YOUR ESSENTIAL GUIDE TO BUYING A FRANCHISE WWW.FRANCHISEBUSINESS.COM.AU
JULY/AUGUST 2017
ISSUE 30 VOL 4
5
REASONS YOU NEED A LAWYER
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IS THE
FOOD COURT DEAD?
The trends shaping tomorrow’s eating habits
FAST, FRESH AND CASUAL CAFE STYLE AT THE FARM WHOLEFOODS
e h t join t e k mar r e d lea 50+ E GYM FRANCHIS IN AUSTRALIA
FORMANCE R E P M Y G N O D BASE
www.anytimefitness.com.au/own-a-gym
NEW LOCATIONS FOR SALE
CONTENTS
REGULARS
LEADERSHIP
5 6 10 124 126 127
14 10 QUIET ACHIEVERS
EDITORIAL
10 businesses to watch that are flying below the radar.
GLOBAL EYE
18 BREAD BARONS
INSIGHTS
Bakers Delight is heading into the future with a new generation at the helm.
GLOSSARY CHECKLIST
18 COVER STORY
RESOURCES
Fresh food concept launches franchise.
28 FRUITFUL ENDEAVOUR
Young mum finds life balance with a fruit juice brand
30 SERVING BEYOND THE RESTAURANT
INDUSTRIES
Zambrero is harnessing its brand power to make a difference.
50 HITTING THE SWEET SPOT
LAW OF THE LAND
Here’s what dessert franchises are serving up.
Find your way through the maze of paperwork.
It has been the stalwart of shopping centres for years, but times are changing.
90 PLAN YOUR EXIT EARLY
66 SAFETY IN NUMBERS
94 SECRET HERBS AND SPICES…
76 FIND A FRANCHISE
Visit the Brisbane franchise expo.
40 ACCOMMODATING
THE WELLNESS TREND
A new hospitality concept has arrived in Australia.
42 FEELING MORE AT HOME
A smoother ride now for a couple who made the shift.
46 FURNISHING A FRESH APPROACH In this new concept, storage is king.
48 FIVE MINUTES WITH…
San Churro’s franchisee recruiter takes our Q & A.
112 DEALING WITH DISPUTES
87 ALL YOU NEED TO KNOW
Aussies are spending more on premium services for their pets.
Adventurous franchise buyers are in luck right now.
82 AN AGREEMENT THAT SHOULD BE AGREEABLE
72 PART OF THE FAMILY
37 BRAND BUZZ
109 LOOKING INTO LEASES
A legally binding contract between a franchisee and franchisor.
Safety is big business, with compliance increasingly important to organisations.
From air force action to the coffee scene.
81 FRANCHISE OR LICENCE?
Check out the important differences.
60 IS THE FOOD COURT DEAD?
32 TAKING OFF IN BUSINESS
If you’re buying a retail business, the lease is a critical element. What to do if you find yourself head-tohead with the franchisor.
114 WHAT IS A TECHNOLOGY AGREEMENT?
116 KNOW THE LIMITS
Who owns the intellectual property that gives the business its value?
120 COUNTING THE COSTS
What franchisors can and can’t do when it comes to preferred suppliers.
103 OUT OF ORDER
How to spot an unfair contract.
104 A FAIR AMOUNT OF WORK
The Fair Work Act and franchisees. JULY/AUGUST 2017 | 3 | WWW.FRANCHISEBUSINESS.COM.AU
Businesses today cannot work without recourse to tech.
Every owner will eventually leave their business.
98 ASK BEFORE YOU COMMIT
79
It is key for a franchise buyer to understand restraint clauses. What can you expect your lawyer to charge?
122 5 REASONS
Why it pays to get legal advice.
138 FINAL WORD
Professor Andrew Terry on regulation.
TREAT YOURSELF TO SUCCESS!
GLOBAL
BRAND LOCAL OPPORTUNITIES
FOR OVER 70 YEARS, BASKIN-ROBBINS HAS BEEN MAKING PEOPLE HAPPY BY CREATING UNFORGETTABLE MEMORIES AND EXPERIENCES. WE JUST HAPPEN TO SELL THE WORLD’S FAVOURITE ICE CREAM!
Whether you’re looking for your first franchise or ready to expand your restaurant portfolio, Baskin-Robbins offers what you need and want: • Internationally Renowned Brand • World Class Training & Support • Fun Work Environment!
Scoop up your own Baskin-Robbins today! Call us on 07 3860 6716 Visit www.baskinrobbins.com.au
EDITORIAL
Why it pays to know the law Get the legal lowdown on franchising in our Franchise Basics series. Is franchising a good model for business? Why do we keep reading about poor operators cheating the system? How can you secure yourself a solid future with all the risks surrounding franchising? Exposure to the failings of franchisees and franchisors is unavoidable these days - there is a greater focus on investigating and, if necessary, prosecuting companies that are guilty of significant breaches of the Franchising Code of Conduct (the mandatory governing regulation for the sector) and workplace legislation. The Fair Work Ombudsman is targeting underpayment of staff, and those who fall foul of the law are getting plenty of publicity. Does this mean franchising is flawed? Franchising is a method of doing business by licensing individuals to take on a brand and business model to replicate the service. As with any business structure, it’s success very much depends on the people running it - at the top level, franchisor, and on the front line, franchisee. Australia has a heavily regulated franchising sector, and that shapes the processes all franchisors and franchisees need to abide by. Get it wrong, and you get caught out. Most franchisors and franchisees by far are acting in good faith, but sometimes there are unintentional slip-ups. So is franchising a good investment? There is no easy answer to this. Every franchise purchase is a business decision that needs to be based on good research and an understanding of the demands of the system. In our previous issues this year we have looked at the basics of franchising, at what considerations need to come into play when deciding if buying a franchise is the right step for you, and at the financial issues involved. In this edition, we’re taking a long, hard look at the law: what you need to know about the franchise agreement and other documents, how to exit a business, what happens in a dispute with a franchisor, and that topic of the moment - workplace law. This section will give you a good sense of the legal issues, and show that it really does pay to get a franchise-experienced lawyer on board before you commit to a franchise. Then it’s up to you…
EDITOR
SENIOR ACCOUNT MANAGER
JOURNALIST
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GLOBAL EYE
GREAT
Expectations
SIMPLY FOOD
What is happening in the food sector? The Franchise Times in the US suggests that with more store closures on their way and changing consumer behaviours, the focus on innovation in site selection is important. Top trends are recycling empty spaces, negotiating limited-lease guarantees, locating outlets in mixed-use environments, providing plenty of parking, restaurant design changes such as communal seating, and understanding the reinvention of the shopping centre. According to Forbes, the future of food retail is neither restaurant-based nor grocery shopping, but a combination of the two, a hybrid it terms “grocerants”. It is being driven by the millennials’ preference for fresh, healthy and value-based food, which translates to ready meals or prepared dishes at convenient locations. It is a trend that Caltex has picked up with its new concept unveiled in Sydney, The Foodary. The trend is expected to take business from traditional restaurants. Forbes reports that one US retailer, Wholefoods, with its pre-packed meal range could capture 20 to 30 per cent of its market share from restaurants. Supermarket News reports that creating a dining experience is the next step for supermarkets and convenience stores. “This is about leveraging your environment to create memorable experiences,” says Juan Romero of design firm API(+). He says customers can spend the whole day in a supermarket eating and enjoying, with an entertainment value happening in grocery design. “The concepts inside supermarkets can go anywhere from fast casual to elegant to urban.”
Could destination-dining environments within supermarkets or convenience stores catch on in Australia? The key is to borrow the best design elements from the restaurant world, Romero suggests. SERVING EXPECTATIONS Not only do today’s shoppers expect a great service experience, they want it to be integrated and harmonised across channels. Recent research by Manhattan Associates shows that three-quarters of shoppers expect a consistent cross-channel shopping experience, yet just 14 per cent claim to enjoy such an experience today. With 82 per cent saying they expect their online experience to be duplicated in store, 78 per cent say they feel they know more about the products and services in store than the shop assistant. It is clear where consumers think retailers need to invest. Half of the 2000 consumers surveyed said they would like store assistants to make personal recommendations in the same way a website already recommends products they might like, indicating that personalisation within every selling channel is high on the consumer’s agenda. The rewards for retailers able to effectively provide customers with a consistent service experience across channels is potentially huge, with 56 per cent of the consumers surveyed saying a seamless service capability is the main reason they would be willing to commit their loyalty to a retailer. The report also found: • 64 per cent of consumers consider free delivery a crucial online service • 62 per cent of respondents go to a store “to get the product there and then” while 53 per cent choose “to try and feel the products before buying in-store”
• 42 per cent would like the store assistant to source an unavailable item from a store nearby so they can collect it, while 19 per cent would prefer the assistant to order and organise delivery to their home or to the same store for collection “Consumers clearly have an expectation of what a retail experience should look like in today’s digital world, and are willing to offer their loyalty in exchange for retailers able to meet that expectation,” says Manhattan Associates Australasian MD Raghav Sibal. “Now is the time for retailers to invest in technologies that keep them ahead of the curve and take the appropriate steps to close the gap between customer expectation and reality. Those who do will be the ones to thrive this year and beyond.”
A big heart SAVING A LIFE Australian medi-aesthetic franchise chain Australian Skin Clinics has found a new use for its medical scrubs and supplies – sending them to Africa to help save the lives of women in need. One in 100 women in Madagascar die during childbirth through the lack of adequate medical standards and equipment. Working together with the not-for-profit organisation Australian Doctors for Africa (ADFA), Australian Skin Clinics MD Deb Farnworth-Wood says she didn’t hesitate to donate supplies that her clinics use every day when she learnt they could save a woman’s life. “It’s hard to imagine when we have ample supplies of medical scrubs at our clinics, that there are women who don’t survive child birth because of the lack of such essentials.
JULY/AUGUST 2017 | 6 | WWW.FRANCHISEBUSINESS.COM.AU
Grow your network with Cashflow It Franchise Accreditation
Help your franchise partners get the finance they need by becoming a Cashflow It accredited franchise system. Not only does accreditation reduce the challenges of accessing finance, it is also a powerful tool to assist in the growth of your franchise network. While Cashflow It operates with the flexibility of a small business, we have the resources and backing of one of Australia’s largest non-bank finance companies - Thorn Group Ltd, an ASX 200 company with over 80 years’ experience in the finance industry.
Cashflow It has been a key partner for the growth of the Rolld system. Where traditional lenders have rigid requirements, the team at Cashflow It have understood the challenges of a growing franchise system and have been prepared to partner for growth. Ray Esquieres, Co-Founder & CFO, Rolld Australia
Benefits of Accreditation
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GLOBAL EYE “At Australian Skin Clinics, we put enormous emphasis on the importance of cleanliness and hygiene, so it seemed only right that we continue that philosophy and practice beyond the clinics themselves and help as many women as possible to enjoy safe and appropriate medical treatment.” While basic healthcare is provided free, patients have to pay for such items as bed sheets, dressings and food. “Working within the medical space, we believe that every woman should be treated with the highest standard of care,” says Farnworth-Wood. “We hope our contribution will allow these women to feel self-respect and dignity when giving birth.”
FEEDING THE HUNGRY Mexican restaurant franchise Zambrero, through its Plate 4 Plate initiative, has donated more than 15 million meals to people facing food scarcity. For every burrito or bowl bought at a Zambrero restaurant, a meal is donated to someone in need. The meal is made from rice, lentils and soy, and invigorated with 23 essential vitamins and nutrients. Communities receive these packs then use available local ingredients to make meals, primarily through school feeding programs. Zambrero works closely with hunger-relief agencies to effectively distribute the food to more than 74 countries, including Australia. Rise Against Hunger distributes the food globally while Foodbank Australia distributes meals locally. Foodbank Australia CEO Brianna Casey says malnutrition and hunger are growing issues in Australia. “One in six Australians face food scarcity, so the dedication of companies like Zambrero goes a long way in fighting hunger in our own backyard.” Zambrero CEO Karim Messih says access to lifesustaining food is a human right “so we are grateful that thousands of customers, employees and communities across Australia and the globe have helped us tackle this issue head on”.
HOME HELP GJ Gardner Homes Sydney West has started building a four-bedroom family home, destined for a charity auction. The Variety Freedom House is on track for completion by August, with a public auction scheduled for September. The profit from the auction will be donated to Variety the Children’s Charity to help Australian children who are sick, disadvantaged or have a disability. David and Belinda Hogan from GJ Gardner Homes Sydney West say that by building the home for cost only, and with the help of partners and suppliers, they hope to raise upward of $250,000 for Variety. “This is the third year GJ Gardner has been involved in the Variety Freedom House initiative, with $175,000 raised at auction last year by our Tamworth franchisee,” says Hogan. “We’d love to go that little bit extra this year and get that figure up to $250,000.” More than 30 suppliers have thrown their support behind the project by providing materials and services, plus the land has been provided at a generous discount. Variety CEO David Sexton says the company has raised nearly $500,000 for the charity over the past three years, enabling it to help 10,000-plus children in New South Wales each year.” n
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INSIGHTS
DISRUPTED
TRAVEL Tourism growth has given a leg-up to the accommodation and travel industries, as well as the economy, and now the technologies that have been helping the leisure traveller are scaling up to disrupt the business travel industry.
A
ustralia’s accommodation sector is buoyant, thanks to a boost in numbers of Asian tourists, the popularity of serviced apartments, and a relatively weak dollar making the country a popular tourist destination.
This is the conclusion of a Bankwest overview of the accommodation industry as part of its Business Insights series. The report found that of the industry's five sub-classes (hotels/ resorts, motels, serviced apartments, caravan parks/camping grounds/holiday houses, flats/hostels), the serviced apartments segment is set to grow the fastest over the next five years, averaging annual growth of 3 per cent.
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INSIGHTS
Bankwest executive GM for business banking, Sinead Taylor, says the report identifies important drivers behind the industry’s successes. “Two key influential factors are the relatively weak Australian dollar, coupled with the digitisation of the industry, leading to a huge variety of online booking websites; together these elements have created a significant boost for the international tourism industry,” she says. The hotels/resorts segment is also expecting relatively high revenue growth of 10.3 per cent over the next five years, taking revenue from $7.7 billion to $8.6 billion. Despite New Zealanders still being the most common visitors to Australia’s shores (1,203,000 last year), increasing economic prosperity in China and India has seen the number of these visitors for the 12 months to the end of June last rise by 22.6 and 9.7 per cent respectively. The growth in digital accommodation services is also creating a more discerning consumer, including increased “savviness” around price and location. “Accommodation comparison sites like Hotels.com and Trivago allow those hunting for accommodation to compare costs at the click of a button, while online accommodation-sharing services like AirBNB challenge traditional sectors, especially motels, holiday houses, flats and hostels.” The accommodation industry is a significant contributor to the Australian economy, providing employment for more than 116,000 individuals and generating more than $17 billion in revenue annually.
RIPE FOR AUTOMATION Business travel is ripe for a shake-up, agrees analysis firm Euromonitor, and perfect for conversion to a highly automated process. TripAdvisor CEO Stephen Kaufer has already said the frequency of business travel makes it particularly suitable for automation. Already the workplace is in flux with many jobs susceptible to automation, a trend that is disrupting the travel industry. And the traveller profile is changing. Expect to see greater diversification of nationality, age and gender among business travellers, and a ubiquitous Gen Y demand for digital connectivity. The connected world that has influenced the leisure consumer’s travel-booking habits will be replicated in the business travel world. For starters, the smartphone
The connected world that has influenced the leisure consumer’s travel-booking habits will be replicated in the business travel world. has been a game-changer for business travel, says Euromonitor. A Global Business Travel Association (GBTA) survey has shown that 64 per cent of global business travellers check their itinerary details while on the road, and the rate is higher among millennials - 77 per cent. For these and other travellers, lack of Wi-Fi access is listed as the most frustrating element of hotel accommodation. Real-time services plus payments and loyalty will be key, and companies offering SaaS (software as a service) are finding a space in the market. Tools such as trip-planning apps are making integration easier. Yet it is important to keep the focus on providing an enhanced, seamless user experience and not become seduced by the myriad of new technologies. And as the processes become yet more automated, the service will need to become more customised, That will extend to unique pricing and payments, suggests Euromonitor. Traditional corporate-travel management companies are finding it hard to stay ahead of the competition, suggests Euromonitor. “Expedia has pivoted its huge inventory, built originally for the leisure market, and created its Egencia corporate-travel management brand. Essentially, Egencia is leveraging the same itinerary but tailored to the corporate market.” Many other leisure brands have emulated this, taking their leisure inventory and developing a “for business” approach. AirBNB, Uber and low-cost airlines such as EasyJet and Ryanair in the UK have built a core business around automating the expense-management process and integrating it with travel management, using cloud technology for big and small businesses to capture bookings made outside the travel-management system. Millennials will be influencing the accommodation market, too. They are the largest working cohort and are keen users of sharing economy brands. AirBNB has been targeting the business-travel market for three years and has integrated expense reports with Concur’s TripLink program. Now it has integrated
with American Express, among others, and allows Delta and Qantas frequent flyers to redeem points. Innovate or die needs to be the mantra for travel agencies working in the business arena.
HOTELS OF THE FUTURE Semi-automated check-in has been particularly relevant in the budget marketplace, and hotels are looking for ways to improve the experience. On the global front, IHG’s luxury brand InterContinental is devising a futuristic hotel room using virtual reality and the talents of futurologist Faith Popcorn. What does it look like? Think remote shared experiences, customised wardrobes, 3D printers and a gaming environment for fantasy escapes. Also adding digital innovations, the Marriott’s Renaissance New York Midtown offers digital corridors and a virtual concierge, a multi-sensory digital experience providing real-time art and local information. Other innovations in the hotel arena include biometric check-in, fingerprint or retina scans for room entry, a room key app, smart mirrors that adjust the light and connect to the internet, and consumer genomics and DNA profiling to deliver a customised experience. Integration of automated systems will continue and brands will seek a direct connection with the consumer. Euromonitor predicts a cluttered space that will be ultimately dominated by the giants of the digital world, Amazon, Apple, Facebook, Google and WeChat. Automation from backend to front desk and the user experience will suit the travel industry, says Euromonitor. Interestingly, the newer serviced apartments and studio-styled hotel rooms that focus on providing connectivity and not room service, restaurants or a mini bar, look to be the future. The tasks at greatest risk from automation include food preparation, cooking and service, says the report. n
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BE IN BUSINESS WITH A CUT ABOVE THE REST
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Now, with over 60 stores internationally, Tommy Gun’s is rapidly expanding. Join us and become a franchisee today. Become a part of Tommy Gun’s revolutionized barbershop experience. franchising@tommyguns.com.au tommyguns.com.au/own-a-franchise 07 3215 6050
THE LIST
N
10
uggets of brilliance glitter across the franchise sector, with some brands quietly going about their business, picking passionate and hardworking franchisees to help grow their network while benefitting from a sound commercial concept.
Here are 10 businesses to watch that are flying below the radar...
1
FASTWAY COURIERS
Most of Fastway’s 800 courier franchisees working from 27 regional depots stay in the network for at least five years. It has been 35 years since the concept launched in New Zealand (25 years in Australia), and as part of the Aramex global network now, Fastway is poised to launch international services. The model is effective because businesses need a reliable courier service, and it is a simple system with training and a cost-effective entry price. Fastway has made a point of using innovations that make life easier for couriers as well as customers, who are increasingly shopping online. THE MEASURE: Sales across the board are growing at 11 per cent this year, with growth of more than 20 per cent in regional areas.
2
FERNWOOD
Fernwood has been franchising its fitness clubs since 1994. There are 69 clubs across Australia run by 54 franchisees, whose average tenure is seven years. National expansion plans include 14 new locations – four in Melbourne, two in Sydney, two in coastal New South Wales, two in Western Australia, two in Queensland and two in South Australia. Fernwood is a strong brand with a proven track record in women’s health and fitness in Australia since the first club opened in 1989. Its success is partly attributable to the time taken to recruit franchisees who share the brand vision, values and passion, and providing them with ongoing support and education. THE MEASURE: Growth of 5 per cent last financial year, and 10 per cent this year.
QUIET ACHIEVERS
While some franchise brands really sparkle, they take a low-key approach just going quietly about their business.
3
GUTTER-VAC
Boasting 78 territories with 51 franchisees, 14 of whom are multi-unit owners, the Gutter-Vac outdoor handyman business has been in franchising for 20 years - and not just in Australia. There are 30 franchise territories in the US, and the brand is working to gain a licensing agreement to expand in the UK. Franchisees commonly stay for seven to 10 years. So why is it a good proposition? As Gutter-Vac explains, “Quite simply because we are an ageing population with cashed-up baby-boomers needing work to be done, and safety and regulatory requirements demanding greater compliance”. THE MEASURE: Gutter-Vac has been showing 35 per cent growth year-on-year for the past three years.
4
HOME INSTEAD SENIOR CARE
Home Instead Senior Care is a basic service that meets the needs of a rapidly growing market - ageing people living independently in their own homes. Its franchisees are helping elderly people and their families achieve independence by enhancing their home lives. Recent government reform to how home-care is funded and delivered makes a Home Instead Senior Care franchise in regional areas far more lucrative than when the brand started franchising 12 years ago. The business is growing its national footprint, particularly in regional areas such as Canberra, Melbourne, Newcastle (New South Wales) and Tasmania. There are now 24 franchisees, half of them with multi-unit businesses. THE MEASURE: Year-on-year revenue growth of 30 per cent since 2005.
5
HOTONDO HOMES
Traditional family values have been instrumental to this home-building brand’s success since it started franchising in 1993. There are currently 73 Hotondo Homes franchisees, and the average tenure is 10.3 years. More than a third of franchisees have been with the brand for at least 15 years. Strong marketing, sales, building and design support enables franchisees to compete with national building groups; processes and policies help them identify areas for improvement within their own business, which the franchisor can help them address. Growth is targeted for metro markets in Adelaide, Brisbane, Melbourne and Sydney, as well as regional areas across the eastern seaboard. THE MEASURE: Sales inquiries have increased 5.3 per cent over the same time last year, leading to more client appointments and sales.
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THE LIST
6
JUST CUTS
Hairdressing experience isn’t needed to own and run a Just Cuts franchise. Stylists are empowered to run all aspects of the business, so many franchisees spend less than 30 hours a week working on their business, and 53 per cent own more than one salon. Franchisees stay for the long term - the first franchisee has been in a Just Cuts business since 1983. A fixed-fee structure means owners commit to a weekly investment of 12 haircuts a week. The marketing investment is based on the same structure at five haircuts a week. THE MEASURE: The company has opened a $3 million warehouse and international distribution centre following 40 per cent year-on-year sales growth since 2013. It offers an exclusive range of professional haircare and styling products.
7
MAIL BOXES ETC (MBE)
MBE franchisees serve small to medium-size businesses, providing tailored services covering their packing, shipping, printing and marketing needs. It is essentially a one-stop shop providing back-office support. The global brand has been franchising for 22 years in Australia, where its network comprises 35 franchises, nine of which are multi-unit businesses. MBE is in the midst of opening eight more centres, and has just introduced an enterprise-based training program for franchisees. On average, a franchisee spends at least eight years in the network. THE MEASURE: MBE is showing same-centre sales growth over the past four years averaging 5.6 per cent.
10
8
QUEST PROPERTIES
Quest will be opening seven properties across Australia before 2019, its key growth markets including New South Wales, Queensland and Western Australia. Its network of 150 properties across Australasia is run by about 180 franchisees, who typically stay for five to seven years. Some are husband-and-wife teams or parent-and-child teams, and about 20 per cent have multi-franchises. Quest launched in 1988 with the first franchisee starting business in Carlton, Victoria, in 1991. The brand has been a pioneer in the serviced-apartment sector, and this first-mover advantage has led to a sustained market leadership status. It is backed by franchisee commitment to deliver the extra 1 per cent on a daily basis to exceed guest expectations. THE MEASURE: Growth is about 8 to 10 per cent.
9
SWIMART
One of Australasia’s largest pool and spa specialist groups, Swimart was established in 1983 as a single pool-retail store. Now the business has 73 franchise outlets across Australia and New Zealand, with a fleet of more than 250 mobileservice vans. The company is backing metro and regional expansion including both brick-and-mortar and mobile franchises. Testament to its success as a system, several franchisees have extended beyond the five-year agreement with one option to renew, and have been with Swimart for more than 25 years. THE MEASURE: Swimart franchisees have, on average, achieved strong sales growth, especially in home pool services.
XPRESSO DELIGHT
This corporate workplace coffee business is organically growing its market share in all territories, with more than 150 outlets throughout Australia, New Zealand and the US. About 10 per cent of franchisees have more than one outlet. Over its 13 years as a franchise, Xpresso Delight has seen franchisees typically stay for six or seven years. While they need passion, enthusiasm and motivation for personal growth, they don’t need experience - the support systems and work mode have been designed to cater for people who have not been in business before. THE MEASURE: Xpresso Delight has same-store sales growth of 10 to 15 per cent.
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LEADERSHIP
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Bread BARONS
As Bakers Delight heads into the future, the new generation at the helm still sees plenty of opportunity in the market.
B
akers Delight founders Roger and Lesley Gillespie have handed over the reins of their business to daughter Elise and her husband David Christie. The young couple took over early this year and have settled into their roles of joint CEOs.
Eight years of managing the Bakers Delight business in Canada has honed their skills and they are ready to steer the Australian chain of 600-plus outlets to a new phase of growth. “The main thing we want to do now is be innovative and nimble, take some youth and enthusiasm to move things a bit faster, to think more about growth, rather than defending our territory,” says Elise. While there will be change, it will predominantly be cultural change, she says. “We’re not just changing for the sake of it. It’s about growth, sales and profits for the franchisee, and there’s an appetite for change in the network.”
CUSTOMER FOCUS There is a sense of relief that Bakers Delight is continuing as a family business with a longer-term perspective, rather than being driven by shareholder value. Elise admits, however, that the change may not be easy. “People say they love change, but it can be quite confronting.” There will also be initiatives designed
to improve the customer experience, from a click-and-collect option to updating some store layouts. Some franchisees will need to reinvest into the bakeries so they are up to date, she says. With artisan-baking boutiques at one end of the competitive spectrum and the supercheap breads from supermarkets at the other end, there remains a massive opportunity in the middle market, Elise says. David says the changes are born of customer demand - whether that be seen through product sales, customer reactions to marketing campaigns or through detailed market research. “We’ll be shifting our focus to a group of customers who don’t shop with us as much as we’d like them to.” That means there will be initiatives to encourage time-poor, health-conscious young families to shop more often in Bakers Delight. One advantage in the market is the niche focus. Unlike supermarkets, the business can continue to concentrate and improve on one area. That, says David, is a huge advantage with the incoming threat of retailers like Amazon. “If you look at what Amazon has done, it has focussed on the customer, given them something that we can’t do. So what can we do that others can’t, that we can do really well?” The answer, he says, is the franchise component. “We have locals in nearly every bakery, employing local people, being part of the community through footy clubs and schools. We make our products from scratch, it’s
what we have focussed on. Supermarkets have 100 different areas to focus on.” Bakers Delight has more than 600 stores across Australia. The long-term target is 800, so there i]s plenty of growth to come if the couple can pull off their expansion plan. It starts next year with 15 new stores the goal. “We need to set our targets high. Our market penetration is strong in Victoria, and I see no reason why it can’t be the same in Queensland and New South Wales.”
BRAND POWER Elise explains the strength of the brand: “It’s very transparent - our portal and extranet has full availability of operating profit line. Anyone at head office or another franchisee can look, and the reports are all named. “If I’m a franchisee in Camberwell and see a bakery is doing similar sales to me but achieving greater profitability, I can ask what they are doing better - is it ingredients, is it wages? I can give them a call and find out.” The headquarters team encourages this, and the transparency helps develop an open, collaborative culture. In fact, while many franchise brands are way off achieving this level of transparency, for Bakers Delight it is old news. “We’ve had this so long,” says Elise. “Once we moved from faxing weekly takings, and it was all done electronically, having all the information at our fingertips has been great.” That does not mean there aren’t still
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LEADERSHIP
Roger and Lesley Gillespie
challenges. It is a longer journey to make sure the information is correct. Sales figures are reliable because they are taken off the registers, but monthly financial statements still need to be entered correctly. “It’s about education and communication, explaining the importance of accuracy, that it helps us better support franchisees, to manage the levers that drive the profitability of the business.” Financial clarity also helps franchisees when they are ready to leave their businesses, providing possible buyers with clear profit-and-loss statements and an easy way to assess the value of the business. Day to day the focus is on topline sales, marketing and performance, and franchisees can become excited and driven to a positive competitiveness, says Elise. There is no excuse for any franchisee not to know how their store is performing at any point during the day - the digital dashboard updates sales figures every 15 minutes. A franchisee can choose 10 bakeries to regularly watch, and will receive their figures as well. “If you have systems it helps engage the community and foster mutual support,” says Elise. “We really have built the culture that
We’ll be shifting our focus to a group of customers who don’t shop with us as much as we’d like them to. one of us is not as good as all of us.” If there is a poor performer, it really impacts the brand and the business, she says. There is another reason why the Bakers Delight brand stands tall: standards. “We make it very clear to our franchisees coming in that this is not an investment - this is you in the bakery, you are the face of your business, someone who has expectations, someone engaging who feeds and brings positivity,” says Elise. Franchisees are expected to be actively involved in their local community, with fellow franchisees and with area managers. Attending conferences and roadshows is mandatory, and ensuring these are valuable events for franchisees is an ongoing commitment, Elise says.
Collaborative events allow for feedback from franchisees, who can voice their concerns about the direction of the business or marketing initiatives, and who expect transparency in return.
FUTURE PROOFING Future proofing the business has included the intranet learning system called Breaducation, an online platform established at Bakers Delight for a few years. “None of our systems are perfect, but they complement great sales staff,” says Elise. There are systems that help train franchisees and managers in core aspects such as financial literacy and cost control. A
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LEADERSHIP `
HEARTS AND
FLOURS
Founders Roger and Lesley Gillespie have stepped away from Baker’s Delight, though they still have roles on the board, after 37 years. But their hearts are still in the business and they continue to have roles in the boardroom. This is their legacy... • Providing fresh, healthy bread for Australian families (and other families in other countries in which the company has stores) for many years • Establishing franchisees who in most cases have truly become the local baker, supporting their local community in many ways • Providing innumerable first jobs for many young Australians as well as providing a career path for many to ultimately become franchisees themselves. Roger says they want to see the business continue to grow and improve to ensure each bakery’s potential is maximised not only in Australia, but in its Cobs subsidiary that has been established in Canada for more than 10 years.
Q&A WITH CO-FOUNDER LESLEY GILLESPIE Is there anything you would have done differently? This is a hard question, because when you set out on a path or make a decision you cannot see the future. With experience and hindsight I’d say we would have hired more skilled people at the appropriate times. What are your expectations for your Canadian business? The expectations are for our Canadian business to reach bakery penetration like that in Australia. We are well on the way to achieving this with nearly 100 bakeries across four provinces. With a presence on the board, what do you want to achieve with the brand now? Bakers Delight in Australia and New Zealand will continue to grow in sales and bakery numbers to serve the growing populations in both countries. We will adapt to changes (I think back to how different we are now to how we were in the ’80s), but we will stay true to our core: specialist bakers of bread and bread-related products from scratch every day at every location. How will the trend for customisation change the franchising sector? The strength of a franchise is the system. The strength of our franchise system is the way we run our bakeries, from the recipe book to the way we promote, but this does not stop our franchisees from putting their own touch on their business. We have flexibility in many areas. For example, in our Pink Bun campaign (where we sell buns with pink icing to raise proceeds for the Breast Cancer Network Australia) many franchisees will go above and beyond to decorate their bakery in pink, encourage their sales staff to dress in pink and to do whatever it takes to help raise funds. This individualisation is not in our franchise agreement, but we certainly applaud and encourage it.
Elise Gillespie and David Christie manage-to-own program has brought in about 4 per cent of new franchisees. “It particularly suits younger people who don’t have the capital to purchase, but who want to buy in a couple of years.” The steps to franchise ownership start with running a corporate store. When the individual reaches specific benchmarks, the next step is for them to consider taking out a lease, then buy a business. Elise says it is a longer road than the four months of training for franchise buyers who have the funds to purchase outright.. Testament to the business is the number of existing bakers and production managers who invest in a franchise, and current franchisees who expand within the system. Just 20 per cent of new franchisees come from outside the Bakers Delight network. New franchise stores were bought last year by: • Existing franchisees - 49 per cent • Internal manage-to-own - 31 per cent • External franchisee - 16 per cent • External manage-to-own - 4 per cent. Multi-unit owners undertake a lot of training and development. It is a potential exit strategy to buy or sell to the team, says Elise. Looking ahead, the key is to increase topline sales, to boost profitability. “Beyond that, we’re looking at equipment innovation that allows bakers to start later, and saves on penalty rates and results in better staff retention. Starting at 2am or 3am is better than starting at midnight,” she says. “This is a big focus for us, and it means fresher product for the customers.” New technology, a new POS system and an improved production schedule mean savings in waste and wages. At the bakery level, franchisees are encouraged to look in detail at the roster, at production, benchmarking, to lean on the area manager and find out how they can make the most of, and maximise, sales. With all this support to hand, does this mean all franchisees are highly profitable? There is a spectrum of financial success, says Elise, with some bakeries barely turning a profit to those running a $500,000 business. “We have lots of support for franchisees who want to make more money. If you get it all right, the basics step go a long way. Friendly staff who know the product range and are helpful make a big difference.”
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COVER STORY
A LITTLE BIT
COUNTRY... JULY/AUGUST 2017 | 24 | WWW.FRANCHISEBUSINESS.COM.AU
It’s all rock’n’roll now for Josh and Lisa Thompson as they expand their healthy food store into a fresh, fast and casual cafe franchise, writes Sarah Stowe.
F
ounders Josh and Lisa Thompson of The Farm Wholefoods have learned the value of listening to customers while introducing city folks to country goodness with their store in the affluent inner-city Sydney suburb of Potts Point, which rubs shoulders with its headline-grabbing neighbour Kings Cross.
When it launched three years ago, The Farm offered locals a raft of bulk-packaged foods in a light and airy space. “The food space is dominated by cluttered health stores, and we wanted to provide a beautiful offer,” says Lisa. Josh’s big Italian family, his grandparents’ farm in Mollymook on the New South Wales south coast, and Lisa’s rural Victorian upbringing inspired them to create a business model that delivers basic foods and encourages clean eating habits. Today the same venue has more of a cafe feel: the back area formerly housing pantry basics is now the kitchen, a graband-go cabinet near the door offers easy snacks, and tables and chairs offer customers the chance to enjoy a leisurely healthy meal on site. This follows the discovery that the locals didn’t want to have to serve themselves from big bags of superfoods to create meals at home, they were far more interested in the convenience of cafe meals in the pleasant surrounding of The Farm. “Customer feedback showed they liked the ambience of the store and wanted to enjoy the space,” says Josh. Two years on and the offer is clear: fresh, fast, casual meals - and treats (organic chocolate and gluten-free cookies).
amazing, but it’s simple and nutritious,” says Lisa. While the cafe is open from 7am to 4pm, a delivery service has been introduced so a compact dinner menu is now available. While the couple clearly thrives on being busy, the flexibility of working for themselves allows them to manage their growing business around their young family. When the shop launched they had a newborn; now, as they unveil a franchise model, their second child is just five months old. Josh and Lisa opened a second store in Cammeray, then added a Neutral Bay outlet and are now poised to unveil an outlet in the residential suburb of Baulkham Hills. It will be the brand’s first franchise, and will have a different look from the existing outlets. That’s where Josh’s design talents have come into play: “It’s been good to entwine these into the new life,” he says. While the layout and style of the stores have changed, the essence of the brand remains - raw industrial with touches of green. There may be more tweaks to suit local demographics as the stores continue to roll out. Next will be another corporate store opening in Brisbane in July. “Franchising was always the plan,” says Lisa, explaining that opening up the business model to keen franchisees boosts the capital needed to further grow the brand. There are plans to open up to 15 outlets along the eastern seaboard. “The demographic is not mainstream, it’s a smaller population,” says Lisa. “We have to be careful where we go and how we place ourselves.”
“Not complicated”
All aspects
The couple collaborated with nutritionist and whole-foods cook Jacqueline Alwill from The Brown Paper Bag to develop the cafe menu, creating a selection of nutrient-rich dishes for breakfast and lunch. Think innovative smoothie bowls as well as a mix of salads, sandwiches, burgers and sides, all with a core focus on ingredients that sustain and nourish the body. Everything is made in-house daily with fresh ingredients. “It’s not complicated food - it looks
As the couple expands interstate it intends to run the first outlet in each state as a corporate store. The headoffice team of six works across all aspects of the business now, each team member able to fill in the gaps at stores and to help with store openings. Ideal franchisees will be owneroperators and have a passion for the business, with some food or retail experience. The couple wants to be challenged.
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COVER STORY
We want franchisees who are not stuck in their ways but who will push us as well.
“We want franchisees who are not stuck in their ways but who will push us as well,” says Josh. “We want broad-minded people.” Lisa’s IT background has ensured that technology is at the heart of the business, with POS and reporting tools crucial to individual store performance and to the network’s growth. “So much is automated in IT,” she says. “We scrutinise reports constantly.” Strong systems and visibility of franchisee finances will help keep the brand on the right side of workplace compliance, she believes. As franchisors, the pair adds to this a strong social-media presence, marketing campaigns, and an understanding that communication is the major factor in a successful franchise relationship - not just between franchisee and franchisor, but franchisees and their staff members. Lisa and Josh are cognisant of the need to understand the nuances of the franchising relationship and the boundaries set by the Franchising Code of Conduct. “Not a lot really phases us,” says Lisa. “We’re really curious. That’s partly why we created our own challenge.” JULY/AUGUST 2017 | 26 | WWW.FRANCHISEBUSINESS.COM.AU
LEADERSHIP
FRUITFUL ENDEAVOUR A young mum has found a true life balance, running two franchise outlets for a juice brand while caring for her two young children.
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other-of-two Jenna Elkordi loves juice so much it has played a major role in her life, and now she juggles ownership of not just one, but two Top Juice stores. Before this, she worked for the company for two years, gaining insights into what owning an outlet might be like. “I loved the company from the beginning,” she says. “The support from head office makes everything possible. Top Juice supports its team, which means I can balance my family life while owning my own business.” After she opened her Top Juice store in Miranda Westfield in New South Wales, an expansion of the mall gave her the opportunity to invest in a second store. “With the first store being successful and profitable, I thought. ‘What better time to take
my career to the next level as a franchisee?’.” In terms of the challenges, Elkordi admits that motivating the teams is an ongoing learning curve, but she manages to run the stores as one with the help of a full-time manager. “For me, it’s seamless to run two stores. I can alternate staff, lead both teams and physically run between both stores daily.” She says support from head office is one of the benefits of being a franchisee. “I don't need to be running around sourcing my own stock. The warehouse does a daily delivery of stock so the staff can start setting up early.
TEAM EFFORT “I'd say the most important thing for me would be getting the right staff members
and having them trained up correctly so the pressure isn't all on me to be at the shops at all times.” Elkordi works about 30 to 35 hours each week, often longer in summer. “I have a strong team that sets up the shops and closes at the end of the day. I'm usually working from 9am to 3pm, school hours, so I can drop and pick up kids from school. “Having my own business works well for me with two children, aged six and seven. I can work hours that fit in with the family schedule.” Elkordi would encourage anyone who has ever thought about franchisee ownership to give it a go. “I’m a mum of two and have made it work for my lifestyle. If I can do it, anyone can.”
Having my own business works well for me with two children, aged six and seven. I can work hours that fit in with the family schedule.
JULY/AUGUST 2017 | 28 | WWW.FRANCHISEBUSINESS.COM.AU
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LEADERSHIP
Serving Beyond the RESTAURANT A Mexican fast-food chain with a mission, Zambrero is harnessing its brand power to make a difference in the world.
A
s Australians seek healthier fast-food options, they are discovering Mexican style with its big serve of flavour. In such a busy market, brand differentiation is an important step for franchises.
There is just such a difference for the Zambrero chain, with founder Dr Sam Prince bringing a humanitarian perspective to the business right from the start, with social initiatives now integral. At the heart of its businesses is the Plate 4 Plate initiative. For every burrito or bowl bought, a meal is provided by the company for someone in need. The fast-food chain has joined forces with international relief agency Rise Against Hunger (previously Stop Hunger Now) which has a mission to deliver nutritious meals across Africa, Asia and the Americas. On a local level, Zambrero has partnered with Foodbank so needy Australians can be supplied with meals. “The volume of meals we are providing and the support of people in need drives the movement,” says Zambrero CEO Karim Messih. “We have meal counters in
our restaurants that record the number of meals donated.” Almost 15 million meals have been distributed through the initiative. “It feels pretty good,” says Messih. He says team training is important, and notes that some staff members, as well as customers, have visited overseas locations where meals are distributed. A new initiative is in-store videos showing children in supported villages to create a more personal link to the charitable activity. “It creates a feeling, an understanding of what it’s like to be in a village,” says Messih. “We will continue to innovate.” In the fast-food sector, costs really count - both for the store owner and the customer. But Messih says there is another priority at Zambrero. “Our world is more about value. People will pay for good food, for convenience and service, if it’s good enough.” Zambrero aims to attract repeat customers. Messih says there is no target demographic, with the brand appealing to three distinct customer profiles: the millennial, who is attracted to the
humanitarian aspect; the family that values the value; and the healthy diner who appreciates the superfood range.
GROWING STRONGER Zambrero’s outlet in Nowra, New South Wales, brought its network of restaurants to 150, with more opportunities to come. The chain has grown by 30 to 40 stores annually for the past three years, and Messih sees no reason to change this. However, he is keen to point out that it is not growth for its own sake as there are plenty of untapped territories around Australia. “The strategy has been more regional and about working our way in, really planning, looking for the right demographics, where this will work well. Location is the key. “You can be in the best street in a suburb, but in the worst spot, and that’s not good. If your site is out of the sweet spot, it is really a struggle.” Zambrero runs food-court, strip location and kiosk models, as well as 16 drivethroughs, and takes a balanced approach to
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Keeping things simple, looking after the customer, is important, more now than ever.
CEO Karim Messih the spread of outlets. The different models suit diverse locations, says Messih. He believes it is important to capitalise on the option to cater for both lunchtime and dinner trade, and while customers appreciate choice, Zambrero has deliberately kept its menu simple. “Sometimes less is more,” says Messih. “Often franchisees have young kids serving, and this also makes it easy for them. I’d rather have fewer menu options, but meals that are amazing.” He compares this with what he has seen in the US, where some chains have more than 100 items on the menu. Messih believes traditional QSR businesses are failing to innovate in their cluttered space. It is the newer chains in the healthy-eating sector that are invested in innovation. Founder Dr Sam Prince getting hands on at Stop Hunger Now
CUSTOMER FOCUS Messih believes in the “theatre of food”, where displays are integral to the customer experience. “In the past two and half years we’ve moved away from bain maries. We present food so it looks appealing to the customer. It’s really critical.” At the heart of Zambrero’s growth is its focus on the customer. “It starts with your products. We consider ourselves product people. We have an obsession about what we sell, and the quality of ingredients.” A customer-centric approach is twofold, he says. It is reflected in the menu, with vegan, vegetarian and now gluten-free options, along with a superfood range that keeps up with the times. Introducing a gluten-free burrito was a challenge: how to give similar taste
sensations with a burrito that wouldn’t crumble. The answer was a black-rice tortilla. “It was launched late last year and sales have been amazing. We even have gluten-free franchisees who can now taste a burrito.” Secondly, the customer is central to marketing, which involves providing franchisees with the right systems so they can use technology to build customer loyalty. Messih believes the brand can stay relevant to the customer through its loyalty programs, online ordering and home delivery. The home-delivery service was launched about six months ago through Deliveroo and Uber Eats, and has brought “good successes”. “For some of our metro markets,
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home delivery is adding real value to the business,” says Messih. So what are the steps to success in fast food? “Fast food is just about basics, customer service 101. It’s cliched, but making a person feel important is so critical. It is important for us to also deliver on speed and service. You can lose a customer quickly, so it’s the sum of all its parts.” He says there is a danger in overcomplicating things. “Simply have amazing products, great locations and fantastic service. Retailing is more competitive than ever. Keeping things simple, looking after the customer, is important, more now than ever. And keep enjoying it - retail should be exciting.”
LEADERSHIP
Taking ofF IN
BUSINESS
Scott Penrose has shelved action with the air force to take up the challenge of running a coffee-shop franchise with wife Nicole.
J
ust back from his fourth deployment to the Middle East for the RAAF, Scott Penrose has been cheering on wife Nicole as she launches a new chapter in their lives. The couple have signed up to a Zarraffa’s Coffee franchise.
It is a change of pace for Scott, who has served a combined 17 years with the air force as both a full-timer and a reservist. “We’ve been a part of the Ipswich [Queensland] community for 15 years and are ready for something new in our careers, and to build a business that suits our family,” he says. “Nicole has done the heavy lifting of late, with loads of phone calls and emails flying back and forward across the
globe, but since my return in April we have been very much a husband-andwife team, dealing with the demands of running a busy Zarraffa’s drive-through store.” Scott says the decision took three years to reach fruition. “Zarraffa’s is very thorough in its selection process for franchisees, and this meant we really had to reach a full understanding of what it takes to own and run one of their drive-through stores, and that protects everyone in the long run.” The new store is in an industrial area of west Ipswich. “Having spent a lot of time in the area we have seen it change and grow, and could see an opportunity to expand the retail offering and convenience for locals,” says Scott.
“With the store opening at 5am, we are also able to cater to tradespeople or early risers on their way to work without them even having to get out of their car.”
TEN QUESTIONS... How will you juggle family demands with running a business? We have the ability to roster ourselves on for times suitable to family life, and have a very supportive immediate family to help when needed. What are your ambitions for the business? To grow a loyal customer base within the local community and deliver the product
JULY/AUGUST 2017 | 32 | WWW.FRANCHISEBUSINESS.COM.AU
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LEADERSHIP
and customer service that sets us apart in our industry. We would like to expand our holdings by becoming multi-franchisees within the company.
Seventeen years in the defence force, both permanent and reserve, has instilled discipline, professionalism, punctuality and leadership on all levels.
Why did you pick the Zarraffa’s brand? We liked the product and convenience for the customer, especially with the drivethrough store, and there is an excellent support structure in place for first-time franchisees. Are you back in the country for good now, Scott? Yes, I am back to learn the business inside and out and to work closely alongside Nicole to grow and promote the brand in our local area. If the opportunity to deploy again was asked of me, I would have another serious conversation with Nicole and more than likely answer the call in some capacity. What will your involvement be in the business over the next year or two? I will be involved in the business full time alongside Nicole. We believe it is important for our customer base to see and know their franchisees. Moving forward, I would like to grow our team and expand into multi stores within the Zarraffa’s company. What skills or experience do you bring to running the coffee shop? Seventeen years in the defence force, both permanent and reserve, has instilled discipline, professionalism, punctuality and leadership on all levels. Being posted into training environments has provided me with the skills required to train,
instruct and manage staff. Nicole, how did you come to the decision to buy a franchise? The decision was reached after a lot of research on brands and products in the market. Zarraffa’s was our clear choice because of the growth potential, the brand itself and viability for the future. What were the challenges of signing up to a franchise and setting up while Scott was away? The challenges involved the constant demands of having to make all the decisions involved with all aspects of setting up the business, staffing the store and training new staff. It was also a challenge having to rely on family to help out with my two girls and no longer being the parent who was always around for school drop-off, tennis lessons and weekends. Also not having Scott to run things past on a day-to-day basis when big decisions had to be made was really hard. How hard will it be to adjust to having Scott involved in the business now? It won’t be difficult but more of a relief that we can now share the workload and familylife balance and begin to build our business together. What have you learned in the first few weeks of running this business? That you should definitely start a new business with your husband in the country. That time management is crucial, and I know that I am a lot stronger and resilient than I ever gave myself credit for. n
JULY/AUGUST 2017 | 34 | WWW.FRANCHISEBUSINESS.COM.AU
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LEADERSHIP
BRAND
BUZZ
Adventurous franchise buyers are in luck right now as ever more business opportunities open up. Options range from fitness to food.
T
here is always a buzz around a fledgling business model, and for franchise buyers keen to buy into an emerging business there are new concepts on the board.
We look at few new franchise opportunities, embracing fitness and food…
ORANGE THEORY FITNESS The company behind Anytime Fitness in Australia has launched a studio-based fitness franchise brand. The Orange Theory Fitness concept delivers individual fitness within a group environment: members will do a fitness session that splits into two groups to maintain heart rates alongside other routines. Each fitness class changes routines daily in step with what its studios are doing around the globe. Arthur McColl, CEO of the parent company Collective Wellness Group (CWG), which also includes the Massage
Envy chain, says the new brand offers a different service to the 24/7 gym model. “At Orange Theory, instructors arrive 15 minutes early to ensure that everyone joining the class feels welcome. There’s a huge element of customer service.” Confident both CWG fitness brands can sit side by side, McColl says he didn’t want the brand to cannibalise existing business. “I have data to show the two could cohabit. “We’ve just opened the first Orange Theory in Canberra, and it was profitable on day one.” Its studio is just a few hundred metres from the largest Anytime Fitness gym in Australia. The two brands appeal to franchisees looking for different management techniques, says McColl, and while there will be a big crossover of existing Anytime franchisees looking to take on the Orange Theory brand, he promises a stringent selection process. There is a distinct membership split across the two chains: Anytime has a predominantly male clientele and a $60
JULY/AUGUST 2017 | 37 | WWW.FRANCHISEBUSINESS.COM.AU
to $70 monthly membership; Orange Theory is popular with women who can buy a $235 premium membership, a package of sessions, or pay as they go. Originating in the US and established in 10 countries, the brand was previously under a different master franchise in Australia but did not scale beyond three outlets. Under CWG, 40 Orange Theory franchise units have already been sold. “I hope potential franchisees will have confidence in the brand itself, and also see the benefits of being part of a bigger business with all the infrastructure,” says McColl. CWG works on a shared-services basis across all brands. “I’d like franchise buyers to walk into any franchise and ask what they think of head office,” he says. Orange Theory units need to be highly visible, and finding the appropriate properties will be a challenge, says McColl. “We have a very tight demographic. We need affluent suburbs with disposable income.” Franchise buyers can expect a
LEADERSHIP
business to cost about $400,000.
HARRY’S SCHNITZEL JOINT Fast-food franchise Harry’s Schnitzel Joint is growing beyond its Newcastle roots, with local and interstate sites up for grabs. Inside Franchise Business speaks to founder Harry James to find out more... The expansion strategy this year includes targeting sites within the New South Wales Central Coast and Western Sydney region. We plan to get our network up to the 10-store mark, surround ourselves with the right expertise across all elements of the business and gain as much feedback as possible from our partners, then re-evaluate if necessary before continuing the journey. We have our fourth store opening in June, will launch two more outlets in the Central Coast and Western Sydney, and establish our third franchisee store by the end of the year. That will take our
store count to seven. Initiatives are in the works to drive our franchise to even greater heights next year, so we’ll be out there meeting and greeting prospective franchisees and looking at new locations - quite possibly Melbourne and Brisbane. Greenfield or newly established sites, depending on the size and type of store, will range from $300,000 to $450,000, and that’s for an all-inclusive turn-key operation. The support you will receive from Harry’s head office will be extensive, interactive and effective, and will be maintained throughout the franchise partnership - that’s the promise we make. Franchising is our preferred way to go from now on. It’s a win-win for all, and we love working with enthusiastic business owners who share the Harry’s vision and passion. 5 THINGS THAT ARE NEW AT HARRY'S 1. It has taken us the better part of 18 months and a whole lot of investment,
but thankfully the Harry's Schnitzel Joint franchisee operations and training manual is ready for storewide launch. Lots of time and heaps of sweat have gone into this, and we're sure it will be in a constant state of refining and adding components, but it's well worth it, especially for our new franchisees. 2. As we prepare for the market beyond Newcastle, we have introduced and upgraded our range of sauces with a few recipes that will be found only at Harry’s. 3. We have spent a fair bit of time working on our store layouts. The strategy is to become more efficient and keep down labour costs. We are implementing this design at the Thornton site in Newcastle. 4. We're always looking to create a better, more convenient customer experience, so we have invested heavily in upgrading our in-store technology, especially at point of sale. I promise you we will turn heads and lead by example. Considering we live
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in a world of experiences, we've made it our mission to introduce best-ofbreed technology that allows Harry’s to provide the best systems at the right cost for our franchisees. 5. With all the news on wage disputes, we have taken it upon ourselves at Harry’s to make sure we have that right for now and for the future. For the past year we have been working with a company that provides rostering, payroll and HR services at an individual store level, which is also integrated into our POS system. This allows for a reporting link back to Harry’s head office. It’s the best way to ensure we always have things right by our employees.
THE FUNKY MEXICAN CANTINA After four years trialling the concept, a new Mexican franchise is launching. The Funky Mexican Cantina aims to provide a full-service, full-flavour experience restaurant, and it starts with head chef Ariel. “I was born in Tequisquiapan,
Queretaro, Mexico,” he says. “When I was a child, my mother would hold large family gatherings and cook everything from scratch. I spent many hours in the kitchen with her and Nana expanding my knowledge of traditional Mexican cuisine. Their teachings continue to have a major influence on me.” From eight years old, Ariel worked in his uncle’s restaurant. He continued his career at exclusive restaurants and hotels before arriving in Australia 11 years ago. Behind the casual-dining concept is Hog’s Australia, which sees the second brand as a valuable addition. “About five years ago we were looking at ways to continue to evolve the company, and looked at the food trends,” says CEO Ross Worth. A visit to the US confirmed the direction Hog’s would take, and once Worth was back in Australia the business started working with its head-office landlord to find a neighbouring space for a restaurant. With Ariel on board, the business opened its first venue, next door to the
Hog's Breath Cafe in Cleveland, Brisbane, and tested the menu on head-office staff members. Four years on, the business is ready for franchising. Flavour profiles are important, says Worth, and with Ariel using a pestle and mortar to grind spices, some of his family recipes have been toned down to suit local tastes. “At Funky’s you can expect carefully crafted, authentic Mexican cuisine developed to suit the Australian palate. Our menu is based on traditional recipes and ingredients, combined with a fresh and healthy approach,” says Ariel. Dishes include tacos, enchiladas, chimichangas, burritos and chorizo burgers. Existing Hog’s franchisees keen to embrace the new initiative and take on a second brand will be first in line to invest in The Funky Mexican, but opportunities to join the network will be available to the public. The first two franchise outlets will open in Perth with a Hog’s Breath Cafe franchisee at the helm.
LEADERSHIP
ACCOMMODATING
THE WELLNESS TREND
A focus on wellbeing is giving one hotel chain an edge in Australia and New Zealand, where it is rolling out a concept fresh from the US.
A
new hospitality concept has arrived in Australia that fits right into the trend for wellbeing, and there could be opportunities for franchising. Inside Franchise Business speaks with the Australasia head of development for the InterContinental Hotels Group (IHG) Matthew Tripolone...
WHY IS THE WELLNESS MARKET IMPORTANT TO HOSPITALITY? According to the Global Wellness Institute, the wellness industry is a $3.7 trillion sector, with wellness tourism contributing $536 billion of the total value. Seeing this overwhelming opportunity area, and after more than 24 months of consumer insights research, IHG launched Even Hotels in 2012. Citing IHG’s track record of delivering hotel industry firsts, our CEO Richard Solomons says we’re doing it again by staking our claim in the wellness space within the affordable lifestyle category. This brand is yet another example of how we are constantly innovating to meet the changing needs of consumers. In our 2017 Trends Report, IHG challenges brands to address the paradoxes driving the decisions of today’s uncompromising customers. The report argues that a brand cannot be a single idea, but a complex, multi-dimensional approach that includes differentiating features, functional, emotional and social benefits as well as a distinctive brand character. From wellness-savvy staff to guest-room fitness zones with in-room trainers and fitness equipment, and an Athletic Studio in each property, Even Hotels aims to help guests stay physically active in their own way throughout their stay. The brand meets each guest’s needs for personalisation while staying true to its overall “wellness promise”: “Eat well, rest easy and accomplish more”. JULY/AUGUST 2017 | 40 | WWW.FRANCHISEBUSINESS.COM.AU
HOW IS THE WELLNESS MODEL BEING ROLLED OUT? In partnership with Pro-invest Group we will develop a portfolio of Even Hotels across key Australian and New Zealand capital cities and economic hubs. This is the first portfolio for the brand to be developed outside the US, where we have six Even Hotels with a further six in development. We are working closely with our partners at Pro-invest to secure ideal locations for these properties – likely to be in capital cities along the eastern seaboard of Australia initially, and within key business and tourism hot spots across both countries. Beyond the physical property, the
brand supports the needs of travellers through a wellness travel site written by an editorial team of health and wellness leaders, lifestyle experts and seasoned travellers.
WHAT OPPORTUNITIES WILL THERE BE FOR FRANCHISEES? IHG has established a strong hotel franchising model to provide owners and investors in Australia, such as Pro-invest, with a reliable and profitable alternative to our equally successful management model. We are open to franchising our brands in strategically important locations - with the right partner.
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WHAT EMPHASIS WILL THIS WELLNESS FOCUS HAVE ON THE BROADER IHG EXPANSION PLAN? Even Hotels’ arrival in Australia was significant for us. As well as focussing on strategic expansion of our core brands of InterContinental, Crowne Plaza, Holiday Inn and Holiday Inn Express, the boutique and lifestyle hotel segment presents huge opportunities for us. We have also signed Australia’s first Hotel Indigo, a boutique brand. We are seeing increasing consumer demand for more personalised travel experiences and are responding to this with the arrival of these new brands.
LEADERSHIP
Feeling more
AT HOME
It’s a smoother ride now for a young couple who gave up the fly-in/ fly-out employment “prison camp” lifestyle for the benefits of running their own franchise.
T
he fly-in/fly-out (FIFO) life is not easy, and despite Justin van Camp and his wife Debbie having a joint income of $400,000, he likens the work to “being in a prison camp for two weeks at a time”.
Their working life saw them sharing the same two-week work roster, but at different mining sites (BHP and Rio Tinto), with a week at home together. But after Debbie became pregnant, it was time for a change. “I wanted to quit being in FIFO because we were looking to start a family and wanted a business we could do together,” says Debbie. The lifestyle change has been significant for the couple as they can now be home every night as their daughter grows up.
“NO BRAINER” “The decision to choose a Bridgestone franchise was easy,” says Debbie. “Justin knew all about the brand from his experiences as a mechanic, and he figured
there is always a demand for tyres and servicing. “He leaves home around 6.30 every morning to beat the traffic and make sure he gets to the store early to do some admin stuff and make sure everything is sorted for the day.” Debbie has a full-time job but supports her husband with accounts, and the couple believes there are many benefits in being backed by a brand like Bridgestone. “They were with us the whole first week, helping and supporting us, and they’ve been just a phone call away ever since,” says Debbie. Justin says the benefit of the industry is a “no brainer”. “You could probably guarantee that almost every household in Australia is going to have 1.5 cars,” he says. “Every car is going to need servicing and new tyres.” Although this is his first business, he says franchising was an easy choice. He values the support of the franchisor most, especially when it comes to accessibility. “If you need help, they’re there to help and they do help.”
BOOTS AND ALL Justin bought a new Western Australia site, Victoria Park. He says that finding the right site was luck and a matter of “being at the right place at the right time with the right attitude”. He says the site’s previous use as an Ultra Tune outlet was beneficial as the client base was already there. Former Ultra Tune customers would come in and still be able to have their cars serviced. While he also gets along well with the franchise development manager, he admits that running a business is not always easy. “Straight off the bat we were running,” he says. “I still put in a lot of hours into the business, but when it’s yours, it’s your baby...” When he started out, van Camp was working 10-hour days, six days a week. “I’ve never worked so hard in my life,” he says. Now, almost two years later, he is clocking eight and a half hours a day each week. “If you’re going to do it, you need to have a goal. I tend to jump into things boots and all. If you don’t do it, you’re
JULY/AUGUST 2017 | 42 | WWW.FRANCHISEBUSINESS.COM.AU
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LEADERSHIP
never going to know.” He admits there was much to learn at the start. He and Debbie refinanced some of their properties to cover the initial investment cost.
STAFFING CHALLENGES
Don’t buy a business just because you want one, do it because you have a passion.
A major challenge is that van Camp is still yet to find a staff member who can deliver up to his standard. He says it is important to maintain customer expectations, and he does like things being done a certain way. “I need to know everything about my business,” he says. “Don’t become mates with your staff members - you need to be careful: there is a line. At the end of the day, you are their employer and it can be hard to put your foot down later. “Try to avoid employing your friends, and do not go into business with your family. It can complicate relationships.” And his goals for the business? “I reckon three sites would be pretty good,” he says. “With every store now having to be opened as a Bridgestone Select, which includes a full range of automotive servicing, not just tyres, it would be difficult without an automotive background.” His advice for potential buyers: “Be prepared to work hard, as you only get out what you put in. However, it is incredibly rewarding. “It has given us the independence to work the way we want to work. We’re doing something for ourselves instead of working for someone else. “Don’t buy a business just because you want one, do it because you have a passion,” he advises.
JULY/AUGUST 2017 | 44 | WWW.FRANCHISEBUSINESS.COM.AU
Following its launch in August 2016, Franchise Retail Brands has acquired New York Slice and Hombre Mexican and has launched four concept brands - 1582, Sabatini’s, Crave and Dessert House to its portfolio – with more to come as the group moves to raise $20M to float on the stock market in the first quarter of FY 17/18. As Franchise Retail Brands looks to expand both concept and existing brands across the Eastern seaboard of Australia, the group has focused its efforts on the QSR sector where food and coffee provide significant room for growth. For Mr Corbin, successful expansion depends on a streamlined and organised franchise model with support offered to franchisees in all areas of business ownership. “We have designed our model specifically to leverage supply-chain operations in all our Franchise Retail Brands franchises through synergies in the purchase of goods, which includes coffee from our 1582 brand coffee roaster - set to lower costs for all brands and to improve profitability.” Mr Corbin said that franchisee expenses will also be reduced with Franchise Retail Brands infrastructure across administration, staff training and marketing. “With added support across general operations including stock ordering, staff management, OH&S and customer service – we hope to equip franchisees with the tools they need to successfully run their business.” Those interested in learning more about Franchise Retail Brands or joining our growing network can visit: http://frb.com.au/ or contact Sean on 07 3999 8950
FRB.COM.AU
07 3999 8950
info@frb.com.au
LEADERSHIP
FURNISHING A
FRESH APPROACH In a new concept for the furniture segment and franchising, storage is king - bypassing warehouses full of stock with data stored in the cloud.
A
fter 15 years of trading, Vast Furniture & Homewares has come up with a new approach to running the business which founder Ross Clayton believes will shake up the furniture retail scene.
It took more than four years to shape and test his concept, which three company stores are now using, and he is ready to roll it out for new franchise stores. His present 22 franchisees have been given the option to adopt the new model, and Clayton says the costs of implementation will be countered by a drop in ongoing storage costs. The brand specialises in versatile, bespoke furniture ranging from tables and bedroom furniture made from disused shipping timber, to vegan leather sofas. Traditionally the market has been the 35 years and older demographic, but with an active social-media presence the brand is attracting a younger crowd. Clayton says millennials are also being drawn to the business because of its artisan, hand-made ethos. “We’re about sustainable hard woods with a hipster vibe,” he says. So what has changed? It’s all about greater efficiencies.
BASED IN CLOUD His franchise model is based in the cloud: a system that can store all inventory information centrally and organise direct delivery from manufacturer to customer, bypassing warehouse overheads. Instead of franchisees having to build their own system from scratch or be expert importers or exporters, each business has instant access to the entire range of suppliers. “One of the biggest challenges for furniture retailers is the logistics of bulky goods,” says Clayton. “It’s an incredibly competitive segment, and warehousing costs are increasing.” He believes his initiative to remove a layer in the supply chain makes it easier and more cost effective for franchisees. Already, delivery times have been cut by 80 per cent, plus he says overheads are down 70 per cent on the traditional industry model. “I have been in the industry for many years and one day simply questioned why we spend so much money on storage, wasting time in terms of delivery and limiting our overall results. I knew there had to be a better way.”
Anyone who wants to be involved in the franchise business can be set up for success with this model.
FRESH OPPORTUNITIES “We’re aiming to open 20 franchises across Australia over the next two years,” says Clayton, who is looking for people with passion, great customer service, a happy personality and a youthful attitude. It costs an average of $150,000 to buy a store in an exclusive territory. Set-up and stock will cost about $200,000. There are also plans to take the brand overseas, expanding from its single store in New Zealand and breaking into the Asian, UK and US markets. “Previously we needed someone who was a born creative business whizz or a cashed-up genius to make their franchise a success. Now anyone who wants to be involved in the franchise business can be set up for success with this model,” says Clayton. “We believe the future lies in being more efficient, productive and cost effective, and by providing a franchise model that ticks all these boxes we offer investors a very real chance of keeping our industry alive right here in Australia.”
JULY/AUGUST 2017 | 46 | WWW.FRANCHISEBUSINESS.COM.AU
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LEADERSHIP
FIVE MINUTES
WITH SAN CHURRO’S
KIM DAVIES
Kim Davies heads up recruitment at chocolateria chain San Churro.
1. What is your personal strength in business?
5. How does a franchisor foster trust in the relationship with a franchisee?
I am definitely a people person, and I genuinely care about our franchise partners. This comes across in my relationships with them, and I take pride in knowing they trust in my honesty.
Again, honesty and consistency. Franchisees invest a huge amount in their franchisor, not just in monetary terms but also in their future. They need to feel confident their franchisor has their best interest at heart, and that happens only if the franchisor is honest, and has clear systems and guidelines, transparent processes and consistent treatment across all franchisees.
2. What have you learned about franchising? Honesty is definitely the best policy when recruiting franchisees – you can recruit the right people only if you deliver the right message. If you don’t, you end up with the wrong franchisees. Follow your gut: if something feels wrong, then most likely it is. Don’t judge people without getting to know them. Not everyone presents well on paper, and there are some amazing people out there who just need a chance to prove themselves.
3. What does it take to have an efficient franchise model? A strong brand, a sensible growth strategy, a clear understanding of the market, high-quality product that is relevant to the market, sturdy policies, consistently high standards across the network and all backed up by a dedicated support network and a commitment to growing profitable businesses.
4. What do franchisees want from their franchisor support team? Experience, understanding, willingness to listen, and honesty.
6. What can franchisees do to ensure a good relationship with the franchisor team? Communicate, be constructive and be open to suggestions for improvement. Most franchisees will go through challenging periods during their tenure, but that is when it is really important for them to contact their business development manager and discuss their concerns. A franchisor can help and provide support only if they know what is happening with their franchisees. Stay passionate about the brand. If franchisees lose focus and passion, it is time for them to make a decision about whether to move on. We respect the decisions of our franchisees and will help them with the sale of their business.
7. In your experience, what is the most common mistake franchisees make? Not doing their homework (due diligence) and having unrealistic expectations. Most people enter franchising to “be their own boss”, but often do not really understand what this means. Being your own boss means taking responsibility for your business, in all areas. You need to wear a lot of hats and learn
a lot of skills. You need to understand that it is a long-term commitment and that you will be devoting a lot of your time to the business, particularly in the early days.
8. What do you look for when interviewing a prospective franchisee? Honesty and openness. At San Churro, we make our franchisee meetings very informal as this encourages applicants to ask as many questions as they can and to be honest about their concerns. This allows us to connect with the candidate and understand if they are right for San Churro, and if San Churro is right for them. If the environment is too formal, people can behave in a way not natural to them. We want to get to know the individuals, and we want them to get to know us. If at the end of the meeting they walk away having decided San Churro is not right for them, that’s OK. We want to partner with people who are totally on board with our brand and our culture.
9. What do you think is the most important quality a franchisee needs? Two qualities spring to mind: the ability to develop, manage and mentor a team of staff members who will echo the brand values, and a genuine commitment to the best possible customer service.
10. What does it take for a franchisee to be a star performer? Passion for the brand, drive to succeed, great customer service, great staff management skills, the ability to work within the guidelines of the brand, the ability to respond positively to challenges and a willingness to embrace change.
JULY/AUGUST 2017 | 48 | WWW.FRANCHISEBUSINESS.COM.AU
Love your work! Make it a reality with The Cheesecake Shop.
Many people just dream about doing a job they love. Why not make those dreams come true by owning a franchise in The Cheesecake Shop. You can be your own boss! Bake tasty masterpieces all for the world to enjoy! And most of all you can enjoy your days working with those you love.
franchise.cheesecake.com.au
INDUSTRY SPOTLIGHT
HITTING THE
sweet spot JULY/AUGUST 2017 | 50 | WWW.FRANCHISEBUSINESS.COM.AU
Chocolatree
Ice cream, gelato, chocolate … Aussies love their desserts, and the rise of Instagram is proving a hub for dessert trends and culture, writes Noha Shaheed.
C
onsumers love niche desserts, “chasing the food truck” and being part of dessert culture at night markets, according to trend report Rise of the Sweet Stuff: Lessons from the Dessert Experts by Goodman Fielder Food Service. In a world where the thrill of one-dessert outlets such as Middle Eastern Knafeh, Japanese Hokkaido Baked Cheese Tart and even doughnut vans reign supreme, how do franchise businesses add value in the face of popular independent brands like these? Franchising is all about culture, but do
JULY/AUGUST 2017 | 51 | WWW.FRANCHISEBUSINESS.COM.AU
dessert franchises with a sit-down option offer that edge for the snap-happy Instadessert consumer?
SAN CHURRO Known for its chocolate and churros, Spanish chocolateria San Churro is headed up by co-founder Giro Maurici who says the concept of desserts and drinks in a Spanish-inspired fit-out appeals to a wide audience. “However, our core target market is 18to 35-year-old females who are social instigators - these are the women who
INDUSTRY SPOTLIGHT organise the catch-ups and are aware of places to go and form the social glue in their circles. They desire to feel connected and indulged, and are keen for a variety of experiences that are not the standard coffee catch-up.” While experience is a key aspect of the model, San Churro is mindful of trends, aiming to ensure it competes by staying true to its core offering while being flexible enough to adapt to flavour trends. “At our heart, we are an accessible brand so we don't alienate consumers the way some of the more ‘on trend’ concepts do. While our churros and chocolate are classic Spanish desserts, we do offer innovative desserts to appeal to a range of customers. Our menu is quite broad and always changing around our core products. “We do jump onboard some dessert trends, but we are more about putting our own slant on them. The beauty of what we do is that we don’t rely on trends to make our business work. They work as a bonus for our sales,” says Maurici. And tech is definitely a key. “We place great emphasis on the use of technology for the smooth and efficient running of our stores. Our integrated POS system ensures our franchise partners benefit from the most up-todate technology on the market, tailored to our specific requirements,” he says. “It also incorporates integrations across other platforms such as our accounting, rostering and payroll systems. “With the increased emphasis on customer loyalty through our app, we are able to target marketing campaigns to our already extensive customer base, and to continue to grow this via direct communication and personalised offers.” For franchisees, San Churro’s initial investment includes the franchise fee, store design and build, training, set-up and support. Depending on the location, the average startup cost can range from about $600,000 to $850,000. Franchisees also benefit from ongoing support and an open-door culture. Help with financing the business is available through San Churro’s accreditation status with three major banks, ANZ, CBA and Westpac. Buying power is also a plus. “As a national franchisor with more than 50 stores across seven Australian states and territories, we have gradually, over our 11 years, developed excellent relationships with key suppliers,” says Maurici. “We have maintained and developed these relationships in order to deliver a high standard of quality products and services to our franchisees. “Within our supply chain, there can be external factors we face from time to time, and our team is committed to aligning with the best suppliers who are
San Churro
not only cost effective but are reliable and have similar core values to ours.” However, Maurici says the most challenging aspect of any franchise business is sourcing, training and retaining quality staff. “At San Churro our training team helps our franchisees with the selection and training of new staff members, and is always on hand to help with ongoing development. Creating a culture that respects and nurtures your team is definitely key to succeeding in this area.”
DESSERT HOUSE Dessert House offers ice cream, gelato, frozen yogurt and sorbet as well as truffles and chocolates, cakes, waffles and other sweet treats. MD Sean Corbin says the brand aims to be the go-to destination where consumers can create what they crave and indulge in what they love. The target consumers are women looking to socialise or indulge in “me-time.”
“Being a premium dessert offering, Dessert House is positioned at a different end of the market to street-food vendors and cheap grab-and-go options,” says Corbin. The Dessert House concept brand itself is an innovative twist on classic offerings. “Our Construction Zone puts customers in charge of their own experiences in store, so we’ve essentially taken a traditional model and loaded it with all the trimmings. In a sense then, we are continually conducting customer research simply through having customers concoct the dessert combinations they want,” Corbin says. “Dessert House is driven by quality and offers an indulgent experience, so we don’t jump on every trending bandwagon – but if something fits our philosophy, then we are open to adapting our range.” As part of the Franchise Retail Brands (FRB) network, which is the parent company of a variety of food concepts, Dessert House offers franchisees the
JULY/AUGUST 2017 | 52 | WWW.FRANCHISEBUSINESS.COM.AU
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If you’re ready to make a clean break with your own Chem-Dry franchise, simply fill out the information form on our website, or call our franchise business info line on 1800 243 637.
INDUSTRY SPOTLIGHT opportunity to leverage enterprise arrangements and investments in technology. FRB has established supply chains with trusted partners, 24-hour distribution and quality-control measures to ensure standards are maintained across the group. Corbin says that changing trends and the cyclical nature of the food and beverage industry are challenges prospective business owners need to be aware of. He advises having a solid plan to boost performance in the lower trading periods and amplify the opportunities during peak periods. Turnkey investment starts from $320,000, and FRB is in the process of becoming accredited. “Until we do receive full accreditation, we will help with arranging finance from external vendors,” says Corbin. Franchisees receive help with site selection and lease negotiations, store fit-out and workflow planning, training, recruitment and staff management, occupational health and safety, financials, point of sale and marketing.
THEOBROMA “Theobroma is a total food-and-beverage concept offering consumers a wide variety of couverture chocolate and chocolate beverages with the added enhancement of a food menu,” says franchise and operations manager Ben Fernandes. “From our chocolate cabinet showcasing our extensive range of artisan handcrafted jewels using real Belgian couverture chocolate, through to our signature mug and warmer, hot chocolate and cold beverages, desserts and chocolate retail products, there is something for everyone and every occasion.” Some stores are even licensed to sell liquor. Fernandes says the key is finding the right balance of staying true to classic favourites while creating interest with new products and innovations. “The challenge is how to incorporate the trend in a franchised environment in a timely fashion.” While tech can be an asset to any business, he says that because of the setup and nature of the store locations, online ordering and sales have not been a strong performer, “but we are carefully monitoring this space”. “Our new stores incorporate digital menu boards and screens, allowing a more interactive engagement with the brand. Our fully integrated loyalty systems also do away with the old stamp card system, moving to a consumer-engaged online program.” Investment levels start from $150,000
St Louis House of Fine Ice Cream and Dessert
for a chocolate pavilion and from $350,000 for a chocolate lounge. “Unlike most food franchises, we do not believe in a one-size-fits-all mentality and focus on the individual business at hand where the franchisee has a lot more influence - right down to choosing the menu,” says Fernandes. Franchisees benefit from unified leasing negotiations and supply agreements with key suppliers, which allows access to competitive prices for products. However, there are challenges. “One of the greatest challenges is managing expectations at all levels,” Fernandes says, “from managing customer expectations
on service and product, through to franchisee expectations on return on investment and support, and franchisor expectations on compliance and growth.”
CHOCOLATREE Chocolatree is a chocolate cafe franchise headed up by Ron Kohli, who says the brand thrives on its fresh and tasty desserts made from quality ingredients and Belgian chocolate. “We have an extensive menu including hot and iced drinks, juices and smoothies, waffles, crepes and fondues.” Chocolatree’s target market is
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Unlike most food franchises, we do not believe in a one-sizefits-all mentality and focus on the individual business at hand where the franchisee has a lot more influence - right down to choosing the menu.
Cold Rock Ice Creamery
women between 15 and 40 years of age. “Customers are looking to spend their money in place with a difference,” says Kohli, who describes the franchise as a traditional yet innovative dessert bar that offers desserts with a difference like deconstructed passionfruit tart, Tellamisu (a Nutella and tiramisu fusion) and dessert shakes as well as traditional favourites like brownies, and sticky date and breadand-butter puddings. The initial investment is from $250,000, and franchisees benefit from full training and ongoing support. “Chocolatree is a growing system and will have the better buying power as the brand grows. We will be supplying the key products to all franchisees at very competitive prices,” says Kohli. .
ST LOUIS HOUSE OF FINE ICE CREAM AND DESSERT
St Louis House of Fine Ice Cream and Dessert specialises in French-style ice cream. “With more than 20 years’ experience in the ice-cream field, we have spent a lot of time making and researching what constitutes a premium product,” says MD George Karamalis.
“Our ice cream is locally produced from premium ingredients and delivered to our stores fresh.” Extended trading hours are also a selling point, with stores open for breakfast and some open until midnight on weekdays. Mood lighting, tabletop candles and even a St Louis playlist add to the business’ romantic feel. Karamalis says the company annually reviews and updates its dessert menus. “This involves employing a food-andbeverage consultant/chef who reviews our products and offerings, and then spends considerable time researching trends before creating new items to be included in our menus at the beginning of every year. This is an exciting process, which we know attracts new customers as well as those returning. “We do like to do a fair bit of research into social-media trending, but if somethingis outside our theme of classic, sophisticated and made from quality ingredients, we simply will not follow that particular trend.” St Louis pushes forward with technology as it becomes available, such as partnering with Deliveroo, Rewardle and UberEats, but Karamalis says customers are not always “tech-aware”. Franchises range from an initial investment of $350,000 to $550,000, depending on the site. Franchisees receive
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training before store opening, and ongoing support. “Because of the increasing number of our store outlets, we now have stronger liaisons with current and new suppliers,” says Karamalis.
COLD ROCK ICE CREAMERY Cold Rock Ice Creamery offers ice creams and sorbet to which customers can add their choice of toppings. Owned by Franchised Food Company (FFCo), Cold Rock Ice Creamery is “not just about the ice cream – it’s all about the theatrical, customised experience”, says director Stan Gordon. Customers are offered a range of ice cream and sorbet flavours, then add their choice of mix-ins such as chocolates, lollies, fruits and nuts. This combo is then mixed and smashed together in front of the customer on the “Cold Rock”, a frozen granite bar, and served up in their choice of a cup, cone, shake, take-home pack or cake. “With more than 3000 flavour combinations available, it’s the theatre ‘while you wait’ that sets us apart,” says Gordon. The target market is families, young children, teenagers and ice-cream lovers. “We’re all about innovating our offering
INDUSTRY SPOTLIGHT
We are not here to run your business - we can only help you not make mistakes.
Cocolat
to make it better. We’re constantly adding new mix-ins and flavours that keep up with trends, like the recent Nutella craze. “We’re also constantly diversifying the Cold Rock brand with new offerings. A good example is the Super Kosher range we’ve just launched in our Malvern [Victoria] store. “While we are always on the lookout for new ideas, the Cold Rock ‘Choose it, mix it, smash it, love it’ essence and design of service has fundamentally remained the same since inception … only we keep on making it better.” Though the brand responds to foodindustry trends, it isn’t quick to jump on short-term trends, instead finding a balance aimed at keeping loyal customers happy.
Gordon says that though some franchises engage with the likes of Menulog and Ubereats, “technology such as apps does not play a major role in the business”. He says the Cold Rock Cake Builder has proved particularly popular. “Customers can create their own custom ice-cream cake in their choice of flavours, mix-ins, decorations and special messages ... We are not aware of anything as sophisticated within our market sector.” The cost of a Cold Rock franchise is about $250,000, and a Cold Rock Express less than $110,000. As part of FFCo, which owns and runs other retail food brands such as Healthy Habits, Pretzel World, Trampoline Gelato and Mr Whippy, Cold Rock offers its franchisees access to buying power. “We work with a number of larger, reputable food, beverage, ingredient and packaging suppliers to ensure we offer our franchisees the best prices possible,” says Gordon. It is important for franchisees to be aware of what they are getting into when they invest in a franchise. “There’s no doubt becoming your own boss is an adjustment – but one any new business owner (franchise or not) is familiar with,” says Gordon. “We are not here to run your business - we can only help you not make mistakes.”
COCOLAT
Gelatissimo
Cocolat offers handmade delicacies including chocolate and gelato desserts, and is described by director
Duncan Powell as “a dessert destination”. “We make our own products right is the heart of the Adelaide Hills,” he says. “One of the key differences that sets our brand apart is that each product is handmade using local produce. A lot of our products are not sold elsewhere.” During week days, the target market is mums with prams, especially in groups who seek coffee and cake. In the evening, Cocolat appeals to individuals seeking desserts after dinner. “Our desserts, chocolates and gelato are not mass produced. Our signature desserts such as The Wild Thing and our chocolates such as The Guilt Bar are trademarked. “When it comes to the brand and experience, each Cocolat location delivers the same experience of quality delivered in a plush environment.” In terms of innovation, Cocolat introduces new products by way of seasonal changes. This is done twice a year, winter and summer, to allow the brand to “innovate via subtle differences in the seasons”. There are three Cocolat store concepts: • Kiosk: in shopping malls and in the middle of walkways • Store: in large shopping centres and usually between 100 to 130 sqm • Street strip: in areas of high foot traffic Shop fits vary from $220,000 to $450,000. “There are several financial institutions we have referred potential franchisees to for finance, and this help is readily available,” says Powell. “Our franchises are turn-key solutions. All our products are handmade in our central kitchen, delivered fresh into store. Our products have a high shelf live to minimise waste. As we make most of our products from scratch, there is no middle man for distribution. Our ingredients are bought in bulk.”
JULY/AUGUST 2017 | 56 | WWW.FRANCHISEBUSINESS.COM.AU
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INDUSTRY SPOTLIGHT
As for tech, plans are in the works. “Currently, Cocolat is working on a model that allows customers to order their specialty cakes online and opt to have them delivered to their home or pick them up from a local store.”
GELATISSIMO “We are constantly wanting to deliver innovation through our products by continually listening to what our customers want as well as staying abreast of industry trends,” says CEO Filipe Barbosa of artisan gelato chain Gelatissimo. “Our product is genuinely artisanal and made fresh in store, using only the finest ingredients without artificial colours or artificial flavours. We do like to appeal to the discerning ‘foodie’, but our range does include familiar flavours for most palates.” The brand has a three-tier model embracing kiosks, gelaterias and cafes. Though social media plays a part in the offering, Barbosa says Gelatissimo only launches products that withstand market research versus “overnight” fast-food fads.
Through economies of scale and our manufacturing side, franchisees can benefit greatly by not having a third-party supplier involved.
A new store can range between $250,000 to $380,000. The brand is accredited with ANZ bank and can review financial aid on a case-by-case basis. There is a flat royalty of $250 a week versus the standard percentage royalty. Barbosa believes this lets the franchisee grow sales and benefit more financially by doing so. “Through economies of scale and our manufacturing side, franchisees can benefit greatly by not having a thirdparty supplier involved. The reliability of attaining stock on time is also vastly improved through Gelatissimo controlling
freight,” says Barbosa. “The main challenge with any frozen dessert business is the weather. Our business has a natural bell curve that reflects this.”
GELÁRE CAFE Geláre Cafe offers premium desserts, or as business development manager Ryan Torabi describes it, “an ultimate dessert experience”. “Quality is in-built into the system, not
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THE INSIDE SCOOP:
only through the quality of the product but also the training we provide. This ranges from our operational training (such as our barista program) to the business and management side (business development program). The key to all of this is the close collaborative and supportive culture within the Geláre group, especially between the franchisor and franchisees.” Torabi says there are a couple of key demographics the 15 to 35 years group which seeks an exciting dessert offering with an atmosphere to match, and families with children who want a more traditional dessert offering. “You can never be static. Learning is a key part of the culture that we create across the network. We value the experiences of each franchise partner in the field and create a body of knowledge that helps us with our innovation strategies,” says Torabi. “Examples of social-media dessert trends that have influenced our offerings include ‘freakshakes’ and coffee in a cone.” Although technology can augment brand loyalty, he says Geláre relies more on the customer’s in-store experience, and relationships built with franchisees. For a traditional brick-and-mortar dessert bar, the initial investment is $350,000-plus. For the new Vintage Food Truck concept, the initial investment is $200,000-plus.
TOP TIPS FOR SUCCESS • If you are new to the hospitality business, keep in mind the hours can often be challenging • Plan out your ideal business model and see whether the franchise you are looking at matches it • Don’t be afraid of high rents - these can be justified when proper market analysis considers the size of the market and potential of the site • Do your due diligence on franchising (via ACCC websites) and be sure to understand all legal and financial responsibilities a small business owner should know • Get to understand your target audience with in-depth social and demographic statistics.
GET THE RIGHT ADVICE BEFORE YOU COMMIT! Whether a Franchisee or a new Franchisor getting the right advice from specialists with industry knowledge and experience may save you considerable money and heartache in the future. Robert Toth has over 30 years of specialist franchise knowledge and experience. We act for local and international Franchisor’s and local master Franchisor. We provide fixed fees based on the scope of services.
Contact
Contact Robert on (03) 9604 9400 or by email at rxt@marshmaher.com.au www.marshmaher.com.au
FRANCHISE LICENSING AND RETAIL GROUP
Marsh & Maher are members of: The Franchise Council of Australia (FCA), International Franchise Lawyers Association (IFLA), US Commercial Service. JULY/AUGUST 2017 | 59 | WWW.FRANCHISEBUSINESS.COM.AU
INDUSTRY SPOTLIGHT
IS THE FOOD COURT
DEAD?
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It has been the stalwart of shopping centres for years, but times are changing. Are new food-and-beverage concepts setting a new path? Sarah Stowe reports.
E
arly this year, fast-food franchisor, founder and CEO Luke Baylis announced SumoSalad’s intention to steer its network growth away from the shoppingcentre food court - a move that has bemused retail analyst Francis Loughran, given the franchise chain’s success in this format.
So what is going on? Is Baylis the vanguard of a new movement, or is this merely a high-profile instance of a change in strategy? Retail is undoubtedly in a state of flux right now. The well-documented rise of online shopping and a trend for customisation are changing retail dynamics. The alarm bells have been rung extra loud over Amazon’s plans for an Australian bricks-and-mortar presence. Fashion retailers have been headline news for all the wrong reasons as they struggle to achieve viability in today’s market. Where does this leave fast food and franchising? The hungry consumer has plenty of choice - in fact, there is increased competition with centres doubling or in some cases tripling the number of outlets in food courts. But the broadening of the food offer does not necessarily equate to extra business. “In fashion spend you’ll buy four or five different items from different vendors; in food, you eat just one meal. In a fashionbased mall, different retailers get more of the wallet share but this doesn’t apply to food,” says Baylis.
DIFFERENT PRECINCTS So while fashion retailers are scrapping for dollars to be spent in-store and not online, food retailers are seeking a competitive edge in a space overflowing with brands. “A lot of new aspiring brands are opening in areas away from food courts, and this is driving traffic to different precincts,” Baylis says. Shopping centres may now house a food court, a casualdining precinct, a marketplace and a fresh food offer. “Traffic growth is being cannibalised. It is not drawing in new customers,” Baylis says. “The food court is no longer the cool spot.” But other brands believe in the model. Soul Origin, a relative newcomer to the fast-food scene, has been expanding across the country at a rapid rate. Convenient, healthy fast-food options are well served in a food court environment, and the brand is committed to the format, says marketing manager Monique Grzesiak. She does admit, however, that the company may maximise access to dining dollars by opening two sites in one centre.
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INDUSTRY SPOTLIGHT “The main driving factor will always be that people are creatures of habit.” Barry Barber at Banro Retail Group points out that changing consumer trends need a different approach. “Grouping all food options in one location in a food court makes sense from a design and construction perspective, but this is not necessarily how everyone wants to eat when they are visiting a shopping centre,” he says. But Grzesiaka says landlords are now investing in improved amenities and customer experiences “to entice people to stick to their traditional shopping habits”.
BIG CHALLENGE “One of the biggest challenges is offering consumers a variety of food offerings without impacting on the key drivers of this model, speed of service and convenience,” she says, “The food-court market is highly competitive, which we see driving businesses away. There is a trend toward casual dining, transforming food courts to be restaurant focussed. Other factors are the increasing rents and reduced foot traffic in shopping centres because of online shopping.” The restrictions of the food court’s trading hours also limit revenue opportunities, generally allowing for only lunch. Step up casual dining - one of the buzzwords in food retail - whether it be breakfast, lunch or dinner. The evolving dining precinct that offers consumers a more relaxed alternative to eating out, one that is destination-driven, has been the shopping-centre approach to keeping consumers on-site. Stockland GM for retail leasing Tony Tsekouras says the $228 million redevelopment of the Stockland Wetherill Park centre in Sydney exemplifies a customer experience defined by fresh food and fast-casual dining. “We doubled our fresh-food and casualdining offering throughout the centre with more than 21 per cent of the retail mix focussed on food, including Grill’d, Nandos, Rashay’s Pizza Pasta and Grill, and San Churro,” he explains. “There are two distinct food precincts - Kinchin Lane, a modern twist on laneway-style street-food vendors, and a new 800-seat indoor/outdoor casualdining precinct, The Grove. This features 14 restaurants, cafes and food outlets including Fogo Brazillia, Le Wrap, Mashita Sushi, Soul Origin, Subway and Top Juice.”
EXTENDED ECONOMY In Western Australia, the Perron Group’s
Stockland food seminar
Stockland Shellharbour
Belmont Forum opened its alfresco dining precinct with five outlets: Guzman Y Gomez, Nando’s, Schnitz and two independents. “The dining precinct extends the traditional trading times and stimulates an extended night-time economy,” says Perron Group CEO Ross Robertson. “Our experience developing dining precincts demonstrates these changes flow through and benefit all retailers within the centre. “Customers now expect shopping centres to be a lifestyle destination and offer more than just traditional shopping. Shopping centres are becoming hubs for the community and must offer a variety of experiences.” Consumers need an oasis, says Gavan Meadows, Sushi Sushi GM - franchise sales and marketing. “They want quality. They couldn’t care less about who owns the business.”
Customers want value for money and convenience. In its Retail MarketView report, commercial real-estate business CBRE highlights the growing emphasis on providing a retail offering that exceeds customer expectations.
INNOVATION KEY CBRE Australian head of retail leasing Leif Olson says innovation is key in winning the war for consumer wallets. “Consumers, particularly millennials, are seeking more than just a means to an end, they are looking to malls and retail outlets that offer an experience.” Baylis can also see the positives in the traditional site so is not rejecting outright the shopping-centre model. “We believe the centre environment is
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Baylis has spotted a major shift in the US with home-delivered food retail growing exponentially, and he wants a piece of the Aussie home-delivery pie. “Domino’s in Australia has 44 per cent online business, and pizza is the incumbent food. The online food market is worth $1.5 billion, with predictions of up to $20 billion,” he says. That is why retailers will be moving out of high-capital, high-cost environments, he suggests.
The Kitchen by Landini Associates
The Kitchen by Landini Associates
viable if you’re in the right areas, and that won’t change for a decade. Food courts are viable for two to three years. “If in four or five years’ time food courts are revived, then casual dining will suffer, and traffic will be shuffled left to right. “Casual dining is trading incredibly well, but if you exclude this growth, the rest of food is in severe decline.” He is determined to wait it out to see how much food retail remains sustainable in a mall. For franchisees stuck in a long lease, there is no option other than to sit out the term, but where possible, Baylis is looking for alternatives.
THE ALTERNATIVES What is taking centre stage in SumoSalad’s development is petrol convenience. The
business is one of several external brands to partner with Caltex for its latest initiative, a re-imagining of the petrol retail store. Introduced at Concord in Sydney’s inner west, the new environment gives consumers the chance to grab a healthy fast meal, take a coffee break or buy snackable fresh food. “Our objective is to try to democratise healthy fast food and make it accessible to all Australians, in places where they have a physical presence,” says Baylis. “We’re looking at transport, education, health a more captive audience. These are less susceptible right now and are not being cannibalised through online. “Sumo can reach the customer more directly from a strip or convenience location. In a food court you can’t deliver, and that means you are missing major growth.” HOME DELIVERY
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THE SUPERMARKET Kate McMahon heads up the Pacific Retail fast-food brands Go Sushi, Kick Juice Bars, The Cheeky Beans and Wasabi Warriors. “We have never gone into food courts because the locations are hidden and destination focussed, and sushi is grab and go. We have been in corner or edge sites or kiosks.” She says “massive” rents are a clear deterrent for shopping-centre locations. “We want our franchisees to control rents so they can invest back into the business and marketing.” McMahon echoes Baylis’ view that viable business opportunities lie elsewhere, and is taking the initiative to move the Pacific Retail brands into the supermarket freshfood space. “We’re essentially picking up the model, changing the displays to an open grab’n’go counter, putting kiosks into supermarkets. That’s for all our brands. “You cap the rents at 10 per cent. We know it’s a financial model that gets the franchise off to a good start. Sushi is so seasonal that the business model with rental caps is a massive benefit.” Longer trading hours, lower upfront costs and the ability to match franchisees with other passionate retailers are also strong drivers for the new partnership. “We’re working with Supa IGAs, which are being really innovative, thinking through how they do fresh food and enhancing the customer experience. Working with them is exciting. We think about how we can bring theatre into it, the customer watching sushi being made.”
DINNER TRADE McMahon says the supermarket link also opens up the dinner trade, a long-term ambition for the brands that has yet to be realised. “It’s a massive market. We know that when we keep a store open on a Thursday late night, the sales equal lunchtime, so it doubles turnover.” While the initiative is launching in partnership with Supa IGA there will be further partnership opportunities for the concession-style outlets, says McMahon. “It might be Caltex, supermarkets, aquatic
INDUSTRY SPOTLIGHT centres.” In New Zealand, Pacific Retail launched The Cheeky Beans cafe, focussed on healthy eating, in aquatic centres. “You need coffee, a few of the naughties, but it’s really about healthy sushi, fruit juice, salad, sandwiches, wraps, healthy muffins. This has a cafe feel but the menu is fresh, healthy food.” McMahon is looking at expanding from the two outlets - not just in aquatic centres but supermarkets.
‘DELUSIONAL’ RENTS Stan Gordon, franchisor at FranchisedFood Co, which includes Cold Rock Ice Cream, Nutshack, Pretzel World and the Healthy Habits sandwich chain, has little faith in the current iteration of the shopping centre for food franchises. “I think centres are questionable going forward. Look at bigger centres like Westfield Bondi Junction, bespoke and upmarket. But franchisees have to spend so much to set up, are they viable? Shopping centres might be sexy, but sexy doesn’t make money,” he says. Gordon is vocal about the costs of siting fast-food outlets in shopping centres, describing rents of 30 to 40 per cent of
turnover as “delusional, unrealistic”. “For landlords to say ‘You should be doing this number of dollars, why aren’t you?’, well, smaller businesses have a ceiling. If they’re selling $5 or $10 products they’ll never do it. “It can’t be a win for the landlords and lose, lose for everyone else.” In one high profile instance, Sumo’s Luke Baylis has taken the fight over costs to the landlords, putting into voluntary administration two leasing entities that negotiate rent agreements for a dozen SumoSalad stores with the intention of forcing the centres into negotiating better deals. The capacity and understanding of how to negotiate for optimum results is one advantage franchises have over the independent outlet, says Gordon. But with an increasing desire for customisation, will landlords be seeking the uniformity that is integral to many franchised brands? CUSTOMISATION TREND At property firm CRS, head of asset management Lincoln McConnell-Brown, says the company’s involvement is in neighbourhood centres with a supermarket anchor and discount department stores. “We are seeing food as flavour of the
month.” Food can now account for 30 per cent of a centre’s gross leasable area, he says. Household names such as Gloria Jean’s Coffees, Hudsons Coffee and SumoSalad are still on the go-to list, but what CRS is seeking now is a fresh approach. “People don’t want a brand name. They are looking for local people - something they can’t get regularly, Mum-and-Dad operations.” So typically, in a mix of six food outlets in a new neighbourhood venue, three of those stores will be big brands, three will local independents. Strip shops are also becoming a new food destination out of major metro hubs. “Food is the new fashion,” says McConnell-Brown.
‘MORE CLEVER’ Does this mean the death of the food court? No, says Gavan Meadows at Sushi Sushi. But it is no longer a special destination for many people as shopping habits change. “I think food courts are a lot more clever now. Chadstone is wowing with its offering. If the food court is dull, it’s dead. You need a few bells and whistles.
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“What’s the next stage? There’s always a place for the food court if it is evolving. Business needs to keep inventing.” Landlords can charge a premium, says Meadows, as long as the rate can be justified. Constant promotion to bring in foot traffic is crucial. “I have a lot of confidence in the food court, and shopping centres. They’re pretty switched on, they’re pretty red hot.” Analyst Francis Loughran is sceptical of any attempt to diminish the importance of the food court. “You only have to look at what Soul Origin is doing,” he says. He also draws attention to the Chatswood hawker market and Chadstone food courts as lively, good-looking imaginings of a food court, delivering fast food at a price. “The food court might have been a platform to develop a food and beverage mix, it’s the offspring that are new and exciting,” he says.
WILL CONTINUE The platform principle of convenience, meals for less than $10 and shared tables, is going to continue, he says. That means the future for fast-food retailing could be a cafe court, a dining terrace, a food emporium or
a food gallery. “Experience had been the buzzword for the trendy, but now it is the mantra for survival,” says senior VP Katie Sprague of US-based RTKL, a global architecture, planning and design practice. “Shopping centres are no longer venues that simply sell stuff… they are innovative environments that offer experiences. The best in class around the world provide a vibrant social scene, with customisable, exclusive, entertaining and even educational content. “Food is at the forefront of this trend, a social activity that is seen less as a commodity and more as a leisure activity. The mix of food-versus-retail in shopping centres around the world has been shifting dramatically.” There has already been the evolution from the rigid model of in-line food tenants to more of a deconstructed food court, she says. Newer venues host a variety of household-name brands and international food in a much more fluid arrangement with several stand-alone tenants with open kitchens.
HYBRID MODELS “We’re seeing new hybrid food-hall models that create a ‘collection’ of
fast-casual tenants with less commonarea seating. This allows the tenants more space for their own seating and a greater ability to express their own brand and sense of space,” says Sprague. “The same trend of local authenticity that we see as a driver for retail is also a driver for food. The millennial generation is looking for bespoke local food offerings that are healthy alternatives to largescale fast-food chains. The rise in market halls is a prime example of this, where the mix of tenants features local brands/chefs or restaurants.” Food continues to be key to the retail mix, says Stockland’s Tony Tsekouras. “Twenty years ago, you weren’t in the main game without a department store, but we now have the latitude and retail palette to create and curate destinations based on a far more intricate and complex retail mix, and far more sophisticated, less homogenous customers who expect modern malls to cater to a wider range of tastes and senses. “We see this continuing to evolve and expand across our portfolio reaching even the far regional centres such as Bundaberg or Ballarat, and we don’t see the focus on destination dining within retail slowing down anytime soon.” n
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INDUSTRY SPOTLIGHT
Safety in
numbers Safety is big business, with compliance increasingly important to organisations. So what are the options for investment? Sarah Stowe investigates...
K
eeping tags on safety compliance is not only a way to build a business, but it can also save lives. Here are three vastly different franchises that prove the point...
SAFETYQUIP SafetyQuip targets businesses with up to 200 employees, selling personal safety equipment, fire protection gear and respiratory clothing. “We’re helping protect workers and avoid injuries and death,” says CEO Gary Shearer. He believes small and medium enterprises are aware of the legislation with which they need to comply, but the issues can be so complex they do not have resources to properly deal with it. Advice
is just part of the SafetyQuip service. “Having been able to provide advice on the right equipment is one of our strengths. We’re not box providers, we’re about solutions,” says Shearer. “Retailing is not our core business, although we have a presence. We’re about industrial distribution. In the time it takes for one person in a store to try on and fit a pair of boots for $99, we can ship product worth $10,000.” Online sales comprise less than 2 per cent of the business, he says. Franchisees out and about with clients can offer advice as well as product choice. So while franchisees often have sales experience, above all they need to have a personable nature and an affinity with the industry. Experience in the safety field is not needed to become a franchisee. The businesses are territory based, and
Shearer says satellite sites can be added at no extra cost to franchisees looking to expand. Starting out with a small warehouse and van, the business can be built up to become a store and distribution hub. The franchisor is fully focused on supporting the franchisee network. “We don’t run our own stores,” says Shearer. That means that every two weeks the franchisor sends a data file updating the 15,000 stock keeping units (SKU), updating the database and website, which are all linked to the product catalogue, referencing the page number relevant to each product. It is important for stores to have at least one other employee helping the franchisee, and often that starts out as a spouse or partner. Franchisees who develop their businesses can take on up
JULY/AUGUST 2017 | 66 | WWW.FRANCHISEBUSINESS.COM.AU
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INDUSTRY SPOTLIGHT
to 10 staff members. SafetyQuip has a three-tier marketing policy - local-area marketing managed by the franchisee using material provided by the franchisor; regional marketing managed by groups of franchisees; and national marketing. “There are a lot of players in the market, but our business model is working for us,” says Shearer.
APPLIANCE TAGGING SERVICES Appliance Tagging Services has a targeted client base: facility managers, retail networks, government departments, schools and universities. GM/co-founder Sarah Allen says that increasingly these organisations are directly contacting ATS to inquire about services. “There’s definitely more awareness about the requirement for these services. We can see our website traffic is up because people are searching ‘What do I need to do about testing and tagging?’. Our information page gets the most traffic on our site.”
• • •
When potential clients approach ATS, there is a strong element of education. “They’ve often had the wrong advice,” says Allen. Despite improved understanding about the need for equipment testing, she believes safety compliance is underdone, with only about 10 per cent of organisations using services. When ATS spotted a gap in the market, the decision to double its portfolio of services made perfect sense. Now the franchise network can offer four services: electrical testing and tagging, and testing safety switches, which have been the core services; and now testing fire extinguishers as well as exit and emergency lighting. Allen estimates that 98 per cent of ATS franchisees provide all four services, which is a boon for the customer base of large organisations that often work interstate. “They don’t want to deal with multiple providers across different states and services. We call them a month before the due dates to schedule a service; we can send an invoice for each site or a consolidated invoice; and the client has one point of contact if something goes wrong.”
Allen says the services are priced on a unit basis. One particular support service is valued above all others by franchisees “We invoice on their behalf, and they are paid each month whether or not the client has paid us,” says Allen. Investing in an ATS franchise will cost from $51,500, and a suitable vehicle is also needed. Ongoing fees are percentage based, with the marketing fee included into the one package. There are two different percentage options, depending on whether the client has been provided by the franchisor, or has been sourced by the franchisee themself. “About 75 per cent of clients are provided by us,” says Allen. “We have a team of 20 and they do the scheduling.”
FCF FIRE & ELECTRICAL Franchisees can join this business model without any technical qualifications. However, electrical contractors who are a year into their business are the perfect potential franchisee for this business with
While franchisees often have sales experience, above all they need to have a personable nature and an affinity with the industry.
its focus on electrical and fire compliance for domestic and business clients. Firesafety advisors are also well-placed to take on a franchise, says franchisor Jacob Foster. But finding good people is a challenge because electricians are reluctant to upskill, despite the opportunity to earn a better salary as a fire technician, he says. “It’s more competitive, but people don’t realise how difficult it is. It’s the compliance behind the scenes.” Franchisees will spend the greatest part of their time in the field, either
cold-calling potential clients or servicing clients. The rest of the time is spent on administrative tasks. The model suits husband-and-wife teams with its Monday-to-Friday hours, although there are demands to be on call 24 hours a day. As franchisees build up their businesses, they can employ staff (the employee count is typically five) and choose to continue to be hands-on or hand over day-to-day processes to a manager. It is a territory-based franchise model. Local leads are sourced through
the marketing team, and by franchisees themselves. National clients are targeted by head office. The most popular franchise package costs $45,000, with ongoing fees of 8 per cent. That includes insurance, fuel and stock discounts. And which service or support do franchisees value most? “Technical experience,” says Foster. “Nothing beats having a guide who can help out in a tough situation.” n
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INDUSTRY SPOTLIGHT
PART OF
THE FAMILY
Australia has one of the highest rates of pet ownership in the world, with statistics showing that more than 60 per cent of households have a pet.
D
espite minimal growth in the total number of pets over the past five years, Australian owners are spending more on each animal in terms of premium products and services.
Figures in IbisWorld’s Pets and Pet Supplies Retailers in Australia 2017 report show that pet services is the fastest-growing sector in the industry, with large retail chains rolling out an expanding array of pet-related services. These include grooming salons and DIY dog washing, ID tag engraving, aquarium water-testing services and puppy schools. Inside Franchise Business gets the inside story from two franchised petcare brands, Aussie Pooch Mobile and Blue Wheelers...
1. What makes your brand different from others in the market? APM: One of the big differences is the work we do in the community, raising funds through the Variety Club so children with special needs can have assistance dogs. Our franchises also help raise funds for animal-related charities. Other differences include the flexible franchise packages we can tailor to a prospective franchisee's budget, a lightweight trailer and large exclusive territories. We lead our industry in the area of social-media presence and innovative services including our latest Doggy Facial. BW: Our all-weather mobile salon is one of our key points of differentiation. Shaped like a big blue dog, it advertises your business everywhere you go, giving you an exceptional marketing advantage. We are the only mobile dog-grooming service with its own training school for franchisees.
2. Are there advantages in being a mobile business? APM: Having a mobile business, as opposed to an actual premises, gives the franchisee the flexibility to work the days and hours they want, and also to be able to take holidays. Our mobile unit gives the franchisee the ability to promote their business throughout
the territory. Not having staff members or premises also helps reduce running costs. BW: From a franchisee’s perspective, outgoings are lower on such items as rent, plus there is more ability to manage their day. Most of our groomers are booked out often weeks in advance and know what their week will look like on their Blue Wheelers business software Mate system. Our groomers are trained to keep their customers close to home and to build ongoing relationships with rebookings.
3. How important is customer loyalty? APM: Customer loyalty in our business is extremely important as 80 per cent of our customers re-book on a regular two- to four-week basis. One of the benefits of providing a service to the family pet is that customers generally treat the dog as part of the family and prefer to have the same person providing that service. This enables the franchisee to build solid relationships with the customers and their pooch. BW: Customer loyalty is the key to any successful business system. We train our franchisees on how to attain a further booking at the end of each service. It is a well-researched fact that most dog owners do not like to change their groomer.
4. What are some benefits of the franchise? APM: • Award-winning franchise system with more than 26 years’ experience • Localised advertising and marketing to launch the franchisee • Lightweight, weatherproof mobile dog-wash unit • Exclusive franchise territory • Guaranteed income • Full training, including government-recognised certificate courses. BW: Our low start-up costs are one of the initial benefits. It is possible to start with either Blue Wheelers or Dash DogWash with as little
as $10,000. Our training, business system and support team provide you with the keys to success. Our Blue Dog mobile salon or Dash DogWash yellow kennel also advertise your business as you go about your day. Another benefit is that we charge a flat management fee. We do not take more as you earn more, and we keep all your outgoings low because of buying strength with 180-plus franchisees on the ground. While you can start a dog-grooming business on your own, you will invariably take years to reach the level of business our new team members attain in months.
5. Do franchisees have access to the franchisor’s buying power? APM: Yes our franchisees have access to our exclusive range of products and marketing materials at reduced prices thanks to our bulk buying. BW: Our team has exclusive access to a complete range of goods and shampoo/ grooming products made just for Blue Wheelers. These special formulations are the best products in the market - we know, because we have tested countless alternative products over the past 11 years. We have bulk-buy opportunities for marketing and promotional items, and partnerships with insurance and vehicle companies. Our new-for-old (regardless of age) insurance policy on our Big Blue Dog mobile salon is a real benefit.
6. What costs can a franchisee expect? APM: We have various new franchise packages ranging from $15,000 to $40,900, and existing franchises are also available. BW: Initial set-up costs for a complete Dash business start from $9999, with a low-interest lease-to-own finance package. For Blue Wheelers, the same package starts from $24,999. Flat management fees are $175 a week, combined with lead costs through our call centre of about $2.10, mean our team has low ongoing costs. The flat-fee structure means the harder you work, the more you earn for
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Na t i o n a l Dr o n e s - HP
10. Do you agree with IbisWorld that growing competition 7. What are some challenges makes specialist pet retailers struggle to differentiate of the business? themselves? yourself and your family.
APM: Challenges vary from franchisee to franchisee. The most common challenge or fear that people have coming into this business is reversing a trailer and/ or cutting dogs’ nails. Both these are covered during the training process so the franchisee is confident from day one. Whatever challenges our franchisee may come across, we provide ongoing coaching and training to help them overcome these. BW: The main challenge is taking all the lessons you are taught at Blue Wheelers training school and putting them into practice without changing them. Some franchisees can take a perfectly round wheel and try to make it square. We know our system works well through all the years of experience we have poured into it. As with any new skill, it can be a challenge in the early days as you build your confidence as a skilled groomer..
8. Do franchisees have territories? APM: Yes, our franchisees have exclusivity to their territory. BW: Yes, we provide a marketing territory that is your area to build. Support areas are available if necessary. We certainly don’t want you travelling very far as this is a waste of your time and money.
9. Is multi-unit ownership encouraged? APM: As a rule we find an owner/ operator archives far greater success than if a Blue Wheelers or Dash business is run under management with staff. We have a handful of businesses run this way, so it is permitted but not necessarily encouraged. BW: Although most franchisees choose to work in their one territory, we do encourage multiunit franchising. Many franchisees have taken on extra territories with the help of self-employed representatives.
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2
2 0 1 6 - 0 6 - 0 8 T
THE SKY’S THE LIMIT
APM: In regards to large pet “retailers” there may be some truth to this, as we have seen with the grocery and fuel sectors. However our “service industry” business is based on building solid relationships with our customers. Our service started with a generation of customers who grew up in households where chores were shared, and now we have the next generation coming through where everything is outsourced. BW: I would strongly disagree - it is not about the quantity of competitors in the market, it is all about the quality of the work, and we are all about “doesn’t your best friend deserve the best?”.
11.How significant is the humanisation of pets as a part of the family? APM: This is a major factor in the success of our business. Our customers want to know that their family member (the dog) is receiving the best possible care. All our franchisees are fully trained in all aspects of the franchise system, including caring for the dog during the service and animal first aid. Customers do not want different people handling their dog so become loyal, regular clients. BW: It is essential. Dogs are members of our family, and Blue Wheelers often refer to their customers as their “fur babies”. Many of our team members say that if they could take all the dogs home at the end of the day, they would. Mobile dog-grooming has proven to be recession proof as people will always spend money on their beloved pets. They might not buy a new car or take that trip, but their “children” always come first. We are focussed on educating customers about the necessity of keeping their dogs well-groomed on a regular basis. No different to children, dogs need to be bathed, brushed and have their hair cut and believe me, dogs are often far more grateful than the two-legged family members. n
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FRANCHISES AVAILABLE
RED ROOSTER Red Rooster has been part of Australian family life for 45 years and with a renewed focus on delivering great food and service, the end-of-year figures will warrant serious crowing! With solid foundations and a desire to be the most loved Aussie restaurant, Red Rooster has set its sights high with strategies to refresh and re-invigorate its brand. It would be hard not to have seen the 400+ Red Rooster delivery cars zipping across the suburbs and impossible to miss their new advertising campaign carrying the message “winner winner” that is packaged as a fusion of convenience, taste and family fun. These initiatives have helped drive the evolution and realignment of the Red Rooster brand and led to a forecast five per cent plus growth in sales this financial year to $520 million. Red Rooster CEO Chris Green talks passionately about his “Changing for the Better”, which he established off the back of customer feedback and the growing trend towards convenience and flavour.
“The key part of our plan is Destination 2020, a strategy that consists of four key goals: To be most loved Aussie restaurant, maintain our position as ‘Roast Chicken Champions’, have a relentless customer obsession and have a network of 500 restaurants by the year 2020”. ‘Relentless in customer obsession?’ “It’s simply about putting the customer at the heart of everything we do. We recognise that we have improvements to make in our customer experience including service and the look and feel of our restaurants.” Over the past 18 months over 100 restaurants have been refurbished and moving forward the plan is to do 60-75 a year. Red Rooster is on the road to expansion, with a view to “super convenience”. The plan is to have 500 Red Roosters across the country. This includes a more inviting small format shopfront in suburban areas -meaning lower rent and lower investment for franchisees. In 2017 Red Rooster will also be looking to expand into Tasmania. “It’s all about recognising that you have to take small steps in order to make progress,” Green says. “and progress is what we are achieving. Customer satisfaction and restaurant growth is on the rise and it is safe to say we are changing for the better.” There has never been a better time to become a Red Rooster Franchise Partner.
RED ROOSTER FRANCHISES ARE AVAILABLE NOW For more information www.redrooster.com.au/franchising
O P O RT O His name is Antonio Cerqueira and he’s back consulting with the $200 million franchise he founded over 30 years ago. Legendary Australian Portuguese Chicken brand Oporto is currently undergoing a transformation - tweaking its unique blend of spice and soul. Cerqueira’s return to Oporto is just one component in a skilfully devised recipe to make over the restaurant chain’s image. With a focus on fresh ingredients and an authentic and innovative menu, Cerqueira has been instrumental in reintroducing his original, authentic, chilli sauce and the perfect Portuguese flame grilled chicken. Combine these amazing flavours with the brand’s new eatery culture, and it’s the perfect marriage of warmth and hospitality, with the fire and vibrancy of Cerqueira’s roots. Oporto CEO Craig Tozer is responsible for the return of Cerqueira. His enthusiasm for the Cerqueira-factor is a product of his own diverse background that includes a behavioural science degree and 15 years as an investment banker.
“Food sits at the top of my pyramid,” says Tozer, who joined Oporto in 2015. “Oporto customers have made it clear that they won’t compromise on their desire for high quality, authentic food. And that is what we deliver” Tozer (who refers to Cerqueira as his mentor) admits that replicating the way Antonio once created his dishes from a traditional family recipe makes the process demanding and expensive. But, with the “exceptional customer feedback” the brand receives, there’s no arguing its value. Oporto doesn’t identify as a fast food eatery, rather Tozer classifies it as “food for foodies who want to know what they’re eating.” With 150 stores across Australia, and with a comprehensive renovation and expansion plan in place, Oporto has never looked better. The new design is casual and contemporary and highlights the use of fresh produce and visible cooking methods. Over the next five years Tozer is intent on re-establishing the integrity of the original brand. Today there are five pillars driving the Oporto business: Our People, Our Customer, Our Stores, Our Food and Financial Returns. Oporto are currently looking for franchisees who are authentic, ambitious and dynamic to take on their new stores across the country – is this you?
OPORTO FRANCHISES ARE AVAILABLE NOW For more information www.oporto.com.au/franchising
FRANCHISE INDUSTRY SPOTLIGHT BASICS
Key details
FIND YOUR
Franchise
Don’t miss the franchising weekend - the expo is on for just two days. Saturday July 22, 10am to 5pm Sunday July 23, 10am to 5pm Brisbane Convention & Exhibition Centre, Hall 1, Corner of Merivale & Glenelg Street, South Bank
A franchise specific expo is an easy way to ease yourself into the franchising state of mind.
A
ttending a franchise expo allows for some great insights into what’s involved in being a franchisee.
If you invest in a franchise you will be part of a significant Australian business sector: franchising comprises 1120 brands and in 2016 it contributed $146bn of sales revenue to the Australian economy, an increase of $2bn over two years. The Franchising Australia 2016 survey showed the total number of people directly employed in business format franchising in Australia had reached 472,000 permanent, part-time and casual employees, up from 461,000 in 2014. It comes with its own mandatory regulations, the Franchising Code of Conduct, which governs the behaviours and processes of the franchisor/franchisee relationship and is administered by the Australian Competition and Consumer Commission. Globally, the sector is regarded as highly regulated, but it’s also a continually popular method of business growth and individual empowerment. Alongside New Zealand, Australia has the greatest number of franchises per capita.
So how do you find out more? A series of franchising expos takes place across the country every year, and coming up next is Queensland’s opportunity to discover more about the franchise model. The Brisbane Franchising & Business Opportunities Expo follows a successful format - a line-up of varied branded opportunities, industry experts on hand to offer advice, and a program of free seminars that unpack some of the complexities of franchising. It’s a set-up that offers the uninitiated the chance to grasp some of the fundamentals of being a franchisee, to be inspired by the experience of other franchisees, and to ask questions of franchisors that will help them make a decision about whether investing a franchise is the right step. For franchise buyers who are already committed to purchasing a franchise business, the expo is an ideal channel for deeper analysis of the brands on offer and the challenges faced by newbie franchisees. A panel discussion with successful franchisees provides insights into how these individuals, all with varied backgrounds, skill sets and ambitions,
Get your FREE tickets online: visit www.franchisingexpo.com.au and use the code FMG
are making a go of their businesses. Some visitors to the expos set out with a clear target in mind - perhaps just attending one seminar and speaking to the single franchisor they have already pinpointed. Other visitors will use the occasion to browse through the brands showcased, representing almost every industry that franchising operates in. Because franchise brands are not just the household names we are all familiar with. Whether your interest is in the ever-popular food sector, a mobile business, a home services operation, working within the community, building a fitness business, delivering businessto-business support, providing financial services..whether you want to follow a life-long passion or start the path to learning new skills, if you’re committed and keen, there will be a business for you. Don’t forget to start your visit with a little advice from the Franchise Council of Australia, then pop in to the neighbouring stand to say hello to the Inside Franchise Business team and find out more about our website, www. franchisebusiness.com.au, the official online directory of the FCA.
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FRANCHISE
WITH THE CHICKEN EXPERTS... Australians love chicken, in fact Australians are amonst the highest consumers of chicken per capita, at 43 kilograms a year... so if you are thinking of buying into a food franchise, the chicken business is booming and there is no better group to join than craveable brands. As the largest Australian owned quick service restaurant operator, craveable brands. own and operate three unique Australian chicken brands; Red Rooster, Oporto and Chicken Treat. Combined, the restaurants hire over 18,000 people and serve over 150,000 customers every day. Having over 560 restaurants across three iconic brands craveable brands. has extensive experience in restaurant operations, supply chain, franchising, IT, marketing, store design and construction, food innovation and customer satisfaction. Our three brands are widely recognised and established in each of the markets in which they operate.
ESTABLISHED: 1972 in Kelmscott, WA
ESTABLISHED: 1986 in Bondi, NSW
ESTABLISHED: 1976 in Perth, WA
SPECIALTY: Roast Chicken
SPECIALTY: Portuguese Flame Grilled Chicken
SPECIALTY: Crunchified Chicken & Rotisserie Chicken
RESTAURANTS: 150 locations across Australia
RESTAURANTS: 60 locations across WA
RESTAURANTS: 360 locations across suburban,regional and rural Australia
Today we look at the two national brands, Oporto and Red Rooster.
A U S T R A L I A Powered by
NextGen 2018
Register now at nextgenfranchising.org
Do you have what it takes to represent Australia on the world stage? FCA Octomedia Nextgen Competition 2017 Australia is now open and the Franchise Council of Australia (FCA) invites young entrepreneurs to explore opportunities and to connect with the franchising sector globally This is part of a global competition that the FCA launched in Australia in partnership with the International Franchise Association (IFA) to celebrate the achievements of our young entrepreneurs who have brought forward innovative business ideas with the potential to franchise. Australian finalists will compete against each other in a FranShark experience to be selected as the Australian winner. As a winner, you will be rewarded with access to the most successful executives, experts and financiers in the sector.
Who can enter Entrepreneurs between 21-35 years old, in business for 1-5 years.
How to enter Register now at nextgenfranchising.org
Deadline Applications close September 1, 2017. The Australian winner and global finalist will be notified on October 10, 2017 during the FCA Excellence in Franchising Awards night.
ENTER NOW! For your chance to take on the franchise world, register at nextgenfranchising.org
Winners will receive 3 Australian finalists will win return air fares and accommodation to the Gold Coast plus complimentary registration to attend FCA’s National Franchise Convention and Awards night. The Australian winner will be representing Australia amongst the top 20 young entrepreneurs in the world at the NextGen global competition taking place in Phoenix, Arizona at the International Franchise Association (IFA) Convention next year – February 8-13 2018. The Australian winner will have their return airfare & accommodation for Phoenix sponsored by the FCA. The IFA will sponsor the Australian finalists IFA Convention registration to attend & compete.
FRANCHISE BASICS
SPOTLIGHT
ON THE LAW Should you read the franchise agreement? What happens in a franchise dispute? Who owns the intellectual property rights of the franchise? Find the answers to these crucial questions in our 28-page guide to understanding your legal rights and responsibilities as a franchisee.
T
he legalities of franchising are an important consideration for any franchise buyer, both for the process of buying the business and for its ongoing trading. Investing in a franchise is a significant lifestyle move, and can be a major financial commitment, so it pays to be aware of what is at stake, how to handle difficulties, and how to move on when the time is right.
This guide is just your starting point. It is intended as a guideline only and does not replace obtaining legal advice that will deal with your specific circumstances.
IN THE NEXT ISSUE Leasing and location • Finding a suitable site • Territory analysis • Negotiating the best deal • Fit-out costs
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FRANCHISE BASICS
Franchise OR LICENCE? If it looks like a duck, walks like a duck and quacks like a duck, it probably is a duck. The same reasoning can be applied to whether a licence agreement constitutes a franchise agreement - it is a matter of substance over form. JANICE BYWATERS AND LUKE MCKAVANAGH Rouse Lawyers
B
oth licence agreements and franchise agreements can grant people the right to use intellectual property, including trademarks, brands and a business system. There are differences between the two types of agreement, so if you are thinking of buying into a franchise you need to make sure of your ground. Under the Australian Franchising Code of Conduct, four elements must be met for an agreement to constitute a franchise agreement... 1. there is an agreement, either written, oral or implied 2. one person grants to another person the right to conduct a business offering, supplying or distributing goods or services under a system or marketing plan substantially determined, controlled or suggested by the franchisor 3. the business will be substantially or materially associated with a trademark, advertising or a commercial symbol owned, used or licensed by the franchisor or specified by the franchisor 4. before starting (or continuing) the business, the franchisee must pay or agree to pay the franchisor a fee. The fee can include an initial capital investment, payment for goods or services, or a royalty fee. It excludes payments for goods or services supplied on a genuine wholesale basis or repayment of a loan.
All four elements are cumulative - in other words, all elements and all parts of each element must be present before the agreement can be classified as a franchise agreement. It does not matter what the agreement is called. If it meets all four criteria, it will constitute a franchise agreement for the purposes of the code. The main factor distinguishing a licence agreement from a franchise agreement is the degree of control and strict compliance with a business system inherent to franchise agreements. Licence agreements are commonly more relaxed in this regard.
CASE STUDY The leading case relative to this area was the 2012 Federal Court decision in Rafferty v Madgwicks. In finding that a “rights agreement” was in fact a franchise agreement, the court set out relevant factors that could potentially indicate the existence of a franchise agreement. These included: 1. specific requirements for accounting and record-keeping, signage and merchandising, sales structures and reporting turnover 2. the franchisor’s right to audit account records and to approve marketing material 3. restrictions on the franchisee’s sale of competing products or services, use of
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the brand name and trademarks, and specific marketing or sales territories. For the document to constitute a franchise agreement, the system or marketing plan under the agreement must be substantially determined, controlled or suggested by the franchisor. The degree of control must be carefully considered, along with the extent to which the franchisee’s business involves the sale of the franchisor’s goods or services. The details of such a system or marketing plan do not need to be set out in the agreement. It will be enough for the business to be proved a franchise if the agreement allows the franchisor to exercise this control. Just because an agreement is not called or intended to be a franchise agreement, it may nevertheless be caught within the ambit of the code, which is intended to protect franchisees involved in transactions where there is inequality of bargaining power. Therefore it is important to look at the substance of an agreement to determine whether it will be governed by the code. Heavy obligations are placed on both parties under the code, as well as consequences for non-compliance. This makes it essential to always obtain legal advice before entering into commercial agreements to ensure full compliance with the relevant laws.
FRANCHISE BASICS
AN AGREEMENT
THAT SHOULD BE
AGREEABLE
One document will shape your franchise experience and set the boundaries for the business. It pays to really understand what the franchise agreement is all about and how to use it to your benefit.
ESTHER GUTNICK Senior associate, corporate advisory and franchising team, MST Lawyers
W
hen buying a franchise, you will be presented with a bundle of documents to read and/or sign. One of the most important of these documents is your franchise agreement.
As the legally binding contract between you as franchisee and your franchisor, the franchise agreement details the obligations
you will be bound to observe during the term of the franchise. Once you sign it, you can withdraw from the franchise agreement only in very limited circumstances, which should be set out in the agreement. Also, if the franchisor terminates the franchise agreement - for instance, if you breach it in some way - you may find you are not necessarily released from your
legal obligations under the franchise agreement. For example, you may still be liable to compensate the franchisor up until the time the agreement would have otherwise expired. That is why it is critical you thoroughly read your franchise agreement and seek legal advice to ensure you properly understand all its terms and conditions.
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WHEN WILL I RECEIVE IT? You should ask to see a copy of the franchisor’s current franchise agreement as early as possible after you have started considering joining a particular franchise system. This will give you plenty of time to read it and ask the franchisor any preliminary questions it may raise for you. At the very latest, the franchisor is legally obliged to give you a copy of the franchise agreement, in the final form you will be asked to sign, at least 14 days before you enter into the franchise or make any non-refundable payments.
has its own documents, and they can vary greatly depending on a range of factors. Your agreement may range in length from 20 to more than 100 pages. It may be written in simple language with an easy-to-read style, or it may contain complex and confusing legal jargon. Don't be put off just because your franchise agreement looks different from the type of agreement used by another franchise system, or because it looks long and intimidating. Often, a comprehensive and lengthy franchise agreement is a sign of a well-developed and experienced franchise system.
WHAT SHOULD I DO WITH IT?
WHAT KEY AREAS SHOULD I FOCUS ON?
On receiving your franchise agreement, carefully review it and note any questions or issues that come to mind. You should read through the document several times to ensure you don't miss anything and that you fully understand it. You should also read it in conjunction with the disclosure document, the operations manual (if the franchisor allows you to see a copy) and any other documents provided to you. At this stage you may start negotiating with the franchisor if there are specific changes you need for the agreement to meet your particular circumstances. It is a good idea to engage a franchise lawyer as early as possible to review the agreement and give you advice. The Australian Franchising Code of Conduct, the law that governs franchising in Australia, contains rules about what a franchise agreement can and cannot contain. A franchise lawyer will be able to advise you if any of the clauses in your franchise agreement are illegal or inappropriate.
You should read the entire franchise agreement thoroughly, because important information and “red flags” may be anywhere in the document. However, here is a general guide to some of the most important clauses you may find in a franchise agreement...
WHAT WILL IT LOOK LIKE?
TERRITORY
There is no such thing as a standard franchise agreement. Each franchise system
Some franchise agreements allow you to run your business only in a specific area. If this is
TERM AND RENEWALS A franchise is almost always granted for a limited time only. You should ensure the term specified will be adequate for you to successfully run the business, derive a return on your investment and repay any loan commitments. If the franchise agreement gives you the option to renew the franchise, you should ensure you are likely to satisfy any conditions for renewal. Renewal is usually not a guaranteed right – it is generally tied to your “good behaviour” and the payment of a renewal fee.
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the case, ensure territories are clearly defined, and that your territory is large enough or has the right demographics for you to sustain and grow your business. You should also check whether you have been granted exclusive rights within your territory. You need to know whether or not the franchisor can appoint other franchisees in your territory, or even if the franchisor can work in your territory, including temporary or mobile franchises, internet sales, wholesale or retail sales from non-franchise branded outlets such as supermarkets, and special events such as sporting events. It is also important to clarify whether the franchisor can change your territory boundaries without your consent, and whether you can lose exclusive rights to your territory, and if so, in what circumstances.
THE PREMISES For franchises that run from a shop or permanent business premises, the franchise agreement should have provisions relating to all aspects of the premises. These considerations are important: • Who chooses the premises, and what happens if you are not happy with the location? • What arrangements apply if you need to relocate to different premises during the term of the franchise? • Will you be required to lease the premises directly from the landlord, or will the franchisor lease the premises and give you a sublease or licence to occupy? If it is the second option, you need copies of all relevant documents. You should ensure you are aware of all the terms and conditions that govern your occupancy rights and obligations. • Who negotiates the terms of the lease? • What happens if the lease ends before the franchise agreement, or vice versa? • What are your obligations regarding upgrading or refurbishing the premises?
FRANCHISE BASICS The Australian Franchising Code of Conduct requires the franchisor to provide you with a copy of the lease and any documents that give you rights to occupy premises, or at least a summary of the conditions of your occupancy. Leases and occupancy documents such as subleases and occupancy licence agreements are usually complex documents that may need the help of a lawyer to be fully understood.
FEES AND PAYMENTS Franchise agreements generally contain a range of fees you will be obliged to pay. These may be set out in different sections of the agreement, or may not be drafted clearly, but it is imperative you do not overlook any of your financial commitments. Fees may include: • one-off payments at the start of the franchise agreement, such as an initial franchise fee, training fee, the cost of fitting out the premises, or fees to cover the franchisor’s costs of issuing you the franchise documents • one-off payments at certain stages, such as fees for renewal of the franchise, transfer to another franchisee or the end
of the franchise agreement • ongoing or recurring payments, such as periodic royalty fees, contributions to the franchisor’s marketing fund, technology licence fees or fees for certain services provided by the franchisor. The franchise agreement may contain extra “hidden” fees such as an obligation to pay the franchisor’s costs if you renew or sell the business, or breach the franchise agreement. There can also be an obligation to pay third-party costs, such as the landlord’s costs of consenting to you occupying the premises. Often, the quantum of these costs will not be known at the outset. So you can properly assess the franchise and ensure your business will be financially viable, be sure your budgets include all the financial obligations set out in the franchise agreement, including estimated amounts for items not yet quantifiable, as well as the extra costs you are likely to incur in setting up your business. Your additional costs may include the fees of your legal and/or financial advisors, registration fees for the business, costs of setting up your company, trust or other structure, and the costs of any permits or licences you must obtain in order to run the business.
SUPPLY AND PURCHASING ARRANGEMENTS In many franchise systems, the franchisor dictates which products and services you can buy, use and sell in the business, and which suppliers you may use. These rules are intended to ensure quality and consistency across the franchise network, but you should carefully check whether the supply arrangements imposed under the franchise agreement are clear, reasonable, sustainable for your particular business, and lawful. In particular, if a franchisor simply instructs you to use a specified third-party supplier, you should aware that this may be illegal conduct known as third-line forcing. You should seek specific advice and make further inquiries before signing a franchise agreement that contains such provisions.
SALE OR TRANSFER A franchise agreement ordinarily sets out a specific process you must follow if you wish to sell the business. This process may include a method and timeframe for seeking the franchisor’s consent to the sale, obligations for you to give the franchisor the first right to buy your business, and conditions
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FRANCHISE BASICS you must satisfy before the sale can proceed. You should read these clauses carefully because they may severely restrict your ability to profitably exit the business.
BREACH AND TERMINATION The Australian Franchising Code of Conduct stipulates certain circumstances that give a franchisor the right to immediately terminate the franchise agreement without giving you prior warning or an opportunity to resolve the issue. You should ensure that any “immediate termination” clauses in the franchise agreement are limited to those consistent with the code, and object to any further circumstances detailed in the franchise agreement. The code also stipulates that if you breach a term of the franchise agreement and the franchisor wishes to terminate the agreement as a result, the franchisor must give you formal written notice and a reasonable period, up to 30 days, to resolve the issue and avoid termination. Again, you should ensure that any breach and termination clauses in the franchise agreement are consistent with the code’s
WHAT IF I AM UNHAPPY WITH ANY OF THE CONTENTS?
requirements. Familiarise yourself with these provisions and ensure you are able to comply with all key obligations under the agreement, because a breach of any obligation may result in you losing your entire business without compensation. You should also carefully review the provisions of the franchise agreement that describe your obligations on termination of the franchise agreement, as these can be onerous.
A franchise agreement, like any contract, is an agreement between two (or more) parties and therefore both sides have a right to negotiate the terms of the agreement. Franchisors are often reluctant to make changes because it is important for them to have consistent agreements for all franchisees in the network. However, if there is anything in the agreement you cannot comply with or agree to, you should negotiate with the franchisor to change or remove the relevant clauses. A franchise lawyer can help you with such negotiations, and also advise if any clauses breach the code or other applicable laws. Ultimately, to maximise your chances of success and satisfaction in the franchised business, it is imperative you enter into the franchise agreement with a complete understanding of its terms, what will be expected of you and what you can expect from the franchisor and the system. To obtain a comprehensive understanding, there is no substitute for reading the documents thoroughly multiple times, obtaining expert advice from relevant professionals, and undertaking extensive due diligence.
RESTRAINTS OF TRADE One of the most common clauses that apply on termination of a franchise agreement is a restraint of trade provision. These clauses effectively restrict you from owning or being involved in a similar business to the franchise for a certain period of time after the franchise agreement ends, or in a certain area, or a combination of both. Pay close attention to these clauses because they can severely limit your ability to obtain another job or derive income after the franchise agreement ends. If the clauses seem very broad or oppressive, seek specific legal advice as they may not be enforceable.
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FRANCHISE BASICS
ALL YOU NEED TO KNOW Find your way through the maze of paperwork with this guide to the disclosure document.
MARIANNE MARCHESI Founder and principal of Legalite
B
uying into a franchise is an exciting time – until you are handed the mound of papers that make up the franchise agreement and disclosure document. While these documents can seem daunting, they contain useful information that will help you make an informed decision about whether to go ahead with the franchise opportunity.
Both documents, in particular the franchise agreement, should be reviewed by a lawyer with expertise in franchising. However, going through the disclosure document yourself is also a great due-diligence exercise. Note that all disclosure documents are in the same format, as set out in the Australian Franchising Code of Conduct, so they are not too hard for you to navigate.
Here are some tips on what you should look out for...
FRANCHISOR’S DETAILS The key thing to note is how long the franchisor has been running their franchise system. This gives you an idea as to their experience. However, do not be too concerned if the franchise system is relatively new. This usually means you need to be extra cautious in doing your due diligence, and if necessary you are entitled to extra evidence of their solvency.
BUSINESS EXPERIENCE This set outs the business experience
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of the franchisor and key personnel. Sometimes a franchisor’s staff and business may be largely based overseas. If so, check if the franchisor has Australianbased personnel, as it is always preferable to have local staff as your main point of contact when running the franchise.
LITIGATION This specifies any legal proceedings involving the franchisor or its directors and officers. Of course, it would be preferable there be no listing. If proceedings are listed, you should check: • What do they involve? • Are there any breaches of the Australian Franchising Code of Conduct?
FRANCHISE BASICS
All disclosure documents are in the same format, so they are not too hard for you to navigate.
• Is the matter ongoing or has it been resolved? • What financial impact have the proceedings had or are likely to have on the franchisor? It is also a good idea to query the proceedings with the franchisor and raise the matter with your lawyer or accountant, who will be able to advise further. Even if no litigation is listed, it is still prudent to do a search of the franchisor online and on the ACCC website to see if there are any other issues or investigations involving the franchisor.
EXISTING FRANCHISES There are two simple exercises you can undertake from the information about existing franchises. The first is to contact a few franchisees to ask them about their experience with the franchisor and the franchise system. Some good questions include: • How have they found their dealings with the franchisor? • Do they receive adequate support? • What kind of marketing is done by the franchisor? The second exercise is to contact previous franchisees and ask them why the franchise relationship ended. Again, ask what it was like dealing with the franchisor. Contact details of existing and
previous franchisees should be listed in the disclosure document, unless previous franchisees have asked that their details not be disclosed.
INTELLECTUAL PROPERTY Sometimes, the intellectual property may be owned by a company other than the franchisor itself. If this is the case, check as to whether there is an agreement in place between the intellectual property owner and the franchisor that might affect your right to use the intellectual property.
PAYMENTS The franchisor must disclose establishment as well as ongoing costs involved in the franchise. This information is obviously quite handy for your due diligence. It is always a good idea to review these payments with your accountant to ensure the franchise opportunity is viable and allows you to pay a salary to yourself.
MARKETING FUND
franchisor does and just how far your marketing fees will go. You should also ask the franchisor to give you a copy of the marketing fund’s financial statements, which will provide a more detailed breakdown of the fund’s income and expenses.
FINANCIAL DETAILS Perhaps the most important item to tick off your due diligence is that the franchisor is solvent. Along with providing a signed statement of solvency, the franchisor must give you with either its past two financial reports or an independent audit report. If the franchisor is less than two years old, it instead must give you a statutory declaration as well as an independent audit report of its solvency. All this is by no means an exhaustive list of what to look out for, and your franchising lawyer will no doubt discuss these items in greater detail with you. However, it is a useful exercise to go through the disclosure document yourself to gain a better understanding of the franchise opportunity and equip yourself with the knowledge to make an informed decision.
If the franchisor runs a marketing fund, its expenses for the past financial year will be detailed. This will give you a good indication of how much marketing the
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LEAVING ON
YOUR TERMS Franchise agreements are often for five years or more. Getting into one is easy enough, but trying to get out of one is less straightforward. BLAKE PALMER Partner and head of litigation, Baybridge Lawyers
B
oundaries have been set and rules put in place that direct how a franchise agreement can be enacted. The ACCC regulates the mandatory industry code, the Australian Franchising Code of Conduct, that applies to the parties in a franchise agreement.
Generally, franchise agreements cannot be terminated by a franchisee. The one obvious exception to the rule is a change of mind shortly after entering into the agreement. The code allows for a seven-day cooling-off period, and this would be reflected in your franchise agreement. Once outside the cooling-off period, your options to exit the franchise are limited, but include: • Surrendering your franchise back to the franchisor • Transferring/selling to a third party with the franchisor’s consent • Establishing a franchisor breach of the franchise agreement • Abandonment.
SURRENDER TO THE FRANCHISOR Surrendering your franchise to the franchisor is the easiest and fastest way to exit your franchise agreement. They are under no obligation to entertain it, but it may be that the franchisor is open to the idea of letting you exit as they might want to take over the business themselves, or they may have other potential franchisees available to take it over. However, you should be aware that a surrender will often entail making an exit payment to compensate the franchisor for future lost franchise fees/royalties. On the other hand, if you have contributed financially to a fit-out of the business premises, you may be able to set
off that amount against any exit payment the franchisor may wish to impose. Either way, you will asked to sign an agreement surrendering your franchise agreement from a particular date. The deed of surrender will usually contain a release of the franchisee entity (whether corporate, trust or individual) and its guarantors from their obligations under the franchise agreement. Of course, you should obtain legal advice if you are not clear about any aspect of your exit.
TRANSFER OR SALE TO THIRD PARTY Rather than surrendering your franchise to the franchisor, you may wish to sell your business on the open market. The code permits you to request a transfer (sale) of your franchise, and a clause in your franchise agreement will reflects the code’s stipulations. Essentially, the process involves you giving the franchisor written notice of your proposed transfer, plus all the necessary information for them to make an informed decision. Information you need to provide the franchisor includes... • When the proposed transfer/sale is scheduled to take place • Details of the proposed transferee • What experience (if any) the proposed transferee has in running a similar business • What capacity the proposed transferee has to meet the financial obligations that come with the franchise • Whether the landlord, if you are the tenant of the franchise premises, consents to an assignment of the lease to the proposed transferee. Once armed with all the necessary information, the franchisor must not unreasonably withhold consent for the transfer.
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FRANCHISE BASICS There is a list of reasons in the code that explain when a franchisor may reasonably withhold consent. The main ones are... • The proposed transferee is not appropriately experienced in the type of business the franchisor runs, or is not likely to be able to meet the financial obligations of the franchise • You are in breach of your franchise agreement in some important way that has not been (and will not be) remedied before the proposed transfer. When you have the franchisor’s consent (and that of the landlord if required), it is then recommended you engage professional help for preparing the paperwork. You will need to enter into a contract for the sale of business with the proposed purchaser, and you may also need a deed of termination with the franchisor. A solicitor experienced in franchise law is best placed to negotiate the terms of those documents on your behalf.
Australian consumer law. An example would be misrepresenting the profitability of the franchise business before you entered into the franchise agreement. If you are in that position, you can use the dispute resolution procedure prescribed in your franchise agreement to, eventually, give notice of termination. Your ability to do that will depend on the seriousness of the franchisor’s breach and whether anything has been done to remedy it. If you have terminated your franchise agreement for a franchisor breach, you may then start court proceedings against the franchisor and seek damages. For example, you might seek to recover the money you have lost by investing in the franchise, and profits you might have otherwise made but for the franchisor’s breach. Again, these are matters on which you should first obtain legal advice.
FRANCHISOR BREACHES
ABANDONMENT
While your franchise agreement will generally not contain a specific right for you to terminate it, this may still be possible if the franchisor is in breach of an essential term of the agreement, or is in breach of
As a last resort, you may simply want to close the doors of your business and walk out. However, if you do so, you potentially face the following actions... • The franchisor immediately terminating
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your franchise agreement, as entitled by the code • The franchisor pursuing you for the fees it would have otherwise received during the balance of the term of the franchise agreement • The landlord pursuing you for breaking the lease, and for rent and outgoings until the end of the term of the lease, or if the franchisor is the lease tenant, you being pursued under the licence or sub-lease you hold with them, for unpaid rent and outgoings until a new franchisee is secured.
FRANCHISOR-INITIATED EXIT The circumstances in which a franchisor may terminate a franchise agreement are more straightforward. A franchisor may have a right written into the franchise agreement whereby it can terminate upon giving the franchisee a written notice explaining the reasons. More commonly, a franchisor’s right to terminate the agreement will arise from either: • Franchisee breach of the agreement • Special circumstances • Non-renewal
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FRANCHISEE BREACH When a franchisee is in breach of one or more obligations under the franchise agreement, the franchisor must send the franchisee a written notice under the code that: • Explains the nature of the breach under the franchise agreement • Tells the franchisee what needs to done to remedy the breach • Allows a reasonable period (up to 30 days) to remedy the breach • Advises the franchisee that the agreement will be terminated if the breach is not remedied. If the breach is remedied in accordance with the notice, the franchisor cannot terminate the agreement. If there is a dispute about the nature of the breach, a franchisee may have it referred for mediation under the dispute resolution process stipulated in the code.
SPECIAL CIRCUMSTANCES A franchisor is not obliged to follow this process when there are special circumstances, such as: • When the franchisee does not hold the relevant licence to run the franchise
• When the franchisee becomes insolvent • When the franchisee abandons the business • When the franchisee is convicted of a serious offence • If the franchisee is running the franchise in a manner that is dangerous to public health and/or safety. • If the franchisee commits fraud in his capacity as franchisee • When the franchisee agrees to terminate.
NON-RENEWAL It should also be noted that the code does not give franchisees an automatic right to renew or extend their franchise agreement, or enter into a new agreement after the initial term has expired. Whether that right exists will depend on the specific terms of the franchise agreement as negotiated by the parties. If an agreement has no right to renew written into it, it will terminate naturally at the end of its term.
FINAL WARNING: INSOLVENCY Finally, both parties to a franchise agreement should be wary of how insolvency might
affect them. Generally, a person or a company is insolvent if it cannot pay bills as and when they fall due. For a franchisee, the immediate problem if you become insolvent is that the franchise agreement will permit the franchisor to immediately terminate the agreement. If a franchisor becomes insolvent, it may have a wide range of disastrous consequences for franchisees, including: • Losing your right to trade using the franchisor’s brand • Losing the right of occupation under sub-leases or licences where the franchisor holds the head lease • Remaining liable to suppliers, landlords, staff and lenders after your ability to trade is lost. Whether you are franchisee or franchisor, if you are a director of an insolvent company, you may be personally liable for the debts accrued by the company during the period in which you allowed it to keep trading while insolvent. The law provides several remedies for potential insolvency situations, so it is imperative you obtain expert legal and accounting advice if you think you are heading down that path.
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FRANCHISE BASICS
THOSE
SECRET HERBS
AND SPICES...
A trademark, design, brand, patent, secret herbs and spices - these all help make a franchise an appealing prospect, but who owns all the intellectual property that gives the business its value?
LOUISE WOLF Senior associate, corporate advisory and franchising team, MST Lawyers
O
ne of the greatest benefits of buying a franchised business is access to the established reputation and goodwill that resides in the intellectual property of the brand. However, buying a franchised business does not give franchisees ownership or control over the intellectual property.
As well as learning about the franchisor and the system, it is important that franchisees investigate who owns the intellectual property and the limitations on their rights to use it.
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FRANCHISE BASICS
Intellectual property usually associated with a franchise system includes trademarks and brand “get up”, copyrighted material such as its operations manuals, and secret or confidential information, such as recipes. Intellectual property may also include registered designs and patents, depending on the type of franchise system. A franchise system’s intellectual property is sometimes owned by the franchisor. Often it is owned by an entity related to the franchisor or an individual associated with the franchisor, such as the founder or one of the directors. In the case of a brand originating outside Australia, it will often be owned by an entity or individual overseas. When the intellectual property is owned by a separate entity from the franchisor, it is protected should, for example, the franchisor become involved in litigation or become insolvent. Separation quarantines the intellectual property in a separate non-trading entity, helping protect its value. Where the intellectual property is not owned by the franchisor, there should be a written licence agreement between the IP owner and the franchisor, setting out the terms and conditions upon which the franchisor is permitted to use the intellectual property, and the way in which the franchisor can allow others to use it. The Australian Franchising Code of Conduct prescribes that certain details about a franchise system’s intellectual property be included in the disclosure document, and that the disclosure document be provided to every prospective franchisee. In its disclosure document, a franchisor must specify the type of intellectual property used in the franchise system and identify the IP owner. If applicable, the franchisor must also provide details about the licence agreement between the IP owner and the franchisor. This includes identifying the parties to the licence agreement, the term of the agreement, the nature and extent of any limitations
and the conditions under which the agreement can be terminated.
FRANCHISEE RISKS There are risks for franchisees where... 1. the term of the licence agreement is short (especially if it is shorter than the term of the franchise agreement) and no renewal terms are provided for; or 2. the licence agreement can be terminated on short notice. If the licence agreement is terminated for any reason or expires, the franchisor loses its right to let franchisees use the intellectual property, unless a new licence agreement is entered into between the IP owner and the franchisor. If the IP owner and the franchisor are owned or controlled by the same individuals, the risks for a franchisee are reduced. However, where the franchisor is not owned by the same individuals as the IP owner, as is often the case when an overseas franchisor appoints a master franchisee in Australia, the risks are far greater. To minimise such risks, prospective
franchisees must find out as much about the intellectual property as they can: • who owns it, including details of the shareholders behind the owner • the duration of the licence agreement and how long before it expires • if the licence agreement can be renewed • under what conditions the licence agreement can be terminated. Prospective franchisees should carefully read the disclosure document provided by the franchisor as this should provide answers to most of these questions. Prospective franchisees should also seek advice from experienced franchising or intellectual property lawyers. The reputation of an established brand and recognised intellectual property offers franchisees some comfort in embarking on a business venture, but it is critical to ensure, as far as possible, that a franchisee’s rights to use such intellectual property will continue for at least the term of the franchise agreement.
In its disclosure document, a franchisor must specify the type of intellectual property used in the franchise system and identify the IP owner.
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FRANCHISE BASICS
ASK BEFORE
YOU COMMIT
What your franchisor can and cannot do when it comes to preferred suppliers and rebates.
ROBERT TOTH Partner, Marsh & Maher Lawyers
A
significant benefit to being part of a franchise system is that the franchisor has negotiated key supply agreements with suppliers. This is aimed at ensuring quality and standards are met, and that customers are delivered a consistent standard of product or service. It also means that as a franchisee you may have access to discounts based on the volume of orders placed by the franchisee group. In theory, this should give you a greater margin in selling your products or services. These supply arrangements are
material contracts that a franchisor will have negotiated for the benefit of franchisees.
1. REBATES What is the difference between a discount and a rebate? A discount is provided by a supplier as an upfront incentive, and is a reduction in the purchase price. A rebate is a portion of the purchase price refunded by the seller to the buyer when certain purchase levels are reached. It is an amount paid by a reduction, return
or refund on what has already been paid. The rebate is generally paid to the buyer. In franchising, the buyer may be the franchisor or one of its related companies that then on-sells and supplies the product or services to the franchisees. Where the franchisee buys stock, for example, from one of the approved suppliers, the rebate may be paid direct to the franchisee; however, that is often not the case and there is no obligation for the supplier to do this. The Franchising Code of Conduct recognises that rebates are legal and there is no obligation on the franchisor to provide the whole or any part of the rebate
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FRANCHISE BASICS
Third-line forcing is a breach of Australian consumer laws and is prohibited. However, a franchisor can apply for an exemption from the ACCC.
it receives back to the franchisee. Of course there might be some tension if you discover your franchisor is not only receiving a royalty on franchisees’ gross sales and a marketing levy, but also gains extra revenue from supplier rebates.
2. DISCLOSURE OBLIGATIONS The Franchising Code of Conduct requires franchisors to disclose: • if they will receive a rebate (or some other financial benefit) for supplying goods or services to a franchisee • which business is providing the rebate or benefit, and whether the rebate will be shared among the franchisees. There is no requirement for the franchisor to share the rebate, even though franchisees may be compelled to buy their products or services only from pre-approved suppliers. However, there is a good-faith obligation under the code that franchisors need to consider when forming their rebate policy. There have also been cases where the forcing of excess stock on a franchisee to enable the franchisor to recoup higher rebates may be considered unconscionable conduct under Australian Consumer Law.
3. ONLINE SALES Franchisors are required to disclose: • whether a franchisee can make goods or services available online • if the franchisor or an associate of the franchisor can also do so • if the franchisor may, or is expected to,
make goods or services available online in the future. Details of those arrangements need to be disclosed upfront if they affect franchisees either directly or indirectly. These disclosures are designed to promote transparency in the franchise sector.
4. THIRD-LINE FORCING EXEMPTION Third-line forcing occurs when the franchisor requires a franchisee to buy products or services exclusively from approved thirdparty suppliers. Third-line forcing is a breach of Australian consumer laws and is prohibited. However, a franchisor can apply for an exemption from the Third-line forcing provisions from the ACCC. If the franchisor requires you to use its approved suppliers, it must first seek statutory exemption under Australian consumer law by notification to the ACCC. This exemption provides protection to the franchisor from legal action under the Competition and Consumer Act where the conduct redsults in a net public benefit which outweighs the public detriment. In many cases, the franchise agreement will state that the franchisee may use one of the recommended suppliers. If the preferred supplier is not able to supply the product or services, you are then free to use an alternate source. However, it is important to first seek the franchisor’s approval for external sourcing to ensure quality and standards are maintained.
5. ARE LEASE INCENTIVES A REBATE?
requires the franchisor to disclose any financial incentive that it or its associates receive in exchange for agreeing to lease or entering into a lease. Again, there is no requirement for the franchisor to pass on that financial benefit to the franchisee. This means the franchisor can retain any landlord lease incentive and still ask the franchisee to pay the full fit-out costs to establish the business. This may seem somewhat unfair, and the franchisee should ask the franchisor whether that is the case.
THINGS TO REMEMBER You should: • Carefully review and understand the terms of the franchise agreement in relation to supplier rebates, lease incentives and the obligation to use only approved suppliers • Before signing the franchise agreement, ask the franchisor if they receive rebates, and if so, do they retain the full amount or share it with the franchisee • Ask the franchisor if you are obliged to buy goods and services only from approved third-party suppliers. If goods or services are not available from the approved suppliers, can you source these readily elsewhere to run your business? Ask the franchisor about their online sales strategy and policy and the impact these might have on your business. By asking these questions before you commit, you will be able to make a more informed decision on whether to take up the franchise opportunity.
Again, the Franchising Code of Conduct
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FRANCHISE BASICS
OUT OF
ORDER
Some contracts may be basically unfair to franchise buyers. Here’s what you need to know to avoid such problems.
I
f you are looking to buy a franchise, be it a new or existing business, at some point you will be presented with a contract or franchise agreement. This will form the basis of your rights and obligations as a franchisee and those of the franchisor. It is an important document as it governs the business relationship.
The franchise agreement will have been drafted by a lawyer, and generally speaking it will favour the franchisor in most respects. Your responsibilities may be extensive and will usually form the bulk of the agreement. If there is a section on franchisor obligations, it will probably fit on one page. Until lately, provided they honoured the franchise code, franchisors had free reign over their contracts, and fairness to the franchisee party was not a major focus, particularly for established and successful franchises. With the introduction of the “unfair contracts” regime, there is now an overarching fairness test. How does it work? Changes were made to the Competition and Consumer Act 2010 and the Australian Securities and Investments Commission Act 2001, taking effect from November 2016, that mean unfair terms in standard smallbusiness contracts can be declared void. Generally speaking, a “standard-form small-business contract” is a contract: • Which supplies goods or services or the sale or grant of an interest in land • Where at least one of the parties is a business employing fewer than 20 people
STEVEN CREA Principal, Crea Legal
• Where the upfront price payable under the contract does not exceed $300,000 if the term is less than one year, or the upfront price does not exceed $1 million if the term is more than one year. These limits rely on fees being ascertainable at the time the contract is signed. In franchise agreements this is not always the case because a percentage of revenue may be used to calculate royalties, so these will not be included in the calculation and most small-business franchises will be within the threshold. An unfair term is a term that: • causes a significant imbalance in the parties’ rights and obligations under the contract • would cause detriment to a party if it were to be relied upon by the other • is not reasonably necessary to protect the commercial interests of the party that would be advantaged by the term. A court will declare a contract term unfair only if all these three aspects are satisfied. The rest of the contract remains legally binding if it is still workable without the unfair element. Some of the common terms in franchise agreements with the potential to be considered unfair include: • Clauses permitting franchisors to make unilateral variations to the agreement without franchisee agreement • Expansive restraint-of-trade provisions on franchisees following the end of the franchise agreement • Termination rights in favour of franchisors, though the franchising code
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already limits the circumstances in which franchises may be terminated • Clauses imposing obligations on franchisees to pay franchisor damages and other penalties, particularly if they are over and above what would be reasonable • Clauses unduly limiting a franchisee’s right to sell the business and/or imposing significant penalties or payment to franchisor in such circumstances • Clauses in favour of the franchisor regarding ownership of customer records, depending on the context • Clauses imposing rights to impose significant expenditure on a franchisee where it cannot be justified, though the code already offers protection in this area. Sometimes the type of clause will cause a problem, for instance, a clause requiring the franchisee to do something “as directed by the franchisor”. Also problematic are clauses providing the franchisor with “absolute or unfettered discretion” over particular matters. Unfair contracts law is not a substitute for reading contracts and knowing what they say before you sign. The enforcement of rights still requires a legal claim with courts or tribunals, and all the usual uncertainty and difficulties with making legal claims apply. Normal mitigation of risk through careful review and robust negotiation of contracts is always encouraged.
FRANCHISE BASICS
A FAIR AMOUNT
With all its complications the Fair Work Act can affect the franchise sector, so you need to make yourself aware of what is involved and find out how you can avoid being put at risk for contraventions. By Suzanne Jarzabkowska, group CEO and partner, and Sophie Letherbarrow, managing partner, DC Strategy Lawyers
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F
or various reasons, the 7-Eleven controversy will live in people’s minds for quite some time. The media highlighted the issues well for the franchise sector: franchisees underpaying employees, many of them on student and other visas, and images of young people at ATMs withdrawing cash to return a portion of their wages to employers who threatened to have their visas revoked.
This incident tarnished not only 7-Eleven’s reputation, but brought the entire franchise sector under increased scrutiny with the Fair Work and the migration offices. And there has been a growing stream of smaller players caught and fined for infringements, both for innocent mistakes and for egregious breaches. This is a complex issue, particularly for franchise networks where business is governed by state-based awards that are updated annually. In many cases, franchisees in the quick-service restaurant (QSR) and retail space rely on casual and part-time workers, often students. Under the Fair Work Act they may be regarded as part-time sometimes and casual at other times. Adding to the confusion, if they are on overseas student visa, they may be allowed to work only 20 to 40 hours a fortnight, creating extra compliance requirements under the Migration Act. Many franchisors and franchisees also depend on working-holiday employees (417 visa) and skilled foreign workers sponsored under a Temporary Skill Shortage (TSS) visa (formerly known as 457). While employers must meet industry-standard salaries, the minimum wage - temporary skilled-migration income threshold (TSMIT) - under the TSS visa class is currently $53,900. This is also subject to both Fair Work and migration compliance. About one in 8 of all workplace disputes has been found to be visa related.
As if this isn’t complicated enough, the Fair Work Commission reduced Sunday penalties across the hospitality, fast-food, restaurant, retail and pharmacy sectors in February with variations of 125, 150, 175 and 200 per cent depending on the industry sector and worker status, whether they are part-time, full-time or casual. There is also the application of different public-holiday penalty rates. While most employers welcome these changes, transition to the fully reduced rates will be phased in over four years, apart from the public holiday awards that apply from July. Franchisors need to keep up with what is required of them and their franchisees.
WHAT YOU NEED TO KNOW Of particular concern to employers, franchisees and franchisors is the issue of accessorial liability under the Fair Work Act, which stipulates that anyone who contravenes the Act is held responsible for that contravention. A person is involved in a contravention if they: • have aided, abetted, counselled or procured the contravention • have induced the contravention, whether by threats or promises or otherwise • have been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention • have conspired with others to effect the contravention. So franchisors, master franchisees, franchisees, individual company directors, in-house HR and account managers and outsourced providers of accounting, HR and wage-payment services can all be found to “involved” or accessorily liable for the infringement. This means both
back-paying employees, and for each of the parties found to be involved, fines of up to $10,800 per contravention for an individual and up to $54,000 in the case of a company.
PROPOSED CHANGES The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 will increase the Fair Work Office budget by a proposed $20 million so it can pursue its efforts. Here are the proposed changes... • Franchisors will be held equally responsible for contraventions of the FWA by their franchisees if it can be established they knew or should have known of the franchisee’s breach or did not take reasonable steps to contain it. While they may place responsibility on to the franchisee for the back payment of wages in the case of an underpayment breach, the franchisor will still be liable to the pay the penalty imposed. • A potential tenfold increase to the individual penalties to $108,000 and for companies to $540,000 where it can be established the breach was intentional or “part of a systematic pattern of conduct relating to one or more persons”. • The establishment and funding of a migrant worker task force to help with policing compliance with both the Migration and Fair Work Acts. • Given that most prosecutions by far involve an accessory, there will be an increase in the Fair Work Office’s search powers to compel employers and other involved parties to provide evidence and co-operate with the investigations. • There will also be new provisions to deal with deliberate contraventions such as the 7-Eleven situation where employers required employees to return part of their wage, or for providing false payroll documentation. Given that these amendments appear
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FRANCHISE BASICS
While most employers welcome these changes, transition to the fully reduced rates will be phased in over four years, apart from the public holiday awards that apply from July.
to have bipartisan support in both houses of parliament, they will almost certainly become law this year.
WHAT YOU CAN DO? Consider if the franchise business unit supports labour costs that meet the awards for your sector. Ask the franchisor for financial data such as profit-and-loss statements from their existing network that show basic costs and revenue. Work out whether the labour costs are reasonable to support award wages. Unsurprisingly, many businesses underpaying employees do so because they would not be profitable if they met the award. Expect the franchisor to demand your profit-and-loss statements with wages outlined clearly. This will allow the franchisor to request clarity for any month where wages as a percentage of turnover fall below an acceptable threshold. It is not only the franchisor’s right to have this information, in order to protect themselves from accessorial liability under the Fair Work Act, it has now become their responsibility. Expect your franchise agreement to contain clauses requiring that franchisees must comply with all state and federal workplace laws as a condition of the agreement. Find out if there is head-office support for franchisees to gain advice about where to source workplace relations advice such as awards, dismissal and other employment issues. Find out if the franchisor educates new franchisees about their external statutory obligations to the Fair Work Act, the Migration Act (and others as relevant to your sector), the penalties for infringement and their obligations under the franchise agreement. Does the franchisor provide a training module in the on-boarding phase that trains and tests franchisee understanding and ensures a passing grade? Franchisors can ensure franchisees do the same with their managers, so ask for access to the training module for your own employees. Check if the Fair Work Act, the Migration Act, industry awards (and other statutory workplace requirements) are addressed in
the franchise’s operations, procedures and training manuals. Your franchisor might have introduced technology tools across the network such as rostering systems with software that can be programmed to determine the appropriate wages, part-time or casual designation, age, penalties, number of hours worked and so on in a payslip advice format that meets the Fair Work and award requirements. Or they might provide a reliable outsourced provider with the appropriate technology and understanding of the legal requirements to handle wages. Ask other franchisees what they do to ensure they comply. It is important that your franchisor provide clear expectations during the recruitment phase in relation to legal and operational compliance, and outlines specifically the Fair Work and Migration Acts and relevant awards and requirements. Find out from other franchisees if the franchisor gives regular updates, training and support on workplace commitments. Does the franchisor promote a culture of accountability and compliance that encourages and supports franchisees with problems or concerns about meeting their obligations? Knowing your responsibilities as a future employer, understanding the laws that govern your industry and going the extra mile in the due-diligence process before you commit to buying your franchise are your best investment in your future. The Franchising Code advises you to take legal and financial advice. Do it. You wouldn’t buy a house without a pest and building report, so ask your specialist franchise lawyer about employment issues such as Fair Work Act compliance when you have your franchise agreement reviewed.
Suzanne Jarzabkowska heads up the multi-disciplinary consulting, legal, recruitment, brand and marketing team at DC Strategy; while Sophie Letherbarrow has had more than 20 years’ experience in commercial and business law.
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FRANCHISE BASICS
LOOKING INTO
Leases If you are buying a retail franchise business, the lease is a critical element. Here are 10 questions to ask about your lease...
CORINNE ATTARD Partner, Holman Webb Lawyers
L
eases can be held in the name of the franchisor or the franchisee as tenant. Whether you or your franchisor is negotiating a new lease with the landlord or you are taking over an existing business and lease, there are basics you need to know beyond the usual commercial terms. 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. Here are the 10 questions to ask when reviewing a lease…
1. IS THE LEASE TERM LONG ENOUGH? It is important to have a lease term (or potential lease term with options) that is long enough to at least match the franchise term. Your bank will also want to see a
lease term that allows you enough time to recover your/its investment. If you are buying an existing business and there is not enough lease term left, you may need to approach the landlord for an extension. There is also a risk the lease may end early through demolition or relocation, if those clauses are in your lease or in the head lease, though the lease or the law may give you rights to compensation for your fitout or other expenses. If at all possible, demolition or relocation clauses should be removed or limited so you have a guarantee of an initial term of sufficient duration.
2. WHAT IS MY RIGHT TO OCCUPY? If the franchisor holds the head lease they need to grant you a sublease or a licence to occupy. Typically a retail lease prevents a tenant from subletting, licensing or “parting with possession” without landlord consent.
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So in that situation the head lease should allow a franchisee of the tenant to occupy the premises as sub-tenant or licensee. Failure to include this right in the lease will mean occupation by a franchisee without landlord consent is a breach of the lease. Whether sub-lease or licence, it is usual for the franchisor to simply “pass through” its same obligations as tenant to the franchisee. It is therefore important to review the head lease - your right to occupy is based on this continuing. If you are to have exclusive access rights to areas outside the premises such as store room, parking bays or outdoor dining area, these rights need to be in the lease or in another licence agreement.
3. WHAT DOES THE LEASE DISCLOSURE STATEMENT SAY? Every state and territory across Australia
FRANCHISE BASICS
has different retail leasing legislation. In most places, tenants, including subtenants and licensees, must receive a lease disclosure statement from the landlord. This document includes important information about the lease such as outgoing obligations, redevelopment plans and details about the shopping centre if the shop is located in one. Read through the disclosure statement. If it tells you building works are planned for the shopping centre, you may not be able to later claim any compensation if those works disrupt your business.
4. CAN I TRANSFER THE LEASE IF I SELL MY BUSINESS? Whether a lease is held by franchisor or franchisee, it should contain the right to assign (transfer) the lease (or licence) 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
unreasonably withhold consent). In some states and territories there are also laws prohibiting retail landlords from refusing consent to a transfer in certain cases, which may protect you from being held liable for breaches after the transfer.
5. ARE THERE ANY REFURBISHMENT OBLIGATIONS? Franchisors and landlords may have separate refurbishment requirements, and making sure these are consistent is in everyone’s best interest. Refurbishments - usually at the end of term or every five years - will typically be at the cost of the franchisee, and if a relocation occurs there will be extra fit-out costs.
6. WHAT INCENTIVES OR FIT-OUT CONTRIBUTIONS ARE PROVIDED? Landlords often 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, and how this has been accounted for. Franchisors must disclose this in any event. If you breach the lease, then part or all of an incentive paid may be repayable to the landlord. You should also advise your financing bank and your accountant if a fit-out contribution is received, as parts of the fit-out and fittings paid for by the landlord will belong to the landlord and not be available as security for a bank loan or for depreciation.
7. IS MY PERMITTED USE BROAD ENOUGH FOR CHANGES? As a general rule, a broader usage favours the tenant. It is common for landlords to try to restrict food-court retailers in particular to a set menu, to avoid conflict between retailers and possible exclusive rights. Rather than having a menu attached to the lease it is preferable to have usage
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such as “takeaway food outlet selling pizza, drinks and any other menu items of a Joe’s Pizza franchise”, which leaves it open for further items to be added without seeking landlord consent.
8. HOW MUCH SECURITY OR BANK GUARANTEE DO I NEED? Most leases will require financial security in the form of a bank guarantee for several months’ gross rent, and this is usually provided by the franchisee. Ensure you make your 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. You may also need to provide a personal guarantee for the lease obligations either directly to the landlord or to the franchisor.
9. WHAT ARE A LANDLORD’S INSURANCE REQUIREMENTS? The lease usually requires the tenant
to take out certain insurances – public liability for a stated minimum amount and insurance of the tenant’s property are standard. Franchisors often require the insurance to be taken out by a franchisee, noting the interest of both landlord and franchisor. Do this early and obtain the certificates of currency for the landlord, or you will not be allowed to take occupation.
10. ARE OTHER EXPENSES PAYABLE TO THE LANDLORD ON TOP OF RENT? As well as the rent and outgoings there may be extra costs in a retail lease, particularly if the premises are in a large shopping centre. There are extra outgoings if you trade outside the shopping centre’s core hours, additional cleaning if you are in a food court, centre promotion contributions, charges for extra waste removal and amounts payable if you fail to open during the required hours. If you aware of these you may be able to take steps to avoid some charges.
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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.
FRANCHISE BASICS
DEALING WITH DISPUTES Understand your options if you find yourself heading for a serious conflict with your franchisor.
STEPHEN GILES Partner, Norton Rose Fulbright
D
ifferences of opinion are an everyday feature of franchising, as it is natural for two independent business owners to have differing views on some issues. While the dispute level in franchising has been consistently low - at less than 2 per cent for many years - it is important for franchisees to know how best to handle any disagreements that arise.
The good news is that since 1998 there has been a highly effective framework for dispute resolution in franchising. The mediation-based process, set out in the Franchising Code of Conduct, is undoubtedly world’s best practice, and in most cases if thoughtfully used will provide the best framework for resolving a dispute quickly, efficiently and cost-effectively. Statistics from the Office of the Franchise Mediation Adviser consistently show a mediation success rate of around 80 per cent under its regime. It is rare to find a franchising dispute where neither party can achieve their best net outcome using the process. However, they both need to be sufficiently prepared and sufficiently realistic, and act at the earliest opportunity. Here are six tips about franchise disputes...
TIP 1: AVOID A DISPUTE IF POSSIBLE
TIP 2: UNDERSTAND YOUR OPTIONS
The following suggestions may help prevent a disagreement or problem from escalating into a major dispute, or may help ensure a dispute is resolved as efficiently and effectively as possible:
In broad terms, you have five options when involved in a serious dispute. Some of these options can be undertaken concurrently: 1. Accept the reality and move on. People often come back to this option after working through the other options. It is therefore important not to burn this bridge too early. 2. Accept the reality and exit. The Franchising Code of Conduct in essence provides franchisees with a statutory right to transfer the franchise, and this will often be the best option, even for franchisees who may feel they have a legitimate legal claim against the franchisor. 3. Activate the code dispute resolution process. 4. Involve the ACCC. 5. Take legal action.
• Act immediately - do not wait for things to improve • Ask for a meeting with the franchisor representatives specifically to discuss your concerns. If necessary, escalate the request to a more senior employee or the franchisor CEO • Be calm, polite and factual. You may need to bite your tongue, but consider the desired outcome. Hurling abuse or making accusations or threats is unlikely to achieve your outcome, even if there is a basis for doing so • Speak to your Franchise Advisory Council representatives, if there is an FAC, or other franchisees. They may take up your issue for you, or add weight to your claims. They may also be good for a reality check • Be honest with yourself. Evaluate the root causes of the dispute, not the symptoms. Ideally a franchisee should obtain independent input into this evaluation. Sometimes a dispute is really a symptom caused by another fact, such as regret about buying the franchise in the first place.
TIP 3: TAKE A REALITY CHECK It is vital to obtain independent input to your decision (remember the saying, if you act for yourself you have a fool for a client). Independent input can come from several sources: • Other franchisees – if they have the same problem, they may also be part of a solution. However, advice needs
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to come from an experienced and objective franchisee, not just someone with a sympathetic ear or their own axe to grind. • A friend – but they need to be experienced and objective. • A lawyer – choose one experienced in franchising who will bring expertise and objectivity. Be wary of one without genuine experience in franchising, or one who seems intent on litigation or an adversarial approach.
TIP 4: UNDERSTAND THE CONSEQUENCES Rarely does anyone “win” in a dispute, and rarely does anyone achieve an ideal outcome. It is particularly important for a franchisee to understand the potential adverse consequences and not be blinded by a view that they are “in the right” or have a good legal case. The consequences of a dispute for a franchisee are not just financial. Disputes place immense personal stress on a franchisee and their family, are a substantial distraction to running the business and can cause adverse reactions from third parties such as financiers and landlords. Most cases take a couple of years to come to court, and it is easy to incur costs well in excess of $100,000, even if you “win” the case. If you lose a court case, you will typically have to pay the legal costs of the other party as well.
The best solution to a dispute will rarely be ideal, so adjust your expectations early. Focus on an outcome you can live with, not your best case.
TIP 5: PRESERVE THE BUSINESS’ VALUE A franchised business has far greater value as a going concern than if it stops trading. If the doors close, not only does goodwill potentially evaporate, but fixed assets and stock can lose significant value. The more value that is preserved in a dispute, the more there is to allocate between the parties. Hang in there - while it is often tempting to just walk away or close the doors, perseverance leaves more options available.
parties try to agree on how best to reach a resolution. Taking account of these tips should help ensure the right mindset, and alert franchisees to steps they can take to increase their chances of securing an acceptable resolution to a dispute. n
Stephen Giles is an FCA director and the author of a range of franchising texts and publications including Franchising Law & Practice, The Franchisor’s Manual and The Franchisee’s Guide.
TIP 6: FOLLOW THE CODE PROCESS I have often seen parties proceed to mediation too early, without proper thought or in the wrong frame of mind to achieve the best outcome. Sometimes an inexperienced lawyer exacerbates the problem by either focussing too much on the legal rights and wrongs, or seeing the organisation of mediation as an outcome of itself. Ensure dispute notices have enough detail about the true nature of the dispute, and list options that could resolve the situation. The code also requires that the
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While it is often tempting to just walk away or close the doors, perseverance leaves more options available.
FRANCHISE BASICS
WHAT IS A
TECHNOLOGY AGREEMENT? Businesses today cannot work without recourse to technology, so it is vital clear rules of engagement are laid out before you sign up to run your own. TIMOTHY MAK Practice leader, LegalVision
T
echnology is transforming the franchise world with customer loyalty programs, point-of-sale (POS) terminals that sync with stock-ordering systems and online training modules to improve efficiency and drive greater brand engagement.
However, franchisees should understand the risks associated with technology. The “WannaCry” malware cyber attack is just one example of how vulnerabilities in computer systems can severely cripple businesses. A “technology agreement” is a catch-all phrase referring to the supply of a particular type of technology to a business, for instance: • software licence agreements; • POS licence agreements; or • website development agreements. These types of agreements often involve the transfer of customer data to a third-party supplier or software provider. Common issues that can arise include: • privacy • intellectual property • warranties and support services • indemnities. These types of agreements can often be found in a franchise context. I unpack each of these terms below and suggest practical steps franchisees can take to ensure ongoing compliance with the law...
1. PRIVACY Franchisees are collecting an increasing amount of customer data, particularly through loyalty programs. Customers can usually redeem points earned through these programs on products in store or by accessing special offers. When collecting, storing, using or disclosing personal information, franchisees must comply with the Privacy Act 1988. Personal information is data
that can be used to identify an individual, such as email addresses collected when customers join a loyalty program or enter a competition. If your franchise has an annual turnover of $3 million or more, you will also have additional obligations under the Australian Privacy Principles. Franchisees should promote a culture of transparency and accountability with their customer base by maintaining an up-todate privacy policy. The policy should set out: • how the franchisee uses a customer’s personal information • whether the franchisee will share the information with any third party • how a customer can complain about a data breach. Your legal advisor can review technology agreements to ensure you do not breach your privacy obligations.
2. INTELLECTUAL PROPERTY The franchisor will generally own and control the IP of the franchise business, including social-media accounts, confidential information and customer data. The franchise agreement will typically contain a clause prohibiting the franchisee from acting in a way that damages the goodwill or reputation of the franchise. It is important to understand what franchisees can and cannot do on social media. For example, the operations manual may not permit setting up a separate Facebook page.
3. SUPPLIER WARRANTIES AND SUPPORT When POS systems break down or don’t work properly, sales can be crippled. Franchisees should contact existing franchisees (listed in the disclosure document) and confirm that the technology used by the network does not cause
any issues, and that they are happy with the level of support the suppliers provide. Franchisees should also ensure the POS provider offers adequate response times and that any incurred costs are incorporated into the system's “subscription cost”. Franchisees should know that Australian Consumer Law protections, such as statutory warranties, apply to POS systems and similar technologies. These warranties include fitness for purpose, and protection against defects. If any product does not perform as expected, contact the franchisor or supplier and raise these issues promptly.
4. INDEMNITIES Indemnities for loss or damage arising from defects in products the franchisor supplied or approved are often non-existent. This means it is important franchisees understand that the primary claim for any defect in supply will be against the supplier. Franchisees should also note it is standard to have a clause in the franchise agreement that indemnifies the franchisor for loss or damage arising from a breach of the operations manual or franchise agreement. For instance, if a franchisee experiences a data breach that leaks their customers' personal information, that then causes damage to the network. Franchisees should take extra care to ensure the security of their data, and update their systems to limit the effect of malware.
SAFEGUARDING INFORMATION Franchisees should actively create a culture of privacy awareness and compliance in their business. To safeguard information, you can: • Speak with the IT provider to better understand how the backup system works and how data is protected • Review the confidentiality clause in your franchise agreement and understand what it entails • Speak with the franchisor about receiving adequate training in the franchise systems • Ask the franchisor about the support team and whether it is available to answer questions • Ensure you can answer questions from customers and direct them to the appropriate person should they wish to lodge a complaint about the handling of their data • Familiarise yourself with how the franchise uses and stores your customer’s personal information. Ignorance is no excuse for inadvertently sharing confidential information or customer data. It is critical to speak with a franchise lawyer who can take you step by step through these requirements to ensure you are complying with the technology agreement. n
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Fresh, Fast and Flavoursome!
Apply now and receive our our ‘Entrepreneurs Package’ and save $30k off your upfront investment. Contact us for more details. Investments from as low as $175K +GST! Do you want to be your own boss in a business with a strong support network? Why not take control of your life and have your own business. Now’s your chance to do just that, while being part of an experienced franchise that Australian’s know and love. LeWrap specialises in fresh tasty fast food and we are spearheading the franchising sector! Jump on board with us as we grow our already established, Aussie owned brand.
FRESH FOOD: Fresh food is what we’re in the business of and consumers are loving it! We specialise in freshly made gourmet wraps, plates and salads.
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TRAINING & SUPPORT: You’re never alone! LeWrap will provide you with great training and ongoing marketing and operational support.
GROWING: LeWrap has proudly been in the QSR industry for over 10 years and we’re growing every day!
LOCATIONS: Campbelltown Mall, Westfield Woden, Stockland Green Hills, Figtree Wollongong, Glenmore Park Sydney, Westfield Tuggerah, Melbourne, Brisbane - you tell us!
FRANCHISE BASICS
KNOW THE
LIMITS How much can a franchisor restrict your business activities during and after your term as a franchisee?
TAMRA SEATON Director, MDS Legal
M
ost franchise agreements contain a restraint of trade or restrictive covenant clause, usually with the intention of restraining a franchisee and its guarantors from competing with the franchisor both during the term of the franchise agreement and for a period of time after its termination. Usually, a particular geographical area is specified. It is important for a franchise buyer to understand restraint clauses because they can significantly impact business interests the franchise buyer may already have, and limit what the franchise buyer can do after the franchise agreement ends (including if
they sell the franchise business). Here are three examples: 1. If the franchise buyer owns an independent fast-food business and wants to keep that and buy a similar franchise business, the restraint clause may prevent the buyer from owning both businesses at the same time as the independent outlet would be regarded as competition. 2. If the franchise buyer is a qualified auto mechanic and buys an auto-mechanic franchise, the restraint clause may prevent the franchise buyer from owning another similar business after the franchise agreement ends. 3. If the franchise buyer owns an independent beauty salon and
converts it into a franchised beautysalon business, the restraint clause may prevent the franchise buyer from converting the business back to an independent salon after the franchise agreement ends. Franchisors usually include restraint clauses in their franchise agreements because they want to protect their goodwill. In other words, they don’t want to teach a franchisee everything they know about running their business and help them build a successful business only to then have the franchisee leave and open a competing business. Usually, a restraint clause will prohibit a franchisee and its guarantors from being involved in a competing business
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For more information visit www.nationalfranchiseconvention.org.au For sponsorship and exhibition opportunities, call Angie Cooksey on 1300 669 030, email angie.cooksey@franchise.org.au or visit franchise.org.au
FRANCHISE BASICS
for a particular period of time and within a particular geographical area. These are often referred to as the “restraint period” and “restraint area”. For example, the restraint period could be one year after the franchise agreement ends, and the restraint area could be within a 10km radius of the franchisee’s premises. Importantly, a restraint clause is only enforceable against a franchisee and its guarantors if it is reasonable. It needs to be judged as a reasonable and necessary action to protect the franchisor’s legitimate business interests, taking into account the franchisee and guarantors’ right to earn a living and the public interest in ensuring a competitive market. The clause usually refers to the period of time and area within which the franchisor needs the former franchisee to be restrained from competing so the replacement franchisee can settle into the business, become established and build relationships with the former franchisee’s customers or clients. A clause that restrains a franchisee from running a competing business for 10 years anywhere in Australia after the franchise agreement ends would probably be considered unreasonable, and therefore unenforceable. However, a clause including a restraint period of one year within a 10km radius of the franchisee’s premises could be considered rational and enforceable. The scope of the restraint must also be practicable. What is considered reasonable will vary from business to business and depend on the circumstances of a
particular case. There are no standard periods nor geographical areas that the law or the courts have stated will be reasonable and therefore enforceable in all cases. Because of this, restraint clauses sometimes include options. For example, the restraint period may be three years, two years or one year after the franchise agreement ends, and the restraint area a 20km, 10km or 5km radius of the franchisee’s premises. This enables a court to choose which time period and geographical area it considers appropriate to protect the franchisor’s legitimate business interests in a particular case, and therefore increases the likelihood the restraint clause will be enforceable. These are known as cascading or ladder clauses. If a franchisee or its guarantors breach a restraint clause by, for example, opening a competing business immediately after the franchise agreement ends, the franchisor may be entitled to obtain an injunction to stop the franchisee and/or guarantor from running the competing business, and/or an order that the franchisee and/ or guarantor pay the franchisor damages for losses resulting from the breach. If the former franchisee has sold the business to a new franchisee, the new franchisee may also be entitled to the same remedies if the sale agreement included a restraint. There have been some changes to the law relating to the enforceability of restraints: 1. The Franchising Code of Conduct now states that a restraint in a franchise
agreement dated after January 1, 2015, will have no effect after the franchise agreement expires if: 1. the franchisee has asked to extend the franchise agreement on substantially the same terms as those contained in the franchisor’s current franchise agreement 2. the franchisee was not in breach of any agreement with the franchisor 3. the franchisee had not infringed the intellectual property of, or a confidentiality agreement with, the franchisor 4. the franchisor does not extend the franchise agreement 5. and either: • the franchisee claimed compensation for goodwill because the franchise agreement was not extended, but the compensation given was merely a nominal amount and did not provide genuine compensation for goodwill; or • the franchise agreement did not allow the franchisee to claim compensation for goodwill in the event it was not extended. 2. The unfair contract terms law now applies to some franchise agreements dated on or after November 12 2016, and provides that overly broad restraint clauses may be considered unfair contract terms and will therefore not be enforceable. 3. A franchise buyer should carefully review proposed restraint clauses so they know the limits before entering into a franchise agreement.
A clause that restrains a franchisee from running a competing business for 10 years anywhere in Australia after the franchise agreement ends would probably be considered unreasonable, and therefore unenforceable.
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JOIN A GROWING FRANCHISE THAT CAN CHANGE YOUR LIFE! • Turnkey Operation for $270K For a standard store & GST exclusive
• Easy to learn store systems • Simple to operate business • 15% sales growth in the last 12 months • Access to 50% finance through SilverChef partnership
Spudbar was founded in 2000 around the simple promise to create delicious food that’s healthy, great value and convenient. It’s a simple and profitable business model that is supported by growing customer preferences for quality, consistency and informality. Spudbar prides itself on being more like a family of supportive outlets than a big system you get lost in. The business is easy to learn and the ongoing training and support is practical and friendly.
“ Our sales growth is
being supported by a big shift towards
healthier eating that is here to stay”
- Ash, Franchisee - QV Melbourne
For more information go to spudbar.com.au or email franchising@spudbar.com.au
FRANCHISE BASICS
COUNTING
THE COSTS There is no easy answer as to how much legal advice will cost when you are buying into a franchise as there are many variables to be considered.
H
ow much can you expect to pay your lawyer for advising you on buying your franchise business? There is no simple answer to this, because fees will vary from firm to firm; some lawyers charge by the hour while others provide a flat-fee structure.
Here is an outline of the fee-charging activities your lawyer is likely to undertake, and a guide to other costs you might need to meet… Typically your lawyer will REVIEW: • the proposed contract of sale, plus explain your rights and obligations under the contract and negotiate any necessary changes, especially those that will give you a right to terminate without penalty if, for instance, you are not satisfied with the franchise agreement or the franchisor does not agree to grant you the franchise • the lease, plus prepare any disclosure statements under the applicable retail leases legislation, review the landlord deed of covenant and prepare the deed of assignment of lease • the franchise agreement, plus provide you with advice about it and undertake any necessary negotiations on your behalf. UNDERTAKE due-diligence inquiries, which will incur search fees. PREPARE stamp-duty declarations and
ELIZABETH GORE-JONES Principal, The Franchise & Business Lawyers
attend to stamping of the documents in the relevant states or territories. ATTEND to any adjustments to the purchase price, including provision for employee entitlements. LIAISE with your bank or financial institution if you have obtained finance. FINALISE settlement. Regardless of the size, price or type of business, these activities usually entail a substantial amount of work. SEARCH FEES Search fees are usually relevant if it is a food business, as this usually requires a council inspection to ensure the premises comply with regulations. Other factors will impact upon the search fees, such as the entity selling the business. If you are buying a food business, it is suggested you allow about $600 to $700 in search fees. If it is not a food business, then your search fees should be around the $300 mark. STAMP DUTY Stamp duty is not payable in all states and territories when buying a business. However, if it should is payable, it is calculated on the purchase price. Ask your lawyer about the cost as it varies.
LEGAL FEES Again, your legal fees will vary depending upon the type of business and, of course, varies between law firms. For a standard transaction (as an indication only) you should allow between $5000 and $6000, plus GST. However, for a larger, more complicated business transaction (for example a restaurant), you could be paying between $10,000 and $15,000 GST. LICENCES You may also need certain licences to run your business, and these may involve fees. These licences vary according to business type and the local council. Licences you may need include: • Music – to play music or the radio in your business (the licence ensures the artists are compensated) • Business name registration • Food hygiene – required when your business involves food preparation • Trade waste – for food and other businesses that produce waste • Signage and advertising – required by some local councils • Outside dining permits – dependent upon the council. When you engage your legal advisor, ask them not only for a quote that includes the hidden extras such as stamp duty, search fees and licence costs. n
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Owning a Franchise Should Be All Fun And Games!
• Mobile Game Theatre • Giant Hamster Ball (Zorb Ball) • Mobile Laser Tag • Water Roller
• Bumper Balls • Water Tag
• T-shirt Cannon
· Parties · School Vacation Care · School Incursions · Fairs, Fetes and Fundraisers · Events · Social Clubs · Team Building
P: 1300 780 562 | E: info@games2u.com.au | W: www.games2u.com.au
5
FRANCHISE BASICS
REASONS YOU
NEED A LEGAL EAGLE Rules and regulations are at the heart of franchising, so it really pays to seek good advice before you buy into a franchise.
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B
efore you buy into a franchise, a lot of due diligence is required. Many legalities are involved, so to best protect yourself it pays to consider working through issues with a specialist lawyer.
Here are five things you should consider about seeking legal advice for a franchise purchase...
1.SEEK LEGAL ADVICE It’s quite simple. Homebuyers would not go ahead with their purchase without the involvement of a lawyer to handle the legal issues and paperwork. It should be the same with a franchise. In many cases, investing in a franchise is a significant financial commitment, so why take a risk? In fact, seeking legal advice is thought to be such a vital stage of the franchise purchase that the Franchising Code of Conduct now requires a franchise buyer to indicate to franchisors whether or not they have sought legal advice.
A 2.HIRE FRANCHISE LAWYER There is one very good reason to employ an experienced franchise lawyer - he or she will understand the nuances of clauses in a franchise agreement, the document
that shapes the relationship between franchisee and franchisor, and the running of the franchise itself. A generalist lawyer who is new to the franchising sector can follow what is set out in the Franchising Code of Conduct but will not be familiar with past court cases, precedents and commonalities across the sector. An inexperienced lawyer might miss elements that would be warning signs to a lawyer immersed in franchising; equally, a franchise expert won’t waste time (and therefore money) questioning standard clauses.
3.DOOWNYOURRESEARCH There’s no doubt expert legal advice is invaluable when buying a franchise, but leaving all the knowledge and understanding in the laps of the lawyers limits franchise buyers. Lawyers can offer clarity and insight into the complexities of the franchise agreement and other relevant documents, but there is no substitute for having a personal understanding of the legals and a grasp of what is required as a franchisee.
THE BUSINESS 4.PROTECTING Legal advice can, of course, extend beyond the obvious minimal reviewing of
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franchise documents. Franchisees might need advice about asset protection and personal guarantees, about business structure, about tax, privacy law or consumer law. And, of course, the issues of employment law are top-of-mind for all business owners right now.
5.BETO PAYPREPARED An online study last year showed that 54 per cent of surveyed franchisees had either avoided consulting a lawyer altogether or sought free advice. As part of the buying process, franchisees spent on average just $2500 on their due diligence. The report was produced by the Asia-Pacific Centre for Franchising Excellence at Griffith University and the University of New South Wales, and the authors were concerned about the lack of investment in expert analysis. “This low spend on pre-purchase professional advice while conducting due diligence implies a rather cavalier approach,” they surmised. Good advice will cost, but it may save significant money in the long run if things do not go according to plan with the franchise - or it can prevent a franchisee buying into a dud business model. n
GLOSSARY
LEARNING THE
BUZZWORDS
Like any area of endeavour, the franchise sector has its own particular terminology that new franchisees need to understand.
ACCREDITATION: a banking
loan scheme that provides franchisees with some of the finance they may need when buying the franchise. It is based on a bank’s understanding of the brand and its business methods. While this funding option is popular, it is not common across the sector.
ASSIGNMENT: when a franchisee sells their business to a new franchisee, it is referred to as assignment. It is common for the franchisor to retain the right to interview and accept or reject any proposed buyer. The franchisor may also have the right to buy back the franchise. The vendor franchisee can set the value of the franchise. BUSINESS-FORMAT FRANCHISE: a business
model with four criteria – a franchise agreement, a trademark or symbol, payment of a fee, and a system or marketing plan. A franchise business falls under the jurisdiction of the Franchising Code of Conduct and franchisors have certain obligations to fulfil.
COMPANY-OWNED UNITS:
locations run by the franchisor rather than a franchisee. CONVERSION: an existing
independent business that joins a franchise network. DISCLOSURE DOCUMENT: this
document provides information about a franchise system, the franchisor and the franchised business. It must be supplied to a prospective franchisee in accordance with the Franchising Code of Conduct. DUE DILIGENCE: the process of conducting in-depth research on a business before purchase. FIELD MANAGER: an individual tasked with managing a group of franchisees, with a focus on relationships, brand alignment, and sales and profit. This role might also be called business development manager or area manager. FIXED SERVICE FEE:
franchisees may pay their franchisor a weekly or monthly fixed-amount payment, or a service fee calculated as a percentage of turnover
(above a minimum payment). FRANCHISE AGREEMENT:
this is the legally binding business between the franchisor and the franchisee. FRANCHISEE: an individual
who runs a franchised business using the intellectual property of the franchisor.
FRANCHISEE ADVISORY COUNCIL: a structure for
franchisors to seek and receive feedback from their franchisees. Participating franchisees may be elected or chosen by the franchisor.
FRANCHISE FEE: an up-front cost paid to the franchisor. It covers the use of the brand name and business system. FRANCHISING CODE OF CONDUCT: a mandatory
code that governs franchising in Australia. It is designed to guide the behaviour of franchisors and provide certain protections to franchisees. It is administered through the Australian Competition and Consumer Commission (ACCC). FRANCHISE TERM: this
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GLOSSARY
is the period granted for trading under the franchise agreement. Most franchise terms are on a renewable three or five year term but they can vary from one year to perpetuity. Franchisors often refer to a term with two options to renew as 5 + 5 + 5, for instance. FRANCHISOR: the franchisor
grants permission to the franchisee to conduct business using its intellectual property, brand name, working methods and marketing.
GREENFIELD SITE: a
brand new site.
GOODWILL: this is a
calculation of the value of trade in an existing business that is likely to continue and benefit the incoming business owner.
INFORMATION STATEMENT:
this is a two-page standard document that outlines what franchise buyers need to know about franchising.
INTELLECTUAL PROPERTY:
this term refers to the trademarks, copyright, know-how, trade secrets, designs, patents, branding, operational manuals, methodologies and/ or recipes franchisors license to franchisees.
LICENSE: the right to use
the same as a franchise. LOCAL AREA MARKETING:
often abbreviated to LAM, this is marketing the franchisee is responsible in their territory or designated marketing area. MARKETING & ADVERTISING LEVY: a regular flat or
percentage-based-fee paid into a centralised advertising or marketing fund.
ROYALTY: fee paid by the
franchisee to the franchisor for the ongoing use of the brand and systems, management and technical support. It may be a flat fee or a percentage of sales or profit.
franchisee who is responsible for a large territory, appointing other franchisees within the territory with direct agreements, and ensuring that the franchisor’s systems and methods are applied.
TERMINATION: the ending of the franchise contract between franchisee and franchisor, usually for breach of contract. Some franchise agreements allow the franchisor to terminate the agreement even if the franchisee has not breached the agreement.
MULTI-UNIT FRANCHISEE:
TERRITORY: is the area assigned
MASTER FRANCHISEE: a
a franchisee who has been granted the rights to run more than one franchise outlet. Not every franchise system allows for franchisees to be multiple operators. OPERATIONS MANUAL:
the franchisee’s guide to operating the franchise business. The franchisor may produce several manuals for different areas of the business, and should regularly update the information. REGIONAL FRANCHISEE:
intellectual property in business, such as sales rights in a territory, manufacturing technology or access to a trademark. A license is not
for a further term. This process is bound by the Franchising Code of Conduct. There is no automatic right of renewal.
similar to master franchisees, regional franchisees operate a large territory and appoints franchisees within the area. RENEWAL: once a franchise
term nears its end, franchisees may or may not be given a right to renew their agreement
to franchisees for their business. Territories can be exclusive or nonexclusive.
TOTAL INVESTMENT: the total
amount of money a franchisee requires to set up in business. This includes the franchise fee, working capital and any equipment purchases required.
TURNKEY FRANCHISE: a
franchise package that includes all the equipment, information and systems required for a franchisee to open up the business and start trading.
WORKING CAPITAL: the funds required by any business to pay its costs before it starts making a profit, and as ongoing cash flow to counter any dips in business activity.
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CHECKLIST
CHECKLIST
30
THINGS TO CHECK BEFORE YOU INVEST GET SET PRIOR TO YOUR PURCHASE WITH OUR EASY CHECKLIST. JUST TICK OFF THE MUST-DO ITEMS.
Are you confident in the franchisor?
Have you worked out your operating costs?
What are the franchisee and franchisor obligations?
Have you seen a disclosure document?
Do you know the term of the agreement?
What training is available and who pays for it?
Is the franchisor compliant with the Franchising Code of Conduct?
Do you need a permit or license to operate the business?
Who owns the intellectual property and what is licensed to the franchisee?
Have you run a credit check on the franchisor?
Is the business operating from fixed or mobile premises?
What marketing will the franchisor implement?
Does the franchisor have a history of litigation? Are there any cases coming up?
Have you checked the lease? Is there a right to renew?
What marketing is your responsibility?
If you are buying an existing business, have you seen current financial statements (balance sheets, profit and loss, tax returns)?
Does the length of the lease match the franchise term?
What is the dispute resolution process?
What are the store fit-out costs?
Do you know what it is like to be a franchisee?
Have you evaluated the financial returns? If you are buying a greenfield (brand new) site, do you have sales and profit examples and know the method behind the calculations? Do you know all the expenses franchisees are required to pay?
What royalties are there and how are they calculated?
Are you working within a territory? If so is the area exclusive?
Do you have an exit plan?
Are you restricted in your product purchase?
Have you spoken to former and current franchisees about the business?
Are you required to reach a minimum performance level?
What restrictions are there on the franchisee and guarantor operating a similar business?
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RESOURCES
DIRECTORY
ASIA-PACIFIC CENTRE FOR FRANCHISING EXCELLENCE
organisation or anyone involved in the franchise industry including franchisees.
A pre-entry franchise education program is available for free and online through this centre. Funded by the ACCC this course attempts to help franchisees understand the process of due diligence and have realistic expectations of what it means to be a franchisee.
Visit: WWW.FRANCHISE.ORG.AU
The Centre was launched by Griffith University in 2008 and undertakes research on franchising best practice. This research helps inform policy and team members regularly engage with government bodies and franchise associations across the Asia-Pacific.
FRANdata is the home of the Australian Franchise Registry which identifies franchise brands that have up-to-date franchise agreements and disclosure documents, and which have confirmed with the Registry their compliance with the Franchising Code of Conduct. FRANdata also provides reports on the franchising sector.
Visit: WWW.FRANCHISE.EDU.AU
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION (ACCC) The ACCC is an independent Commonwealth statutory authority which regulates the mandatory Franchising Code of Conduct (Code) and can investigate alleged breaches of the Code. The ACCC is responsible for enforcing the Competition and Consumer Act 2010 as well as legislation, promoting competition, fair trading and regulating national infrastructure. Its role is to protect, strengthen and improve the way competition works in Australian markets and industries. Visit: WWW.ACCC.GOV.AU
BUSINESS.GOV.AU This website is an online government resource for the Australian business community which gives the public access to government information, forms and services for all things business. It is aimed at assisting individuals or a group of people to plan, start and grow their business. New business owners can access the advice finder, events calendar, grants and assistance finder, a directory of government and business associations, planning templates, business videos, and business checklists. Business topics include emergency management and recovery, finance, recruitment, environmental management, fair trading, taxation, online business, franchising, importing and exporting, intellectual property and training. Visit: WWW.BUSINESS.GOV.AU
FRANCHISE COUNCIL OF AUSTRALIA The FCA is the main body for representing franchisees, franchisors and service providers in the $146bn franchising sector in Australia. Becoming a member of the FCA is a voluntary and is available for any
FRANDATA
Well established in the US since 1989, the business was established in Australia in 2013 to help the franchise sector address key strategic challenges and take advantage of opportunities available to qualifying brands. Visit: WWW.FRANDATA.COM.AU
THE FAIR WORK COMMISSION Fair Work Commission (the Commission, previously called Fair Work Australia) and the Fair Work Ombudsman (FWO) are independent government organisations that regulate Australia’s workplace relations system but have different roles. The Commission is the independent national workplace relations tribunal. It is responsible for maintaining a safety net of minimum wages and employment conditions, as well as a range of other workplace functions and regulation. The FWO enforces compliance with the Fair Work Act, related legislation, awards and registered agreements. It also helps employers and employees by providing advice and education on pay rates and workplace conditions. Visit: WWW.FAIRWORK.COM.AU
FRANCHISEBUSINESS.COM.AU This is the online arm of the Inside Franchise Business publication. Both platforms are focused on providing essential advice and information for anyone looking to invest in a franchise. The website provides short and snappy business tips and news, video interviews, industry commentary and market reports. FranchiseBusiness.com.au is also the official directory of the FCA and lists franchising opportunities available in Australia and New Zealand. Potential franchisees looking to move into the franchising sphere can explore opportunities that currently exist in the market and enquire about the franchisor or brand. Users also have access to franchise consultants and advisors who can assist prospective or existing franchisees and franchisors with legal, financial educational and training, IT and other services. Visit: WWW.FRANCHISEBUSINESS.COM.AU
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Everything you need to find a franchise
• Browse more than 4,700 franchise opportunities to discover on Franchisebusiness.com.au – the Official online directory for the Franchise Council of Australia – the peak body for the $146-billion franchise sector in Australia • Free online educational program “How to buy franchise” designed to kick-start your journey into franchising • Access essential financial, legal and business advice and up-to-date news and information • Be inspired by real-life stories of everyday people making their franchising dream a reality
Inside Franchise Business is your essential guide to buying franchise – join us online now at www.franchisebusiness.com.au
INSIDE
ACCESS FREE ONLINE EDUCATION PROGRAM
FRANCHISE BUS I N E S S official online directory
A-Z LISTINGS
Phone: 07 3999 8950 Contact: Todd McGregor todd@1582.com.au www.1582.com.au
Phone: 02 9415 5300 Contact: Raheem Abdul Raheem.abdul@anytimefitness.com.au www.anytimefitness.com.au/own-a-gym/
Start up costs: $175,000 + gst
Start up costs: Enquire
PROFILE: 1582 draws on the original qualities and characteristics of coffee dating back to this time as we aim to raise the bar of all things coffee related. 1582 is Coffee Evolved. The ideal 1582 Coffee franchisee is passionate about good quality coffee, is business-savvy and looking to take the next step to turn their passion into a career. If being part of a genuine brand that truly cares about coffee is important to you and you are seeking the reward of owning your own business and working for yourself, then 1582 might just be your cup of tea (or strongly brewed coffee)!
PROFILE: Australia’s biggest gym community, Anytime Fitness Australia has over 500,000 members and 450+ clubs nationwide. We’re the brand that brought the 24/7 concept to life, and cut-through app Anytime Workouts. We’re getting Australians moving for a fitter and healthier future.
Phone: 1300 287 669 Fax: 1300 795 287 Contact: Steve Wren steve@ats.com.au www.appliancetaggingservices.com.au
Phone: 07 3860 6716 Contact: Michael Payne franchise@palmoasisventures.com www.baskinrobbins.com.au Start up costs: from $190,000.00 +
Start up costs from: $52,000 + GST PROFILE: Looking for a franchise with on-going repeat business, large territories and access to an existing client base to get you started?
PROFILE: Baskin-Robbins® has been creating irresistible treats to make you smile and feel good inside and out for over 70 years. We’ve perfected the combination of delicious treats and a fun atmosphere.
ATS are Australia-wide specialists in Electrical Testing and Tagging in accordance with AS/NZS 3760:2010. Providing expert technical, admin, business and sales support, access to our National client base and comprehensive on and off-site training, ATS are committed to helping its 50 franchisees grow profitable and successful businesses.
Now, we’re offering rewarding franchise opportunities that help aspiring business owners thrive and to continue to be the world’s leading chain of ice cream specialty restaurants
No prior electrical experience is required - just a passion for safety and a commitment to growing your business. With low entry fees and minimal franchisee administration, an ATS franchise may just be the opportunity for you.
Contact: franchise@palmoasisventures.com to scoop up your own Baskin-Robbins®.
If you love to have fun and put a smile on people’s faces; if you are hard-working, dedicated and community oriented; and in touch with your ‘ice cream side’; Baskin-Robbins® may be a perfect fit for you.
Phone: 0419 494 480 Fax: 03 9439 5594 Contact: Rod Parker rparker@bedshed.com.au www.bedshed.com.au/franchising
Phone: 07 5591 3242 Fax: 07 5591 9021 Contact: Adam Peppiatt adam.peppiatt@rfg.com.au www.franchising.brumbys.com.au Start up costs: $360,000 - $480,000
PROFILE: Bedshed, one of Australia’s largest and most trusted bedding retailers, is continuing its expansion across the East Coast with further opportunities now available in Queensland, Victoria and New South Wales. We are looking for people who are passionate about customer service, managing a sales team, and want to work in their own business. You will have access to our accredited franchise model which has been perfected during our 30+ year history, along with the support of an established specialist team. Take the first step towards being rewarded with the financial and lifestyle benefits of owning a Bedshed Franchise by calling Rod Parker for a confidential chat.
A-Z Read more at http://www.franchisebusiness.com.au/brands/ bedshed#tbO0B8QGRO75FLzq.99
L I S T I N GS
FOR A-Z LISTINGS ENQUIRIES CONTACT:
NATIONAL SALES & MARKETING MANAGER DAVID STRONG ON 02 8224 8370 DAVID.STRONG@OCTOMEDIA.COM.AU
PROFILE: Brumby’s is one of Australia’s most iconic bakeries. With a history of baking fresh bread every day since 1975, it has fostered a loyal legion of customers who buy more than 10.5 million loaves each year. Featuring more than 250 stores across Australia, New Zealand and Papua New Guinea, Brumby’s has also grown to incorporate the specialty sub-brands Brumby’s GO! and Big Dad’s Pies. Brumby’s specialise in freshly baked bread and bakery goods including, artisan loaves, sweet cakes, tarts and slices, savouries, pastries, gourmet pies and sandwiches. In 2013 Brumby’s underwent a transformation in order to remain current in the market and meet ever changing consumer demands. The brand extending their range to include functional health breads, large cakes, and quality crafted coffee.
Phone: 1300 99 55 12 Mobile: 0488 11 55 33 Contact: David Pascoe franchise@buyaustralianproperties.com.au www.buyaustralianproperties.com.au Start up costs from: $50K to $100K + GST PROFILE: Buy Australian Properties is the first professional property investment Franchised Business operating in Australia that is a fully accredited member of the FCA (Franchise Council of Australia) and adheres to their code of conduct. We assist clients from all over Australia find and purchase suitable property investment products that suit their needs and wants through our “Unique 4 Step Client Engagement Process” that is based on “Investing with Integrity”. We are a company that is solely focussed on what our clients’ want. We are a full-service company that sources and provides property investors with quality brand new house and land packages, townhouses, units, row houses, duplexes, dual occupancies and apartments (Boutique and High Rise) for traditional and SMSF buyers.
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Phone: 1800 243 637 Fax: (02) 4587 8733 Contact: Alan Biddle alanbiddle@chemdry.com.au www.chemdry.com.au Start up costs from $39,950 + GST
Phone: 1300 659 676 Fax: 1300 659 675 Contact: Dan Toms customerservice@cashflowit.com.au www.cashflowit.com.au PROFILE: PROFILE: Cashflow It are the franchise finance experts. With competitive rates and flexible terms from 12 months to 5 years, Cashflow It can provide the funding that franchisors and franchisees need today. We offer flexible rental solutions, traditional leasing and business loans tailored to your requirements. What can we Fund - New equipment / Used equipment / Fit-outs / Store refurbishments / Re-financing from other lenders / Buying an existing franchise / National equipment roll-outs Franchise Accreditation - If you belong to a Cashflow It Accredited Franchise system, you can enjoy pre-approval and other exclusive benefits.
Chem-Dry is Australia’s largest and most successful carpet and upholstery cleaning franchise. Established in 1986 as a healthy and green carpet cleaning alternative, today Chem-Dry cleans more carpet and surfaces than any other company. Using the company’s patented cleaning solutions and over 35 years of experience, our franchise partners are able to build successful businesses by making their customers’ homes and workplaces cleaner and healthier. Our franchise partners are passionate about providing their customers with the cleanest and healthiest homes. A Chem-Dry franchise is not just about residential and commercial carpet cleaning. Our franchise partners also clean upholstery, leather, tiles and grout, and are specialists in water damage restoration.
Phone: 03 9508 4465 Fax: 03 9508 4499 Contact: Sally Nathan Sally.Nathan@retailzoo.com.au www.cibo.com.au
Phone: 02 9905 3441 Mobile: 0417 214 917 Contact: Craig Arnold franchise@core9.com.au core9.com.au
Start up costs: $220k - $300k + GST (Hole in the Wall model) $400k - $500k + GST (Kiosk model) $450k - $600k + GST (Street site location) PROFILE: CIBO Espresso was born from a passion to share the simple pleasures of the Italian lifestyle - wonderful coffee and quality food in a modern, stylish bar setting. Share an “Italian moment” whenever you choose, just by stepping through the door. We use 100 percent Premium Arabica coffee beans, roasted and blended to our own special recipe. Our baristas are trained to ensure a great shot every time. Adelaide has always had a passion for really good coffee and after identifying a gap in the market, the first ‘CIBO Espresso Bar’ opened in Rundle Street in 2000. It was such a hit, that the phenomenon has expanded across the country fast and is continuing to grow Australia-wide!
Start up costs: $120,000 - $180,000 PROFILE: The Core9 Program is scientifically engineered to bring out the best out of our members ensuring they enjoy the workout and stay motivated each and every time. Core9 delivers a total body functional workout in just 31minutes with a new class starting every three and a half minutes thus bookings are no longer required. Core9 is the only model that draws on years of experience in kickboxing, gymnastics fundamentals, military techniques and discipline. This unique model allows all members to have access to a personal trainer throughout their workout without the need to pay the high cost of traditional oneon-one personal training sessions. Core9 provides an unparalleled brand and model for personal trainers and investors to grow their business.
Phone: 07 5591 3242 Fax: 07 5591 9021 Contact: Todd McGregor todd@newyorkslice.com.au newyorkslice.com.au
Phone: 08 9321 5844 Fax: 08 9321 5855 Contact: Head Office info@cxpresso.com.au www.cxpresso.com.au
Start up costs: $375,000 - $450,000
Start up costs: Entry from $300K inclusive of fees
PROFILE: From a small-time family business to a multi-million-dollar pizza empire, Crust Gourmet Pizza Bar has grown to more than 200 stores across Australia, New Zealand, Singapore and the USA since 2001. Crust is known as the brand that makes pizza more interesting. It’s not just the finest ingredients we use, but the way we fuse them to create unique combinations which are adventurous in flavour. Making pizza the authentic way, we rely on instinct and measuring by hand rather than following a strict formula. Our ‘boutique’ style extends beyond our menu to a customer’s experience in a Crust store. While there are commonalities in store design, we endeavour to keep the boutique, local pizzeria feel.
Phone: 07 5591 3242 Fax: 07 5591 9021 Contact: Ben Hatten Ben.hatten@rfg.com.au www.franchising.donutking.com.au Start up costs: $280,000 - $360,000 PROFILE: Donut King is an iconic Australian brand with strong recognition amongst consumers. Since opening over 30 years ago, Donut King has grown to over 300 stores nationwide and is Australia’s largest specialty donut and coffee chain - and we’re still growing! Not only selling donuts, Donut King stocks a wide range of snack options including hot dogs, churros, smoothies, milkshakes, Fruit Freezes, barista-crafted coffee and more. In 2013, Donut King underwent a major brand evolution, which includes a modern, updated store design.
PROFILE: CXpresso, an extension of sister brand Croissant Express, specialises in the delivery of delicious sit down or grab and go options. We cater to the busy morning commuter, the lunch time crowd and anyone looking for a delicious treat or refreshing beverage. There are few experiences more satisfying than growing your own business, especially with the experience of a strong brand, with clearly defined objectives and the support to achieve them. Become your own boss with new and existing store opportunities available Australia wide.
A-Z L I S T I N GS
FOR A-Z LISTINGS ENQUIRIES CONTACT:
CONTACT SENIOR ACCOUNT MANAGER CHARLOTTE REDFERN ON 02 8224 8373 CHARLOTTE.REDFERN@OCTOMEDIA.COM.AU
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A-Z LISTINGS
Phone: 03 9336 3200 Fax: 03 9336 3266 Contact: Peter Collins franchising@fergusonplarre.com.au www.fergusonplarre.com.au
A-Z LISTINGS
Phone: 1300 852 556 or 0438 801 575 Contact: Andrew Roberts Andrew.roberts@fifocapital.com.au www.fifocapital.com.au Start up costs: $49,500
Start up costs: $250,000 - $300,000 PROFILE: Ferguson Plarre Bakehouses has always been and still is a family owned and operated business celebrating its 115 year anniversary in 2016. The fourth generation of the Plarre family still actively own and manage the day to day running of the business from baking through to retail shop design, operations and bakery franchising. The family continue to embrace their forefather’s commitment to quality products, service and innovation. With no Royalty or Marketing Fees, fresh product delivered daily to the store and no baking required, the business is perfect for people who can drive sales and install this trait into their own team.
PROFILE: Fifo Capital provides cash flow assistance to small businesses whilst giving a great lifestyle, excellent returns and an enviable work/life balance to its franchisees. No experience necessary as full training and ongoing support is provided. Having grown by over 35% this year Fifo Capital is making a huge impact right across the country for a variety of reasons. Below are some of the benefits our partners enjoy as members of the Fifo family. • • • •
ROI of 50+% annualised* Backed by insurance Part-time potential, Work from home (if you wish),
Contact: franchise@freshii.com freshii.com/franchising Start up costs: Investment Levels: $200,000 - $300,000 based on 35 to 100sqm Capital Investment: $100,000
Phone: 03 9013 0190 Contact: Dana dana@firstindex.com au.firstindex.com PROFILE: First Index Group is your gateway to a successful trading business. Consisting of five brands, each specializing in a different field of investment, First Index is a fast growing group, aiming at reaching all 5 continents by 2018. Based on two decades of financial and trading experience, we have developed the First Index Business Starter Kit. First Index provides you with unsurpassed level of professional, marketing, finance and operations training and tools. Our team will provide you with ongoing personal support to ensure you get off to an easy and solid beginning, achieve a profitable business within a year, and constantly develop. Opening a First Index branch you can offer traders worldwide a diverse and highly advanced suite of trading services, products and platforms, including selftrading, portfolio management, Algo-trading, mirror-trading, expert adviser and a diverse range of other investments. We invite you to build your own success story with First Index.
• Backed by one of the biggest and most successful finance franchisors in the country. • Multiple income streams
PROFILE: Come join the fastest growing franchise in the world! Freshii is the fastest growing franchise in the world today, delivering fresh, healthy fast food to people across 5 continents. We make healthy food convenient and affordable in the hopes of changing people’s opinions on what fast food should be – and our sights are set on Australia! We pride ourselves on being a transparent, modern, clean and friendly business. We primarily operate in urban/CBD areas to provide quick service for our clientele’s busy lifestyles. Our franchise model, combined with our variety and customisable options from our menu, maintains repeat business from our target market by fulfilling our customers need for tasty, healthy and unique food.
Phone: 1300 780 562 Contact: Con Klestinis con@games2u.com.au www.games2u.com.au
Phone: 02 8845 0100 Contact: Franchise Development Manager franchise@gelatissimo.com.au www.gelatissimo.com.au
Start up costs: $200,000 + GST
Start up costs from: $280,000
PROFILE: Everyone loves to have a great party or event. And by making it easy and pleasant, we’ve not only tapped into a truly vibrant industry, we’ve secured the lead position.
PROFILE: Australia’s leading gelato franchise is looking for outstanding franchisees.
Our on-going marketing and operational support will ensure that you are able to enjoy the flexibility and lifestyle benefits that owning your own successful business can provide. You’ll also receive all the training you require, with no prior gaming experience necessary.
Prior food experience is not necessary however franchisees must have passion for the system and brand, leadership skills, and enthusiasm for delivering quality products through excellent customer service.
The mobile business is easy to operate with low overheads.
Multi award winning Gelatissimo provides full training and on-going support from dedicated operational, marketing and development teams enabling them to produce artisan gelato fresh in store using a simple and proven system.
A Games2u franchisee is young at heart with business experience, entrepreneurial flair and most of all – an absolute passion for customer service.
A-Z Exciting opportunities now exist to join the Games2u Franchise network throughout Australia. Claim your territory now.
If you’re looking for a franchise with high energy and heaps of fun, this one takes the cake.
L I S T I N GS
FOR A-Z LISTINGS ENQUIRIES CONTACT:
NATIONAL SALES & MARKETING MANAGER DAVID STRONG ON 02 8224 8370 DAVID.STRONG@OCTOMEDIA.COM.AU
Phone: 03 9234 2200 Fax: 03 9234 2266 Contact: Peter Fiasco franchising@hairhousewarehouse.com.au Hairhousefranchising.com.au Start up costs from: $350k +
PROFILE: With over 20 years of experience in the hair and beauty industry, Hairhouse Warehouse is one of Australia’s leading retail franchise brands. Hairhouse Warehouse’s vision is clear and simple. Offer quality products at a reasonable price, whilst providing exceptional customer service. This mission is clearly on display in each and every one of our locations by simply looking at our franchisees and the teams they work with. As a franchisee, no hair or beauty certification is required - just a passion for success. As Hairhouse Warehouse continues to dominate the hair and beauty industry in Australia, the brand and franchisees are seeing amazing results. To continue our brand domination Hairhouse Warehouse is planning to expand to over 180 stores over the next three years.
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Phone: 0412 692 052 Contact: David Wilkinson sales.au@inxpress.com inxpress.com inxpress.com.au/franchising
Phone: 1300 301 177 Contact: Nina Rosace info@homesorted.com.au www.homesorted.com.au Start up costs: from $14,990
Start up costs: $74,950 + GST
PROFILE: Home Sorted! offer Professional Home Organising services Australia wide. Our organising methods and systems are easily applicable to any household. Demand for our unique services are high and our brand attracts quality referrals from our various professional partners. Considering our line of work is organising, our business systems offer simple step-by-step processes for operating a successful business. If you love organising and helping others then a Home Sorted! Franchise offers the perfect balance. A low investment with a high income potential Franchise Business.
PROFILE: InXpress provides a revolutionary concept delivering customers with express freight advantages to gain a competitive edge in the marketplace. InXpress is an authorised sales partner for the world class courier company, DHL. Domestically, InXpress partners with companies such as Toll and TNT to offer a complete suite of courier and freight solutions, providing increased value and service, saving valuable time and money. Operating in 13 countries with over 350 franchisees globally, InXpress is now accepting applications to grow the Australian business. Benefits to franchisees include: • Low entry costs • Guaranteed income* • No inventory/warehousing
• Work from home • High income potential • Ongoing training and support
For more information about becoming an InXpress franchisee contact us now. *conditions apply
Phone: 0459 654 146 Contact: Andrew Lyme andrew.lyme@justbettercare.com www.justbettercare.com
Phone: 131 546 Contact: John O’Callaghan admin@jimsantennas.com.au www.jimsantennas.com.au Start up costs: $59,000
PROFILE: Jim’s Antennas is Australia’s largest and most trusted Audio Visual installation company and is part of the Jim’s Group of Home Services. Established in 1999 Jim’s Antennas currently has 150 franchisees throughout Australia and we are looking for enthusiastic candidates who enjoying working for themselves to join our team. No experience is required as we provide full training – with ongoing support for the life of your franchise. Call us today on 131 546 for more information
PROFILE: Just Better Care is Australia’s largest franchised provider of in-home care services to the elderly and disabled. We provide a wide range of in-home services and are extremely passionate to support people to live the quality of life they want in the place that offers them the most security and comfort – their home. Just Better Care has been in operation since 2005, built on over 20 years in community care experience. The exceptional results of the business led to the development of the Just Better Care Franchise in 2007. Today Just Better Care is part of the global Caring Brands International group and has over 35 offices nationally.
Phone: 02 9648 2500 Contact: Bob Ozdemir info@lewrap.com www.lewrap.com
Phone: 1800 068 111 Fax: (07) 3100 7888 Contact: Aroha Leigh Email: opportunities@lenards.com.au Website: http://franchise.lenards.com.au/ Start up costs: $350k-$400k turnkey PROFILE: Lenard’s Chicken is Australia’s favourite chicken shop and a leading brand among Australia’s fresh food retailers. Our unique concept of value-adding amazing ingredients and flavours to fresh chicken has established our offer as the leader in the marketplace. Since the first store opened in Queensland, Lenard’s has sold more than 500 million chickens, served more than 200 million customers and injected more than $2 billion into the Australian poultry market. Today, Lenard’s employs more than 2,000 staff in nearly 300 franchises, supermarkets and butchers across Australia and remains one of the great success stories of Australian retailing.
Phone: 0424 144 035 Contact: Greg Prussia greg.prussia@mbe.com.au www.mbebusinessfranchise.com.au Start up costs: From $130,000 PROFILE: Looking for more than just a print and design company? Mail Boxes Etc. is a part of the world’s largest Business Services franchise system; with over 1,600 MBE Centres world-wide and growing. We offer a multiincome stream of printing, shipping and mailing services, just to name a few. Our Owners enjoy a great work/life balance with your Centre opening hours of 8am to 5:30pm Monday through Friday – closed for Public Holidays. As Business Services Franchise, there is no spoilage and we also partner with our training program – no experience is necessary. Our National Marketing Program will help you identify and find your clients, and our National Supplier Agreements, will ensure you’re always purchasing as cost effectively as possible. With MBE, it’s an investment in your future.
PROFILE: When you join the LeWrap team you are becoming part of the fresh food revolution. Our stores supply the discerning public with quality, fresh-made wraps, plates and salads. You don’t need prior experience to become a LeWrap franchise partner – we are looking for individuals with ambition, initiative and integrity. Great interpersonal skills are essential as you will be working hands-on in your own store – your passion for LeWrap will be on show!
A-Z You will receive full support from our management team, including training, operations and brand marketing, to assist you to become a successful business operator. After all, your success is our success.
L I S T I N GS
FOR A-Z LISTINGS ENQUIRIES CONTACT:
CONTACT SENIOR ACCOUNT MANAGER CHARLOTTE REDFERN ON 02 8224 8373 CHARLOTTE.REDFERN@OCTOMEDIA.COM.AU
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A-Z LISTINGS
Phone: 02 9415 5300 Contact: info@collectivewellnessgroup.com.au www.massageenvyfranchise.com.au/
Phone: 03 9604 9400 Fax: 03 9600 3313 rxt@marshmaher.com.au www.marshmaher.com.au
A-Z LISTINGS
Start up costs: Enquire
PROFILE: Well recognised and published franchise specialist with over 30 years industry knowledge and experience. Providing advice to:
PROFILE: Taking care of yourself shouldn’t be a luxury. Massage Envy Australia offers great value membership to rejuvenating massage and skincare treatments that help you to feel your best. If you want less stress, more energy and improved wellness, it all starts with treating your body right.
4. Franchisee Advice and fixed fee reports. 1. International Franchisors and 5. Sale/ Purchase of franchise systems. Franchising. 6. IP/ Trademark advice. 2. Master Franchising. 3. Dispute Resolution – Solutions and 7. Company structures and tax advice. 8. ACCC and Consumer Law advice. Strategies We provide clients fixed fees based on the scope of work. Contact Robert on (03) 9604 9400 or by email at rxt@marshmaher.com.au
Phone: 1300 650 330 Contact: Tzuri Avila franchising@mortgagechoice.com.au www.mortgagechoice.com.au/join-mortgagechoice.aspx
Phone: 07 5591 3242 Fax: 07 5591 9021 Contact: Joanne Taylor joanne.taylor@rfg.com.au www.franchising.michels.com.au
Start up costs from: $14,815 + GST subject to terms and conditions
Start up costs: $320,000 - $400,000 PROFILE: Michel’s Patisserie & Café has grown to become Australia’s largest patisserie chain with over 200 locations. Renowned for delicious specialty cakes, pastries, treats, savouries and awardwinning coffee, Michel’s has been awarded ‘Coffee Shop of the Year’ for four consecutive years, as voted by consumers through Roy Morgan. In 2013 Michel’s Patisserie underwent the single biggest evolution in its history to bring forward its French inspired heritage. Michel’s also evolved its product offering to cater to a wider demographic. Most recently, Michel’s Patisserie evolved further to include a larger Café model, complete with an extended menu, including breakfast and light meals.
PROFILE: ASX-listed Mortgage Choice was established in 1992 by co-founders Rod Higgins and Peter Higgins, with a vision of building a national network of ethical, credible and professional mortgage brokers who local communities could trust. This vision has since extended to providing Australians with financial choices and expert advice for all of their finance needs whether that’s buying a home, buying a new car, starting a business, travelling around the world or enjoying life in retirement. At Mortgage Choice, we’re about helping people make better choices with their finances, because we believe that making better choices leads to a better life.
Phone: 1300 SKY VIEW (1300 759 843) Contact: Kevin Scrimshaw skyview@nationaldrones.com.au http://nationaldrones.com.au
Phone: 02 9472 8555 Contact: Lee Rubino info@mrsfields.com.au www.mrsfields.com.au
Start up costs: $50,000 - $75,000
Start up costs: $200,000-$300,000 PROFILE: Mrs. Fields Franchisees are attracted to our brand, for a wide variety of reasons. Whether you are currently an experienced business owner or you are commencing a new and exciting journey, Mrs. Fields is a great way to be in business for yourself, but not by yourself, as you always have the full support of your very own Franchise Business Consultant. Mrs. Fields is all about making people feel good, through simple, special moments. The mouth-watering taste of Mrs. Fields freshly baked cookies, toasties and savoury selection, along with a hand-crafted Barista coffee (specially blended and exclusive to Mrs Fields Bakery Cafes and roasted at Mrs. Fields Head office roasting facility), what more could you want?
A-Z L I S T I N GS
FOR A-Z LISTINGS ENQUIRIES CONTACT:
NATIONAL SALES & MARKETING MANAGER DAVID STRONG ON 02 8224 8370 DAVID.STRONG@OCTOMEDIA.COM.AU
PROFILE: Looking to ditch your boring desk job or yearning for a change of career, but can’t bear the thought of being tied to a retail outlet? Looking for variety in your workday and enjoy being outdoors, but don’t want to get your hands dirty? Look at things from a different perspective! National Drones is Australia’s first aerial photography, aerial videography, aerial spotting and aerial surveillance franchise utilising Unmanned Aerial Vehicles (UAV’s) to cut costs, deliver efficiencies and save time across a range of industries. No prior experience is necessary as all training is provided. Get your career flying today! For initial enquiries, please call 1300 SKY VIEW or visit http://nationaldrones.com.au/franchising to submit an enquiry form.
Phone: +613 8526 4488 Fax: +613 9645 1859 Contact: Daphne Chin franchise@nenechicken.com.au www. nenechicken.com.au Start up costs from: $500,000 + PROFILE: Nene chicken is one of the top Korean fried chicken chains with over 1,000 outlets in South Korea. NeNe Chicken flew into Australia in 2015 and in 18 months has rapidly expanded to all over Australia. We pride ourselves on delivering the NeNe experience with uniquely marinated and batter coated fried chicken and range of authentic NeNe sauces. With Nene Chicken, you can get extensive franchisee owner support and training. As well as, various marketing activities throughout local and national. Nene chicken invites you to start your own successful story by becoming a franchisee. Visit our website for further information.
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Phone: 0413 546 565 Fax: 8 5095 456 Contact: Marc franchise@nirvanabeauty.com.au www.nirvanabeauty.com.au
Phone: 07 3999 8950 Contact: Todd McGregor todd@newyorkslice.com.au newyorkslice.com.au Start up costs: $295k + GST turnkey investment PROFILE: Serving pizza that will take you to the bustling streets of New York, New York Slice has served up millions of mouth watering pizzas over the last 15 years! They continue to offer their classic massive slices with some new favorites too! If you are driven, passionate, hungry for success and want a slice of a wellestablished successful business then a New York Style Pizza is right for you. Franchises now available across Sydney, Melbourne, Brisbane as well as regional areas. Visit our website for further information and to get in touch.
Start up costs: $250,000 - $550,000 PROFILE: Having conquered some of the latest beauty treatments and technologies, Nirvana Beauty Laser Clinics presents a huge investment opportunity for people wishing to enter an industry with enormous potential. As a franchise owner with Nirvana Beauty Laser Clinics, you will experience the satisfaction of working in an exciting and on-trend industry. Every day you will reap the fruits of your own input by delivering results-driven treatments to many satisfied clients. Enjoy working with state-of-the art equipment, a great work-life balance, a personalised support network, and ongoing training through our Head Office What are you waiting for? Contact us today and join in our success.
Contact: Fernanda Camerini Fernanda.camerini@craveablebrands.com www.oporto.com.au/franchising
Phone: 02 9415 5300 Contact: info@collectivewellnessgroup.com.au Start up costs: Enquire
Start up costs: From $350,000
PROFILE: It all started 30 years ago with one man’s passion for the food of his homeland Portugal, flame grilled chicken basted in an amazing home-made chilli sauce… fast forward 30 years and there are over 150 Oporto restaurants across the country.
PROFILE: A one-of-a-kind personal training workout, Orangetheory Fitness is all about keeping you fit, healthy and ready for anything. Backed by science, heart rate monitors are worn throughout the one-hour session, making sure you stay at the optimum metabolic rates.
Not only does Oporto have amazing food, they have incredibly talented and supportive people to help you succeed. The franchising, property, construction and supply chain teams are ready to get you up and running. The training, operations and marketing teams will always be on hand to help your store thrive long into the future. Are you interested? Enquire about franchise opportunities today.
Phone: 02 4626 7777 Contact: Brian Laul franchise@ozfunland.com www.ozfunland.com
Phone: 03 9645 4667 Fax: 03 9645 4747 Contact: Jian franchise@papparich.net.au www.papparich.net.au
Start up costs: from $300,000 + leased equipment PROFILE: Since it opened in July 2008, The Wizard of Oz Funland has become a landmark in Sydney’s Macarthur Region, a popular community hub and winner of several prestigious awards. •
A unique, first-of-its-kind venue in Australia, an exciting children’s entertainment, party and education centre.
•
Recognises that children today demand more than just passive play, and that the children’s entertainment sector will soon have to reach beyond current boundaries to remain relevant for the future.
•
An interactive ‘live’ space that is changing the way children are entertained by engaging its young visitors with creative activity and giving them an unforgettable time of adventure, fun & discovery.
We seek expressions of interest from people who wish to join the growth of Oz Funland in Greater Sydney, Central Coast, Newcastle, Wollongong, Melbourne, Brisbane, Perth, Adelaide and Regional Australia. Read more at http://www.franchisebusiness.com.au/brands/ozfunland#H8sedhki4FaGDRPz.99
Phone: 1800 245 447 Email: joinourteam@poolwerx.com.au Web: www.poolwerx.com.au Start up costs: From $95,000 + GST + vehicle
PROFILE: Australia’s Franchise System of the Year 2016. Build your successful business future with us. We have a career path in business that we can tailor to suit you. As a Poolwerx Franchise Partner, you can start small or jump right in. Join us as a man in a van, progress to multi-vans, a retail store and vans and then in multi store. Or purchase an existing fast start mobile territory or retail mobile business. Whatever your journey, we will help you realise your vision. Our one focus is to create a profitable partnership. We do that by matching over 25 years experience and outstanding support, marketing and business development systems to your energy and enthusiasm. For more information, visit poolwerx.com.au/franchising.
Start up costs from: $600K to $1.5M, depending on model/size
PROFILE: Founded in Kuala Lumpur in 2005, PappaRich is a chain of cafés and restaurants in Singapore, China, South Korea, USA, Australia and New Zealand that serves a plethora of authentic Malaysian delights. Each eatery is fitted out with a modern, earthy-coloured interior and an extensive kitchen with hardworking chefs ready to create your meal. Groupies can enjoy a range of roti canai, satay, rice, noodle, fish, dim sum or vegetarian dishes, as well as traditional Malaysian drinks including kopi, teh tarik, and lemon tea.
A-Z L I S T I N GS
FOR A-Z LISTINGS ENQUIRIES CONTACT:
CONTACT SENIOR ACCOUNT MANAGER CHARLOTTE REDFERN ON 02 8224 8373 CHARLOTTE.REDFERN@OCTOMEDIA.COM.AU
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A-Z LISTINGS
Phone: 07 3456 4255 Fax: 07 3456 4299 Contact: Phil Hill phil.hill@propertyclub.com.au www.propertyclub.com.au
A-Z LISTINGS
Phone: 1800 809 913 Fax: 03 8699 1555 Contact: Anna Goncalves franchising@ questapartments.com.au www.questfranchise.com.au
Start up costs from: $1,000 (Try Before You Buy)
Start up costs: $750,000 upwards
PROFILE: Property Club was established in 1994 as The Investors Club, and has grown to become one of Australia’s most successful property investing organisations.
PROFILE: Quest Apartment Hotels is the largest and fastest growing apartment hotel operator in Australasia, with a network of 150 franchised properties across Australia, New Zealand and Fiji.
By educating and assisting members to purchase carefully selected investment properties in Australia, Property Club has worked together with investors and property vendors with over 20,000 properties purchased to date. Success of the Club is evident through the 5,000+ members of our Property Millionaires Club.
For over 25 years, Quest has provided convenient locations, reliable standards and flexible living conditions for extended stay corporate travellers among Australia’s top 500 companies.
Property Club now offers an opportunity to join our existing 15 Branches. Full training, supported by a dedicated team of head office staff and licensed property researchers will be provided to successful applicants.
Quest is now one of the top 15 apartment hotel providers in the world, and widely recognised as the market leader of apartment hotel accommodation in Australia. To become a Quest Franchisee you must be prepared to make a significant investment and commitment to the business, both personally and financially.
Phone: 1300 4 REDCAT (1300 473 322) hello@redcat.com.au www.redcat.com.au
Contact: Sean O’Connor Sean.oconnor@craveablebrands.com www.redrooster.com.au/franchising Start up costs: From $350,000
PROFILE: Redcat is an Australian POS provider, supplying end-to-end point of sale, accounting and business management solutions that give users total control of their business. Our customers include some of Australia’s best known franchises, restaurants and cafes. Redcat Polygon is an integrated software and hardware solution that manages sales, staff, stock, payroll, accounts, inventory, and customer loyalty. Polygon includes web based multi-site reporting, to provide a complete business management system. Franchised groups benefit from our flexible centralised management capability, that permits multiple levels of control and reporting. Redcat also provides integrated online ordering systems. Customers order and pay through a customer-branded app, with the order passed into Redcat Polygon. Fully audited, fully automatic.
PROFILE: Red Rooster is an Australian icon that was first established in 1972 and still growing today. When you are granted a Red Rooster franchise, you’re not just buying a restaurant; you are buying a powerful brand, built over 45 years. With over 360 restaurants nationwide, we are one of Australia’s most popular quick service restaurants brands with the unique position of being Roast Chicken Champions. You’ll find us in cities and suburbs, on freeways and in regional areas. The launch of new small store formats with a focus on delivery will see Red Rooster open in more urban and high density areas. Enquire today about Red Rooster franchise opportunities in your area.
Phone: 07 5455 3822 Fax: 07 5455 3616 Contact: Gary Shearer franchise@safetyquip.com.au www.safetyquip.com.au
Phone: 1800 762 766 sota.franchise@snapon.com www.snapontools.com.au Start up costs: from $55,000
Start up costs: $250,000 - $500,000 plus working capital PROFILE: SafetyQuip is Australia’s only franchised player in full scope Workplace Safety Supplies and services – a booming, billion dollar market. Serving a target market of small to medium-sized businesses, a developed SafetyQuip franchise has a counter-sales base and distribution warehouse anchoring one or more mobile units, providing customers with competitive pricing yet the personal service of a local business. It’s a potent combination, with franchisees turning over up to $3.4 million pa. The SafetyQuip system, highly developed over 20+ years, has thirteen territories currently operating across Australia. No prior experience in safety is necessary.
A-Z L I S T I N GS
FOR A-Z LISTINGS ENQUIRIES CONTACT:
NATIONAL SALES & MARKETING MANAGER DAVID STRONG ON 02 8224 8370 DAVID.STRONG@OCTOMEDIA.COM.AU
PROFILE: Snap-on Tools is a mobile franchise operation putting high quality tools and equipment into the hands of mechanics, engineers and technicians across the country. Snap-on Tools Australia & NZ is a wholly owned subsidiary of Snap-on Inc., a developer and manufacturer of innovative and technologically advanced tools with over 4,500 franchisees worldwide. After 30 years in the Australian market, Snap-on Tools continues to grow with an increasing number of franchisees reaching the million dollar club, and new growth opportunities available for existing franchisees such as sales assistants, multi-units and specialised tool storage and diagnostic sales programs. Initial training occurs in Dallas, USA and ongoing support is provided - no previous mechanical experience required. Snap-on offers an exclusive finance package to assist new franchisees.
Phone: 03 9571 0600 Contact: Kate Hopley kate@spudbar.com.au Spudbar.com.au Start up costs: $250,000-$280,000 PROFILE: Spudbar was founded in 2000 around the simple promise to create delicious food that’s healthy, great value, quick and casual. We discovered the spud was the perfect platform to build a meal around - delicious, filling and much healthier than the typical meal staples of pasta, bread and rice. We have built an exciting business around this nutrient rich gem of natural goodness and would like to share it with likeminded people. Our franchisees enjoy • Work with a product that you can feel good about serving
• Easy to learn store systems • Simple to operate business
• Low start up costs Ongoing support and guidance
E: franchising@spudbar.com.au
For more information contact us on
W: www.spudbar.com.au
P: 03 9571 0600
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Phone: 02 9898 8608 Contact: Chris Fitzmaurice enquiries@swimart.com.au www.swimartfranchise.com.au Start up costs from: Retail - $175,000 - $250,000 Mobile - $25,000 PROFILE: Swimart operates in the pool and spa industry providing owners with all their pool and spa needs from filtration equipment and chemicals to pool cleaners, accessories, spare parts and leisure products. We also provide extensive, in home services, such as pool cleaning and maintenance. Established in 1983, Swimart has over 70 retail stores and more than 250 service vehicles across both Australia & New Zealand and is a fully owned subsidiary of Waterco Ltd, a publicly listed Australian company with operations in over eight countries around the globe. We offer both retail and mobile franchises with set up AZ-The Shop.pdf If1you’re 11/8/2016 10:54:58 AMa retail or service costs starting from Cheesecake as little as $25,000. looking for either business that delivers solid revenues with high margins and low fees, just ask Swimart!
Phone: 02 9037 2849 Contact: Doug Downer doug@thealternativeboard.com.au www.thealternativeboard.com.au Start up costs: from $40,000 up to $95,000
PROFILE: The Alternative Board is a membership organisation of Business Owners and CEOs who meet monthly in confidential board meetings to assist each other in transforming their businesses. The Alternative Board (TAB) exists to help business owners align their business vision with their personal vision. It exists to provide owners/CEO’s with the power to ensure that their businesses will deliver what they want out of life. In addition to the monthly board meetings, the facilitator/coach meets with the business owner/CEO each month and works with them in a one on one coaching session focussed exclusively on their business.
Phone: 029723 97231011 1011 Phone: 02 02 9723 Phone: Fax: 029727 97276771 6771 Fax:02 02 9727 Fax: Contact: Nick Nick Avgerinos Contact: NickAvgerinos Avgerinos Contact: Email: franchise@cheesecake.com.au franchise@cheesecake.com.au franchise@cheesecake.com.au Website: www.cheesecake.com.au www.cheesecake.com.au www.cheesecake.com.au
Phone: 0407 105 613 Contact: Robert Graham robert@ceoconsulting.com.au www.therotisserie.com.au
Start up costs costs from: $200,000 --$800,000 Start $1million Startup up costsfrom: from:$200,000 $200,000 - $800,000
Start up costs: $130,000 - $250,000
PROFILE:
PROFILE: Master franchise and store level franchise opportunities now available in Australia.
Our award winning system makes for one of the simplest businesses to operate.
After years of success in Singapore, The Rotisserie brings its all day comfort food menu and restaurants to Australia. Broad food & beverage menu including coffee & alcohol, 7 days trading, 3 meals a day.
PROFILE: PROFILE: The Cheesecake Shop opened in 1991 and has developed into an Australian TheCheesecake Cheesecake Shop Shop opened 1991 into anan Australian The openedofininalmost 1991and andhas hasdeveloped developed into Australian favourite with a massive network 200 stores across Australasia. favourite with with aa massive massive network 200200 stores across Australasia. favourite networkof ofover almost stores across Australasia. Our award winning system makes for one of the simplest businesses to operate. Our award winning system makes for oneyou of need the simplest businesses operate. Our systems guide you on how many cakes to produce each weektoand Our much systems guide you on how many cakes you need to produce each week and how of each ingredient to order. Our systems guide you on how many cakes you need to produce each week and how much of each ingredient to order. how muchare of baked each ingredient order. recipes. You don’t need to be a chef or Our cakes from easy to to follow Our cakes are baked from easy to follow recipes. You don’t need to be a chef or a baker, its so Our cakes areeasy! baked from easy to follow recipes. You don’t need to be a chef or a baker, its so easy! loveitstoso bake cakes for the kids then here is your chance to turn your aIf you baker, easy! If you love to bake cakes for the kids then here is your chance to turn your If you love to bake cakes for the kids then here is your chance to turn your
Backed and operated by an international food and hospitality team with Australian support and local experts. Join early to secure the best sites and terms.
Phone: 07 3215 6050 Contact: Gen Alexander Franchising@tommyguns.com.au www.tommyguns.com.au
Phone: 0439 966 391 Contact: Wayne Stapleton info@under-wraps.com.au www.under-wraps.com.au
Start up costs: $250,000 - $500,000
Start up costs: $100,000
PROFILE: Tommy Gun’s Original Barbershops have been designed with the customer experience at centre, creating a complete destination for male grooming. For years men’s grooming needs have been largely ignored. Getting a haircut in a salon surrounded by flowers and piles of ladies magazines…or joining the queue of guys on an uninspiring bench at the local cheap cuts. Getting their hands on the right grooming products was also a challenge, running around to multiple stores for razors, oils or waxes. Tommy Gun’s is the new alternative that has been received with high fives and fist pumps. Seamlessly combining the latest technology with old-world finishes, grooming services and products, all under the one accessible roof. What’s not to love? With custom red barber chairs, an exclusive waiting lounge, arcade games and Foxtel in every mirror, the experience is relaxed, luxurious and affordable.
Phone: 0414 669 101 Contact: Stephen Spitz stephen.spitz@xpressodelight.com.au www.xpressodelight.com.au Start up costs from: $49,500 + GST
PROFILE: The Under Wraps Franchise opportunity is a health and superfood inspired fast food business in the sandwich, salad & juice bar arena offering the confident entrepreneur the business ownership option of a single or multi-unit Kiosk, Food Court and/or Cafe store operation. Staying true to philosophy – “Real Food, Real Fresh” – Under Wraps offers a nutritious approach for breakfast, lunch, snacks, take home meals, Juices and more, prepared fresh, everyday, with love, using premium seasonal ingredients and selected superfoods. FRANCHISES ARE NOW AVAILABLE AUSTRALIA WIDE... Under Wraps is a “Real Food, Real Fresh” fast food franchise opportunity set for national expansion.
Phone: 0459 654 146 Contact: Andrew Lyme andrew.l@zsg.com.au zeusstreetgreek.com.au Start up costs: $350 – $600k+
PROFILE: Invest in an Xpresso Delight franchise and seize the opportunity to profit from one of the fastest growing markets on the planet. As the number of savvy, educated coffee drinkers has boomed, the market has exploded!
PROFILE: Zeus is a fast growing franchise on a journey to lead and innovate fresh casual dining and bring its distinctive brand of healthy Greek street food to your street.
This pent up demand for gourmet coffee in the workplace is very poorly met.
The Zeus team has proven franchising expertize and are committed to working closely and collaboratively with its franchise partners. Zeus provides store set-up and ongoing support for franchisee’s including site selection, store development, hiring, training, marketing and all that is required to deliver the Zeus experience.
Each day, thousands of workers trek to the nearest café to pay as much as $4.00 for their morning and afternoon coffees. This is the premise of Xpresso Delight - transplanting the cafe into the heart of the workplace at a fraction of the price that people pay normally.
Zeus is on the lookout for franchise partners with a passion for customer service and combining business savvy with great tasting food.
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A-Z LISTINGS
FINAL WORD
IT'S A REGULAR THING... Regulation is just part of doing business, and Australia’s franchise sector shows how it can be handled elegantly and simply rather than tying everyone up in red tape. ANDREW TERRY Professor of Business Regulation, University of Sydney Business School
R
egulation is an inevitable characteristic of contemporary life. Our economic and social growth depends on a highly complex economy, which in turn needs sophisticated rules and enforcement procedures across a wide range of activities. Efficient regulation enhances growth and competitiveness, provides consumer confidence and stimulates investment. Sadly, however, not all regulation is good and efficient. The 2006 Rethinking Regulation report came to the conclusion that over-regulation or inappropriate regulation impedes economic growth, limits the scope for innovation, undermines entrepreneurial drive and reduces productivity and competition. The report acknowledged that there are too many examples of inefficient regulation in Australia. Regulation, of course, involves a cost to business. The Rethinking Regulation report estimated that compliance matters can consume up to 25 per cent of the time of senior management, but the impact is even greater for small businesses which generally do not have the in-house capacity to deal with and keep abreast of the “regulatory morass”.
RESILIENT PEST While all regulation has a cost to business as well as to governments in administration and enforcement - it is red tape that poses the greatest problems. The term “red tape” is commonly used to describe regulatory requirements that are excessive, unnecessary, redundant, overly rigid, inefficient or bureaucratic. Though the red-tape issue is universally acknowledged and parties of every political persuasion commit to its destruction, it proves to be a resilient pest whose extinction is not imminent. The regulatory challenge in Australia is,
of course, complicated by our federal system that necessitates power sharing among the constituent parts. Although we are getting better, the reality is that Australia’s nine regulatory clocks - federal, state and territory – do not always chime in unison, and there is frequently overlap and duplication. However, this reality does not explain the sheer bulk of our regulatory repertoire. Our income laws, which started life in 1936 with 88 pages, grew to more than 11,000 pages by 2006 before 4000 pages were culled. Our laws regulating competition, corporations, fair trading and other areas of business, while not quite as voluminous are still massively daunting.
WELL SERVED How has regulation impacted the Australian franchising sector? We are undoubtedly one of the world’s most comprehensively regulated franchise sectors with the comprehensive underlying laws of general application - especially the prohibitions of misleading and unconscionable conduct supplemented since 1998 by specific-sector regulation imposed by the Franchising Code of Conduct. Australia is among the minority of countries that specifically regulate their
franchising sectors. The sector has been well served by the code, which has wide support and is entitled to much of the credit for Australia’s enviable standing internationally. The code has improved industry standards, discouraged unethical franchisors, given comfort to vulnerable franchisees and led to better relationships. The Australian sector has been fortunate that the constitutional complexities of a federal system, which has in so many cases frustrated business by a mishmash of federal, state and territory legislation, has not bedevilled and complicated the franchise sector. We have one regulatory instrument, the Franchising Code of Conduct, and it is fortunate that proposed initiatives from South Australia and Western Australia for state legislation imposing a further layer of regulation did not eventuate. The franchise sector indeed offers an instructive precedent for the regulation of other industry sectors. The code pioneered a new form of regulation - an industry code under the Competition and Consumer Act which, in essence, gave legislative recognition and authority to an unenforceable industry code of practice through “substantial opportunity for industry involvement to ensure appropriately targeted regulatory solutions”.
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1582 IS COFFEE. EVOLVED.
COFFEE EXCELLENCE IS OUR PASSION - NOT JUST OUR PROMISE $175,000 turn-key investment Intensive training & ongoing support Sleek 20M 2 kiosk Specialty coffee, gourmet food
FOR MORE INFO VISIT OUR WEBSITE
1582.COM.AU
FOLLOW US! @1582COFFEE