13 minute read
Safe Hands
Stewart and Janice Germann with Laurel and David McCulloch
The Franchise Coach brings years of experience to the process of franchising your business
One of the first home-grown franchises in New Zealand, back in 1985, was a company called Arano. Teaming up with the company’s founders, Laurel and David McCulloch appointed a network of franchisees to distribute freshly-squeezed orange juice around New Zealand. By the time the brand was sold to Frucor, 22 years later, New Zealand was already on its way to becoming the most franchised country in the world.
That was no coincidence. As early pioneers in franchising here, David and Laurel had made it their business to find out as much as they could about this new way of doing business, travelling overseas to research the best ways to franchise and establishing a network of experienced mentors and advisors. They generously shared what they learned with other New Zealand franchisors, too, and in 1997 established their own consultancy, The Franchise Coach, to help other small businesses find success through franchising.
After working with over 100 different franchise brands over the years, The Franchise Coach has now changed hands – and new owner Stewart Germann brings even more expertise to the business. A specialist franchise lawyer for over 40 years, Stewart has a wealth of experience and contacts, having worked with new franchisors, established franchises and overseas franchise brands over the years.
All the help you need
‘The Franchise Coach is a very well-established brand in New Zealand which has excellent systems and people in place,’ says Stewart. ‘I’ve worked with David for many years and know that the team has a lot to offer, including:
• Initial assessment of a company’s potential for franchising
• Feasibility studies
• Preparation of manuals
• System reviews for existing franchises
• Financial modelling and analysis
• Overseas expansion planning
• Competitor analysis • Importation of overseas brands
‘I see there being a great synergy with my legal practice, helping franchises to put in place all the legal, financial and operational structures they need to succeed in the modern marketplace.’ S
tewart says that this integration helps The Franchise Coach offer a total service which is both fast and good value, while not compromising standards. The company has advised new and existing franchisors all over the country, and has worked with businesses in every industry from retail and hospitality to rental accommodation and training.
How can you grow?
for others it’s “Yes, and this is what we need to do to make it happen.” It’s a source of great joy and happiness when we see companies we have advised get their first franchisees on board and start to grow into national brands.’
Stewart agrees. ‘If you have a successful business with a few branches, franchising is something you really should explore. Why put hardearned capital into opening more branches and employing more managers and staff when you can expand via a network of dedicated owner-operators with a real investment in every outlet? Franchising is one of the most efficient business models ever developed, but you have to have the right framework in place from the start – and that’s where The Franchise Coach can help.
‘We want to talk to people with a successful business they want to expand, entrepreneurs looking for new opportunities, and companies with an international vision.’
Overseas connections
As far as international expansion is concerned, Stewart has developed a wealth of contacts over the years, especially in Australia, the UK, Canada and the USA. He has sat on the US-based International Franchise Association’s Supplier Board, and has a long history working with one of America’s foremost franchise consultants who specialises in exporting and importing franchise brands.
‘That means we can offer New Zealand companies a whole new range of opportunities, whether they want to enter overseas markets or diversify by developing an established overseas brand here,’ Stewart says.
Future growth
David McCulloch says he will continue to work in the business, although taking more of a back-seat role. ‘Stewart and I have worked together for many years, and I am delighted he is taking the helm at The Franchise Coach.
‘Laurel and I are proud of everything that The Franchise Coach has achieved, the franchises we have helped start up or re-focus, and the many franchisors and franchisees who have found success as a result. We look forward to seeing the list continue to grow.’
Stewart concludes, ‘The Franchise Coach is a well-respected, awardwinning service designed to provide those seeking assistance with a comprehensive support package from franchise development, coaching and logistical support right through to financial modelling and legal expertise.
‘If you are looking to franchise, want help reviewing your franchise structures, or are thinking of importing or exporting via franchising, talk to us first.’
Advertiser Info
The Franchise Coach
www.franchisecoach.co.nz
Contact Nationwide Enquiries
P 021 276 9898
stewart@thefranchisecoach.co.nz
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5. How do I pay taxes & GST?
There are two main reasons for business failure: the first is lack of capital, so choose a business you can afford in the first place. The second, however, can creep up on you – not planning for your tax obligations. That’s why you need to work through a number of key questions with your accountant before you start your business. Do you put yourself on the payroll and pay PAYE once a month? What about KiwiSaver? Employer or employee contributions? Which payroll system should you use? Or instead of a salary, should you take drawings? Drawings are withdrawals you take as an owner that have no tax attached at the time, although it will need to be paid later. If you do take drawings, how do you record them in your books? When does the tax on the drawings become payable? Drawings will often move you from being a PAYE tax payer to being a ‘provisional tax payer’. It can be tempting to use the money for other things ‘in the meantime,’ so beware. The Accounting Income Method (AIM), which allows you to pay your income tax as you go, may merit consideration. There are various GST payment cycles ranging from monthly to six-monthly filing and different methods for calculating GST. This is a common area where cash flow suffers if you don’t get it right. For all these reasons, taking tax advice from an accountant before you start trading is critical to operating a business – the IRD doesn’t accept ignorance as an excuse.
6. What can I put through the business?
This is one of the most common questions I hear from new franchisees. Operating a business means that you can claim certain types of expenses against tax, which is not the case if you’re a wage or salary earner. What you can claim, however, will vary depending on your individual circumstances.
I often hear people saying things like, ‘My friend’s accountant said I could claim the household dog food as a security cost,’ or ‘My new designer wardrobe can be claimed as uniforms.’ Such bizarre or excessive claims
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are frowned upon by the IRD, which has benchmarks on all industry types. Any excessive personal expenses put through the business may trigger an IRD audit – a disruptive process for any business. The IRD do prescribe certain types of costs that can be claimed within defined parameters. Common areas include a proportion of home office expenses such as internet costs, a proportion of rent, interest, insurances, power, etc. Good record-keeping will be essential to follow these costs. As a rule of thumb, expenses claimed need to have a connection to deriving income: for example, filling the boat with fuel will be a deductible expense if you are a fisherman, but not if you operate a stationery store! Again, it pays to get advice from an experienced accountant on this to set realistic expectations on what you can and can’t claim.
7. When can I have a company car?
It takes time to get a business up and running profitably, so unless you need one to operate then you will need to wait. You have to make the money before you spend the money, and leaving cash in the business is critical – you’ll need to spend it on more stock, more staff, more marketing or whatever before splashing out on a new BMW. Knowing your break-even point, reaching critical mass, paying all your taxes and operating costs will all help you achieve your ultimate goal. If you do need a vehicle, take advice on claiming motor vehicle expenses before you buy it. Being realistic on the type of vehicle is important – that Beemer may not be deemed appropriate for delivering spouting! Some vehicle types will attract Fringe Benefit Tax (FBT) while others allow your business to claim 100 percent of the operating costs without incurring FBT. Other questions include: how much of my vehicle running costs can I claim as a business expense? Do I need to keep a log book? Can I claim the GST on the purchase of my vehicle? What happens when I sell it? This is a complex area and each case needs to be evaluated on its own merits.
8. How much can I earn?
This is a million dollar question, although the answer is unlikely to be ‘a million dollars.’ The real question is, ‘How much money can I take out of the business without damaging it?’ A one-man-and-a-van franchise is likely to produce a different result from a large restaurant employing 50 staff. Some questions you should ask yourself are: How much money do you need to live on? Are you comfortable with earning less than what you are being paid now until your business is established? Although some new businesses do offer a return from day one, most take time to be able to start paying you back. You need to find out how long this will take. The franchisor and other franchisees should be able to give you some guidelines, but using a specialist accountant who knows the franchise is your best bet. Putting together a business plan and a cashflow budget will assist you in establishing what income you could reasonably expect to earn before you sign.
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9. How much will my business be worth?
When the time comes to sell your business and move on, how much can you expect to get for it? Well, it’s just like selling your family home – what you can get for it depends on what someone is willing to pay. As a general rule, though, a high-performing franchise business with a recognised brand will be easier to sell than an independently-owned business. A successful business with good cashflow will fetch more than a struggling one. Profitability, a track record of consistent performance, a good location and good record-keeping all contribute to how much a business is worth.
10. Do I need to pay for advice?
If you had a particular medical problem, you’d consult a specialist rather than your GP. In the same way, if you’re considering buying a franchise, consult a specialist franchise lawyer, banker and accountant (see page 54). They won’t be learning on you, and they’re likely to know the franchise system and the franchisor involved. They’ll know about the specific issues, set you on the right path and, ultimately, save you time, money, headaches and even tax.
Having realistic expectations is important for your future success and your future happiness, so don’t try to save money or take short-cuts. Do proper pre-purchase evaluation. Remember, good advice pays, not costs.
About the Author
Philip Morrison is principal of Franchise Accountants, a specialist accounting practice which has worked with over 250 different franchise brands throughout New Zealand.
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