱ Specialised equipment ✱ Administration aids (product labels, logo, forms etc) ✱ Point of Sale material ✱ National advertising program ✱ On-going training programs ✱ IT Support ✱ Uniform and image The franchisors promise is to give you both an established brand name and an established business. Will it work?

JUST HOW GOOD IS THE PRODUCT OR SERVICE? Consider exactly what is your franchisor good at: ✱ Product or service ✱ Marketing ✱ Picking the trends and purchasing A great product or service is only part of the promise. Eventually that product or service will be superseded – whatever it is, you want a franchisor that has the vision and werewhithal to stay with, or ahead of, the times.

DOES THE FRANCHISOR COMMUNICATE WELL ON AN ONGOING BASIS? Communication is at the heart of a franchise network, which is a group of individuals and teams working for a common goal. What form of communication does the franchisor use for the franchisee network? ✱ Constant communication: a newsletter, an intranet, emails, regular meetings ✱ Specific events: annual meetings, avenues for franchise feedback ✱ Face to face: a field visit when you need it – what’s the frequency? ✱ Franchise Advisory Council: a group of franchisees You want to stay close to the action in your franchise system. Are the avenues of support present and established?

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How do you see this franchise purchase fitting into your personal plan?

DO YOU INTEND TO: ✱ Build it up, gain more stores or territories ✱ Sell it in three to five years ✱ Upgrade within the franchise network ✱ Use this as a stepping-stone to your own business initiative Your franchise is something you must live with daily. It must therefore make sense in terms of what you want to do with the next few years of your life. As you can see, the information you need to obtain covers the following four important aspects: your suitability to be a franchisee, the credibility of your franchisor, the business itself and the fairness of the deal. F BILL LOCKETT IS A DIRECTOR AT FRANCHISE SYSTEMS GROUP

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he value of a franchise extends beyond the operating brand name that is an appeal for so many franchisees, writes Bill Lockett. Of course, each franchise offer will vary in the detail but here’s a guideline...

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TAKE YOUR PICK!

2 business opportunities from Swimart. Work for yourself and be part of the Swimart success story. Tired of working on the tools or in an office for someone else? If you love the outdoors and have a passion for customer service, you could be running your own successful franchise business with Swimart.

1 Own

2 Own a Swimart

YOUR OWN Swimart Store

Mobile Pool Services business

With over 30 years experience in the industry and a huge network of independently owned stores, we’re Australia’s leading pool and spa specialist. A Swimart franchise offers: • Strong gross profits and low operational costs • Low fixed fees • Comprehensive training • Professional support including marketing, TV advertising and business training.

A brand new business opportunity from Swimart. • In specially selected regional and rural areas • At last, the chance to open a business in the area you love to live in! Get with the strength When you become a Swimart franchisee, you’ll benefit from: • Strong brand awareness and a powerful marketing program including TV advertising hosted by Susie O’Neill • Comprehensive initial and ongoing training through the Swimart Training Academy • Exclusive Territory • The backing of a franchisor with 30 years in the business. • Customer database of pools in your area.

ng “Nothing beats achievi success in the pool” Susie O’Neill

To find out more, call Chris Fitzmaurice on 02 9898 8608

swimartfranchise.com.au SWI2243-R

ISL-207-ADW.indd 1

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how to set up your business

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ou’ve decided to invest in a franchise and with the franchise purchase will come some of the tools needed to operate the business. But although you will be trading under a brand, quite possibly a household name, your individual business still needs a format, a name and probably an Australian business number (ABN).

So do you know which business structure will best suit your needs? The most common formats are sole trader, partnership, trust and company. Each of these structures has negative and positive elements, according to individual requirements. For instance, a sole trader is responsible for any business liabilities; there is no separate legal entity that distinguishes the business from the owner - and this might suit you. In contrast the choice of a company structure means the business itself exists as a legal entity; however there are legal and reporting obligations for company directors.

BUSINESS STRUCTURES SOLE TRADER Inseparable in law from the owner who is liable for the business. All income has to be reported on a personal income tax return. PARTNERSHIP A joint venture between at least two people who can legally share any profits but also the losses and any other risks as set out in the agreement. This requires a separate partnership tax return.

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A partnership agreement should outline the following: ✱ Partnership shares ✱ Partnership assets ✱ The distribution of any profits ✱ The process for further capital contributions ✱ Liabilities ✱ What to do in case of disputes ✱ How to end the partnership TRUST Setting up your business to be run by a trust means a third party has both legal control and a duty to operate the business to benefit someone else. A separate trust income tax return is required. The law surrounding trusts is complicated and there are limitations to the type of trust; legal and accountancy advice is recommended for this business structure. COMPANY A separate legal entity from the shareholders of the business and as such it can take legal action for any losses incurred. Company directors have legal and financial obligations to the business, and may be liable for debts in the event of insolvency. »

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Account keeping must meet the requirements of the Corporations Act. There are three steps to incorporating a business and these set out how the company will operate: ✱ Company name ✱ Lodging documents ✱ Fee payment The best business structure for your situation may not be the most obvious one: this is an area where seeking appropriate advice from

an accountant can be helpful. If you decide to change your business structure once set up there may be an impact on the business, your taxation requirements and any registrations.

government departments, and on invoices and sales documents. Businesses trading with you may withhold 46.5 percent tax if you don’t include your ABN on paperwork.

The Australian Securities & Investments Commission can offer further advice.

An ABN is required for companies intending to register for the Goods and Services Tax (GST). The ABN allows businesses to: ✱ Use a single Business Activity Statement (BAS) ✱ Claim GST credits and energy grants credits ✱ Avoid PAYG tax on incoming payments

WILL YOU NEED AN ABN? An ABN is an 11 digit number that identifies a particular business; it is used by the Australian Taxation Office and other

10 THINGS YOU NEED TO DO TO GET AN ABN: 1. If your business structure is to be a company, it needs to be registered with ASIC first; the Commission will issue an Australian Company Number. 2. Adding a tax agent number to your application will allow the agent to do work on behalf of your business. 3. Provide the legal name of the business entity (for a partnership, for instance, this is all the names). 4. You may need to provide FR 0 number 7 1 4 _ 0 0 0 _ COF F E E a tax file

5. Supply the street address, business activity and phone and email contact details for each of the premises in which the business will operate. The business office or home address will suffice if there is no permanent base; for mobiles the permanent base from which admin is conducted is regarded as the business location. 6. Provide details for a contact authorised to deal with ABN 1issues 2 0affecting 1 4 - 0the 6 -business. 3 0 T1 3 : 5 8 : 3 6

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7. Details of business associates are required: all partners in a partnership; all trustees in a trust; the public officer, company secretary and all the directors in a company. 8. Supply a description of your business activity, including the type of work undertaken - for instance, cleaning residential properties or commercial cleaning. 9. You will need to indicate the date you require the ABN - no +more 1 0 :than 0 0 six months ahead.

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REGISTERING A BUSINESS NAME

Business taxes include income tax (which might include capital gains tax), fringe benefits tax, GST, pay-roll tax, stamp duty and land tax 10 THINGS YOU NEED TO CHECK 1. Have you registered your business name? (Check the ASIC site for more) 2. Do you need to register an ABN or for GST? (If youâ&#x20AC;&#x2122;re turnover exceeds $75,000, you must register for GST) 3. Will you need to register for PAYG (pay as you go withholding)? 4. Does your business require a licence? 5. Have you taken legal advice? 6. Are you aware of any standards and F Rof 0 practice 7 1 4 _ for 0 0your 0 _ industry? I NX 1 codes

7. Have you investigated your insurance options? 8. Do you have an accounting system? 9. Do you know your tax liabilities? Business taxes include income tax (which might include capital gains tax), fringe benefits tax, GST, pay-roll tax, stamp duty and land tax. 10. You will also need to submit a declaration that the informa2 0ton 1 provided 4 - 0 6 - is1true 3 Tand 1 3 correct. : 4 0 : 0 3 + 1 0

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There is now a national registration system for business names, administered by ASIC. But not everyone needs to register their business name: for instance sole traders using their full name in the business, and partners using all their names as the operating name. Check the ASIC website for full details (see below). The Commission charges a minimal amount for registration - $33 for one year; $76 for three years. F

USEFUL WEBSITES ASIC (Australian Securities & Investments Commission WWW.ASIC.GOV.AU

The Governmentâ&#x20AC;&#x2122;s main business resource WWW.BUSINESS.GOV.AU. : 0 0

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STEPS TO BUYING AN established business

hatever the field of investment you choose, ensure you follow the right path to buying an existing business. Consider the three important steps: investigate, evaluate and negotiate, advises RSM Bird Cameron's Andrew Graham. ^

diligence process focuses on the key factors likely to affect the decision to proceed with the purchase and that affect the price paid.”

3 STEPS TO THE PURCHASE INVESTIGATE

There is much to be said for buying a business that’s already proven, and it does have its advantages over investing in a greenfield business. However buyers do need to take steps to minimise the risk of inheriting existing problems, financial or otherwise, incurred by the seller. Andrew Graham, national head of business solutions, RSM Bird Cameron, says “Before buying an existing business be aware of the advantages and disadvantages and the steps to make sure you understand exactly what you are buying and that you don’t pay too much. “It is critical that you think about ways to protect yourself from the unknowns associated with buying an existing business. For example, rather than buying the Pty Ltd company, you may buy the assets and trading name and set up a new company. That way you may avoid being caught up with any possible skeletons which may exist in the old company structure.

“Once you have evaluated the benefits and risks, and have found a business that matches your strengths and interests, you must then conduct a thorough examination of the business opportunity which is a formal process called due diligence. The due

When you have thoroughly investigated and assessed the value of the business, you can begin to negotiate a price with the seller

Find out why the business is for sale. One of the primary reasons businesses are sold is because they are failing in some way or simply do not produce sufficient profit for owners. By gathering as much information as possible about the business, you should be able to pinpoint its weaknesses. Question whether or not it has potential for future growth and what some of its prospective shortcomings might be.

goodwill, inventory, suppliers, equipment, employees, legal contracts and financial records. You may also decide to consult a business advisor experienced in conducting due diligence processes whose expertise will focus on your interests and help to reduce the risk of overlooking important details. NEGOTIATE When you have thoroughly investigated and assessed the value of the business, you can begin to negotiate a price with the seller. It is important to document all communications and representations to make sure that both you and the seller are clear on what is being negotiated and what is included and excluded in the sale (for example, existing inventory).

Whether you want to acquire a service, retail, manufacturing or wholesale business, be sure to analyse the industry market as well. Determine the current industry trends and who its customers are as well as the stage of the business life cycle and sustainability of its current business model.

Andrew Graham says “Once you have undertaken due diligence and the contract is signed it is critical to implement an internal communication and change management strategy. This will ensure a smooth transition for existing employees and help you retain them in the long term.” F

EVALUATE

RSM BIRD CAMERON IS THE LARGEST MID-TIER ACCOUNTING FIRM IN AUSTRALIA WITH NATIONAL OWNERSHIP AND PROFIT SHARING AND OFFERS A FULL RANGE OF SPECIALIST ADVISORY SERVICES.

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etting finance for a franchise investment can be a challenge but how are banks performing for their existing business customers? The findings from Roy Morgan Research which surveyed more than 13,000 business finance decision makers show the business community overall in Australia is less satisfied with banks than are personal customers. ^

Out of the big four banking institutions Westpac topped the satisfaction levels among business customers with a score card of 68.7 percent - just 9.9 percent behind personal banking clients.

CREDITS: CHRISBOSWELL - THINKSTOCK

The biggest gap between personal and business customer satisfaction was at NAB, where business customers are 17.4 percent behind personal customers.

...meeting the needs of business clients?

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Low levels of satisfaction were recorded for the major products - CBA had the lowest satisfaction level for its loans.

with their clients, but at this stage the satisfaction level with these managers is less than 70 percent for each of the four major banks.

However, business banking satisfaction is improving: up 2.1 percent over the last year.

“This is an area that obviously needs some improvement if overall satisfaction is to increase.

Norman Morris, industry communications director, Roy Morgan Research, says “Recent moves by the major banks to show an increased focus on the business customers obviously stems from a realisation that something needs to be done to attract and retain them to compensate for the reduced prospects for growth in the personal market. Banks currently appear to lack empathy with their business customers who require more attention and understanding. “This is evidenced by the fact that these customers rate their banks very poorly on 'maintaining regular contact’, 'following developments in the industry’ and having a 'good understanding of their business’.

“The current Financial System Inquiry will need to consider how well the needs of business are being met by the banks in order to ensure that they remain viable and contribute to economic growth. At the present time it appears there is room for improvement,” he adds. Alastair Welsh, general manager for Westpac’s commercial banking division, comments on the funding: “I’m pleased to see that our customers have recognised the work we are doing to help them do business. We recognise that our business customers hold the key to future economic growth and we should do everything we can to help them prosper and grow.

“Banks recognise the need for personal contact with their business customers and use “Having said that, we also know that there D r e managers a m d o otormanage s - the1relationship 2 0 1 4 - 0is 6a lot - 2more 7 T 1we2 can : 0 do 9 :on5this 9 + front 1 0 :which 0 0 business

Kitchens, bathrooms & bedrooms

is why we are investing in providing more front-line bankers and better qualified ones as well as investing in our expanding digital services to allow our customers to do what they do well.” Darryn McAuliffe is a former banker and now heads up the Australian arm of US based FranData. He says “As banks look for stability and better information on their small business clients, those same clients are increasingly looking for stability and confidence in their business bankers. "With perennial restructures often resulting in new and less experienced bankers it is understandable that small business clients have experienced increased levels of frustration and lower confidence levels with their banking relationships. This in turn directly undermines satisfaction levels. "An excellent, and converse, example of this can be seen in franchise lending where a clear advantage in attracting and retaining clients is maintained by those banks possessing well informed and experienced franchise banking professionals.” F

Dream Doors – Don’t let anyone steal your dream…

Hi, my name is Derek Lilly and I am the worldwide co-founder of Dream Doors, an internationally proven franchise system with a 14 year history of success. I am now expanding into Australia via a network of Franchisees and I am looking for Marketers, Business Innovators, Go-Getters and Entrepreneurs to develop the brand in Australia with me. Dream Doors is different from other kitchen, bathroom, and bedroom renovation companies. By simply replacing the doors, drawer fronts, and bench tops, we save the customers $1,000’s on their own renovation and therein is the secret to our international success. History of success:

What does it cost:

50 Franchises in the UK where i co-founded the business 2007 I moved to New Zealand to start the dream doors business I have an extremely happy network of Franchisees in NZ and Australia (Just ask them) I am now sharing my success and winning formula throughout Australia Australian Master Franchise sold Queensland Regional Master sold 2 x Australian Franchise areas sold (South Adelaide and Northern Beaches Sydney) The question “does this business work or not” is not longer open for debate

Territory Franchise areas available with initial costs: From $40,000 to $60,000 +GST I look forward to sharing more of my story with you... Contact details Derek Lilly (Managing Director) Dream Doors Australia Pty Ltd Address: Suite 3, 203-205 Henley Beach Rd, Torrensville. SA. 5031, Australia Tel: 1-800-373-263 Email: del@dreamdoors.com.au

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10 FR0714_062

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lease is critical in any retail business, and there are some extra things to consider in franchising. Corinne Attard looks at some of the key elements of a retail rental agreement.

premises are not found in a reasonable time. If you are buying an existing business make sure there is enough lease term left or you may need to approach the landlord for an extension.

2. RIGHT FOR A FRANCHISEE TO OCCUPY

Leases can be held in the name of the franchisor or the franchisee as tenant. Whether your franchisor is negotiating with the landlord or you are doing it directly or you are taking over an existing business and lease, here is the checklist for the 10 top points to look out for.

1. A LONG ENOUGH TERM It is important to have a lease term (or potential lease term with options) to match the franchise term. Your bank will also want to see a long enough term. The best outcome is for the dates of both franchise agreement and lease to coincide although this is not always possible. Sometimes leases end early and the franchise agreement can provide for alternative premises to be found to relocate the business and for termination of the franchise if suitable

A typical retail lease prohibits a tenant from subletting, licensing or â&#x20AC;&#x153;parting with possessionâ&#x20AC;? or at least not without landlord consent. It is a fundamental requirement for leases of franchised businesses that they allow a franchisee to occupy the premises if the franchisor holds the lease.

Failure by a franchisor to do this will mean occupation by a franchisee will be a breach of the lease. Also if the franchisor holds the lease as tenant then the franchisee should be granted a licence to occupy or sublease by the franchisor. This is an extremely important document and like the franchise agreement should be reviewed by your lawyer.

3. LEASE DISCLOSURE STATEMENT Retail leases in Australia are covered by different legislation in every state and territory. Tenants, including subtenants or licensees in most places must receive a lease disclosure statement. This includes important information about the lease such as outgoings

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THINGS YOU MUST HAVE IN YOUR LEASE

and obligations and about the shopping centre if the shop is located in one. You should make sure you receive a copy of this disclosure statement prepared by either the landlord or the franchisor. If disclosure is not properly given you may have additional legal rights. It is very important to have a lawyer familiar with the retail leasing laws look over your lease and/or your licence and the disclosure statements.

4. RIGHT TO TRANSFER Whether a lease is held by franchisor or franchisee it should contain the right to assign (transfer) the lease to certain qualified transferees such as a purchaser of your business. That is, the tenant should be able to transfer the lease to any approved franchisee or potential franchisee of the same franchise system, without needing landlord consent (or at least the landlord should not be able to withhold consent). Otherwise there is a risk that a landlord could withhold consent to a purchaser with inferior “retailing skills” or financial resources which will severely limit your ability to sell the business.

Additionally if the lease is in the franchisee’s name your franchisor might require that it contain a right allowing it to step in and take over the lease if you choose to sell or leave the franchise system.

5. REFURBISHMENT Franchisees need to be aware that both franchisors and landlords may have separate refurbishment requirements and that negotiation to make sure that these are consistent is in everyone’s best interest. Refurbishments (usually at the end of term or every five years) will be typically at the cost of the franchisee and if a relocation occurs there will be additional fit-out costs. Be aware that the refurbishment timing of landlord and franchisor may not coincide particularly if the lease term and franchise term do not match.

6. FIT-OUT CONTRIBUTIONS Landlords frequently provide fit-out contributions or lease incentives to their tenants. Franchisees of new sites should ask if a lease incentive has been received by the franchisor, particularly a contribution to the fit-out. »

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CORINNE ATTARD A franchising and retail commercial law specialist with more than 25 years franchising and retail industry experience including extensive in-house experience.

FR0714_064

Most leases will require security in the form of a bank guarantee for several months gross rent and this is usually provided by the franchisee if it is a franchised business

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If the franchisor constructs the fit-out and on-charges the franchisee providing the franchise as a 'turn-key’ operation (so the franchisee pays the fit-out costs indirectly) it may elect to keep the contribution and take it into account when calculating the cost of the franchise. Franchisees should be aware that the landlord’s fit-out contribution is usually confidential and will be dealt with in a separate agreement to the lease. The franchisor can negotiate an exception to the confidentiality clause or ask the landlord for consent to advise the franchisee of the details. At the moment it is up to the franchisor to decide whether to tell the franchisee of the contribution however the Franchising Code is under revision and one of the changes proposed for next year (2015) is the requirement to advise the franchisee if a lease incentive has been received and if it is going to be shared with the franchisee. Many franchisors are therefore going to have to rethink how they handle this issue. Most landlords require that the contribution be refunded (usually on a pro rata basis) in certain situations such as termination of the lease for breach or if there is a transfer of the lease so even if it is passed on to the franchisee you may need to pay it back. Also as a landlord’s fit-out contribution is ordinarily allocated against certain works so that they remain the property of the landlord for depreciation purposes the franchisee should make sure its accountant and bank know these details.

7. USAGE AND MENUS As a general rule a broader usage favours the tenant. It is common for landlords to try to restrict food court retailers especially to a set menu to avoid conflict between retailers and possible exclusive rights. It is preferable for franchised businesses to obtain a usage such as “Take away food outlet selling pizza, drinks and any other menu items of a 'Joe’s Pizza’ franchise”. This leaves it open to add further items

without seeking landlord consent as the nature of the franchise changes. However, including the name of the franchise system in the permitted use may also limit potential assignees.

8. SIGNAGE AND MARKETING Leases often have strict requirements for landlord consent for displays and signs. Many franchise systems require their franchisees to display temporary or promotional signage or displays to reflect seasonal marketing campaigns. This marketing collateral is usually produced centrally and distributed to franchisees. In many situations it is not practical for landlord consent to be obtained every time for this type of temporary display and landlord approval should be obtained to permit promotional signage which conforms with the franchisor’s national image or marketing campaigns.

9. BANK GUARANTEE Most leases will require security in the form of a bank guarantee for several months gross rent and this is usually provided by the franchisee if it is a franchised business. Franchisees should ensure that they make their bank aware of the need for the bank guarantee as early as possible as this is a common source of delay in securing access to the premises.

10. INSURANCE The lease usually requires the tenant to take out certain insurances. Franchisors often require the insurance to be taken out by a franchisee (noting the interest of both landlord and franchisor). Again ensure that this is taken care of by your broker at an early stage and obtain the certificates of currency for the landlord. On top of the above you must also look at the usual tenant obligations such as the payment of rent and outgoings, trading hours and so on. Just like the franchise agreement the lease is a binding long term commitment and needs to be treated with as much care and due diligence. F

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FR0714_066

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W HOW SAFE

CREDIT: SEAN MURPHY - THINKSTOCK

is your franchise territory?

hen you sign up for a territory with exclusivity can you be sure your franchisor will protect these rights? Now the Courts have decided just how far a franchisor should extend its protection of a franchiseeâ&#x20AC;&#x2122;s territorial rights in an exclusive territory, writes lawyer Nick Birbas.

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NICK BIRBAS Partner at Newhouse & Arnold Solicitors and an accredited specialist in business law who specialises franchise law for franchisors and franchisees.

Following a couple of legal cases, the Courts have decided that there is a positive obligation that a franchisor does not itself compete in that territory or allow other franchisees to compete. Until now, there have been very few territorial cases in the Courts brought by franchisees because of the legal costs and potential damage to the working franchise relationship. The two most recent decisions recognised the franchisee’s exclusive territory and awarded F R 0 9against 1 3 _ the 0 8franchisor. 5 _ RED damages

The Courts have reinforced the value in the exclusive territory of a franchisee.

TWO TYPES OF EXCLUSIVE TERRITORIES There are two different types of exclusive territories under a franchise agreement:

this area. Customers can come from anywhere. 2. Store/business is located within an exclusive territory (identified by geographical area either by map or postcode(s)) and the business can only sell to customers within the exclusive territory. CAN A FRANCHISOR COMPETE ON-LINE WITH THEIR TRADITIONAL BRICKS AND MORTAR FRANCHISEES? In the Video Ezy Case*, the Supreme Court on appeal, agreed with the Local Court’s decision that Video Ezy (franchisor) breached a franchisee’s exclusive territory by allowing Blockbuster and EzyDVD (as related entities of the franchisor) to engage in online sales and subscriptions of movies and DVDs in a franchisee’s territory.

1. Store/business is located within an exclusive territory (identified by geographical area either by map or postcode(s)) where another competing franchisee or franThe franchisor argued that 1 cannot 2 0 1operate 3 - 0 8in- 1 3 T 1 it0 :was 2 7 not : 0 in 7 +breach 1 0 : 0of0 the chisor

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exclusive territory because it had not physically entered into the franchisee’s territory and establish a bricks and mortar store to directly compete against the franchisee. THE COURT RULED: The distinction suggested between the operation of a 'bricks and mortar’ business and on-line trading is illusory. The contractual documentation reasonably affords an interpretation that the restrictive covenants and the exclusivity provisions were intended to protect either party from either conducting a competing business in the hire and sale or hire of video products. It would have been no different had [the franchisor] commenced operating a business of the sale or hire of video products by mail order, at a market stall or out of the back of a truck in the territories. It would be an affront to the reasonable person on the 'Bondi bus’ to

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WHAT CAN YOU DO TO PROTECT YOURSELF AND YOUR FRANCHISE BUSINESS?

suggest that it was the common understanding of the parties that [the franchisor] could sell or hire video products by mail order or at a market stall or the back of a truck in the territories. So it would be to suggest that the TiVo movie service and ezydvd. com.au on-line businesses were any different. The Court also held that the franchisor was in breach of an implied term to act in good faith against the franchisee by failing:

The Courts have reinforced the value in the exclusive territory of a franchisee

✱ To remain loyal to the franchisee and to comply with certain standards of conduct ✱ To act reasonably in relation to the promise of exclusivity in the territories ✱ To not compete against the franchisee in respect to a rental or retail business. CAN A FRANCHISOR ALLOW FRANCHISEES TO COMPETE AGAINST EACH OTHER WITHIN AN EXCLUSIVE TERRITORY? In the RPR Case**, the franchisee (RPR Maintenance Pty Ltd) over a two year period complained to the franchisor, (Spanline Weatherstrong Building Systems Pty Ltd) that its neighbouring franchisee (Marmax Investments Pty Ltd), was poaching jobs in its franchised territory on NSW's south coast. The franchisor maintained that it would not tolerate other franchisees poaching jobs in another’s territory and would take necessary steps to prevent this occurring. However the Court found that the franchisor had done a 'side deal’ with the neighbouring franchisee in July 2009, allowing them to perform work within the franchisee’s exclusive territory in certain circumstances but the franchisor never told the affected

The Court decided that under this particular franchise agreement, the exclusive territory included the activities of selling and installing the franchisor’s product and did not simply rely on whether a showroom was established in the franchisee’s territory.

Consider these four points: 1. Check if you need to negotiate an exclusive franchise territory. This will prevent the franchisor competing against you in any way, including online sales in your territory. 2. Ensure that once in business your customers will fall within your exclusive territory. Confirm this with the franchisor. 3. When entering into new franchise agreements, franchisors will need to carefully draft exclusive territory clauses with appropriate carve-out provisions, if they wish to exclusively sell online to customers within their franchisees’ exclusive territories. This may affect your ability to market and sell on-line so check your franchise agreement. 4. There is a positive obligation for franchisors to take active steps to prevent neighbouring franchisees from operating within another franchisee’s exclusive territory. It has now been decided that franchisors need to properly address and investigate a franchisee’s complaint. If as a franchisee you compete in another franchisee’s exclusive territory you may be in breach of your obligations under your franchise agreement to the franchisor.

The court also held the franchisor had an implied term of good faith and fair dealing towards the franchisee.

Take your questions about your exclusive territory or franchise agreement rights to a specialist franchise lawyer. F

The franchisor was ordered to pay for the lost profits that the franchisee had missed out on, by losing the sales and profits to the neighbouring franchisee, even though the franchisor did not receive or benefit from the profits.

* VIDEO EZY INTERNATIONAL PTY LTD V SEDEMA PTY LTD [2014] NSWSC 143 (VIDEO EZY CASE)

franchisee of this 'side deal’. The Court was critical of the deficiencies in the franchisor’s investigations into the complaints made by the affected franchisee. The franchisor argued that there was no breach of the exclusive territory provisions when the neighbouring franchisee did not establish a showroom to sell the Spanline products in the franchisee’s exclusive territory, nor did the neighbouring franchisee directly advertise in the exclusive territory.

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** RPR MAINTENANCE PTY LTD V MARMAX INVESTMENTS PTY LTD [2014] FCA 409, (RPR CASE) CONTACT NICK BIRBAS AT NICK@NEWHOUSEARNOLD.COM.AU

CREDIT: SEAN MURPHY - THINKSTOCK

The law courts have now sent a strong message to franchisors that if they do not preserve their franchisee’s exclusive territories, then a franchisor may be liable for lost profits, whether or not they received those profits.

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FR0714_070

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Your own space JUL/AUG 2014 | 70 | www.franchise.net.au

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f you are looking to invest in a franchise system which is dependent on territories, then the planning of these territories is hugely important. But does the franchise system and the franchisor of the system give it the importance you need it to have to ensure your future? Peter Buckingham explains what you need to know about territory planning. ^

A couple of large clients we work with have started their working relationship with us by showing us a series of paper based maps, and saying they have all their territories worked out, and just need a few “minor” issues sorted out, and all will be fine. In these cases our first week(s) of work was to copy all the individual territory maps into our mapping system to understand the issues. The first problem inevitably is overlapping territories, where some areas are in more than one territory. The second concern is small slivers of land that are effectively in no-man’s land. What level of confidence does this give the franchisees when not only are they competing in the market to grow their business with their competitors, but fighting with their neighbouring franchisees and the franchisor just to understand their territory? One client of ours is so aware of a major overlap, that the joke in head office is that this specific overlap is known as The Gaza Strip! These problems arise over time as the franchisor’s staff (who may have changed many times), do their best to represent the current geographies, and map out territories.

WHAT MANY DO NOT REALISE IS: 1. Postcode boundaries can be moved by Australia Post to suit the market. New postcodes can be added (normally new developing areas), and whole postcodes can be removed or combined (normally in some country areas). Unless there is a very good overall recording system, such as an electronic mapping system, these postcode changes will escape you. In many franchise systems, it simply is not given the importance to be kept up to date. 2. The potential problems it may »

PETER BUCKINGHAM Managing director of geodemographic and sales prediction modelling company, Spectrum Analysis Australia.

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cause in franchisee confidence and potential legal issues in the future. 3. The inconsistency in the business potential of different territories - why some work really well, and why some franchisees may be starving for business.

In June 2012 37 variables were unveiled, and the final 10 variables were released in late October that year. The other information is SEIFA or the Socio Economic Index For Areas - or in other words where along a line do you live? The latest index was released in March 2013.

HOW ARE GOOD TERRITORIES DRAWN UP?

The Census data allows us, once we have mapped a system’s territories into a geographic area to then measure each territory in many ways.

We are at a great time for a franchisor to fix their territory issues at present. Once every five years we have the full release of the Census, giving us reasonably fresh information to work with. The 2011 Census of Population and Housing costs us (the taxpayer) $440 million according to the Australian Bureau of Statistics (ABS) - and we should be using it.

We can count the number of people, number of households, cars, computers and many other things you told the ABS you had in your house, and then we can understand the internal components of the households in each area in terms of average income, ethnicity, language

spoken at home, employment and many other factors. This time round, Australia changed its base geography from the old way of around 35,000 Census Collection Districts (CCD), to now 54,805 Standard Area 1s or SA1s, each with a population of between 200 and 800 people. SA1s then fit into 2,214 SA2s, each with a population of between 3,000 and 25,000 persons (fairly similar to postcodes in size), then 351 SA3s and finally 106 SA4s.

The point is apply a reality check to understand what the franchisor could do if they were ever to fill all their territories, and what that could do to you, and the long term business

What is important is that nearly every territory that has been drawn manually can be electronically copied, and unless the franchisor has used minor streets and lanes as the boundaries, most main

LEFT: MELBOURNE SEIFA MAP - BASED ON DATA PROVIDED UNDER LICENCE FROM PSMA AUSTRALIA LIMITED PRODUCED BY: SPECTRUM ANALYSIS AUSTRALIA PTY LTD 03 9882 6488.

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FR1113_000_Wor_5Dog

2013-10-09T11:04:31+11:00

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FOR FRANCHISE ENQUIRIES CONTACT:

Robert Hueston Mobile: 0432 455 444 Email: bossdog@5dogs.com.au

www.5dogs.com.au

Get a dog in yah!

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roads serve as the boundaries between SA1s. Once drawn accordingly, all the Census factors can be measured.

What happens if your area has one of the big four accounting firm’s offices, so there are thousands of shelf companies registered there?

If the franchise system is more a business to business (B2B) operation, then there is similar data available through the ABS

to count the number of businesses and business types in any specific area. For a home based or mobile franchise, it is very important to consider what is good or poor for the business concept, and make adjustments to

the territory accordingly. Our aim is never to make every territory equal in its base number of households or population, but to make each territory similar in the amount of potential business it should offer each franchisee.

THINGS TO CONSIDER If you are investing in a franchise system, stand back and understand the long term numbers. POPULATION ✱ Australia had a population of 23,457,978, according to the population clock on the ABS website on the morning of 17/4/14. If a franchisor says they want to give each territory 10,000 persons, then you are looking at over 2,000 territories Australia wide. For a point of reference, Jim’s Mowing is reported to have around 1,600 territories, and probably the most of any service business in Australia. By comparison most of the lending institutions such as Mortgage Choice, ANZ mobile lending and Aussie, have between 150 and 200 territories.

QUOTA

BASE OF OPERATIONS

✱ If a franchisor says all you need is 1,000 businesses in an area to be successful, then theoretically there could be 2,300 franchisees. Maybe their long term strategy is to only have 200 or 300 franchises, but then why are the areas so small? And what happens if your area has one of the big four accounting firm’s offices, so there are thousands of shelf companies registered there? Probably not much profitable business will ever be done with such companies, unless you are a liquidating franchise.

✱ If you are looking at taking on a mobile or home based franchise, ask the franchisor what research they have done, and more importantly, what assumptions they are making in working out your territory, and whether it has a reasonable chance of sustaining the business.

The point is apply a reality check to understand what the franchisor could do if they were ever to fill all their territories, and what that could do to you, and the long term business.

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Also look at it in terms of what could happen in 10 or 20 years if they were to fill all their territories, and what could be the impact on your business? If the answer is cloudy or blank, may I suggest either refer the franchisor to a company such as ours until this is sorted out properly or look at another franchise system. F CONTACT PETER BUCKINGHAM AT PETERB@SPECTRUMANALYSIS.COM.AU

FR0714_076

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HOW TO ENSURE YOU

GET THE MESSAGE KARLI FURMAGE Trainer, coach and writer

e are all guilty of not listening, writes Karli Furmage. We don’t want to hear what’s being said, we are distracted, we don’t like the person who is talking or the topic doesn’t interest us. There are a million reasons why we tune out. ^

There is always a reason why someone is not listening to you. And if it’s your franchisor, that’s going to hinder your working relationship. But are you listening to them?

1. SOMEONE ISN’T LISTENING We talk at 200 to 250 words a minute but we can listen at 300 to 500 words a minute. That’s why we get side-tracked; we have the capacity to listen to more than a speaker can say. Often we stop listening when we decide on our response. Or to avoid forgetting what we are going to say, we keep rehearsing our thoughts in our minds. We wait for our turn to speak, rather than staying focused on JUL/AUG 2014 | 76 | WWW.FRANCHISE.NET.AU

CREDIT: GEORGE DOYLE - THINKSTOCK

If we are talking, it’s usually easy to spot when the other person has drifted off. They go suspiciously quiet on the other end of the phone, or if face to face they stop nodding or their eyes glaze over. It’s frustrating when we have an important message to share and our listener goes on a space walk.

FR0714_077

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Wi s e w o u l d

what’s being said. Most of us kid ourselves we can have a conversation while checking Facebook. The most effective way to get someone’s attention is to give them yours. Stay present in the conversation, maintain eyecontact, put your phone away and make notes if you need to… give them the courtesy of listening.

The most effective way to get someone’s attention is to give them yours

2 0 1 4 - 0 6 - 2 7 T1 2 : 1 4 : 3 6 + 1 0 : 0 0

Wisewould Mahony Lawyers Lawyers in love...... with Franchising

2. YOU’RE ON A MISSION TO BE RIGHT Which makes the franchisor or business development manager wrong. We all love being right. There is nothing like saying ‘I told you so’ to make our tails wag. But, when we go into a conversation wanting to make a point, or be right… we shut down to new information. Our challenge is to let go of the need to be right and make it about the right thing to do. Park your ego. Listen, don’t defend.

3. YOU DON’T BELIEVE WHAT YOU’RE SAYING… OR YOU DON’T HAVE ALL THE FACTS Deal with your own doubts, questions or issues before you have the conversation. Get armed with facts, evidence and experiences from others. If we hear something unconvincing we tune out. Why should I listen to you, when I don’t believe what you’re saying? It’s the same with having your information correct.

4. YOU WOULD RATHER TALK This is a biggie. Most of us would rather be the talker than the listener because we are in control of the conversation. The person talking usually has the attention. With this self-focus, they do not notice that other people are waiting to speak. Even if they do notice, many people will continue to talk,

(even if nobody is listening). It can become a loop. They want to be heard, they feel you’re not listening, so they keep talking, makes you space out even more… break the cycle. Listen intently.

5. YOU ARE A WAFFLER There is a big difference between explaining a situation or point thoroughly and rambling on. I worked with a colleague for many years who was the king of ‘recapping the recap’. He would make a point in five different ways. Luckily for his co-workers, he was on a mission to become a great communicator. He would take a moment before conversations to jot down what he wanted to say, and ensure he stopped once he said it. You want quality over quantity. So work on fine-tuning what you need to say in meetings with your franchisor and later with the support team – the team is there to help you with your business goals so be specific, and be open to ideas and advice. Choose collaboration than confrontation. F

rather

CONTACT KARLI AT: HELLO@KARLIFURMAGE.COM

FRANCHISE SPECIALISTS Call for a complimentary guide to Franchising:

Dispute Resolution, Mediation/Solutions & Strategies, Franchisee reports and assessments, Master Franchisee agreements, International Franchising Employment Law & Workplace Relations

Fixed fee service to Franchisors and Franchisees based on scope of work Members of the

FCA, IFLA, FANZ

Accredited Business Law Specialists

Contact: Robert Toth t: +61 3 9612 7297 e: robert.toth@wisemah.com.au

JUL/AUG 2014 | 77 | WWW.FRANCHISE.NET.AU

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COFFEE the cafe industry’s fuel T

he nation’s cafe industry is tracking well thanks to Australians love of coffee, and businesses that offer healthy alternatives as well as premium quality products are proving popular – a reflection of people’s increasingly discerning tastes.

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According to Euromonitor International’s Cafes/Bars in Australia (November 2013) report, the segment’s valued growth increased by two percent to reach $13.1 billion in 2012, meanwhile the average spend per transaction increased by one percent to $9.78. Despite consumers opting to cut back on their spending in 2012, cafes and coffee shops were less affected than bars and pubs by virtue of people’s perception of coffee as an everyday essential. “Australia’s love affair with coffee continued in 2012, particularly in the major city centres, contributing to the four percent foodservice value growth experienced by cafes and two percent value growth of specialist coffee shops,” the report reads. IBISWorld’s Cafes and Coffee Shops in Australia (March 2014) industry report reaffirms this notion – it states: “A robust coffee culture has driven the success of the cafes and coffee shops industry over the past five years. Industry players have benefited from Australia’s love of quality coffee, which steered the industry through the economic downturn. “While cafe and coffee shop spending may be considered a luxury, it is generally considered an affordable luxury. As a result, consumers are unwilling to forgo their daily

cup of coffee, which provides a stable industry revenue base.” IBISWorld predicts industry revenue will grow by an annualised 5.3 percent through 2013-14, and sustained growth is expected over the next five years. Euromonitor predicts the cafe/bar market will register a compound annual growth rate (CAGR) of one percent for both sales and outlet numbers between 2012 and 2017, and transactions are also set to post an anticipated CAGR of one percent. Interestingly, the report states growth within chained cafes is forecast to outpace that of independent cafes during the 2012-17 period – chained cafes are expected to register a five percent constant value CAGR, as opposed to two percent for independents. JAMAICA BLUE According to Drew Eide, the national brand manager at Jamaica Blue, the business is performing well across the board. “We are experiencing strong same store sales growth in all territories in which we operate,” he says. “Today we have more than 130 cafes operating in Australia, New Zealand, China, Singapore and the United Arab Emirates, and we opened our our third cafe in Singapore in mid-June. In addition, we will be opening Jamaica Blue cafes in Malaysia and the UK later this year.” Eide recognises the modern customer is more discerning than ever, which means product quality is at the forefront. “An average cup of coffee is just not good enough,” he says. “Jamaica Blue guests will often tell us: 'I am not a coffee connoisseur but I can tell when a coffee is bad!’ As such, ongoing training is a critical JUL/AUG 2014 | 81 | WWW.FRANCHISE.NET.AU

MAIN: JAMAICA BLUE COFFEE TOP: A MIX OF JAMAICA BLUE'S FLAT BREADS BOTTOM: PANCAKES BY JAMAICA BLUE

and very important component of our business model.” Eide has noticed, and both reports state, coffee is a daily essential most Australians simply won’t go without. “Our business is what I call an affordable luxury, which means we must be prepared when our guests are ready to escape from the business of their daily lives. They may hold off on high value purchases such as a holiday or technology gadget but they won’t give up their coffee.” Eide says the demand for Jamaica Blue outlets in metropolitan and regional locations is fairly consistent at present. “We have strong performing stores in regional areas such as Gladstone and Mackay in Queensland, Albury and Tamworth, as well as metro city areas such as Bondi Junction and Chatswood in NSW, Doncaster in Victoria and the Perth CBD.” The brand’s customers are increasingly more health conscious, and Eide says this

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is evident across their food and coffee orders. “In the coffee world, full cream milk is being replaced by skim or soy and even no milk. Sugar is being replaced with artificial sweetener or raw sugar and often no sugar is used at all.

In the coffee world, full cream milk is being replaced by skim or soy and even no milk. Sugar is being replaced with artificial sweetener or raw sugar and often no sugar is used at all

“From a food point of view we are seeing more and more requests for gluten free items or low gluten foods. This plays a major role in our food evolution at Jamaica Blue,” he adds.

TOP & BOTTOM: SHINGLE INN'S FOOD & COFFEE OFFERING CREDIT: MARK BURGIN RIGHT: CREMA ESPRESSO COFFEE INFOGRAPHIC: JESSICA SIMMONDS

SHINGLE INN Brisbane-based cafe and bakery franchise, Shingle Inn has managed to withstand a series of economic highs and lows since its inception in 1936 – and its current focus is on expansion. “Although we’re expecting to open more stores in Australia’s eastern states this year, Western Australia will be where the biggest percentage growth remains,” says co-director Andrew Bellchambers. Bellchambers believes the cafe industry as a whole is faring well, and he notes its resilience

during, and after the global financial crisis (GFC) has been well documented. “The number of cafes that continue to open seem evidence that the cafe industry is in pretty good shape with a healthy amount of consumer and business confidence,” he says. Bellchambers agrees with Eide that customers are more specific about what they want, and they are more health conscious. “We’re certainly moving to a far more elaborate food offer than has been available at Shingle Inn in the past,” he says. “Customers tastes have changed and so have their expectations, which are far more sophisticated than at any other point in our company’s history.” Coffee remains a key seller at Shingle Inn, however Bellchambers and his team have found tea is on the rise, and they’ve acted accordingly. “We’ve noticed a shift towards

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tea, especially herbal teas. As a result we recently implemented leaf tea throughout our network. Having said that, coffee sales continue to heavily outweigh tea sales which ensure we keep a tight focus on training our baristas to maintain a strong coffee culture throughout the network,” he explains. While the majority of Shingle Inn’s 40 cafes are situated in metropolitan areas, additional regional sites are on the cards. “We’re only now looking further afield to more regional sites such as Townsville, although we have already experienced the strength of regional locations with our franchised cafe in Toowoomba,” says Bellchambers. “Obviously there are many more logistical implications in moving to regional centres, although having already expanded from a very South East Queenslandcentric business into interstate locations we’ve already faced many of these challenges in our expansion so far.”

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CREMA ESPRESSO Managing director Antony Forbutt says Crema Espresso’s network comprises 12 stores, and another four are scheduled to open before the end of the year. “The group’s gross turnover this year is forecast to be about $10.7 million – that’s up on last year which was about 7.4 million, and with new stores coming in, next year I expect we’ll be having a turnover of something like $15.5 million as a gross number for the group,” he says. Forbutt agrees customer tastes are changing, and the company strives to offer food and beverages that reflect their preferences. “The coffee market in Australia is definitely maturing – anyone you speak to now will tell you where they get their coffee from and where they get a good or bad one. We do really good coffee beans, we buy the best that we can from Columbia and Brazil and that product is flavour profiled so we can maintain the consistency,” he says. “We’ve also followed the lifestyle choices in menu scenario, so we don’t have fries in our business – we offer premium, light meals such as Caesar salads with salmon and premium breakfast options – it’s fresh and lifestyle focused.”

Crema Espresso encompasses mall and street stores in metropolitan and regional locations, and Forbutt says there’s keen interest from franchisees in regional areas. “The whole Australian coffee culture is evolving; it’s no longer just an inner city CBD thing. We opened up in Toowoomba last June with a local brother and sister team and the store is trading well above our expectations. “The difference when you go regional is you can engage customers so much quicker, and if you do it right it’s actually really quite smart to move into regional areas,” he adds. Forbutt is experiencing generic as opposed to cafe industry specific challenges, and they relate primarily to funding. “Funding is the biggest issue for any business I am sure – every year we gain funding and then we need more funding as we expand as a brand. “Last year half a million dollars was fantastic, however this year I am looking for $1.5 million to take the brand to the next step and I am sure that’s only going to increase in the future,” he explains. »

SOURCE: EUROMONITOR CAFES/BARS IN AUSTRALIA (NOV 13) REPORT JUL/AUG 2014 | 83 | WWW.FRANCHISE.NET.AU

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TOP: COFFEE IS A KEY FOCUS FOR THE COFFEE CLUB BOTTOM: A PALEO FRIENDLY DISH BY PALEO CAFE

THE COFFEE CLUB Continued expansion, including in new countries such as Malaysia, Indonesia and Dubai are in the pipeline this year, says group marketing manager, Greg Bowell. “The Coffee Club has strong growth plans, both domestically and internationally, with over 50 new stores to open in the coming year supporting network sales growth of over 10 percent,” he explains. Bowell recognises Australians’ interest in coffee is on the rise, and he predicts the trend will continue. “Fuelled by the influx of immigrants and influence of European culture, the love for coffee has rapidly increased across Australia over the past three to five years. “We expect to see this level of coffee appreciation continue to increase, as Aussies further refine their tastebuds,” he adds.

Australia has almost doubled over the past eight years which means increased competition in a market where consumers have less disposable income and more choice in regards to where they spend their money.” That being said, The Coffee Club recognises the importance of differentiating itself from other players in order to stay ahead of the pack. “Demand is expected to increase across the next five years so it is important to stand out from the crowd. “We look forward to continuing to adapt to this market to ensure our brew is of the highest quality. Our success is fuelled by our passion for coffee, our customer-centric focus and our savvy business owners who recognise opportunity for themselves in that,” Bowell explains.

He’s also found people prefer face-to-face as opposed to virtual interactions, and so customer service is, and will continue to form, an important part of the brand’s offering. “There’s a strong trend favouring the need for human interaction over the 'disconnect’ encouraged by social media – so we expect to see more and more people walking through the doors. Providing a welcoming, family-friendly atmosphere is something The Coffee Club prides itself on and we look forward to giving more patrons a place to relax and enjoy a meal with great company.” PALEO CAFE According to co-founder Jai Hobbes, who runs the business with his wife Marlies, the Paleo Cafe brand has grown by 1000 percent in seven months – it’s network spans 11 stores across Queensland, NSW, Victoria and South Australia, and the current annual turnover of all Paleo Cafe’s is more than $10 million. He believes the benefits associated with a niche cafe concept link back to the customer – namely it’s easier to identify who your target market is. “By focusing on the Paleo lifestyle we can confidently communicate with our staff and customers about the vision and direction of the business.” That being said, people don’t necessarily need to comply

While the trend means more business for the cafe industry, it also presents a challenge for The Coffee Club – enhanced competition. “The increase in specialty cafes and coffee shops has made the retail environment a much tougher playground,” Bowell says.

with the lifestyle to visit a Paleo Cafe franchise – the menu offers a Paleo-friendly take on mainstream dishes. “Whether you’re a Paleo, primal or just looking for a good clean meal, Paleo Cafe covers all the bases. Ideally we want our menu to appeal to the general public and then we take the opportunity to educate them about the Paleo lifestyle. Paleo Cafe is and always will be about promoting the Paleo lifestyle and serving good quality clean food,” Hobbes explains. “We still offer dairy milk for our customers to use in their coffee but ensure our food is 100 percent Paleo and gluten-free. We include meals such as eggs benedict, a lamb burger with sweet potato fries and Atlantic salmon, which is served with mashed sweet potato and asparagus, on the menu.”

WILL A NICHE OFFERING WORK FOR YOU? Hobbes provides three pieces of advice for people interested in a niche franchise. 1. Know your market and the brand. Are you truly passionate about the brand and the industry and willing to do what it takes to succeed? Anything worth doing requires work and effort, ensuring you truly love what you do will make this process easier and a lot more fun along the way. 2. Get clear about who your ideal customer is, what they want, how often they will buy from you and how you can reach them. Knowing your target market and how to reach them will ensure you are not wasting valuable time and marketing dollars trying to drive people into your store. 3. Trust your gut instinct, if it feels right then do it. Don’t wait for the timing, economy or local area to be right. It never will be. F

“The number of cafe outlets and specialty coffee shops in JUL/AUG 2014 | 84 | WWW.FRANCHISE.NET.AU

FR0114_000_ATS

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Australia’s premier 7HVW DQG 7DJ IUDQFKLVH KDV RSSRUWXQLWLHV IRU SDVVLRQDWH IUDQFKLVHHV $XVWUDOLD ZLGH

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Low entry costs

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Large territories

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High level of administration and operational support

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Report preparation, invoicing, debt collection handled for you!

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Genuine repeat business

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Full training provided – no electrical experience required

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Not weather dependant

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Part of the $10 billion safety industry

FCA National Franchisee of the Year 2013

Top Franchisor 2010

BRW Fast Franchises 2009, 2010, 2011, 2012, 2013

For further information visit

appliancetaggingservices.com.au or contact Steve Wren 0401 655 655 steve@ats.com.au

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9588 RedCat Franchise Directory D1 paths.indd 1

2013-11-28T16:17:07+11:00

27/11/13 5:30 PM

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SLEEPTRAVELSPEND T

he tourism sector contributed $42.3 billion to the Australian economy in the year 2012-13, that’s an increase of 3.7 percent, according to Tourism Research Australia. And total visitor expenditure of $98.7 billion was up 3.4 percent. So if you want to join the travel trade where should you invest? Check out these trends and statistics. ^

Jane Ianniello, international director of tourism, travel & leisure, Roy Morgan Research, says “After declining dramatically early last year, holiday intention has recovered and is now at a five-year high, for both domestic and overseas holidays. "This is particularly good news for the Australian tourism industry, which saw domestic intention hit a five-year low this time last year. “Intriguingly, there have been no significant year-onyear increases in Australians’ overall sense of financial

security or optimism about the future, or even in consumer confidence levels. Furthermore, there isn’t a specific age bracket or demographic group driving the rise in holiday intention – it appears to be a fairly general trend.” However fi nding accommodation is going to be an issue, suggests Euromonitor senior research analyst Daniel Grimsey. “One concern is where are we going to put people? With the dollar down there is an increase in Asian visitors – tourists from Malaysia and Singapore saw double digit growth last year.

“Arrivals overall grew by only five percent – but this is still quite good and the strongest growth in arrivals we’ve had since the GFC. “There’s a bit of growth in budget hotels. If you fly in on a budget airline, you need to stay in budget accommodation.” For the business market the end of the mining boom and the cuts to government travel over the last two years have had an impact, says Grimsey.

MARKET DISRUPTERS: ✱ Home-owner accommodation website Airbnb ✱ Gamification element to online bookings ✱ Sydney based software company Wynbox has doubled the number of room bookings for Rydges, according to BRW, with a focus on the lowest available room rate and a one in five chance for customers who book to get their room for free. »

JUL/AUG 2014 | 87 | WWW.FRANCHISE.NET.AU

OVERNIGHT SPEND JAN-DEC 2013 = $51.5BN UP 3% OVERNIGHT TRIPS FOR HOLIDAYS UP 4% TO 33M SHARE OF VISITS: HOLIDAY 47% VISITING FRIENDS/ RELATIVES 32%, BUSINESS 15%, OTHER 6% 28.8 MILLION NIGHTS IN RENTED HOUSES AND APARTMENTS, UP 3% $26.2BN SPENT IN REGIONAL AUSTRALIA

SOURCE: TOURISM RESEARCH AUSTRALIA NATIONAL VISITORS SURVEY; TRA.GOV.AU

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oVernighT TripS nsw + 4% vIC + 2% QLd - 2% sA + 1% wA + 5% tasmania + 1% northern territory - 13% ACt + 5%

credIT: MIcHAel BeVAN

Source: TourISM reSeArcH AuSTrAlIA NATIoNAl VISITorS SurVeY; TrA.GoV.Au

WhaT abouT reVenue? Average room rates: Capital cities +1.7% = $176 Beach holiday destinations + 4.5% = $154 Mining & resources hotspots + 3.1% = $159 wine tourism - 2.1% = $145 Source: TourISM reSeArcH AuSTrAlIA NATIoNAl VISITorS SurVeY; TrA.GoV.Au

reVenue per aVailable rooM: Capital cities +2.5% = $138 Beach holiday destinations + 5.2% = $76 Mining & resources hotspots - 15.3% = $102 wine tourism - 8% = $73 Source: TourISM & TrANSporT foruM HoSTpluS NATIoNAl AccoMModATIoN BAroMeTer 2013 Q2 ocToBer

oCCupanCy raTeS Capital cities + 0.6 = 78.5% Beach holiday destinations + 0.3 =45.5% Mining & resources hotspots -14 = 64.2% wine tourism regions -3.2 = 50.2%

oVerSeaS ViSiTorS

hoTel Value Share 2013

Arrivals grew 5% overall franchised chains: singapore + 12% Malaysia + 13% China + 14%

Source: euroMoNITor

Source: TourISM & TrANSporT foruM HoSTpluS NATIoNAl AccoMModATIoN BAroMeTer 2013 Q2 ocToBer

JUL/AUG 2014 | 88 | www.frAnChIsE.nEt.AU

Accor 18% Mantra 16% Intercontinental 8% Source: euroMoNITor

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IN HOLIDAY MODE TAKING A GREYCATION

HOLIDAY ON A SHOESTRING

Baby boomers are travelling and there will be more demand for family accommodation over the next 10 years.

Cost conscious visitors flying in on budget airlines are looking for low price accommodation.

While the number of caravan parks is declining the value of the sector is going gangbusters: for instance, Big4 has upgraded from being a chain of caravan parks to a network of holiday parks with resort facilities.

New to the franchise arena in Australia is Tune hotels, a global budget hotel business focused on providing the extras on a user-pays basis and owned by low-cost fares airline AirAsia.

F R 0 9 1 3 _ 0 0 0 _ MO N

FRANCHISE PLAYERS ✱ Accor ✱ Big4 ✱ Choice Hotels ✱ Escape Travel ✱ Evergreen Holidays ✱ Flight Centre ✱ Harvey World Travel ✱ Jetset Travel ✱ Intercontinental ✱ Mantra ✱ MTA Travel ✱ Quest Serviced Accommodation ✱ Tune F

2 0 1 3 - 0 8 - 1 6 T1 0 : 4 4 : 2 6 + 1 0 : 0 0

Connecting People, Creating Careers

FRANCHISORS Are you looking for top talent for your management team? Please connect with Steve Bianchini at Mondo Direct – The Number 1 Specialists in Franchise Executive Search and Recruitment Tel: 0403 840 996 | Email: steve@mondodirect.com.au JUL/AUG 2014 | 89 | WWW.FRANCHISE.NET.AU

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THE ECO DEBATE

ost Australian business owners are aware of the need to go eco-friendly, yet what exactly are environmentally friendly initiatives? How can businesses implement them, and what cost-saving benefits can they expect?

The Minister for Small Business, Bruce Billson says energy and resource efficient measures are a key focus for small business owners.

shift – 28.4 percent saw the costs involved, as well as payback time as a major barrier for improving energy efficiency.

“We’re finding there is a greater awareness of environmental responsibility as a normal part of doing business.

In a bid to help small business owners better achieve energy efficiency; Billson says the government has introduced aggregated small business measures as part of its direct action environmental strategy.

“In a number of areas it [energy efficiency] can broadly be described as waste reduction, whether it be waste in materials and resources or in terms of energy and water, and that’s largely been because of a great concern about higher energy and input costs – that’s largely where the focus has been according to the Australian Bureau of Statistics (ABS),” he explains. The ABS’s Australian Energy Use, Electricity Generation and Environmental Management, Australia, 2011-12 report, which applies to business owners who employ between 0-19 people, uncovered around 11 percent of small businesses had engaged in environmental education and training for their staff, Billson says. “There’s quite a deal of awareness raising, and a lot of that is driven around cost savings and the way in which businesses want to present themselves to their market place.” The report found 32.7 percent of small business owners were recycling or reusing materials, however business owners also identified challenges associated with the

“It allows small businesses to come together and say 'look if all of us changed our refrigeration systems to use a more energy efficient process we could save X amount of emissions’ and present that for funding through the competitive tender process, which enables small business to be a part of that direct action to reduce our emissions and improve our competitiveness as an economy,” he explains.

CASE STUDY: KFC Michael Clarke, the head of environmental initiatives at KFC says the brand’s corporate social responsibility program includes four pillars, one of which is dedicated to the environment. “Our philosophy is really to minimise our impact on the rest of the world that we operate and live in, and we have put a lot of strategies in place to help minimise that impact. “We’ve made some substantial investments in things like recycling and putting energy JUL/AUG 2014 | 90 | WWW.FRANCHISE.NET.AU

efficient equipment in our stores, and we’ve redesigned some of our stores to minimise their impact on the environment,” he explains. For the last three years Clark and his team have been tracking how many kilowatts each of their stores use, and overall the results seem positive. “In the last two years we’ve dropped our kilowatt hours per store by about 10 percent, which is almost like turning off the lights at 600 stores, but at the same time our sales and transactions have grown, so we’re serving more customers, we’re selling more chicken and we’re using less electricity,” Clark says.

THE COST FACTOR Clark explains new initiatives are trialled in company-owned stores first, which means franchisees aren’t required to fork out additional money until they know the measures are effective. “We apply new initiatives within our around 150 company stores, test them, make sure they work okay, prove the model and then we tell our franchisees about them.” Clark acknowledges the environmental initiatives tend to incur a cost, however he believes the investment is worth it given there is a payback. “There is an upfront capital cost but typically a two to three year payback, so you make savings after that. “We’re happy to invest capital provided there’s a return, and most of these initiatives have a pretty fast return. We tend to pick the ones that offer the best return and biggest savings,” he adds. »

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KEY INITIATIVES

ARE ECO-FRIENDLY INITIATIVES WORTHWHILE? KFC’S STRATEGIES AT A GLANCE: The business has dropped its kilowatt hours per store by about 10% over the past two years, which Michael Clark says is almost like turning off the lights at 600 stores.

Key initiatives revolve around energy efficiency and waste reduction, both of which enable business to save on costs. THE GREEN STORE

THE GREEN STORE:

35% 16% 93%

KFC has a project team that focuses specifically on the business's environmental strategy – they’ve introduced around 10 different projects over the last two years and there’s more to come.

less water

less energy

recycled materials used

Perhaps most notable is the brand’s Leadership in Energy and Environmental Design (LEED) certified restaurant in East Maitland, New South Wales. LEED is a voluntary, consensus-based, market driven program that provides global third-party verification of green buildings, and there are currently nine LEED KFC stores across the world.

RECYCLING

“It’s our green store – all the waste there is recycled – we’ve got a special waste system which basically recycles everything from the food and cardboard to bottles and cans,” he says.

3,000 TONNES

“It uses 35 percent less water, 16 percent less energy and 93 percent of the construction materials are recycled.”

worth of cardboard have been saved in the last year

4,000 TONNES of bottles have been saved over the same period

LED LIGHTS

70% 70%

saving on electricity costs more efficient than the previous halo lights

KITCHEN VENTILATION TECHNOLOGY: Produces electricity savings of $3,000-$4,000 per store

10%

Saves around of a store’s entire electricity costs Costs between $5000 and $10,000 per store to install

The store also includes a series of watersaving measures including water efficient landscaping, tankless water heaters and water conservation systems for taps, bathrooms and urinals, and Clark says additional green stores are on the horizon.

so we put the new bins in as we build and upgrade each store, which happens every five years. “We’ve worked with the Australian Packaging Covenant and Australian Food and Grocery Council (AFGC) and we’ve got some government grants to help us roll them out,” Clark adds. KFC also recycles all of the cardboard boxes it receives back of house. “The cardboard back of house recycling made economic sense straight away because the landfill levy is much higher for general waste versus recycling.”

“We are planning to do more lead certified stores in the future – they should be cheaper to run at really not much extra in capital cost,” he explains.

Clark explains the savings have been quite significant overall. “We’ve saved around 3,000 tonnes worth of cardboard in the last year, and we’ve saved around 400 tonnes of bottles and cans from landfill,” he says.

RECYCLING

ENERGY-EFFICIENT LIGHTING

KFC spent between four and five years developing its recycling bins for stores, which were introduced in 2011.

Almost all of KFC’s company-owned stores now have LED lights, and Clark says the business has enjoyed substantial savings as a result of the changeover.

“We’re the first QSR to do front of house bottle and can recycling – they allow customers to separate waste from bottles and cans,” he explains. The bins have been installed in 185 KFC stores, and Clark says they will continue to roll them out across the system. “The bins are often built into the wall meaning there is a capital cost involved, JUL/AUG 2014 | 92 | WWW.FRANCHISE.NET.AU

“The LED lights save about 70 percent of the cost of electricity, they are about 70 percent more efficient than the previous lights we used and they last about five years as long. KFC is also looking at switching its car park lighting to LED. “They use about 70 percent less power than the current halo lights and last about three times as long,” says Clark.

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KITCHEN VENTILATION TECHNOLOGY

We've saved around 3,000 tonnes worth of cardboard in the last year, as we've saved around 400 tonnes of bottles and cans from landfill

Stores’ extraction hoods, which sit above the fryers, are also undergoing a bit of a redesign – the aim is to adjust the amount of air they suck out based on how many cookers are in operation. “That saves a lot of money on electricity because it makes the air conditioners work more efficiently – they aren’t extracting all that air that’s just been cooled down. “We’re getting savings of $3,000 or $4,000 in electricity per store for those, which equates to around 10 percent of the electricity costs of the whole store,” Clark says. “While it’s not a small investment – about $5000 to $10,000 a store – we’re rolling it out across the entire network because we can see that short payback.”

“Some of them are just as simple as turning the air conditioning set point from 25 degrees to 20 degrees – you can actually make money from day one when you do that,” Clark says.

because they can actually understand their usage as opposed to getting a bill in the mail two months later – it gives them really powerful information to help manage their electricity usage,” he adds.

The company’s electricity provider has an electricity monitoring system that allows each store to track its energy usage.

KFC also provides its franchisees and store managers with energy saving tips around how and when to use electricity.

“Stores can look at what they did the previous day by hour and work out how much electricity they’ve used – they can see how much electricity they use at their peak, if they’ve forgotten to turn something off at night and so on.

“We cover things like starting up the store – if store managers or franchisees turn all the equipment on at the same time you get a spike in demand, which throws the store’s COST FREE INITIATIVES power bill out, so really staggering the start KFC also educates its store managers times and doing the right things in the right and franchisees about environmentally order does make a big difference to the friendly behaviours, which are straightfor- “Giving store owners and managers that energy use in store, and that’s something F Rand 0 7can 1 4be_ adopted 0 0 0 _ at M no G Ccost.1 2 0information 1 4 - 0 6 - has 2 5 made T 1 4 :a 3big 5 : difference 2 1 + 1 0 : the 0 0store can control,” Clark explains. F ward

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ou’re interested in the idea of investing in a franchise but want to know more. Well the Franchising & Business Opportunities Expo visits Brisbane from July 19 to 20, and Melbourne the following month: August 22 to 24. ^

Both these events will be showcasing a number of established and emerging franchise systems and provide a great opportunity for people looking for a business investment to discover more about franchising. But before you head off to the shows, let’s look a little deeper at what franchising is all about. First of all some statistics (and you can gain more info on the industry from our market report feature on p12). The franchising sector is a major contributor to the Australian economy; with 1180 franchise systems achieving $131 billion in annual turnover, and 73,000 franchisees who employ more than 400,000 staff. In addition the indirect economic impact of franchising has been estimated at almost $4 billion annually. There’s hardly a sector of business or services today that isn’t represented by a franchise brand, whether that’s a household name such as The Cheesecake Shop, or an emerging brand like urban Asian street food business Bing Boy. Investing in a franchise business offers different benefits, and challenges, to investing in your own business idea. Franchisees can enjoy brand recognition, training and marketing programs, backoffice support, mentoring, supply chain benefits and business development advice. They are also required to comply with the regulations and procedures of the brand, use the operations manual, follow marketing and advertising guidelines, share the financial results of the business with the network and pay regular fees to the franchisor. It isn’t a path that everyone will happily tread, and a visit to an expo can help the decision-making process. Finding out why franchisees chose the model, the brand and the location of their business and the process they went through to get this right can be illuminating and these points and more revelations about the reality of being a franchisee are discussed in the daily Bootcamp sessions. A visit to the expo will also give you the chance to question members of the Franchise Council of Australia and other advisers about the franchising model, why it works, what the challenges are for franchisees, and how to approach both the legal and financial considerations. » JUL/AUG 2014 | 94 | WWW.FRANCHISE.NET.AU

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EXPO TALK

CREDIT: RIZWAN NAWAZ - ANARCHY CONCEPTS

spotlight on opportunity

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CREDIT: RIZWAN NAWAZ - ANARCHY CONCEPTS

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No other event gives people the chance to talk faceto-face with leading franchisors and successful franchisees across a range of business

Small businesses need a competitive and fair business environment to grow and ways to resolve disputes quickly and cheaply when they arise. In 2003 the Victorian Government formed the Office of the Victorian Small Business Commissioner (VSBC) and in its dispute resolution role this organisation provides guidance to businesses about their legal rights and obligations. Advice from the VSBC, which will be exhibiting at the Melbourne expo, is that franchisees need to carefully read and fully understand the contract, and be clear about the expectations of the franchisor. Before signing, franchisees should have a lawyer, accountant or business consultant carefully review all aspects of the documentation.

OPPORTUNITIES GALORE A host of business opportunities will be showcased – some franchised, some licensed – and there will be a seminar series offering guidance and insights into the path into franchising and the life of a franchisee. So whether you have your heart set on a food and beverage business, want to tap the potential of the home services sector, can see yourself making a success of retail or want the out-of-office experience of a mobile franchisee, you’ll find something to whet your appetite at the Franchising & Business Opportunities Expos. Once through the doors at the show you will have the opportunity to meet some of the people behind the brands. Exhibitor Neil McMillan at Fifo Capital says visitors attending the expo may find a business they want to invest in. “This year at the Sydney Expo we found that the people coming through were serious about buying a business and we had a sizeable number of interested parties at the end of the weekend. That has translated into one successful new franchisee plus another three at the advanced due diligence stage.” He highlighted the opportunity for further insights to be gained by talking to franchisors and experts at the show.

“I spoke at one of the seminars and quite a lot of people came up afterwards asking for more information, people were very engaged. They knew the context of franchising but didn’t know about the disclosure document and the cooling off period, for instance, or what questions to ask.” It’s worth preparing questions, even if the answers seem obvious to you, and spend time with exhibitors, at advice stands and in seminars to completely understand the processes, requirements and challenges that you may face when purchasing a franchise. Fiona Stacey, exhibition manager, says “No other event gives people the chance to talk face-to-face with leading franchisors and successful franchisees across a range of businesses. “No one should make a big investment decision without investigating all the facts. At the Franchising & Business Opportunities Expo, visitors can research the industries they are interested in and also discover new business ideas they may never have thought of. “Meeting the franchisors on their stands also allows visitors to ask questions and gather all the facts and figures they need. This is the way people can turn their dreams into reality. “Attending the seminars is another important way to get the most out of the show. Spanning the breadth and depth of Australia’s thriving franchise industry, this year’s line-up of speakers at the Brisbane and Melbourne Franchising and Business Opportunities Expos promises to inform, entertain and inspire attendees who seek the freedom of being their own boss. “They are free to attend and bookings are not required. Feedback tells us that these speakers do more than just share information – they can be motivating and inspiring, or even life-changing. I encourage visitors to take advantage of this expo highlight."

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SO WHO IS EXHIBITING?

DATES AND DETAILS

BRISBANE

MELBOURNE

Among the exhibitors showcasing their franchise offer are the following brands:

The following exhibitors are included in the line-up of brands:

✱ Aussie Home Loans ✱ Bodiez 24/7 Fitness ✱ Croc’s Playcentre ✱ Dream Doors NZ ✱ Evolve Entertainment ✱ Fibrenew ✱ Geowash ✱ HiDow Australia ✱ Indian Brothers Restaurant ✱ Jim’s Test & Tag ✱ Kwik Kerb ✱ Mix & Go FroYo ✱ Open2View ✱ Property Club ✱ Raw Energy ✱ Scottys the Movers ✱ The Cheesecake Shop ✱ Unscratch the Surface ✱ VIP Home Services ✱ Xpresso Mobile Cafe F R 0 7Living 1 4 _ 0 0 0 _ BAY ✱ Young

BRISBANE

✱ AA Business Brokers ✱ Briggins ✱ Chatime ✱ Dream Doors ✱ Evolve Entertainment ✱ Fifo Capital Australia ✱ Geowash ✱ HiDow Australia ✱ Indian Brothers Restaurant ✱ Jim’s Test & Tag ✱ Keen to Clean ✱ Muzz Buzz Franchising ✱ Open2View ✱ Pack & Send ✱ Step into Life ✱ Tutor Doctor ✱ United Petroleum ✱ VIP Home Services ✱ Xpresso Mobile Cafe ✱ Yogabugs Australia 2 0✱ 1Zadel 4 - 0Property 6 - 2 4Education T1 2 : 5 1 : 1 8 + 1 0

Need expert litigation advice?

Date: Sat 19 - Sun 20 July 2014 Time: 10am to 5pm Venue: Brisbane Convention & Exhibition Centre, Corner of Merivale & Glenelg Street, South Bank, Brisbane 4101

MELBOURNE Date: Fri 22 - Sun 24 August 2014 Time: 10am - 5pm Venue: Melbourne Exhibition Centre, 2 Clarendon Street (opposite Crown Casino), South Wharf, Melbourne 3006 For your FREE ticket to either show, visit www.franchisingexpo.com.au

At both events there will be a host of other opportunities either showcased on own-brand stand or as part of a franchise broker’s offering. Plenty of advisory busi: nesses 0 0 will be participating too. »

LAWYERS

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Our accredited specialists deliver results to a wide variety of clients. Talk to us today and experience the Baybridge difference.

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JUL/AUG 2014 | 97 | WWW.FRANCHISE.NET.AU

Level 1, 109 Pitt St. Sydney, NSW, 2000

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SHOWCASING We set exhibitors the challenge of profiling their business offer in a couple of sentences. Here's what they had to say...

which are traditional thin wheat omelette wraps with various fillings, and they have their origins in Chinese history.

AA BUSINESS BROKERS

BODIEZ 24/7 FITNESS

AA Business Brokers is a very friendly and professional firm which specialises in the sale of franchises and general businesses; we represent over 50 major franchise business brands.

Bodiez 24/7 fitness is the next evolution in the health and fitness industry providing state of the art technology based around a fun family friendly atmosphere. Come see us at the Expo if you are ready to become healthy, wealthy and wise.

AUSSIE HOME LOANS Aussie Home Loans offers a competitive un-capped upfront and recurring commission structure that helps build a saleable asset. As a true franchise system, Aussie has the systems and support structure in place to help your business grow. BING BOY Bing Boy was established in June 2011 and is a brand new food concept that brings urban Asian street food to Australia. Bing Boy is based on Chinese crepes (Jian Bing),

BOOKS & GIFTS At Books & Gifts there will be no more time stuck behind a desk, you’ll be out and about meeting people in your very own territory, selling products that people actually want to buy, at a price they can’t refuse – up to 70 percent off RRP. We sell our products from more than 55,000 workplaces. CITY FARMERS DOGWASH City Farmers Dogwash is following its retail stores rapid national growth and is

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now expanding operations into Victoria. We are looking for people passionate about dogs who want to get in early for the pick of the territories! CONFLATE Conflate creates IT businesses that run from a laptop with minimum investment and great returns, to deliver innovative solutions for small and medium businesses. All our offerings utilise innovative and booming technologies and are extremely easy to implement allowing the businesses to focus on their core area of work while increasing business revenue and customer engagement. DREAM DOORS Dream Doors sold two franchises from the Sydney expo and we have a massive growth campaign around both the Brisbane and Melbourne shows. We are just selling a regional master franchise into Queensland that will help with on the ground development of any new franchisees.

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Attending the seminars is another important way to get the most out of the show HAIR EXTENSIONS FULL STOP Hair Extensions Full Stop is an owner-investor business model offering 12 months free marketing as a special promotion at the expo this year. Licensing only began in 2013 and territories have been selling fast.

printing and shipping franchise model and not have to pay an initial $48,000 franchise fee. Customers can take advantage of business tools including digital printing, document finishing and worldwide shipping.

KNM Group specialises in insurance for small business. Whether its cover for business premises, liability or life insurance, debt protection and income protection, KNM offers professional advice and reliable service.

THE FRANCHISE ACCOUNTANT’S NETWORK Buying a franchise? As a group of accountants with specialist skills in franchising, The Franchise Accountant’s Network will work with you to achieve the best result for your specific needs. THE LEATHER DOCTOR

STEP INTO LIFE KNM GROUP

franchise opportunities including In2it Fitness, Wingzone, Taxassist, The Alternative Board and Edible Arrangements.

Step into Life specialises in group outdoor personal training. We have the systems to maintain strong businesses throughout the year, and have introduced a new in-house marketing, social media and IT team.

Due to high demand from our national customers, Melbourne show goers will be able to purchase a Leather Doctor, Timber Doctor and Fabric Doctor franchise for the price of one franchise. XPRESSO MOBILE CAFÈ

THE FRANCHISE SHOP

The Franchise Shop will be recruiting for a number of new franchisors at the Brisbane Postnet has launched a business conver- Expo including HandyMan Now, ACE sion program to allow independent retail Training, Sunspot, and Tumbletown. TFS operators diversify represent a 7number F R 0 1to1 4 _ 0 0 0into _ A the U T company’s 1 2 0will 1 3also - 1 1 - 1 9 T1 : 0 8 : of4 master 6 + 1 1 POSTNET

We are hoping to attract new entrepreneurs that are passionate about great coffee at the Brisbane and Melbourne shows. Further improvements have been made to the Xpresso Mobile Cafe fit out that allow for of new Di Bella Coffee products. F : a0range 0

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or go to autobarn.com.au JUL/AUG 2014 | 99 | WWW.FRANCHISE.NET.AU

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Capital required - 220K - 410K forever Number of outlets - 13+ Opportunities available - nationally

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Ca N Op

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y Capital required - $400K â&#x20AC;&#x201C; $600K Number of outlets - 25+ Opportunities available - Nationally

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Capital required - $250K - $450K Number of outlets - 63 Opportunities available - VIC only

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THE

andwich

PECIALIST

ane Richards is the sole franchisee of two Sydney based Subway stores, and he owns another in partnership with Subway’s Australian master franchisees. ^

Kane joined the system in 2006, and in April he received the company’s highest accolade, the 2014 Franchisee of the Year award. Subway didn’t initially fit into Kane’s career plan; in fact his future had been mapped out from a young age - he was to be an oyster farmer. “I was destined to have been a fourth generation oyster farmer, which was thoroughly rewarding work,” Kane says. “Unfortunately due to a disease that affected the oysters, the business was wiped out, which was obviously devastating for the family.”

“It is a healthy food alternative and a well established business model - it’s really great to be developing and growing with the brand.”

THE ROLE OF RESEARCH

Looking back, if I was going through the process again, I would work more with franchisees from a broader cross section of Subway stores

giving their time and advice – this enabled me to truly make an informed decision,” he explains. While Kane is confident he made the right decision, he would delve a little deeper if he had his time again. “Looking back, if I was going through the process again, I would work more with franchisees from a broader cross section of Subway stores to gain additional in-store/operational experience prior to opening my own store.”

Kane began to research the Subway brand by heading online, and he proceeded to make contact with the team at Subway.

He advises potential franchisees put a sufficient amount of time aside to thoroughly research the brand they are interested in.

COVER: KANE RICHARDS WITH HIS WIFE

“I requested all the formal documents from Subway and I met with many existing franchisees, who were fantastic in

“It’s imperative that you research and gather as much information as you can, as this will help you to make the best

BOTTOM: KANE RICHARDS AND THE TEAM AT ONE OF HIS SUBWAY OUTLETS

The unfortunate circumstances meant Kane had to decide on an alternate career path. He always dreamed of owning his own business and had a genuine interest in the sandwich chain. “The Subway model stood out as a great fit for me, and it was enticing for several reasons. It’s a healthy alternative in the QSR market, part of a large network, there’s a wealth of opportunity to expand and it’s affordable in terms of set up costs,” Kane explains. JUL/AUG 2014 | 103 | WWW.FRANCHISE.NET.AU

LEFT: KANE RICHARDS

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Imagine getting paid to soak up the sunshine ...and spend time around the pool

VIP Pool Services An innovative approach to mobile pool cleaning www.vippoolservices.com.au

Call us today 1300 729 121 or email admin@vipps.com.au VIP_POOL.indd 1

25/06/14 10:30 AM

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decision. Taking the time to speak with current franchisees in the system, particularly from a diverse number of locations is important,” Kane explains. “I was quite thorough with my research and probably a little bit full on, but you have to be when you’re investing a considerable amount of money.”

THE FINANCIALS The costs associated with purchasing a business were at the back of Kane’s mind throughout the research process, and he worked tirelessly to finance the investment. “I worked three jobs to save up for the initial set-up costs and the bank financed the remaining portion. “My newest store has been financed through FinanceNet, an initiative of the Independent Purchasing Company of Australasia (IPCA) and Subway. FinanceNet has given me access to a team of professionals who understand the Subway business, which has streamlined the process for me,” Kane adds.

TOP: KANE'S UNIVERSITY STORES ARE POPULAR WITH STUDENTS BOTTOM: A SUBWAY STAFF MEMBER

TRAINING Upon completion of the transaction, Kane took part in Subway’s initial franchisee training, which he says was highly valuable. “Subway delivers a comprehensive two week training program in Brisbane, where franchisees spend time both in-store and at the training centre. “It was fantastic in preparing me for owning and operating a Subway franchise and it’s really intensive, which is great because in a way that’s how it is when you’re actually running a store,” he explains. Subway also offers a one week multi-unit owner training program, which is now compulsory for franchisees that wish to invest in additional stores. “The company organises for some really great existing multi-unit franchisees to come in and present – it’s a really valuable course for people considering owning a second store, I’d really recommend it. “Subway provides effective systems and extensive support, which is readily available,” he adds. JUL/AUG 2014 | 105 | WWW.FRANCHISE.NET.AU

NOT YOUR TYPICAL NINE TO FIVE Kane says owning a franchise is definitely hard work, and he tends to work on the business every day. “The university stores are open seven days a week and they close for one of the days over the non-semester period, but for me that’s a great time to go in and do repairs and maintenance, and there isn’t anyone around so I can sit down and go through a lot of the paperwork. »

I worked three jobs to save up for the initial set-up costs and the bank financed the remaining portion

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TOP: KANE AND HIS WIFE BOTTOM: A SUBWAY STAFF MEMBER DELIVERS SERVICE WITH A SMILE

I’ll travel between the stores up until lunch time, where I’ll work as part of the team during the lunch period,” he explains. “Normally I’d leave after the lunch rush and go home, and that’s where I get a bit of balance with the family I am fortunate enough to be able to pick my son up from school.” Once he’s home for the day, Kane will continue to work on the business. “Evenings are spent catching up on the administrative side of the business and following up on operations,” he says.

Thinking back I've actually postponed a fair few holidays just so I could stick around and do some work and stay on top of everything

He is responsible for managing all three stores, and is in constant communication with his partners. “We meet quarterly to discuss store performance.”

A SMOOTH JOURNEY?

“It is seven days but when you have everything in place you do get that little bit more freedom to look for other opportunities and importantly for me I get to spend more time with the family.” Kane admits he finds it hard to separate his work and personal life, and credits the company’s network of franchisees to helping him achieve a better balance.

ON THE GO

Kane explains opening his first store, which was to be situated at a brand new site in Gordon, was definitely challenging.

Kane is constantly on the move, travelling between his three stores, which are situated in the Sydney suburb of Gordon, as well as at The University of Sydney and The University of New South Wales, each day.

“It opened a week after my wife and I were married and it was certainly a trying time! Hiring the right people for the right positions, and then building a great team culture is an ongoing challenge.

“I am always up really early; I can be up from 5.30am. Normally I’d start the rounds by going in at about 6.30am and

“Maintaining and building business profitability in an ever changing economy can also prove trying, and as the

“It’s always been a slight problem for me because I am passionate about the brand and the business so I am very much hands on. Thinking back I’ve actually postponed a fair few holidays just so I could stick around and do some work and stay on top of everything. “The great thing about being part of such a large network is you can really work with other franchisees and see how they find that balance,” he adds.

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company grows with more stores, time management can be challenging,” Kane adds. Over the past eight years he’s learned a lot about both the Subway brand specifically, and the franchising model more generally. “The biggest lesson I’ve learned is to follow the system! The system has been refined over many years, and it gives franchisees the best opportunity to succeed.

GOALS: PAST, PRESENT, FUTURE Kane says he’s achieved a number of business goals during his time with the brand, including receiving awards such as Rookie of the Year and the more recent National Franchisee of the Year title. “Serving on the IPCA Board, which is an independent Subway

For me it’s been great investing with Subway and it’s been a great investment with each store so I am certainly looking for more franchisee owned and operated purchasing company, alongside many dedicated and passionate Subway franchisees is another personal goal that I’ve fulfilled.

opening more stores, continuing to strengthen store operations and the culture of the company, and to focus on the team and achieving KPIs,” he says.

“Being a Board member has given me the opportunity to be involved with strategic buying, managing the supply chain and delivering business solutions to assist Subway franchisees,” Kane explains.

“For me it’s been great investing with Subway and it’s been a great investment with each store so I am certainly looking for more.”

Kane is constantly re-evaluating his goals for the business, and they currently include: “reinvesting in the business and

He’s subsequently recruited a number of employees to help him achieve these goals. ONE OF KANE'S UNIVERSITY STORES

“As the company has grown I’ve been able to recruit area managers and people in operations. I’ve got a manger in each of the stores, assistant managers in the university stores and I am in the process of training an area manager for the three stores. “It gives me a bit of time to step back and work on operational aspects of the business and look at other sites, and I enjoy a little more freedom now,” he explains.

A HAPPY FRANCHISEE? Kane is pleased he decided to invest in the Subway brand all those years ago, and he’s kicked a numer of personal goals in the process. “Subway has provided me with a career that I’ve been able to grow and develop with. The experience has been fantastic in terms of personal development – I’ve had some amazing experiences and met some incredibly influential people within the system." “I have never looked back since owning my first Subway franchise and I am always looking for new locations." F JUL/AUG 2014 | 108 | WWW.FRANCHISE.NET.AU

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The Experts in Leather & Plastic Restoration

Why Fibrenew? The ever-growing consumer-driven need for the repair and restoration of leather, plastics and vinyl represents a huge opportunity for all franchise owners.

Visit us at the Brisbane Franchising & Business Opportunities Expo July 19 & 20 - Booth # A18

Single Operator or Fleet A Fibrenew franchise can operate as a single operator or as a fleet. Our flat-fee franchise model and low overhead make it a great fit for budding entrepreneurs.

First-Rate Support & Products Fibrenew scored a 99% satisfaction rate with existing franchisees regarding the ongoing support, products and service that are provided.

An Eco-Friendly Business Fibrenew offers a business solution to a serious environmental problem. Our products and services help preserve mother nature.

Fibrenew-Franchising.com.au Visit our website to learn more about the opportunity to start your franchise. Fibrenew is a proud member of the IFA.

www.fibrenew-franchising.com.au

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A wave of change for

PRINT & SIGNAGE

he print and signage industry has been subject to immense change in recent years. Avoiding complacency is at the forefront of the Signwave brand, and the company has adopted a series of strategies to ensure it remains relevant in modern times. ^

Signwave, the Australian arm of global print and signage business Fastsigns International, has recently appointed three new Australian master franchisees, and there are plans to expand upon the brand’s existing sites. The new master franchisees have a unique set of qualities - Leo Baker and Di Rowland are Signwave’s highest volume franchise partners, while Linda Sultmann has worked with the brand as a business coach for the past two years. “There is no better skill set to grow the brand here in Australia – it’s just the perfect grouping of people together to be growing the brand,” Fastsigns International CEO, Catherine Monson told Franchising on her recent trip to Australia. Monson says Signwave’s focus is around strengthening existing franchise businesses and then increasing the network to between 45 and 50 locations. “We’re very much focused on having highly profitable franchisees with healthy, large sales volumes and multiple outside sales people, and so rather than looking to put 100 locations in Australia we would rather have well placed, very high volume, very profitable locations.

“Step one is to make sure that we’re helping each and every one of our 17 locations reach maximum success and step two would then be to add additional locations,” she explains.

PLANS FOR GROWTH The brand will employ three different strategies to achieve its expansion goal of 45 to 50 stores: Greenfield sites, conversion franchising and a new offer – co-branding. “We have traditional Greenfield start up locations and we also do conversion franchising where if there is a sign business here in Australia that understands the real value of having a brand name, the scope, the scale, the training, the improved purchasing for equipment and services and supplies we would allow them to convert to the Signwave brand,” she explains. “We also have a new franchise offering called a co-brand where we let someone who is in a related business such as a printing or photo processing company that wants to expand into signage and visual graphics to co-brand their existing independent business with Signwave.” Monson is confident the three avenues of growth will enable Fastsigns to achieve its JUL/AUG 2014 | 110 | WWW.FRANCHISE.NET.AU

LEFT TO RIGHT: DEAN ROWLAND, CATHERINE MONSON, LINDA SULTMANN AND LEO BAKER

For the first two months this year in the US we are up just under 10 percent and we are up just under five percent here in Australia

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goals in the Australian market under the Signwave brand. “We believe they will give us a really strong growth opportunity here in Australia,” she says.

COMPANY PERFORMANCE Monson says Fastsigns International is tracking well across each of the eight countries in which it operates – the US, Canada, the UK, Cayman Islands, Brazil, Mexico, Saudi Arabia and Australia. “Our business is doing very well. If we take a look globally we are continuing to expand in a number of locations and we’re having a very good couple of years as far as same centre sales growth goes – for the first two months this year in the US we are up just under 10 percent and we are up just under five percent here in Australia.” She attributes the company’s success not only to its recently revamped business model, but its hardworking franchisees. “We are seeing significant growth in all eight F Rcountries 3 9 3 1 _that T uwe r nare e rinF today, r e e and ma

we think that’s because we have smart franchisees that do a great job helping their local customers to grow their own businesses, and then that alignment drives sales growth with our franchisees,” Monson explains.

TIPS FOR DEVELOPING A BRAND IN A NEW MARKET Site selection plays an important role in Fastsigns’ brand building strategy on a global scale, and it leverages several marketing and promotional strategies to spread the word. “We start with very good locations with good visibility and from there we look at creating really strong marketing materials, from direct marketing to collateral material, space ads, display ads and so on. We will place the appropriate advertising based on what works best in each market. “We have very strong websites that have a lot of content and depth to them and we are very active in social media and public -relations,” 1 2 0Monson 1 4 - 0adds. 4 - 1 7 T1 1 : 5 7 :

THE KEY TO BUSINESS SUCCESS: A PROACTIVE, NOT REACTIVE APPROACH Many traditional print and signage businesses have fallen to the wayside in recent years in the face of increased competition from both online providers and existing retailers; however Fastsigns has sought to stay ahead of the pack. “We didn’t need to have outside sales in the late 1980s and 1990s, but the market has changed – there are more companies that compete with us – printing companies are getting into large format, in the US there are some office supply stores that have got into signage and visual graphics, there are online providers that people can use to order certain types of simple signage online; we had to find a way to respond to that changing marketplace,” recalls Monson. Over the past five years Fastsigns' global business model has been under constant development, and it’s gradually shifted from a solely retail walk-in model to what Monson describes as a proactive one – a 3move 6 + 1driven 0 : 0 by 0 changes in the industry. »

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1800 683 928 | www.tfqlawyers.com.au JUL/AUG 2014 | 111 | WWW.FRANCHISE.NET.AU

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SUCCESSFUL PEOPLE CHARACTERISTICS: Catherine Monson has worked in franchising for 34 years and has held a position on the Board of Directors of the International Franchise Association (IFA) for the past five years. Monson says successful people exhibit the following five characteristics: 1. A positive mental attitude – she says people only want to follow people with a positive attitude. 2. Goal directed behaviour – Monson believes it’s important that franchisees establish great business and personal goals, and advises they do something every day to achieve those goals. 3. Self motivation – do a little more of whatever it is that will help your business to grow every single day than your competition, she explains. 4. A sense of urgency – Monson stresses people never put off to tomorrow what they can do today. 5. The desire to never stop learning – ensure you’re knowledgeable about the industry in which the business operates, develop an understanding of the business’s key drivers and focus on how to push those key drivers each and every day, Monson concludes.

“We studied this changing marketplace, did a lot of market research and spent a lot of time in the field and came to the conclusion that yes, we’ll sell as many commoditised or simple products as possible, but our real market niche is to get into comprehensive solutions, to almost be a small marketing agency for our customers – we see that it’s better to grow with a very proactive business development stance rather than wait on retail walk-in customers. “We have trained and developed our franchisees and their outside and inside salespeople how to provide really smart marketing solutions and visual communication solutions to customers,” she adds. Fastsigns customers are primarily small to medium sized (SME) business owners, and subsequently most do not have a marketing department or deal with marketing agencies - Fastsigns seeks to fill this space through a wholly proactive approach. “We need to go to their place of business and ask some open ended questions about what their business challenges are and come back to them with really smart solutions on how to help them achieve their goals,” she explains.

“That doesn’t mean franchisees don’t work some weekends and some evenings, but the opening hours are typical business hours - compare that to lots of other franchise concepts that may be in food or retail, which are seven days a week and long hours. “The low staffing model means a Signwave franchise is easier to manage than a fast food restaurant, where franchisees typically manage lots of part time employees including younger employees and they are staffing three or four shifts a day – that’s not what our franchisees focus on, they focus on a small staffing B2B model,” says Monson.

TRAINING Training plays an important part in the success of any franchise, and Monson says Signwave's training is extensive. Franchisees will receive initial training when they join the brand, and it’s supplemented by ongoing training and support.

Monson says the model has already proved incredibly successful in the US and Canada, and she predicts it will be just as well received in Australia.

“The day someone becomes a franchisee we enroll them in our university online, which is an online e-learning management system with over 400 courses. Before we even look for a location we want new franchisees to learn about the product, marketing services and visual communications and salesmanship – that’s the track we put them on the day they sign the franchise agreement,” she explains.

THE BENEFITS FROM A FRANCHISEE PERSPECTIVE

Signwave works with franchisees to locate an appropriate site, negotiate the lease and implement the new store layout and design.

Monson says Signwave franchisees enjoy rewarding careers by virtue of the services they provide; they play a part in the success of local businesses, the flow-on effect of which is beneficial for franchisees. In essence, it is a win-win for all involved. “What’s so great about our business and what our franchisees do is they help local businesses, whether they are small, medium or large – they help them to inform, direct and sell, they help them develop new customers and sell more to existing customers.

Once the store is up to standard, practical training across existing, as well as the franchisee’s own site will take place. “When franchisees are just about ready to open they take part in an in-person four week training program; the first week takes place within an existing Signwave location, two weeks is spent in our foundations initial training, followed by a week in their centre when they are ready to open.”

“Our franchisees help their customers grow their businesses and when they do that their businesses grow as well,” she adds.

Ongoing training and support is facilitated through regional meetings and an annual conference, and a business consultant/coach will visit franchisees on a regular basis.

Signwave is a business to business (B2B) company that operates from Monday to Friday, and it works on a low staffing model which can keep costs down and elminate issues associated with rostering.

“We really work to provide a depth of training that makes our franchisees the absolute best in the marketplace, to ensure they are up to date on new technologies, new products and new services,” she says. F

JUL/AUG 2014 | 112 | WWW.FRANCHISE.NET.AU

CREDIT: STEVAN KOYE PHOTOGRAPHY (IMAGE LEFT)

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HUNGRY FOR SUCCESS

TOP: IAN MARTIN OTHER: NOODLE BOX AIMS TO BE THE FIRST CHOICE NOODLE VENUE

hy experienced food franchise executive Ian Martin is bringing his talents to the noodle market. Could he be the new wok master?

Pad thai chicken, nasi goreng, blackbean char beef... the tantalising aromas of the Singapore street food markets inspired Aussies Josh James and David Milne to build a business around the taste of fresh Asian dishes captured in a takeaway box. The pair established the Noodle Box stir fried noodle quick service restaurant chain in Melbourne 13 years ago. In March 2013 Ian Martin was appointed as CEO to take the 79-strong chain to the next level while the founding pair remain on the board. So who is Ian Martin and what is he doing for the takeaway chain? The credentials: Martin describes himself on the social media business networking site LinkedIn as “A seasoned senior executive with over 25 years multi distribution point franchise and retail management experience gained both domestically and internationally.” He has spent more than 10 years in either regional or global senior roles in franchising management in Hong Kong, Singapore and London. Martin’s resume includes chief financial officer of Yum! Brands in Asia, senior vice president and chief financial officer international for Burger King, the CEO of Gloria Jean’s Coffees, and general manager of Dunkin’ Brands, where he was responsible for rebuilding the BaskinRobbins brand in Australia. So what are the things that motivate him? “Now it’s coaching and mentoring members of a team to succeed in their own roles," he says. “When I was CEO of Gloria Jeans, less so at BaskinRobbins, and here at Noodle Box, I was told 'you need to make staff changes’. But I disagreed. People had JUL/AUG 2014 | 114 | WWW.FRANCHISE.NET.AU

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"One brand I hold in high esteem is Yum! This has nothing to do with the food or the profitability. It’s the culture, the focus on the guests and team people and franchisees. It’s world class.”

The last franchise survey showed the engagement level had more than doubled from a year ago

BRINGING CHANGE TO NOODLE BOX For the last year Martin has been heading up the Noodle Box business as chief executive.

glass ceilings and hadn’t been mentored through them.

On a global scale, he counts successful new country entries as good achievements.

“I can bring some knowledge and experience to everybody in the business. I get satisfaction from seeing how people grow.

“I launched Pizza Hut in China and Burger King in Brazil and China. They are not easy to do, I had great teams and learned a lot; developing a strong team and improving the competency of individuals.

“I like to see franchisee profitability increase; from a more personal perspective, to see that happen you have to do a lot of things right, and consistently, there is no silver bullet.

“When I look back at my life, I have been a very beneficial corporate franchisee for eight different brands.

“It’s very clear that a high level of significant change was required when I joined the business. One of the drivers was the annual franchise partners' survey feedback that they didn’t know what was the company’s vision. “Articulating this is very important for the alignment and engagement of the franchisees.

“We want to be the first choice noodle restau“I take the most personal pleasure in seeing rant in every market we operate in, whether that the things we’ve implemented as a “I got to see the good, bad and ugly of how that’s as a guest, franchisor partner or team F Rhave worked.” 0 5 1 4 _ 0 0 0 _ J US 2 2 0the 1 franchise 4 - 0 4 - partnership 2 4 T 1 0 :was 2 9dealt : 5 with. 5 + 1 0 : member. 0 0 team We want to be top of mind.”

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The business has moved from running a combination of company owned and franchised outlets to purely franchised in the last 12 months and is, says Martin, ahead of the target. “We’re one year into a three year plan and ahead of the plan. The migration to 100 percent franchising is what we are most proud of. The majority [of the outlets] have been refranchised to people within the system. Wok chefs are buying their own businesses.” Of the 14 company owned restaurants a dozen have been franchised, the Chermside Park store remains fully operational – franchisees spend their final week of training in this live restaurant environment and it is the base for trialling new ideas – and one has become a full training facility. This year establishing the training network support centre has cost the business about $250,000 – funded internally or by shareholder investment: however the restauFR 0 7 1 already 4 _ 0 0 existed 0 _ X Pand R Erequired 1 rant facility

only $70,000 to be fully functional as a training centre. Most of the investment has been spent on Noodle You, an online program of which Martin is particularly proud. It uses gamification modules, cartoons, video and some text to educate users. “Gamification was a huge cost,” admits Martin, “but it is making an investment in the right place. We’re investing in the business rather than cutting costs.” The business has made savings though. Costs have been reduced through the exit of company owned outlets; the operational team providing the structure of support has been removed, and frontline staffing costs at each outlet have been transferred to the incoming franchisees. “Retail has been a bit flat. But from 1 July 2012 to 2013 there’s been a two percent revenue rise nationally on same stores,” says Martin.

outlets has compensated. The Gold Coast has 15 of the 42 Queensland restaurants and has seen a six percent boost. One of the other statistical measures is same restaurant guest counts and the most recent shows a 1.8 percent national rise – the business is driving more people into the stores. For a number of years the business had seen both declining top line sales growth and a drop in guest count. “We are encouraged by the work we are doing,” says Martin.

THE STRATEGIES “We have six strategic pillars. One is franchisee profitability. If we are a 100 percent franchise business only way we can grow is to ensure our franchise partners are profitable.”

There are a number of steps that have been taken to achieve this: While Tasmania has shown negative 1. Driving the top line higher through 2results, 0 1 4 -the 0 6performance - 1 8 T 1 0 of : 3Queensland 1 : 4 7 + 1 0focused : 0 0 innovative marketing campaigns

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driving frequency of guests or new clients. 2. Broadening the menu offer: ice cream has been introduced and now yum cha allows customers to build a full meal order. “There has been no price increase in 18 months and we are very focused on increasing the average spend.” 3. Managing the cost of goods; this focuses on labour, food costs and suppliers. LABOUR Franchisees need to schedule staff rosters that give them the staff they need at the time they need them, and not when they don’t. It’s one of the small business traps and a core competency, says Martin.

It is key that both partners are aligned; there needs to be clarity about where the brand is going and individual goals

Franchisees now see the operations team refocused away from policing and compliance - though it is still an accepted part of the process. “We’re much further down the line working on their businesses, on KPIs and how to achieve growth. Health and safety is paramount but we’ve moved to a central position where it’s a given. “Internally I am most proud of the shift in alignment and engagement of the network. We’ve worked very hard. The last franchise survey a month ago showed the engagement level had more than doubled from a year ago. “If you haven’t got the trust and engagement it is hard to get data and benchmarks. "But it’s important for the franchisees to see commitment from the franchisor to use this data effectively, and in a timely fashion. We will benchmark within certain detailed analytics that are relevant, and within two weeks of getting the information.” FOOD COSTS A longer term vision, investment in training and teaching franchisees how to run a restaurant efficiently, are having huge impacts. Martin highlights the need for franchisees to understand how to cut wastage in the system.

SUPPLIERS This is about working hard to maintain and decrease prices and the success of this is due to relationships built with supply partners.

WHAT ARE THE CHALLENGES AT NOODLE BOX? Martin cites increased penetration of profitable restaurants in Australia for starters. Beyond that, he says, the brand has significant potential to go international. A 65 restaurant deal has been signed which will see Noodle Box rolled out over five countries in the Middle East, starting with Saudi Arabia. The brand had already moved into overseas expansion when Martin joined the firm: the five outlets in Mauritius are flourishing, he says. The next challenge? “Taking what is a homegrown Australian brand selling noodles into Asia,” says Martin. HOW TO ACHIEVE THE NOODLE BOX GOALS To reach the aim of being top of mind as a noodle restaurant there are three key elements: ✱ Becoming a world class franchise restaurant chain ✱ Serving authentic high quality fresh meals ✱ Having well trained partners and team members MEASURES OF SUCCESS Martin highlights the elements that Noodle Box uses to evaluate its progress: ✱ Same restaurant sales growth ✱ Transactional growth ✱ Customer satisfaction gauged through mystery shoppers ✱ Profitable franchisees and restaurant economics

WHAT SHOULD A PROSPECTIVE FRANCHISEE LOOK FOR IN A FRANCHISOR’S VISION? Look for partnership and shared vision, suggests Martin. "It is key that both partners are aligned; there needs to be clarity about where the brand is going and individual goals. It has to go deeper than affection for the brand. "It’s about the roles of both parties," he says. "If everyone thinks they are doing the same JUL/AUG 2014 | 118 | WWW.FRANCHISE.NET.AU

role, there will be conflict. "Most conflict is in either a franchisee with an entrepreneur mindset, when the need for creativity in marketing is not tempered by following the brand; or a bureaucratic mindset; the franchisee wants to be led to water and force fed, to open the door and for the business to work by itself. " F

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PHARMACY FACTS

ounder and director Anthony Yap has set a number of goals for his Queensland-based discount chemist chain, Good Price Pharmacy Warehouse. ^

These include achieving a nationwide footprint within the next five to 10 years, providing quality customer service and offering the most extensive range of products.

prices around, we do not want to compromise on the service that we offer as part of our customer experience.”

“We want to be Australia’s most recognised and most respected pharmacy brand,” he says.

Yap plans to achieve the expansion goals he’s set for the business through the acquisition of existing sites as well as opening completely new outlets.

“We want to be known for having the biggest range and the lowest prices as well as good customer service, the quality that consumers come to expect when visiting a pharmacy.” Yap believes this is where Good Price Pharmacy Warehouse differs from its competitors – it offers the entire package. “Although we have the biggest range and although we offer probably one of the lowest

EXPANSION

The company recently acquired two Oze Pharmacy stores as a means of entering the Sydney market, and there are plans to take on another two before the end of the year. “We’ve already got stores in New South Wales but we really haven’t got a large presence in the Sydney metropolitan area, so we saw the acquisition of these stores as a good starting

point which will hopefully then spur on further acquisitions or new store openings in the metro area,” says Yap. He believes the acquisition strategy is beneficial in many ways; namely it enables the brand to expand at a much faster rate. “We saw the opportunity to convert the Oze Pharmacy stores to our brand because they already had the floor space, range and method of operating that we do. "We thought that by leveraging our brand and our marketing we would be able to get some quick wins with increases in turnover and profitability almost immediately,” Yap explains. “This will potentially convert or act as the impetus to convert some of the smaller big box pharmacy operators into our brand so that we can get economies of scale a lot quicker in the other states.” Expansion will also be achieved through the opening of Greenfield, or brand new sites, and Yap believes expansion will be

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ATHONY YAP (CENTRE) WITH MEMBERS OF HIS TEAM

At the moment we're aiming for around six to 10 new stores per year, whether that be Greenfield sites or conversion of existing sites

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ails – 03 9413 1400 unitedpetroleum.com.au

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We've had double digit growth for 13 consecutive years. In 2013 it was 17% and we've got an addition of 20% as a company this year

achieved at a faster rate as the company increases in size. “At the moment we’re aiming for around six to 10 new stores per year, whether that be Greenfield sites or conversion of existing sites, but as we progress the actual infrastructure that we require to roll out these new stores will grow, and we’ll be able to roll these stores out a lot faster, so I do expect that the speed of increasing store numbers will improve over the next few years,” he explains.

BUSINESS PERFORMANCE Yap says the business is tracking well overall, and he has a positive outlook. He hopes to see an increase in revenue year on year. “We’ve had double digit growth for 13 consecutive years. In 2013 F R 17 0 1percent 1 4 _ and 0 0 we’ve 0 _ U got NI it was

an addition of 20 percent as a company this year.” He attributes the company’s success in part to its carefully planned and controlled growth strategy. “I think a lot of brands fall into the trap of expanding too quickly, and if you have too many Greenfield sites all at the same time it could be a recipe for disaster if they don’t perform well.

Firm turnover objectives have also been established for the future.

and procedures were well established prior to embarking on the franchising route.

“We definitely want to be a national player with over 100 locations and eventually the long term goal is to have over a billion dollars per annum in sales,” says Yap.

“We had a relatively proven model before we considered going out there and offering it to the market, and I think that’s what people buy into: a proven brand with proven systems and proven results - I think that’s why we’ve been able to continue to expand over the last four to five years," he explains.

SUCCESS THROUGH FRANCHISING Yap says Good Price Pharmacy Warehouse was a wholly company owned business for the first eight years.

“We want to make sure everything is controlled so that when we actually put on new sites every 1 one2is0a winner,” 1 3 - 1 he 1 -adds. 1 5 T 1 He 2 : wanted 0 9 : 5to6ensure + 1 1its : systems 0 0 single

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2011

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“We made sure that we had a proven network of stores because people have to believe in what you’re actually offering, and you’ve

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got to be able to prove to them that it’s going to be successful before they actually buy into the model; I think that’s what we’ve been able to do." The networks of key franchisees in Western Australia, South Australia and New South Wales will be utilised to grow the brand. “When we first started out it was predominantly company owned stores, but then we realised that for us to get economies of scale and build the brand it was necessary to tap into the franchise market."

“The trade-off for us is that we are able to expand the brand across various states because a lot of these places are quite far away from our head office, so it makes sense for a franchisee

to own and run the store themselves, and in exchange we give them a model that will be sustainable in the future. “As competition increases and

there’s continued pressure in the pharmacy industry itself we provide franchisees with something that will ensure the sustainability of their store moving forward,” he adds.

YAP’S TIP FOR SUCCESS OVER DIFFERENT STAGES OF A BUSINESS’S LIFE THE FIRST FIVE YEARS

FIVE TO TEN YEARS

✱ Be unique – find a way ✱ Invest in the future – to offer something that make sure you build the is different from your infrastructure that you competitors because that’s need for where you want the only way that you’re to be, not just where you going to stand out. are today because you will ✱ Manage your growth – eventually grow into it. ✱ Keep employing the “It meant we could get access to you need to have the right right people – surround sites that would be financially systems in place before you yourself with a great team unviable if we were to try and expand to avoid failure. ✱ Employ the right people – that can get the job done. do it ourselves," says Yap. surround yourself with the ✱ Evolve – as customers expectations change and He recognises that franchising right people and the right more competitors enter your needs to benefit both the fran- team who have a shared market you need to adapt and chisor and franchisee if the passion and vision for what F R is 0 to 7 grow 1 4 _ and 0 0 prosper. 0 _ D R B you’re 1 trying 2 0 1to achieve. 4 - 0 6 - 2 5 T 1 evolve 4 : 4 0 : 2offer 0 + accordingly. 1 0 : 0 0 your brand

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MORE THAN TEN YEARS ✱ Improve – there’s always a better and more efficient way of doing things. This should be something that you look at every day. ✱ Evolve – you need to continually change and evolve your model. ✱ Create – look for new and innovative programs that can be used to build and expand on your existing customer base, because what you see in the industry today is going to be very different to what you see in five to 10 years. F

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up the industry

STIRRING

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wo coffee franchises are celebrating a decade in business. Following a similar trajectory of serving a cup of coffee in a non-traditional cafè venue, both mobile truck system Cafe2U and the office-based self-serve model at Xpresso Delight have expanded internationally, most recently into the US market.

CAFE2U MANAGING DIRECTOR, DEREK BLACK

CAFE2U Ten years ago Cafe2U started life as a one-van operation on the North Shore of Sydney. Managing director Derek Black says the brand has continued to remain relevant in the market place. “The Australian coffee drinker has changed a lot in the last 10 years and to survive we have had to change our product right alongside them,” he says. “We have invested a lot into research and development of our equipment and also our coffee offering. We developed our own blends – they have proven extremely popular. “Ten years ago cappuccinos were the go-to beverage but there is a lot more variation now in consumer tastes, and consequently our menu,” he adds. Black says the relatively low cost, low risk investment opportunity has helped boost growth of the network. “There is limited competition; you have your own territory, franchise support in growing that territory, and excellent F R 0 5 support. 1 4 _ 0 0It0is_ aDlow I Sinvestment 1 2 marketing

franchise model which offers a high return on investment.” The company chose to take the model to international markets before addressing the challenge of moving into regional Australia – that’s coming up next. Overseas there are 60 franchises in the UK, 12 in New Zealand and five in the US; the first South African franchise is set to open soon. While expansion into New Zealand saw a very similar customer to the Australian consumer, with a high coffee IQ, the American market has proven quite different, Black says. “It is far harder in the States. It’s very expensive, there are legal documents for each state. We have a softly, softly approach to our mission. We’re taking it very slowly and working very hard and have engaged consultants for our five franchisees. They are neatly clustered all over the place,” Black adds.

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1 7 9 G e r t r u d e S t r e e t , F i t z r o y , JUL/AUG V I C 32014 0 6| 5125 | WWW.FRANCHISE.NET.AU Te l 0 3 9 4 1 7 5 0 0 0 F a x 0 3 9 4 1 9 0 9 3 7 sales@d isplaydesign.com.au

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9 tHiNGs aBOUt caFe2U Cafe2U was the ﬁ rst mobile coffee franchise system launched in Australia, and took a lead role in creating the mobile coffee industry we see today.

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the company says more than 98% of all its franchisees have achieved or exceeded the level of success they had set for themselves prior to starting their business.

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the mobile coffee business was listed as one of Australia’s fastest growing franchise systems for four consecutive years, starting at the height of the Gfc.

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It was the ﬁ rst mobile coffee franchise system in Australia to achieve the food safe management accreditation hAccp (hazard Analysis critical control point).

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the cafe2U coffee blend has received multiple Australian and international coffee awards in both the espresso and milk based categories. the business remains as the only mobile based coffee franchise to be recognised in these competitions.

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6whAt 7 9 of Goods – AboUt 8 the costs the price of coffee?

“Coffee is always an issue, we tend to purchase forward. We’ve had an increase in the last six months and before that is was two years, and two years before that. It comes down to astute buying from our roasting partner.

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the mobile coffee chain is the ﬁ rst business for more than 90% of its franchisees.

over the last four years a new franchisee has started up their business every 10 days.

“We can’t control it, we can only respond and work through efficiencies. The franchise development manager helps franchisees analyse their business, we look at things like product range and average ticket spend. We charge franchisees a fixed fee per week, so success is in the hands of the individual.

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the best performing franchisees had never made an espresso coffee before joining the network.

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cafe2U serves more than 32,000 espresso coffees every day across 7 countries.

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“Franchisees get a good product for a good price. But there are low costs and wages are low. The entry cost in the US is less than in Australia but the relationship between the investment and the return is similar.”

“It’s up to the franchisee how much they want to work, some do full time, some part time, some only three or four hours a week. We’ll try to support them without dictating to them.

“As part of our business we sell coffee cups, syrups and so on as well as our franchisor services. It’s all about support. I believe the biggest challenge is maintaining relevance with franchise partners and continuing to service them without going to work for them. Communication is hardest to manage and we work very hard at it.”

XpRessO DeliGHt Stephen Spitz and Paul Crabtree established a model that brought cafe-quality coffee to the workplace and opened up business opportunities for those not looking for a traditional franchise. It’s a system that has now been launched in the North American market headed up on the ground by former franchisee and now regional franchisor for the US North East, Nigel Lee. It’s early days for Xpresso Delight in the US and Crabtree has taken on the development role while Spitz retains a strong focus on the domestic market. Spitz explains, “For us always the challenge is not identifying suitable franchisees but making sure they have the finance. Particularly because of the type of business, it’s not 24/7, six days a week, JUL/AUG 2014 | 126 | www.frAnchise.net.AU

the challenge is once the machines are in locations, sometimes franchisees are lulled into a false sense of security that they don’t need to do anything else.” He says it is important that the behavioural patterns of someone who has never been in business before are understood and harnessed. At Xpresso Delight the challenge is getting franchisees to focus on their sales reports and purchasing and understanding how the business is functioning on a daily basis. “If someone is only operating one or two days a week, they have a different sense of priority. We’re constantly trying to improve our systems around these behavioural patterns. “Fifty percent of our franchisees are women who lead extremely busy lives in their own rights; typically running the family, doing the shopping, after school sports, all of which are crucial to the household. “This business might give them a sense of identity. What’s needed is the ability to prioritise their schedules and time management. We have to provide a very easy reporting system, we give them an iPad app and the data goes straight into the back end portal. “If you’ve not been in business before, we provide the systems but you can’t be the passenger, you’ve got to drive the car. We can teach you how to drive, give you the rules of the road and the code but you’ve got to buckle up your seatbelt, start the car and drive.” Buying at future prices for green beans gives the company some immunity from day to day price fluctuation, says Spitz. “But if there was a massive frost in Brazil and that led to a radical change in supply

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of green beans we would be affected. But it affects all of us [in the coffee industry]. But our proposition is roughly a third of the cost of a coffee from a cafe and we’re always going to be relative to what cafes sell. “There is no price erosion in the gross profit margin for franchisees.” FRANCHISEE TALE Franchisees Yeeman Lui and her husband Alan bought their business in October 2006. “We decided on Xpresso Delight because of its semi-passive income nature. It guaranteed a great return on investment and we wanted to work smarter, not harder. “The franchise model is simple compared to other franchises and it had a relatively low start up cost. The benefits are that we get the flexibility that we require in raising a young family. We have the freedom to choose to work as much or as little as we desire,” adds Yeeman. “I started the Highpoint business and was the first female franchisee in Victoria. I didn’t

have any experience in running a business so I underwent training with the master agent, and I felt supported all the way,” she says.

RIGHT: YEEMAN LUI BOTTOM LEFT: PAUL CRABTREE AND STEPHEN SPITZ

The initial training included a two day intensive training workshop, and operations manuals were presented to franchisees. “The workshop taught us about the products, how to market, run the business on a day-to-day basis and service the coffee machines” Yeeman says. “The training was invaluable! It gave us the tools and confidence to hit the ground running and gain momentum. The ongoing training and meetings run by the master agent support the running of the business, too.” Yeeman started with five coffee systems and the business grew rather rapidly from there thanks to a referral from a friend.

The benefits are that we get the flexibility that we require in raising a young family

Between them, Yeeman and Alan spend approximately three days a week on the business – a far cry from their previous work schedules. F

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me in resolving issues based on solutions tried before. Q. WHAT ADVICE WOULD YOU OFFER POTENTIAL FRANCHISEES? A. First and foremost, prepare some detailed budgets based on best case, worst case and expected scenarios. Make your decision based on the worst case and treat any improvement on that as a bonus, and think through your exit strategy; consider what the business will be worth when you choose to sell.

the BUSINESS of BUDGETING

rampoline Gelato franchisee John Hall advises franchise buyers to budget for best and worst case scenarios. John invested in the Trampoline Gelato business four years ago, and he currently operates two Darwin-based stores. ^

While he hadn’t planned to buy a franchise, John says the model has made starting a business much easier than if he were to establish it from the ground up. He notes that the support of a franchisor is invaluable, yet also encourages franchisees to remember that they are accountable for their own problems within the business, and he believes budgeting is a must prior to investment. Q. WHY DID YOU DECIDE TO BUY A FRANCHISE? A. I noticed a newspaper advertisement from the franchisor, who was seeking expressions of interest in operating a gelato franchise at Darwin’s Waterfront.

In my opinion the location was a winner at the time, so I contacted the franchisor and things moved along from there. Q. HOW DID YOU DECIDE ON THIS BRAND? WHAT ARE THE BENEFITS? A. After meeting with the franchisor and doing a tour of some of the existing franchised stores, it quickly became apparent that Trampoline Gelato was a modern, quirky and fun brand. All my requests for marketing collateral have been met since the day that I opened, and the materials are consistent with the brand I was originally attracted to.

Q. WHAT SURPRISED YOU ABOUT THE BUSINESS? A. There were no real surprises. I was well prepared thanks to the training provided by the franchisor, which included the opportunity to work in an existing store. Q. WHAT CHALLENGES HAVE YOU FACED IN THE BUSINESS, AND WHAT STRATEGIES DID YOU DEVELOP TO OVERCOME THEM? A. I have faced many challenges including critical equipment failures, a major fire that destroyed the cold storage facility where I was keeping my stock and unforeseeable cost blow-outs. One of the benefits of being a franchisee is having access to a collective pool of knowledge arising from the experience of other franchisees in the network. Most of the time the franchisor has been able to assist

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Finally, if you make the decision to take on the franchise, accept that you have full responsibility for your business. The franchisor will help you to overcome problems but, at the end of the day, they are your problems. Q. HOW DO YOU SPEND AN AVERAGE WORKING DAY? A. This has changed over time. When I first opened my franchise, I spent most of my time working directly in the business, and I set myself up so I could attend to paperwork during quiet times. As the business has grown, the time I spend directly working in the business has reduced. I now spend more time supporting the business by ensuring staff have all that they need to function efficiently. This involves a lot of running around and more time at home working on accounts, ordering etc. I still work at least one or two shifts a week in the business and I am usually the back up person when someone calls in sick. Q. ARE YOU A SOLE FRANCHISEE OR IN PARTNERSHIP? A. I am a sole franchisee. My background is in banking where it was drilled into me that partnerships often end badly.

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RIGHT: JOHN HALL

Q. HOW DO YOU RAISE YOUR BRAND’S PROFILE IN THE COMMUNITY? A. I receive many requests for support for fundraisers and so on. I am happy to provide vouchers as prizes for many of these. Prize winners are likely to visit my shop to redeem their vouchers and may not have tried my products before. I also donate gelato for use at parties organised for disadvantaged children a couple of times a year, and I sell my product at major events including the Darwin Festival and the Darwin round of the V8’s.

First and foremost, prepare some detailed budgets based on best case, worst case and expected scenarios

Q. WHAT ARE YOUR GOALS FOR THE BUSINESS? A. I want my local customers R 0proud 3 1 4 _ 0 0 _ VI P to Fbe to 0 recommend

LEFT: THE BRAND'S GELATO AND ICE CREAM PRODUCTS

my business to others and for tourists to see my business as a must visit destination.

I don’t want to stray too far from the core gelato product, but I do want to see continual innovation to keep things interesting. I will want to sell one day so I want to continue to 2 0 1 4 - 0 2 - 2 1 T 0 grow 9 : 2the 1 :value 3 7 + 1 business. : 0 0 of 1the

Q. HOW HAS FRANCHISING CHANGED YOUR LIFE? A. Franchising has enabled me to start and operate my own business, which would have been very difficult if I had started from scratch. While I am very busy, I now have the flexibility to work my own hours. F

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18 CELEBRATING

YEARS OF SUCCESS

t is a well known fact that hard work generally leads to success, and in business it is vital franchisees and their staff work together to achieve a common goal. One couple reveal how they put these ideals into practice to create an award-winning franchise.

Husband and wife team Marlene and Peter Scott invested in a Clark Rubber franchise in Queensland’s Toowoomba 18 years ago, and in that time their business has gone from strength to strength. At Clark Rubber’s Annual Conference in March, the pair received the National Best Practice Franchise of the Year award, a prestigious title that cements their store’s status as

one of the best in the network; they received the award ahead of 78 other Australian stores. “We are really passionate about what we do, so winning this incredible award is a fantastic recognition of that, and truly is the icing on the cake for us, we’re a little bit speechless,” Marlene said on the night. She added the pair’s efforts have been well worth it, and was JUL/AUG 2014 | 130 | WWW.FRANCHISE.NET.AU

ABOVE: PETER AND MARLENE SCOTT

quick to recognise the input of the store’s hard working staff and customers. “We have all been working really hard, so it’s rewarding to see that it’s paid off. It’s really satisfying to be able to show the team that their dedication to Clark Rubber Toowoomba is appreciated. We are lucky to have such a loyal network of customers; without them; this award would not be possible.” What was it that prompted Marlene and Peter to invest all those years ago? “We wanted to buy a business and stumbled across the Toowoomba franchise when it was for sale. We found it offered not only a business but job security and support,” she told Franchising.

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“Clark Rubber is an Australian brand and we could also remember people talking about it.” Marlene and Peter play equally important, yet clearly defined roles in the business, and both are heavily involved in its day to day operation . “I work between the office, where I do paperwork, and serving customers on the floor. Peter works between the office, floor sales and pool servicing. “We manage other roles by delegating certain aspects of the business to staff members,” she adds. Marlene says Clark Rubber’s training is ongoing and in line with the market. “It’s relevant to product trends, which are forever changing with new F Ror0 suppliers.” 7 1 4 _ 0 0 0 _ NOO items

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After 18 years in the business Marlene and Peter have developed a firm understanding of what constitutes effective local area marketing.

Franchising has given us the power to choose our own destiny and it's made us work harder and longer hours than we would have thought possible

“We do television advertising across three networks, radio advertising across five stations, sponsor Cancer Fun Runs, Church Race Days and donate to the Care Flight Ball as well as local schools, day care centres and kindies. “I also Attend Women on the Move morning teas, which are organised for women in business, when I can. In addition, we do at least two home shows every year, such as the Outdoor Adventure & Motoring Expo or the AG Show,” she adds.

Looking to the future, a move to larger premises could be on 2 0 1 4 - 0 6 - 2 6 T 1 the 6 : cards 4 4 for : 0the 3 + 1 0as: the 0 0pair store

seeks to offer their customers greater convenience. “We would like to see the business as a stand-alone store with ample customer parking, which would mean moving and relaunching ourselves to create a new experience for the customer,” Marlene explains. Franchising has enabled Marlene and Peter to take control of their lives. “We have met the most wonderful people, travelled places we otherwise would never have; we’ve been looked after like a king and queen and learned so much along the way without even realising it. “Franchising has given us the power to choose our own destiny and it’s made us work harder and longer hours than we would have thought possible. F

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Turning a new leaf in the food court

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umo Salad CEO and co-founder Luke Baylis has recently opened the company's first ever concept store, which is reflective of his vision to differentiate the brand from its less health conscious food court counterparts. ^

The brand recently introduced a new store concept, and Baylis has his sights firmly set on continued local and international expansion. Baylis has established a three year business plan for the brand, and notes overall performance is positive. “We’ve had three-and-a-half years of like-for-like growth which has been great, especially in an environment where we’ve had the GFC and a lot of our competitors have dealt with significant decline in that food court space, so it shows that we’re definitely building a lot of market share,” he says.

THE NEED TO DIFFERENTIATE The business was originally established 11 years ago as a means of filling the gap in a market otherwise populated by unhealthy food chains, and Baylis notes the healthy fast food market has matured in that time. “It has become more and more crowded, not only with new entrants but people such as McDonald’s, KFC and Subway are putting forward healthier alternatives. “When the major fast food giants try to push healthy foods they are doing it to sell more hamburgers, whereas we are doing it to actually fulfil a need in society – there’s a lot of integrity behind it,” he says. The need to clearly differentiate SumoSalad from its competitors, as well as address the stereotype that food courts are filled with unhealthy food options, is a key focus for the brand. “When people walk into a food court the general perception is that the food is highly processed; we needed to find a way to be a bit of a shining light in the food court,” says Baylis.

THE NEW STORE FORMAT This is how the idea behind the new concept store, which includes real lettuce and fresh herbs growing out of the walls, came about. “We’ve got such a great connection with our produce and Aussie farmers and we wanted to find a way to really showcase that.

LEFT: THE NEW CONCEPT STORE

“We decided it would be a good idea to actually grow the produce in store so people could come down and

BOTTOM RIGHT: A SELECTION OF FRESH SALADS

TOP RIGHT: LUKE BAYLIS

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interact with it - they can pull the leaves off the wall and eat them while they are waiting for their meal,” Baylis explains.

We decided it would be a good idea to actually grow the produce in store so people could come down and interact with it

There is also a focus on breaking down the barriers between front and back of house, enabling customers to view the cooking and preparation processes firsthand. “We are bringing all of our back of house forward so it’s really maximising not just the experiential side of the business but also the transparency of what we do – people can watch on as the fresh free range chicken is being grilled in front of them and things like that.” Baylis is passionate about educating consumers about SumoSalad’s produce philosophy – namely that fresh, locally grown as opposed to genetically modified fruit and vegetables from overseas are at the forefront. “We have been going out to local farms to source produce; we’re not just trying to ship stuff over from China or far distances, we engage with our local community and local farmers.

The new Sydney CBD store, which opened its doors in May, has been well received so far, and additional sites are in the works. “We’re going to do a lot more of them,” Baylis says.

THE THREE YEAR PLAN There’s a new focus on opening sites outside of the shopping centres and malls SumoSalad has traditionally played in, says Baylis. “Over the last couple of years we’ve refined a lot of our different store formats and we’re actively rolling these out,” he explains. “It offers a great opportunity for us to take on locations outside of major shopping centres as well. We’re not looking to reduce our presence within shopping centres by any means but we are looking to build a higher ratio of stores external to shopping centres.” SumoSalad recently entered the South American market with a store in Sao Paolo, Brazil, and a Los Angeles opening is scheduled for around the end of September; however Baylis says local expansion is still very much on his radar.

“It’s really easy for us to tell this story because its stuff we are already doing within our core business, it’s just a matter of really communicating it and letting F R 0 9 1 3 _ 0 4 5customers _ A U S engage 1 with 2 0it1a 3little - 0 bit 8 -more,” he 1 9 T 1 adds. 1 : 3 8 : 1“The 9 + 1 0 : 0 0of our focus is within the domestic majority

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market – we believe we can get to 400 stores within Australia.

its future needs, as well as the people that we required to fulfil those needs.”

“We’re certainly not trying to achieve that within three years but we believe we could easily double our store count and take it to between 230 and 250 within that period,” he adds.

Baylis explains SumoSalad has deployed a series of different strategies over the years, and notes they change depending on the business cycle.

New stores are set to open across Australia in the coming months, including in Brisbane, Strathpine and the Melbourne CBD.

TEAMWORK: THE KEY TO SUCCESS Baylis believes business success, either as a franchisee or franchisor, is achieved when you devote the time to recruiting a great team. “I think it all comes down to getting the right team around you – if you surround yourself with good people things are a lot easier to execute, plan for and predict,” he says.

“Our current strategy is very much around creating a really strong culture within the business where people are really passionate about the brand and really pumped to come to work, put forward ideas and be better at their jobs,” he says.

PRE-INVESTMENT CHECKLIST Baylis offers a series of tips for potential franchisees looking to invest in a business. The advice can be applied to franchises across multiple industries, from food to retail and beyond.

“I always recommend that they go and speak with a lot of existing franchisees, “Our business really transformed itself not only the best performers but those who F Rwe 0 7took 1 4 a_ step 0 0 0back _ Tand O Wreassessed 1 2 0might 1 4 -not 0 be 6 tracking - 2 6 T as 1 6 : 4– it6gives : 1 5a good + 1 0 well when

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balance perspective on the opportunity.” He says it’s important they conduct proper legal and financial due diligence, and physically work in a store before they invest. “I heavily recommend people roll their sleeves up and work in a store or franchise – you get a true indication of what a business is going to be like in the future if you’re actually hands on within the business. “There’s nothing worse than making a huge financial commitment and then turning back and realising you hate what you are doing,” Baylis adds. He also advises franchisees come to realise that in all businesses and all things in life, you get out what you put in. “It’s important people understand that if they put in a huge effort and really give it their best shot then its more than likely that the business will have a greater chance of success If they go in there looking for a passive investment then generally they : won’t 0 0 maximise the opportunity.” F

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LEGALESE

RAYNIA THEODORE Principal, MST Lawyers

Legal costs: who pays?

t is important that prospective franchisees obtain legal advice before entering into a franchise agreement with a franchisor, and they will need to add the relevant costs for such advice to their working budget. So what exactly will the franchise buyer need to finance? ^

In fact the Franchising Code of Conduct requires franchisors to obtain from a franchisee, before entering into a franchise agreement, either: ✱ a signed statement that the franchisee has been given advice about the proposed franchise agreement or franchised business; or ✱ a signed statement that the franchisee has been told by the franchisor to seek such advice, but the franchisee has decided not to seek it. Whilst the Code does not compel franchisees to seek legal advice, the fact that the above requirement is contained within the Code shows the importance placed on franchisees seeking legal advice on a franchise agreement. Franchisees should not only seek advice in respect of the franchise agreement but also any other documents the franchisor may require the franchisee to sign, such as: ✱ the sale of business agreement, where the franchisee is buying an existing franchise; ✱ the premises lease, where the franchise operates from leased premises and the franchisee is to lease the premises; and ✱ the occupancy agreement (e.g. sublease or occupancy licence), where the franchised business operates from leased premises and the franchisor is to lease the premises. So franchisees will therefore incur their own legal costs but in addition, may be required to pay the franchisor’s legal costs associated with the documents prepared for the particular franchise.

WHAT ARE THE COSTS? Franchisees should read the franchise agreement and all other agreements carefully because these will undoubtedly contain a requirement that the franchisee pay these associated costs. Where the franchise operates from leased premises, a franchisee may also be required to pay the landlord’s costs associated with the lease, irrespective of whether the franchisor or the franchisee holds the head lease. What this means is that the franchisee may have to bear three sets of legal costs: the landlord’s costs associated with the drafting of the lease, the franchisor’s legal costs associated with the review and negotiation of the lease and the franchisee’s legal costs in obtaining its own legal advice in relation to the lease.

WHO PAYS THE FRANCHISOR’S LEGAL COSTS? Franchisees should also bear in mind that they are usually also required to pay the franchisor’s legal costs in relation to the following: ✱ any breach of the franchise agreement by the franchisee, including the franchisor having to seek legal advice in relation to its options and the drafting of any breach notice; and ✱ the termination of a franchise agreement. While a range of the likely legal costs may be set out in the franchisor’s disclosure document, franchisees should seek, from the franchisor, costs estimates for the

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LEGALESE

legal costs reimbursable to the franchisor, as well as costs estimates from their own lawyers. To ensure greater certainty franchisees may want to consider negotiating fixed fees or a cap on the legal costs payable to the franchisor and/or the legal costs payable to their own lawyers.

of the franchisor. Franchise agreements are usually long term agreements that do not allow much scope for franchisees to later withdraw so it is crucial that franchisees understand the terms and conditions contained in their franchise agreement.

The above legal costs should not deter franchisees from seeking their own legal advice, especially in relation to documents such as lease documents. While the lease documents may have been reviewed and negotiated by the franchisorâ&#x20AC;&#x2122;s lawyers the documents would have been reviewed from the franchisorâ&#x20AC;&#x2122;s perspective and for the benefit of the franchisor. Alterations to a lease may not be possible but it is important that franchisees receive and understand the terms and obligations contained in the lease.

A lawyer will be able to explain the terms of a franchise agreement, in particular what rights the franchisee receives under the franchise and any limitations to the franchise granted. A lawyer will also highlight any terms that are unusual or excessively onerous; they may even be able to negotiate changes to oppressive terms of the franchise agreement.

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In relation to the franchise agreement, this is usually a one sided agreement drafted very much in favour

Legal advice at the outset should prevent a franchisee from pouring their life savings into a franchise opportunity and entering a long term arrangement with a franchisor without a complete understanding of what the opportunity will involve. F

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When the franchise operates from leased premises a franchisee may also be required to pay the landlord's costs associated with the lease

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TRENDS

Good Morning Vietnam McBreakfast is served ANDREW TERRY Professor of Business Regulation, The University of Sydney Business School with Trang Quang, The University of Sydney Business School

ith more than 34,000 outlets in 118 countries the opening of a new McDonald’s restaurant is no longer an event of any real significance beyond reinforcing the power of the franchise business model. Unless that restaurant is the first to open in Vietnam.

Four decades after the US retreated having lost the war to contain communism, the iconic brand that represents all that the US stands for opened for business on 8 February in the former Saigon, now Ho Chi Minh City, to a rock star welcome. Over 20,000 visits a day have been reported, far exceeding the restaurant’s 350 seat capacity. The restaurant is strategically located on the city’s busiest intersection and, as Vietnam’s first fast-food restaurant to offer 24/7 drive through service, is well placed to attract the rapidly growing middle class who have graduated from motor scooters to cars.

Foreign franchise systems provide the catalyst for the development of the domestic franchise sector. Vietnam, with a youthful population of 92 million (85 percent under the age of 40) outperformed other emerging markets in 2013 and is predicted to continue its economic improvement with GDP growth forecast of 5.42 percent in 2014. Favourable economic forecasts predict domestic demand will continue to strengthen in the next few years suggesting a promising future for foreign investors as well as for domestic entrepreneurs.

A NEW CONCEPT IN VIETNAM The entry of McDonald’s, which for many is a tangible sign of Vietnam’s progress in international integration and embrace of western models, is a landmark event in the development of Vietnam’s franchising sector. Franchising is a relatively new concept in Vietnam. Given its complicated history it could not be otherwise. The title of George Ritzer’s book — The McDonaldization of Society — encapsulates concerns with the homogenisation and standardisation of society; that “the principles of McDonald’s are coming to dominate more and more sectors of American society as well as the rest of the world”. Franchising is nevertheless a proven strategy for SME development. It is essentially a strategy for cloning a business through the replication of proven management and business systems. It is the multiplier that paves the way for successful business endeavours. For this reason franchising is a particularly important strategy in developing countries encouraged by governments for its contribution to building a services oriented economy. Foreign franchise systems bring not only their distinctive business concepts but also high standards of business operation and customer service, new technologies and new way of thinking about business. Franchisees’ opportunities for successful business operation are improved because of the provision of operational and business formats, technical expertise, management skills, training and ongoing support.

Franchising has a significant role in SME entrepreneur development With unsaturated markets, a growing middle class and a young population increasingly attracted to global brands, it is not surprising that Vietnam with its rich potential was the destination chosen by McDonald’s to mark its first entrance into a new Southeast Asian market after two decades. Its entry is symbolic of the new Vietnam but it is also so much more. McDonald’s is a reluctant icon for Western values and a metaphor for Western capitalism but its contribution to any developing country is much greater than its product offering. Franchising has a significant role in SME entrepreneur development and if McDonald’s Ho Chi Minh City outlet inspires the new generation of Vietnamese entrepreneurs its legacy will be so much greater than the Big Mac. F

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LEADERSHIP

Encounters with operational excellence GREG NATHAN Psychologist, founder of Franchise Relationships Institute, and author of Profitable Partnerships

’ve had the privilege of working with companies across a range of industries and at different stages of their growth. I recently contributed to the conference of a mature franchise network that has been operating for over 40 years, with many second and even third generation franchisees. What particularly impressed me was the quality of their franchisees and the performance of their stores, with strong year on year sales growth. ^

Because I am fascinated by what successful people do, I made a point of catching up with three of their top operators who run 11 stores between them. After interviewing these people it was clear they shared three attributes.

A THIRST FOR LEARNING Despite their success there was no complacency. In fact it was the opposite. One operator said she’d taken five pages of notes from my talk and had then spent a morning planning how she was going to apply these with her team. The second operator said she constantly asks for feedback from her franchisor, business partners and staff on what can be done to improve the business. “I don’t see it as criticism,” she said. “It’s a way of getting honest information on how I can do better.” The third operator sought me out before the session to get some tips on how she could improve her public speaking ability as she was increasingly being asked to deliver talks to community groups.

GIVING OPPORTUNITIES TO OTHERS The focus of these people on giving opportunities to others was so strong you could call it a philosophy. One lady had left school to work as a secretary for a multi-unit franchisee in this system. After 15 years of assisting and learning from him she noticed he seemed to be running out of steam.

All three operators talked with enthusiasm about the importance of sharing key performance indicators with their teams

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Pulling him aside one day she suggested maybe he had run his race and needed to do something different. Instead of getting defensive, he agreed, and she offered to buy him out if he would help her. They set up a deal and 12 years later she is going stronger than ever, having opened two more stores. She has also taken to heart this philosophy of giving opportunities to others and is constantly on the lookout for new talent to nurture and develop. Another franchisee enabled her most loyal and talented managers to buy a 40 percent stake in some of her stores, and has been rewarded with record sales growth. By retaining knowledgeable, skilled and committed staff, these franchisees are investing in their own future, as well as contributing to the health of the franchise system’s brand and culture.

SHARING DATA Finally all three operators talked with enthusiasm about the importance of sharing key performance indicators with their teams. Two of them shared full P&Ls with their store managers and ensured all staff were equipped with up to date information on sales, cost of goods, and how they were tracking against specific targets such as add-on sales. “You’ve got to keep the team informed if you want them to take ownership of their performance” was the common message. Regular team meetings were also held where data was shared, fresh targets set and ideas explored on how breakthroughs could be achieved. By the way, you may have noticed all three operators were women, a growing trend as women increasingly make their mark as top operators. F

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Plan your success. Design your lifestyle. A Kwik Kopy franchise lets you experience the best of both worlds, financial success and quality of life. Kwik Kopy offers graphic design, printing and marketing services to the business sector. Be part of a creative process that delivers: • Marketing brochure design and production • Branding and logo development • Direct mail campaigns • Email marketing and website development, to name but a few. Kwik Kopy franchisees handle a broad range of jobs every day, in fact that’s what makes a Kwik Kopy franchise so exciting. But you DON’T require any print or design experience to take on a Kwik Kopy franchise.

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