Franchising July August 2016 by Cirrus Media

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FRANCHISING

Franchising YOUR ESSENTIAL GUIDE TO BUYING A FRANCHISE | WWW.FRANCHISEBUSINESS.COM.AU JUL/AUG 2016 VOL.29/NO.4

EXERCISE YOUR POTENTIAL How the gym sector is shaping up

JUL/AUG 2016

BEAUTY, COFFEE, COURIERS, DESSERTS

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12 REASONS TO INVEST IN FRANCHISING

SPOTTING PROFIT IN A FRANCHISE

10 THINGS TO AVOID IN A FRANCHISE

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CONTENTS

COV E R STORY COVER IMAGE: JETTS FITNESS

12 TRENDS REPORT

Who is franchising in Australia, and who is buying franchises?

14 SHAPING THE FUTURE OF FRANCHISING

The former Minister for Small Business, Bruce Billson talks about his new role heading up the the Franchise Council of Australia

18 50 QUESTIONS TO ASK

What questions should you be asking before you buy a franchise? Here’s a checklist of essential questions for every franchise buyer

20 WHY INVEST IN A FRANCHISE?

So why exactly is this business model so popular?

48 SWEET SATISFACTION

We love our desserts and popular franchised chains are dishing up classic and innovative taste sensations

57 DELIVERING THE BUSINESS

We take a look at trends in the courier business

64 COFFEE ON THE GO

Coffee-drinkers are seeking a handy solution for their caffeine hit, so coffee franchises are on the move

SURVIVAL OF THE FITTEST

72 IN THE BUSINESS OF BEAUTY 24 WHAT ARE THE SIGNS OF A PROFITABLE FRANCHISE?

REGULARS

Here is what should you be looking for in a good franchise business

If you’re looking to buy a beauty business, this overview is a must read

90 STREET EATS

If you’ve got a taste for Vietnamese cuisine, the Roll’d chain recently opened its 40th outlet

28 DO YOU HAVE TO STAY? 5 WELCOME We look at some circumstances where a 92 MUM-FRIENDLY FRANCHISE SET FOR GROWTH franchise agreement can end early 6 INSIGHTS Home organisation franchise Home Sorted is targeting the working mum 104 LEGALESE 32 A RECIPE FOR DISASTER Here are the ACCC’s warning signs for a 106 SKETCH business opportunity you should reconsider 95 COMMUNITY SPIRIT PROVES A WINNING STREAK How one franchisee found his business was 108 LEADERSHIP 36 10 THINGS TO AVOID WHEN a channel to help the homeless YOU BUY A FRANCHISE 110 CHECKLIST Here are 10 things to definitely avoid when 98 GEN Y SPILL THE BEANS ON 111 GLOSSARY evaluating a franchise opportunity BUYING A FRANCHISE 112 DIRECTORY Who says you’re too young to run a franchise? 40 UNLOCKING DREAMS: BRISBANE AND MELBOURNE EXPOS 113 LISTINGS Previewing the Brisbane and Melbourne 103 FAMILY FORTUNES How one family has its succession sorted 122 ADVERTISERS INDEX franchising expos JUL/AUG 2016 | 3 | WWW.FRANCHISEBUSINESS.COM.AU

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NATIONAL FRANCHISE CONVENTION 2016

NEW HORIZONS 9-11 OCTOBER CANBERRA

Innovation Meets Opportunity Innovation has long been the backbone of the Australian franchise sector and the entrepreneurial men and women who drive its success. And as the National Franchise Convention 2016 heads to Canberra from Sunday 9 to Tuesday 11 October, innovation will form a key theme of this year’s program. Innovation is the transformation of systems and processes to promote sustained success across your franchise system. It’s fostering and implementing new ideas to recruit and engage franchisees as well as to develop new growth opportunities. It is, of course, effectively harnessing technologies to enhance marketing and unearth new sales channels, while improving the customer experience. Whatever your innovation goals and challenges, NFC16 will deliver vital information to assist your franchise to reach its objectives.

Book your ticket to NFC16 today & save Super Early Bird registrations available until 1 July 2016

NFC16 Program Highlights n Keynote speakers sharing their expert knowledge and motivational stories n Concurrent panel sessions featuring franchising case studies n Certified Franchise Executive endorsed sessions

Early Bird registrations available until 15 August 2016 Group and package discounts are also available for a limited time

The FCA gratefully acknowledges the contribution of the following NFC16 sponsors

n The Sunday Legal Symposium n MYOB FCA Excellence in Franchising Awards Gala Dinner recognising the best and brightest in the industry n Abundant networking opportunities n Bustling trade exhibition

For sponsorship and exhibition opportunities, call Angie Cooksey on 1300 669 030, email angie.cooksey@franchise.org.au or go to franchise.org.au

For more information and to register, visit nationalfranchiseconvention.org.au

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( WELCOME )

SARAH STOWE EDITOR

re you new to the world of franchising? Are you just exploring the opportunities and challenges that the franchise sector presents? Then you’ve come to the right place.

Franchising magazine, and its sister media channel the website www.franchisebusiness.com.au, serves up inspiration, guidance, franchise perspectives, legal advice, business tips, franchisee insights and great success stories, not to mention the best access to brands across all the franchise sectors. In this issue we turn our attention to the popular coffee and dessert options and look at what’s happening in these vibrant marketplaces. We go behind the scenes in the world of the beauty business, we discover the latest moves in the fitness arena, and fi nd out how a courier business can go digital. If you’re new to franchising, there are some brilliant case studies that showcase just how much can be done in a franchise business – not just for yourself, but for others – and how fresh ideas can really take off when the right combination of franchisor, good systems and great franchisees come together. If you’re new to franchising, then you’re not alone. There are thousands of fellow Australians like you searching for the next great opportunity and the path to a more secure, successful and fulfilling future.

Our spotlight on the franchise sector draws on research conducted by FranData, an independent business intelligence company and pinpoints some of the factors that are shaping the franchising community. If you’re new to franchising, then you’re in good company. The Franchise Council of Australia is the peak industry body in our sector, and is poised to enter a new phase with the appointment of two new executives. We’re delighted to welcome former Minister for Small Business, Bruce Billson as the executive chairman, and Damian Paull as the chief executive officer. Turn to page 14 to read how Bruce Billson sees the role of the FCA and the future of franchising. If you’re new to franchising, then you’ll discover there are a host of businesses for sale, brands looking to expand and franchisors searching for franchise buyers just like you. A visit to the Brisbane and Melbourne expos could be another positive step in your journey to run your own business. Read our preview of the expos on page 40.

There are thousands of fellow Australians like you searching for the next great opportunity and the path to a more secure, successful and fulfilling future

Welcome to the world of franchising.

EDITOR Sarah Stowe P: 02 8484 0900 sarah.stowe@cirrusmedia.com.au

CLIENT SUCCESS MANAGER Jarha Serafi n P: 02 8484 0963 jarha.serafi n@cirrusmedia.com.au

JOURNALIST Noha Shaheed P: 02 8484 0740 noha.shaheed@cirrusmedia.com.au

ART DIRECTOR Julia Gee P: 02 8484 0708 julia.gee@cirrusmedia.com.au

NATIONAL SALES AND MARKETING MANAGER David Strong P: 02 8484 0905 david.strong@cirrusmedia.com.au

GRAPHIC DESIGN Ian Sudjatmiko P: 02 8484 0843 ian.sudjatmiko@cirrusmedia.com.au

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ALL FRANCHISING MATERIAL IS COPYRIGHT. REPRODUCTION IN WHOLE OR IN PART IS NOT ALLOWED WITHOUT WRITTEN PERMISSION FROM THE EDITOR. OPINIONS EXPRESSED IN FRANCHISING ARE NOT NECESSARILY THOSE OF FRANCHISING OR CIRRUS MEDIA. © COPYRIGHT CIRRUS MEDIA, 2016

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INSIGHTS

REGIONAL EXPANSION COOLABAH TREE CAFÉ Coolabah Tree Café franchise is set for expansion, with four franchises to open in Queensland by September. QUEST Quest Apartments has plans to expand across urban and regional areas in New South Wales, Victoria, South Australia and Western Australia, with a total of 10 outlets set to open this year. KX PILATES Fitness franchise KX Pilates has major plans to expand in all states, opening 35 new studios across the country by the end of 2016, and 50 studios by end of 2017. SPORTING GLOBE Family friendly sports bar and grill franchise The Sporting Globe has opened its first interstate venue in Western Australia with an Olympic hopeful for a franchisee. Locals Phil and Tim Deavin are the father and son franchisee team. JOLLY MILLER The Jolly Miller Café is a family owned business looking for franchisees for new sites in Melbourne. New sites are coming up in Williams Landing, Essendon, Plenty Valley and Melbourne CBD at this stage. RAW ENERGY Mooloolaba-based fresh food franchise Raw Energy has opened four stores in as many months and are in place to open another six stores by the end of the year.

Brazilian Beauty set to refresh brand Brazilian Beauty, a leading franchise beauty brand, is set for a major brand refresh in June 2016, designed to empower women to celebrate their own style of beautiful.

our category and the expert brand of choice to trust with their beauty needs.”

Francesca Webster, CEO and founder, said signage, website and stationary collateral changes would be made to enhance the customer experience. The changes are intended to promote client confidence in their own beauty styles.

“The brand refresh will not radically change the franchise model, rather, it will enhance the offering,” said Webster.

“The brand refresh was about projecting these values via all customer touch points and about the fact that we have grown so much in our service offering over the years,” said Webster. Twelve months in the making, the strategy was created from feedback and insights from consumers, team members, and franchisees. “The re-branding will reassure our existing customers that we are a thought leader in

So what does this mean for the franchisee?

As the majority of franchisees have a high level fit out, Webster said the costs have been minimised to minor signage, website and stationary collateral changes. For franchisees with a lower level of fit out, dates have been set to bring their salons in line with the network. “Overall franchisees will have access to a wider demographic and larger market share as the brand has been positioned to offer a wider range of expert products and services,” she said.

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CMY

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INSIGHTS

How to choose a workplace compliant franchise: new register announced Franchise buyers concerned about investing in a franchise system that may not support minimum or award wages, for instance, can now find out if the business has registered for Workplace Transparency Standard through the Australian Franchise Registry, an initiative of Frandata Australia. Although this is not an audited process, franchisors who have signed up to this standard must certify their compliance with workplace regulations and record keeping. The Workplace Transparency Standard has been developed after consultation with key

industry stakeholders, and draws significantly from the compliance expectations of Fair Work Australia. Frandata Australia CEO Darryn McAuliffe said “Recent events have caused the franchise sector to reflect upon the respective roles of franchisors and franchisees in the context of workplace compliance.” McAuliffe said the new Standard codifies industry expectations. It makes it clear that workplace compliance is a collaborative responsibility; franchisees

US BEAUTY AND WELLBEING FRANCHISE EXPANDS IN AUSTRALIA

“Australia has a very healthconscious culture, which is one of the reasons we believe our first foray into being a global brand fits well there,” said Joe Magnacca, president and CEO.

The release of the Workplace Transparency Standard comes at a time when both the Government and the Opposition are seeking to beef up the legislative protection provided to vulnerable workers, and provide extra enforcement and investigative resources to Fair Work Australia. Registration and the publicly accessible search function can be accessed online through www. thefranchiseregistry.com.au

“From a business perspective, our partnership with Massage Envy creates new opportunities for franchise growth and enables us to make Massage Envy the premier provider of therapeutic massage and skincare services in the country.”

U.S. based wellness franchise Massage Envy has partnered with Collective Wellness Group and will open its first international location in Sydney. The Sydney location is the first in a 100-unit, 15-year deal between Massage Envy and Australiabased Collective Wellness Group, which will manage Massage Envy’s Australian operations. Along with Massage Envy, the Collective Wellness Group also oversees operations for Australia-based Anytime Fitness and Urban Yoga locations.

have the fundamental obligations as employer and operator of the franchised businesses, but there are also expectations for franchisors.

The brand also focuses on affordable massage and skincare memberships.

“As a company dedicated to empowering people to live healthy lifestyles and to re-think what wellness means to them personally, we are very excited to welcome Massage Envy to Australia,” said Justin McDonnel, Collective Wellness Group chairman.

“We’ve had amazing domestic growth here in the United States. Now, it’s time to make Massage Envy a global brand,” said Lee Knowlton, senior vice president of global sales and international at Massage Envy. The existing Paddingtonbased Massage Collective outlet, which is one of the two upcoming Sydney locations, will convert to the Massage Envy brand. Both outlets will be company-owned.

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HAVE YOU SEEN OUR NEW ADVICE VIDEOS ON YOUTUBE? Now you can view industry specific advice before you buy a franchise. We’ve sourced data from the most recent IBIS World reports about industry specific franchises. We’ve recently published two new videos:

1. 5 reasons to buy a fitness franchise You can check out our five reasons for selecting a fitness franchise, ranging from the 24/7 model to full service, and specialist studios.

2. Top reasons to invest in a pizza franchise In this video, we take a look at the booming pizza business and the best reasons to join a franchised brand. Visit our youtube channel, FranchiseBusiness.com.au for more tips like these.

REASONS TO BUY A SANDWICH FRANCHISE ✱ Industry revenue to grow by an annualised 1.6% in the five to reach $1.8 billion ✱ Franchised brands dominate the competitive market ✱ Franchised brands benefit from brand power ✱ High foot traffic areas drive growth ✱ Franchised brands can extend their opening hours

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INSIGHTS

MBE TO OFFER FRANCHISE BUYERS FINANCE OPTION FROM JULY If you’re looking to buy a franchise with funding support, Mail Boxes Etc. (MBE) will now offer financing options for franchisees after July 1. MBE provides business to business services in design, print, and shipping and champions the work/life balance under a five-day-aweek business model with typical working hours from 8:30am- 5:30pm.

This development comes as the brand projects four new franchises to open nationally by the end of the year. “We now have finance available for up to 50 percent,” said Paul Kasper, franchise development manager. “Our centres do well in regional cities due to opportunities for multi-income streams in those areas,” he added.

7-Eleven launches internal wage repayment program Embattled convenience chain 7-Eleven has launched an in-house, streamlined wage repayment program after booting the independent Fels Wage Fairness Panel. The brand has launched an in-house, streamlined wage repayment program after sacking the independent Fels Wage Fairness Panel. “7-Eleven took the Wage Repayment Program process in-house in order to deliver a robust and efficient process that puts money in the hands of aggrieved franchisee staff as quickly as possible,” said 7-Eleven CEO Angus McKay. “The Program meets our commitment to right past wrongs. It meets the standards we set for ourselves and those that the community expects of us. “We are happy to be judged on our actions, and will publicly report our progress as we move forward.” This is the most recent development since a string of reports of short-changing and systemic

non-compliance was exposed at the sacked independent wage claims panel. The in-house program is supported by an independent Secretariat and backed by Deloitte. The Fair Work Ombudsman has also been invited to review the new protocol. However, an ABC report states the axed panel chairman Professor Allan Fels is not convinced about the program and its trustworthiness. “The new arrangement is unexplained and somewhat ambiguous as to whether 7-Eleven or Deloitte’s or some combination makes a decision. But either way, I don’t think the claimants will have much faith in the process and its independence,” he said. “Everything I heard from 7-Eleven for months was aimed at cutting the cost to them of the process, by setting really high standards and making it difficult to get claims through. “I’ve [got] no reason to believe they have departed from that.”

Who has bought the Healthy Habits chain? The Healthy Habits brand of sandwich, salad and juice bars has been acquired by a foodfocused franchise group. Franchised Food Company (FFCO) and the the owners of Healthy Habits, the Dymocks Group, have finalised an agreement that will see the Healthy Habits franchise business trading under the control of FFCO as of 1 July, 2016. FFCO’s CEO Stan Gordon said “It is gratifying to be able to acquire Healthy Habits, which has been recognised throughout the fast- food industry as a leader in providing great tasting, healthy food; I firmly believe its introduction to the our stable will prove a valuable addition to all the FFCO brands.” Dymocks bought the Healthy Habits business from founder Kathryn Sampson in 2009 The most recent managing director, Mark Buckland, has held the reins for three year during which the brand has undergone a period of rapid change to its products and its ecommerce capability to position it for the future. “The sale to FFCO which successfully operates multiple brands was seen as a natural

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fit. The divestment into FFCOs capable hands also positions the Dymocks Group well as it continues to develop and exploit opportunities for its other businesses which have experienced significant growth both organically and recently through acquisitions,” he said. The FFCO group includes Cold Rock Ice Creamery, Mr Whippy, Trampoline, Pretzel World, Europa Coffee and Nutshack. Stan Gordon, CEO said “We’ve seen dramatic changes in how Australians want to consume fast food. While there is always an appetite for an occasional treat, generally Australians are now much more health conscious. Gordon believes FFCO ownership will ultimately benefit Healthy Habits franchisees. “The immediate focus for FFCO is to ensure the transition to the new ownership occurs seamlessly and without disruption to customers and staff. Key business systems such as POS and rewards will remain unchanged post-transaction, as will key supplier relationships, to ensure all franchisees will be able to continue without interruption to their businesses.

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ho is franchising in Australia? We take a quick peek at some statistics on the franchise sector.

THE FRANCHISE SECTOR According to the FranData Report on the Franchise Sector 2015, 72 percent of franchise brands are in fact operating in non‐food related industries. Within the food sector the coffee arena has the greatest number of brands with 34 or 14.6 percent of all food brands. WHERE DO THE BRANDS ORIGINATE? The vast majority are home-grown, Aussie firms – 87 percent in fact. The second biggest contingent is from the US, which accounts for as many franchise chains as all other imported brands put together. Other countries of origin are: New Zealand, UK, Canada, France, Japan, Belgium, Denmark, Korea, Malaysia, Singapore, South Africa and Taiwan. ✱ 30 percent have international operations ✱ 26 Australian brands are trading in the US MULTIPLE BUSINESSES Almost 10 percent of brands are part of large multi‐brand holding companies. Jim’s Group is the largest with a portfolio of 25 franchise brands and more nonfranchise brands) of service brands. Here are some multi-brand companies in the franchise sector: ✱ Jim’s group ✱ Retail Food Group ✱ Franchised Food Company ✱ Metcash ✱ Foodco Group ✱ Pacific Retail Management ✱ Quick Service Restaurant Holdings

✱ United Franchise Group ✱ Australian Pharmaceutical Industries ✱ Emerald Foods Group ✱ Evolve Entertainment ✱ GJ Gardener Homes ✱ helloworld ✱ ICED ✱ Laser Group ✱ Luxottica Group ✱ Minor DKL Food ✱ Mpower Franchising ✱ Yum brands ✱ 7 Eleven Australia

GOING ONLINE Which are the top brands franchise buyers are looking at on our website w w w.f r a n c h i s e b u s i n e s s.c o m . au? The popularity of the hospitality sector doesn’t diminish - Australians continue to seek food and beverage opportunities for a business investment. This autumn's popular searches include: ✱ Movenpick ✱ Boost Juice ✱ Gloria Jean's Coffees ✱ IGA ✱ Domino's ✱ The Cheesecake Shop ✱ Oporto ✱ Zambrero ✱ Red Rooster ✱ Donut King But there is so much more to the franchise sector: working in the fitness industry, operating a mobile business, setting up a home-based business... Some of the most searched non-food brands: ✱ Fastway Couriers ✱ Laser Clinics Australia ✱ Jims Mowing ✱ Kumon ✱ Mobile Skips ✱ Mortgage Choice ✱ Plus Fitness ✱ Mail Boxes Etc ✱ Supercheap Storage ✱ Home Instead Senior Care ✱ Tobacco Station ✱ Bridgestone ✱ InXpress Australia

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SHAPING THE FUTURE

OF FRANCHISING

BRUCE BILLSON AT AN FCA CONFERENCE

ruce Billson has many talents. He has small business experience, he’s got the political nous and turn of phrase honed from years in federal parliament, and he’s a bit of a showman – he can really work a crowd. All of these talents he is bringing to his latest role heading up the franchising industry’s peak body, the Franchise Council of Australia.

This non-profit organisation has for decades been the face of the sector which is now worth $144bn but it started out as a franchisor association and has found it hard to shake off the franchisor perspective. Today, says Billson, who describes himself as an ex-Macca’s boy, change is afoot. Broadening the FCA’s reach and representation is just one of many goals set by the board and Billson as executive chairman is a keen advocate for addressing the challenges and opportunities facing the franchise sector now. The former Minister for Small Business, Billson has been in the top seat for a month. Not yet in the hot seat, but appointed and due to begin in July is the new CEO, Damian Paull, who

has an association background. So that’s the first goal ticked off for Billson and the board – CEO appointed. Next will be the development of a clear strategy for the FCA and this is an area Billson has already started working on. He is meeting and asking non-members why they are not involved with the association and weaving their responses into ideas that will help shape the strategy. “I’m asking people who are not members who I think have much to offer, why they are not involved and they are sharing their insights.” Armed with seemingly endless passion and energy for the partnership model of franchising,

and the tasks ahead, Billson pinpoints some of the initiatives of the new wave FCA. Story telling comes high on his agenda – putting a spotlight on the great success stories that abound in franchising. “We’re talking to people at the coal face. We’re looking at how the Certified Franchise Executive program can be expanded, new franchisees who become members could get to participate in the program.” Engaging with mainstream media to reach beyond the franchising community to spread the message about the sector’s growth is vital, he says. That could be through news outlets, through social media, identifying great business stories and putting them in front of business and economic journalists to showcase what’s happening in franchising. “People might think how can I give effect to my entrepreneurial ambitions and the sparkle in my eye, maybe franchising is for me?”

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It’s crucial to inspire with success stories. Problem solving and new ideas are not limited to single franchise operations, he says, because what happens in one franchise can be useful to others. "Hearing these stories at the State Awards the energy is electric.” On a bigger scale, the broad public and government perspective is a focus for Billson, reiterating how the sector adds to the economy and is a platform for innovation. “Franchise systems are researching, developing and deploying new business strategies and insights. “I’m absolutely passionate about what enterprising men and women in Australian can contribute to the economy. It helps that Billson has experience in the ways of politics – he understands how politics works, how opinion leaders form their insights, how laws get passed – because he identifies his role as one of spreading the message

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not just to the public but to government, about the powerhouse that is franchising.

OVERCOMING THE 7-ELEVEN CHALLENGE Then there is the bad news. Of course this is pertinent to the 7-Eleven situation that has shone a spotlight on the franchising sector. Billson is quick to emphasise to the public, and to government, that the troubles faced by the convenience chain are specific to the brand, and not representative of the franchising model. “We need to make sure that people understand there is a much broader story about franchising, and the challenges 7-Eleven faces, many of them are quite particular to their unique and particular circumstance. “We’ve been very consistent in saying no-one in the FCA wants to see employees underpaid, the 7-Eleven circumstance is quite complicated, there are a number of moving parts and plenty of blame to go around but the best thing to do is to make sure that those people who have missed out on their lawful entitlements get those entitlements and where systems have failed to detect non-compliance or worker exploitation that we encourage 7-Eleven to remedy those system deficiencies and that’s what they’ve assured us they are doing. “They’ve made it clear they have been stepping up to own the responsibility of the challenges within their system. It’s not just the franchisor. There are plenty of things that franchisees may have done along the way that could have alleviated those concerns but we know the ramifications right across the franchising sector but 7-Eleven are taking their responsibilities very seriously. “We’re also making sure our own work is supporting franchise systems to do all that

BRUCE BILLSON WITH DAMIAN PAULL

they can to make sure there is no worker exploitation or failure to meet employee responsibilities within their system. “We’ve got a workplace relations framework that enables franchise systems to show the steps they’ve taken to make sure they are not found to be wanting, as 7-Eleven has been found to be wanting.” The 7-Eleven case has inevitably resulted in some fallout, says Billson. “It’s caused some anxieties even with lenders, and we know access to finance is an issue.” The FCA has teamed up with FranData in an initiative to bring back confidence in the lending field by identifying a good franchise system with the appropriate support and information infrastructure. “Now the banks are saying they’d really value that and that would help with their credit assessment processes and that’s where we’re stepping up

to see what we can do to put that kind of quality assurance framework in place.”

AN FCA FOR ALL STAKEHOLDERS Billson admits he has clashed with the FCA in the past, mostly for the association’s tendency to favour the franchisor viewpoint over that of franchisees. “I haven’t been without my arm wrestles with the Franchise Council over the last 20 years and that’s often because the franchisee experience wasn’t in the forefront of the organisation’s thinking. Now I’m making sure that it is. Successful franchisees are the best advertisements and the best precondition for investment into the franchise sector,” he says. “Everyone keeps talking about the importance of small business. Well, I hope everyone continues to talk about small business and entrepreneurship, we are an extraordinarily significant part of the Australian economy - $144bn worth of

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annual turnover, hundreds of thousands of people deriving their livelihood through franchising – we have an awful lot to contribute to growth and jobs in the economy and we are taken, and will continue to present ourselves, as serious players in the national policy agenda of our country.” The FCA of the future will be forward looking and strategic, he predicts. “An organisation that aims to be resourceful, that is making good use of resources and relationships, an FCA that doesn’t seek to replicate the work of others but to synthesise and amplify work that’s relevant to us that we can support while we focus on things that are very specific for franchising, and an FCA that is viewed as the best ally and asset for all stakeholders in the franchise sector. “I love franchising, it’s a great model. And there’s never been a better or more important time to be part of the FCA.”

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QUESTIONS W

hat questions should you be asking before you buy a franchise? Here’s a checklist of essential questions for every franchise buyer.

ASK THE FRANCHISOR ABOUT THE BUSINESS 1. How long has the business been franchised? 2. How long was the business operating before it became a franchise network? 3. How experienced is the franchisor team? 4. What is your financial investment in the business? 5. Who owns the intellectual property? 6. What’s your vision for the business? 7. When was the last brand refresh? 8. What peaks and troughs are there in the business? 9. Are there any financing arrangements? 10. What working capital is required? 11. Are there company owned units in the chain? 12. What’s the fran-

chisee turnover rate? 13. How many franchisees fail? 14. How many franchisees renew their agreements? 15. Is your business a member of the Franchise Council of Australia? 16. Has your business signed up to The Franchise Registry?

ASK THE FRANCHISOR ABOUT FRANCHISEE SUPPORT 17. Can you demonstrate your capacity to offer ongoing support for franchisees? 18. Is training included in the initial cost of the franchise? 19. What marketing support is provided? 20. Who will be the main point of contact for me as a franchisee? 21. How do franchisees

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connect with each other in the network? 22. How do you communicate with franchisees, and how often? 23. How do you help underperforming franchises?

ASK THE FRANCHISOR ABOUT THE FRANCHISE AGREEMENT 24. How long is a franchise term? 25. What restraints of trade exist in the agreement? 26. Is there any exclusivity with the agreement? 27. How often will I need to refurbish the store or update equipment? 28. How are online sales managed across the network? 29. What happens if my business is not a success? 30. What is the process for selling on my business?

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ASK THE FRANCHISOR ABOUT THE FRANCHISE OPERATIONS 31. Is there a call centre for leads and how are these dispersed? 32. How much control will I have over any ordering and choice of supplier? 33. Will I get any help with staff recruitment and training? 34. What minimum orders or benchmarks to I have to meet? 35. How often is the operations manual updated? 36. How is marketing material made available?

ASK THE FRANCHISOR ABOUT THE LOCATION 37. Who finds the site? 38. How are locations evaluated? 39. Do you negotiate the lease with the landlord?

40. Who will hold the head lease? 41. Is there an optimum time to open a business?

ASK THE FRANCHISOR ABOUT FRANCHISE SELECTION 42. What are the criteria you use to select franchisees? 43. What do you think are my strengths and weaknesses as a franchise candidate?

ASK FRANCHISEES 44. Why did your franchise succeed/fail? 45. What are the strengths and weaknesses of the management and support teams? 46. How does the franchisor handle conflict? 47. When did you start taking a wage and how long did it take you to make a

profit in the business? 48. How many hours do you/did you work? 49. Would you buy this franchise again? 50. Can I work alongside you for a day? Alongside these questions, it’s wise to consider your own role as a franchisee and how wellsuited you and your family will be to operating your own business in a franchise network.

It's wise to consider your own role as a Franchise buyers will want to franchisee get as much detail about the investment, royalties and any other expenses too. Of course there will also be legal and financial questions to ask your advisers. Conducting thorough research or due diligence is an important part of the buying process.

JUL/AUG 2016 | 19 | WWW.FRANCHISEBUSINESS.COM.AU

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Why invest in a

FRANCHISE? F

ranchising is a highly successful method of distribution of goods and services so it works for the brand but why does anyone choose to buy a franchise?

Of course it’s a global phenomenon than began in the US and has developed in various forms across the world with some of the most recognised brands on the planet: McDonald’s, Subway and KFC for instance. Franchising has inspired generations of individuals to invest in building a business for themselves – with a little help along the way.

In Australia, according to the Franchising Australia 2014 report by the Asia Pacific Centre for Franchising Excellence, the franchising sector is estimated to be worth $144bn – that includes vehicle and fuel sales – with a possible 1180 systems trading as franchised businesses. So why exactly is this business model so popular? ‘In business for yourself but not by yourself’ that’s a mantra of the franchising sector. And that pretty much sums up the appeal – franchisees have the back-up and experience of the franchisor team and other franchisees which can prove invaluable.

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PHOTO BY QINGHILL, UNSPLASH

12 REASONS TO INVEST IN THE FRANCHISE SECTOR 1. IT JUST KEEPS GROWING This is a billion dollar sector that constantly embraces new systems and innovations across every imaginable industry. 2. MINIMISED RISK There is never a guarantee of success with a franchise - or any other business operation - but working with a tried and tested system makes it a little easier to get established and avoid some of the major mistakes of business ownership.

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PHOTO BY CHRISTIAN BISBO JOHNSEN, UNSPLASH

While it may not be perfect, a franchise system cuts out the need for an individual business owner to create their own processes. What could be better than setting up a business with marketing tools, branding, uniforms, recipes or instructions and an operations manual all ready to go? 3. TRAINING If you haven’t run a small business before, how are you going to learn the basics? Set up your own initiative and you will learn on the job. There’s an element to that in franchising too, of course, but a particular advantage of setting up as a franchise is the initial training that teaches you the key elements of running the business. Many franchisors offer ongoing training that means franchisees can keep updating their skills and knowledge bank. And franchisors may get involved in training franchise employees too, depending on the system. 4. THE POWER OF THE BRAND To set up your own brand and develop customer recognition and loyalty can take years. So it makes sense to harness your talents to an existing brand. In franchising, someone has already built and established the brand for you! 5. COMPETITIVE ADVANTAGE The franchisor is not the only valuable source of information for a franchisee. Other franchisees in the network can offer advice and share their experiences. Business development managers or field support managers are usually on hand to keep you on track with your business plan and to find the most effective ways to achieve business success. And when business picks up for your brand

because of new and improved methods, franchisees following the lead will benefit too. 6. WORK ON THE BUSINESS Working on and not in the business is a common theme in franchising. And because so many systems and processes are already in place franchisees can focus on the elements of the business they enjoy, and spend time building up this asset. 7. ACCESS TO FINANCE We all know that banks are inherently cautious, so if you’re starting out with a brand that has already performed well and has a strong reputation, you stand a better chance of getting the funding you need to buy and then grow the business. 8. ACCESS TO BUYING POWER In a franchise you have the power of the network behind you and buying power can be invaluable. This is equally effective whether you are sourcing ingredients and merchandise, or wanting to secure a fi nancially-favourable rental agreement with a national landlord by accessing the negotiation skills of the franchisor. 9. ACCESS TO INNOVATION In a good franchise business the franchisor is investing in research and innovation to ensure the brand, the systems and the network are staying competitive and relevant. 10. EXPANSION PLANS Franchisees can grow their businesses by adding customers in a territory or by JUL/AUG 2016 | 22 | WWW.FRANCHISEBUSINESS.COM.AU

adding territories or stores to the existing business. Many franchise systems see value in embracing multi-unit operations for their successful franchisees. 11. MENTORING Franchisees can access help from their colleagues whenever they like, but a more formal mentoring program might well be available too either with franchisees in the network or from an external source. 12. RULES AND REGULATIONS It’s a fundamental rule of franchising that compliance must be adhered to but this is really an advantage, not a disadvantage. There are guidelines for both systems and the sector. Franchisees need to be prepared to be compliant and to accept that systems created have proven successful – and buying into the processes is one of the reasons for buying a franchise. Rules and regulations of the sector overall are embedded in the Franchising Code of Conduct. This Code sets out processes for buying and selling franchises, and for the behaviour of both franchisors and franchisees throughout the business relationship. Still not sure if franchising offers the right growth potential for you? Perhaps you want to flex your creativity and are concerned that the rules might be too restricting? You can fi nd advice and guidance on these topics and many more key issues for any franchise buyer on our website www.franchisebusiness.com.au

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I D I D I T. “Jackie and I bought The Leather Doctor franchise because we love being together as a family. But it built up so quickly we became frantic! We trained our son, Cameron and his wife, Kayla to take over the Mackay region while we stay focused on Rockhampton. Truth is, we do better together than what we do apart!” - Jon & Jackie Minards Franchisee

Exciting new brands are now available following the same winning system, The Leather Doctor, The Timber Doctor and The Fabric Doctor. This is real opportunity.

I_DID_IT_MINARDS_205x275mm.indd 1

Call 1300 453 284 or visit www.myleatherdoctor.com.au You can do it too.

15/12/2015 2:14 pm

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WHAT ARE THE SIGNS OF A

PROFITABLE FRANCHISE?

his is an interesting question and with more than 80,000 franchised businesses operating in the Australian market, one that many people before you should have asked themselves.

BY SUZANNE JARZABKOWSKA Suzanne is CEO of DC Strategy, a consulting, legal, recruitment and brand and marketing firm that has advised more than 200 networks and established more than 2000 franchised locations across Australia.

Your ability to evaluate a franchisor’s offer before buying into a network is simply about assessing the risk you are taking. About 80 percent of independent small businesses in Australia fail in the first five years and about half of those fail in the first 12 months. So how do franchised businesses compare? Less than 20 percent of businesses that are part of a franchise network fail in the first five years. But this is still a reasonably high rate of failure, so how do you mitigate against that risk and what should you look for when trying to determine if the franchise you are considering purchasing is profitable? There is a range of decision criteria and working through the following checklist will assist you in your deliberations. JUL/AUG 2016 | 24 | WWW.FRANCHISEBUSINESS.COM.AU

IS THE BUSINESS A SOUND FINANCIAL PROPOSITION? Ask the franchisor for fi nancial data preferably based on franchisees’ and corporate store performance. This may include some kind of business plan or a fi nancial model and hopefully a profit and loss statement (P&L) for other units in the network. Break the numbers down so you can see how many products or services you need to sell, how many clients you need to service and what the average spend would need to be to break even after meeting all your overheads. Not all sites or territories however will be equally profitable and the fi nancial data you have been given may be an average across the network. If the business will be in a shopping mall, visit at different times of the day and on different days of the week to be certain there is enough foot traffic to generate sufficient revenue. What about operating capital and the operating costs? This will vary from business to business so figure out how much money you will need to cover overheads such as rent, wages, cost of goods, utilities, loan repayments and franchise fees until the business becomes profitable.

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Be realistic and don’t forget to factor in your salary during this time so you can maintain your standard of living and meet your rent/mortgage, school fees etc.

HOW LONG WILL IT TAKE TO SEE THE RETURN OF YOUR INVESTMENT (ROI)? Simply, how long will it take to get back all the money you have invested including interest on any loans to purchase the franchise, your operational capital and a reasonable salary during this period? Generally the larger the initial investment, the longer the pay-back period. An investment under $100,000 may return $50,000 to $70,000 annually whereas a $1.2m business may return $250,000 to $400,000. As a rough guide to your of investment and ROI: ✱ businesses under $100,000 may take 12 to 24 months; ✱ businesses from $180,000 to $400,000 may take 2.5 to 3.5 years; ✱ businesses from $500,000 to $850,000 may take around four years; ✱ businesses over $1m may take five or more years.

So it’s critical to ensure that the terms of your franchise agreement and your lease are sufficient to get back your initial investment, and hopefully to build some capital. Franchisees typically spend seven years in a network which, if they are successful, allows them to realise ample goodwill value as well upon the sale of their business.

SUCCESSFUL FRANCHISE CANDIDATES GET VERIFICATION FROM OTHER FRANCHISEES The franchisor is required under the terms of the disclosure document to provide the contact details of all current and past franchisees. Get in touch with as many as possible and ask them all the financial questions noted. Then you can estimate how long it takes you to become profitable and at worst how long you could survive if the business didn’t turn a profit as quickly as you may have calculated.

SUCCESSFUL FRANCHISEES ARE RISK AVERSE ENTREPRENEURS! They want to own their own business and are prepared to work hard. However they mitigate against the risk of failure by buying into a proven and profitable JUL/AUG 2016 | 25 | WWW.FRANCHISEBUSINESS.COM.AU

business system where the franchisor has secured supply, refined the operational systems and processes, developed the brand and marketing and provides sound legal documentation to safeguard their intellectual property.

PROFITABLE FRANCHISE NETWORKS TEND TO BE HIGHLY PRESCRIPTIVE In fact the higher the degree of prescription, generally the higher the profit: McDonalds is a case in point. So you would expect profitable franchises to outline exactly how to run your business; how training is delivered and at what cost; what ongoing support is offered; what marketing the franchisor does and how you would market your business locally. You would expect to know what your responsibilities are: financial reporting, minimum performance criteria, attendance at conferences, operational and brand compliance.

SUCCESSFUL FRANCHISES PROVIDE COMPREHENSIVE DOCUMENTATION: ASSESS IT The documentation should include information about most of the following:

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✱ operations, training and procedures in manuals and/or a learning management system, not only for your induction and training on how to run the business but to hire, train and support your employees ✱ brand guidelines and collateral so you can maintain brand consistency ✱ marketing campaigns and collateral so you can engage in the requisite local area marketing and business development ✱ a communication platform including for example a website and social media communicating with customers; internet and possibly intranet allowing you to communicate and take direction from and report to the franchisor

PROFITABLE FRANCHISEES ARE HARD-WORKING OWNER OPERATORS Many good franchises are both labour and capital intensive requiring a total commitment especially in the early years. Successful franchisees know that an award winning franchisor or brand cannot make them successful. The best a franchisor can provide is a business model, the rest is up to the franchisee which is why you will see very successful multiunit franchisees in the same network with franchisees who fail to thrive or even lose their investment. Becoming a profitable franchisee is a serious undertaking requiring hard work, long hours and sacrifices for you and your family. But taking a medium to longer term view to reducing debt and building wealth first and then lifestyle can offer superior income, flexibility and security.

SUCCESSFUL FRANCHISEES ARE WILLING AND ABLE TO COMPLY You have an opportunity to run your own business, but remember, you are buying access to the franchisor’s intellectual property to reduce the risk of establishing your own business. So your profitability is entirely dependent upon your willingness and ability to comply fully with every aspect of the franchise business as outlined in the operations manuals and the franchise agreement. A franchise is not a democracy!

A GREAT CULTURE WITH PASSIONATE BRAND AMBASSADORS The most successful people work because they believe in what they do – money is a

consequence of that endeavour rather than the driver. Belief in the mission or cultural allegiance drives performance. If you want to be really profitable it’s fundamentally important that you support and believe in the company’s values and are aligned with the founder’s vision. Make sure the franchise matches your experience and skills, that you are sufficiently passionate about the industry, and that the brand and culture fit is right for you. Your genuine commitment to the brand will drive your employees’ commitment, your customers’ loyalty and ultimately your profitability. While the culture may seem less important than a sound financial proposition you need to believe in what you do to be really successful.

SUCCESSFUL FRANCHISEES TAKE PROFESSIONAL ADVICE In the same way you wouldn’t make a major purchase such as a house without a building or pest report, it is simply good sense to take professional business and legal advice when buying a franchise. The Franchising Code of Conduct requires franchisors to recommend that you seek legal and financial/business advice. This highlights the serious nature of the agreement protecting both parties and allowing you to fully assess the representations made by the franchisor. There is a section underneath this recommendation where – if you decide not to take such advice – you must sign to show you have declined to do so. Whilst buying a franchise is less risky than starting your own business, there is no guarantee that your franchise business will be a success simply because it is a franchise. So get advice in writing from a lawyer and an accountant or business advisor who specialise in franchising and try to get a fixed fee quote for that advice upfront.

PROFITABLE FRANCHISEES MANAGE RISK Buying a franchise is an exciting opportunity to work for yourself. But there are over 1200 franchise systems out there and many fail to thrive, scale or capture market share. Understanding the decision criteria in assessing and researching each of these opportunities diligently reduces the risk of losing your investment. It also ensures that with hard work you too may join thousands of successful profitable franchisees in building future wealth and security for you and your family.

JUL/AUG 2016 | 26 | WWW.FRANCHISEBUSINESS.COM.AU

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Visit www.sumosaladfranchise.com or contact Andrew Wild at andreww@sumosalad.com for all the information you need to make a healthy business choice.

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DO YOU HAVE TO

STAY? F

ranchise agreements generally specify the length of time, or term, for which they will run. Usually, this is then the length of time for which a franchisee must operate the business. However, in some circumstances a franchise agreement can end early. We look at some of these situations below.

DURING THE COOLING OFF PERIOD A franchisee can exit a franchise agreement within seven days of first entering into the agreement or paying any non-refundable amounts, a period known as the cooling off period. If you are having doubts about a franchise agreement you have just entered into, do not delay and discuss the situation with your advisors. The time limits are strict and it is important you do not let them lapse due to delay. It is important to remember that if you withdraw from the agreement during the cooling off period that the franchisor is entitled to retain

their reasonable costs. This means that you may not get a full refund of monies paid to the franchisor.

SELLING A FRANCHISE Another common way a franchise agreement’s term can end early is sale of the franchise. Selling or transferring a franchise can be an excellent way for a franchisee wanting to exit the network to realise value from their investment and to ensure continuity of the business. Generally franchisors do not oppose sales, however, there are a few things to be aware of: ✱ A transfer request will need to be given to the franchisor, to which the franchisor cannot

unreasonably withhold consent. If the franchisor does not object within 42 days, the request is taken to be granted. ✱ There may be a transfer fee or other terms that apply. The franchise agreement will generally spell these out. ✱ Appropriate sale agreements and deeds of release and indemnity should always be entered into, to ensure the new franchisee bears all responsibility for the franchise moving forward. ✱ Any outstanding bank guarantees should be returned to the outgoing franchisee and replaced by the new franchisee and any personal guarantees should be discharged as part of the sale. ✱ For franchisees looking to exit their franchise, sale of their business is generally the best way to realise value.

TOMAS MELICHAREK Tomas is a corporate lawyer at Baybridge Lawyers, with a focus on mergers and acquisitions and experience across a wide range of commercial transactions

BY MUTUAL AGREEMENT Another way a franchise agreement can be brought to an end early is by mutual agreement between the

JUL/AUG 2016 | 28 | WWW.FRANCHISEBUSINESS.COM.AU

PHOTOS BY BEN ROSETT, UNSPLASH

Signal88-201607-FP

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SECURITY FRANCHISES

Founded in 2003 in Nebraska USA and located in over 160 areas in the USA and Canada, Signal 88 Security is now looking to expand into Australia.

✹ Previous Security

✹ Ideally, prospective Franchisees will

✹ Comprehensive

✹ Start up cost:

Experience is not required. Training provided.

have some management experience.

From $50-$80K

We’re on the lookout for new franchise operators, so if you think you’ve got what it takes, and are ready to lead the way in your own business – contact us today!

signal88.com.au

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franchisee and franchisor. In some cases the business may even be bought back by the franchisor, although there is no obligation on the franchisor to do so. Although this will generally not realise as much value as a sale to a third party, this can be the right option for franchisees wanting to exit a network without a ready buyer. It is important, however, to note a few important considerations: ✱ If you are the lessee under a lease to the business premises, the lease will either have to be terminated with the consent of the landlord or assigned to the franchisor. Similarly, any supply agreements and other contracts entered into during the course of the business will have to be dealt with. ✱ It is important to ensure that no personal liabilities, guarantees or bank guarantees are left outstanding. ✱ It is crucial that appropriate documentation is entered into (including with any landlord) to document the sale or termination. As long as the arrangement is documented properly, a mutually agreed exit or buy back can be a good way for a franchisee to exit a franchise.

IF THE FRANCHISOR GOES OUT OF BUSINESS Business is risky and not every franchise succeeds. Sometimes, unfortunately, a franchisor can become insolvent or even go out of business, leaving the question of what happens to the franchise network and whether franchise agreements are terminated early. Such situations are generally very complex and will depend upon legal advice, but

some important considerations include:

alternative premises can be located.

✱ If the franchisor holds a head lease over the premises, the franchisee may lose their right to occupy the premises. A continued right to operate may often be negotiated with the landlord. ✱ The franchisee may lose the right to use the brand and rebranding may need to be discussed and considered with the franchisor to keep the business operating. ✱ If the franchisor supplies stock, software or marketing and training support, the franchisee will generally lose this support and will need to find alternative suppliers. ✱ Even though the franchise may be at an end, the franchisee’s obligations to suppliers, landlords, employees, banks and other creditors will generally remain. It is therefore important for franchisees to consider alternative arrangements to keep the business operating. ✱ It is important to note that a franchisor going into administration does not automatically spell the end of the franchise. If the franchisor, operated by administrators, continues to meet its obligations, the franchise may continue operating.

If appropriate premises cannot be found, it may be necessary to end the franchise agreement early. The considerations outlined above for termination by mutual agreement will apply and should be considered.

Franchisees should contact their legal advisors and review the terms of their franchise agreements in such circumstances to explore what options may be available.

IF THE LEASE ENDS In some situations, for example, where the premises are damaged beyond repair or the lease term is less than the franchise term, a lease may end earlier than the franchise agreement and the franchisee may find themselves without premises. The franchise agreement will generally spell out what happens in such circumstances and how JUL/AUG 2016 | 30 | WWW.FRANCHISEBUSINESS.COM.AU

IF THE FRANCHISEE IS IN DEFAULT Unfortunately, sometimes franchisees find themselves unable to comply with their franchise agreements and in default of their terms. Franchise agreements will spell out what happens in case of default, including when the franchise agreement can be terminated. Franchisees should do everything to avoid default, as the franchisee will generally be liable for the franchisor’s damages and losses as a result, including for lost royalties. If a franchisee is struggling to comply with their franchise agreement, it is best to urgently seek legal advice and to open negotiations with the franchisor about remedying the problem.

GET EXPERT ADVICE While franchise agreements will normally run their full term, in some situations franchise agreements can end early. Depending upon the circumstances, the likely consequences and value realised from the business will, however, differ. Franchisees in these situations should consult their advisors and consider carefully what option will best allow them to exit the franchise and end their franchise agreement early.

FR0915_000_DOM

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MAKE break? OR

ranchising is a business and, like any business, success isn’t always guaranteed. Researching and investigating the franchise system before signing-up will help you make an informed decision about the franchise’s likely success, including its short-term and long-term viability.

Here are a few tips.

A FINE TOOTH COMB Disclosure of key information to would-be franchisees is a driving force behind the mandatory Franchising Code of Conduct. Under the Code, a franchisor must provide specific documents to help you make a decision about whether to proceed with the franchise. You should receive: 1. an information statement—a two-pager highlighting the risks and rewards of franchising 2. a disclosure document— containing key ﬁnancial information and details about the system 3. a copy of the franchise agreement—which becomes a legally binding contract 4. a copy of the Code Read these documents carefully and pay close attention to things like territory, online sales, purchas-

Don’t rely on verbal claims made about earnings: ask the franchisor to put the figures down on paper.

CHECK THE BOOKS ing ability, site selection, payments and end of term arrangements. Your research should also involve verifying any information provided to you by the franchisor. It’s important that you seek professional legal, accounting and business advice to assist. You should also verify information by speaking to former and current franchisees.

DO THE SUMS The franchisor may provide you with earnings information. This may take the form of historical figures or a projection or forecast. Either way, if the franchisor has provided you with projected earnings, it must also provide you with information about the assumptions on which the projection is based. An accountant or business adviser will be able to assist you compare and verify any figures or projections.

The franchisor’s financial situation will be a deciding factor. The Code requires the franchisor to present certain financial details in the disclosure document. This includes a statement of the franchisor’s solvency, supported by financial reports for the past two financial years or an independent audit. Use this information to form an opinion about the viability of the franchise and the level of investment risk. Again, an accountant is an invaluable resource and will be able to help you explore this further. If updated fi nancial details become available after the franchisor has provided you with a copy of the disclosure document, the franchisor must provide you with the new details as soon as possible. The franchisor must provide updated fi nancial details before you enter into the franchise agreement.

JUL/AUG 2016 | 32 | WWW.FRANCHISEBUSINESS.COM.AU

DR MICHAEL SCHAPER Dr Michael Schaper is deputy chair of the Australian Competition and Consumer Commission, the agency responsible for enforcing and encouraging compliance with the Franchising Code of Conduct.

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JOIN AN INDUSTRY WITH GROWING POTENTIAL NIRVANA BEAUTY LASER CLINICS PRESENTS AN EXCITING OPPORTUNITY FOR INVESTORS AND FRANCHISEES 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. With Nirvana Beauty Laser Clinics you will experience the satisfaction of delivering results-driven treatments for many happy clients with state of the art technologies. Achieve a true work-life balance and live the life you always wanted. Enquire today!

For enquiries contact us at: franchise@nirvanabeauty.com.au www.nirvanabeauty.com.au 1300 761 925

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KEEPING GOOD COMPANY Do some general internet searches on the franchise and the franchisor. This may help you identify information relevant to your decision whether to purchase a franchise. Companies, businesses and other traders must be registered before they can operate legally in Australia. Having the correct registrations doesn’t guarantee that the company or business is totally genuine, but it’s a good start. The Australian Securities and Investments Commission website (www.asic.gov.au) is a useful resource where you can do a background check to see if the company and/or business name is registered in Australia. You can also fi nd information about the company and the people that you are dealing with. You can take these leads and do your own detective work. Consider: ✱ What sort of background do the operators have? ✱ Have they been involved in other business ventures

and how did they turn out? ✱ Is the franchise business a member of a professional or trade association?

are many apartments and restrictions on pet ownership or where the local pet shop offers customers free dog washes.

There are many questions to ask.

‘COURT’ OUT

KNOW YOUR MARKET

A franchisor is also required to disclose the details of court proceedings against the franchisor, a franchisor director, an associate of the franchisor or a director of an associate of the franchisor. If legal action has been taken, you should obtain further information about the matter and the outcome.

Do some research on the market for your product or service and the industry in general. It’s important that you consider the sustainability of the product or service. For example: ✱ Is the product a passing fad? ✱ Are there any seasonal changes in demand? ✱ Does the franchisor have solid evidence to back-up claims about the efficacy of the product? Who are your competitors and where are they located? Once you understand the market for your product or service, you should then research the proposed franchise territory or site to see whether it is suitable for your franchise. You should look at the demographics, culture and spending habits of consumers within the area. For example, a dog washing business might struggle in areas where there

As part of your research when buying a franchise business, you should check whether any government agency or private party has taken legal action against the franchisor or any other persons responsible for the management of the franchise (including directors and majority shareholders) and/ or the franchise itself. To do this you can search the ACCC website, the ASIC website or court listings. MORE INFORMATION IS AVAILABLE AT WWW.ACCC.GOV.AU/ FRANCHISING

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A RECIPE FOR DISASTER The ACCC strongly recommends that you seriously reconsider a business opportunity if you see any of these warning signs. If you ignore them, your decision may come back to haunt you. Look out for: ✱ Claims you can make large amounts of money quickly and with little effort—i.e. ‘get rich quick schemes’ ✱ A reluctance to give you the contact details of the other franchisees or to put claims made to you in writing ✱ A requirement that payment be made up front before any information is released ✱ The provision of inconsistent financial information about the business’s profitability, and ✱ Incomplete or limited disclosure about the franchise system and/or franchisor.

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10 THINGS to avoid when you buy a franchise

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JANE GARBER-ROSENZWEIG Jane’s practice, Gable Lawyers, focuses on commercial law, franchising, distribution and licensing on a domestic and international basis, leasing, and the protection of intellectual property. Jane is also adjunct lecturer at the College of Law and a board member of Awards Victoria.

urchasing a franchise business may seem like an easy task. If you are buying into a wellknown brand, what could possibly go wrong? The answer is it may not be all that it seems and in your search for a perfect franchised business, you should carefully consider all facts at hand and do thorough research.

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Here are 10 things to definitely avoid when evaluating a franchise opportunity:

Not obtaining advice from an accountant and a solicitor may be your downfall and one of the biggest regrets you will have

1. NOT DOING PROPER DUE DILIGENCE Due diligence is just another term for an in-depth investigation of the franchised business in question. It is a task that must not be undertaken lightly, as it can determine whether the decision to buy a particular franchise is the right choice for you. The due diligence process can assist a franchise buyer verify financial and other records of the franchised business, evaluate its viability and discover any problems with the system or the franchise management team. Underestimating the importance of thorough research is one of the biggest mistakes made by potential franchises.

2. BEING LURED IN BY THE GLOSSY ADVERTISING AND PROMISES OF BIG RETURNS Many a franchise system will advertise its business opportunity using glossy marketing brochures with promises of great financial returns. Although in most cases the promises are justified, you must verify all the financial data provided, do your own calculations, assessments and forecasts. You must evaluate all the promises made and check the information to the best of your ability and that of your advisers.

3. FRANCHISORS IN FINANCIAL DISTRESS It only takes a quick Google search to discover if a particular franchisor has recently been in financial trouble. Of course the franchisor’s prior

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financial difficulties do not in itself mean that the opportunity presented to you is a bad one. However, you should always proceed very cautiously if there is history of financial issues. One thing to remember is that should the franchisor eventually become insolvent, you may end up not having any rights to run your business, depending on your set up, industry and purchasing channels.

4. NOT GETTING ADVICE When buying a franchise, not obtaining advice from an accountant and a solicitor may be your downfall and one of the biggest regrets you will have. Financial figures need to be verified, projections analysed and forecasts and budgets created. Legal documentation needs to be checked and explained to you,

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so that you understand what you are signing up for before it is too late to get out.

5. NOT SPEAKING WITH OTHER FRANCHISEES Speaking with current and past franchisees of the franchise system you are considering joining is absolutely essential, as they will be your best source of information about the franchisor, their operational requirements and day to day issues.

6. NOT UNDERSTANDING THE INDUSTRY AND ITS REQUIREMENTS When buying a business, especially if you are planning to operate it rather than be a passive investor, you must understand what is required and how it will affect all aspects of your life. For example, managing a bakery, even if you will employ a

baker, may require you to be present at the bakery in the middle of the night or in the early hours of the morning. Another example is if you are running a retail store, which is open seven days a week, and you are the main employee: you will be missing out on weekends with your family. Think carefully how the franchised business you are interested in fits in your life.

7. UNDERESTIMATING FINANCIAL COMMITMENT When calculating the investment required, including working capital and payments of ongoing fees, fixed and variable, franchisees often grossly underestimate the total amount. This leads to financial trouble and in turn may lead to losing the business, the family home and even bankruptcy.

Once again, the assistance of an experienced accountant should reduce the variance and include any possible extra expenditure in your budgets and forecast calculations.

8. BUYING A FRANCHISE BUSINESS DOES NOT ASSURE SUCCESS There is a common misconception that if you purchase a franchise, your business cannot fail. This cannot be further from the truth. Many franchised businesses have failed and continue to fail. However, often such failures are due to the operational incapability of and mismanagement by the franchisee.

9. THINKING THAT THE LARGER THE FRANCHISE CHAIN IS, THE BETTER IT MUST BE Bigger is often not better. Franchisees in a large franchise

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chain may be barely making ends meet, whilst its smaller competitors may provide a much greater return on investment. This is another area where due diligence is imperative.

10. OVERESTIMATING YOUR BORROWING CAPACITY It is common for potential franchisees to miscalculate how much funding the bank will lend them. Gone are the days when banks would lend up to 70 percent of the total investment against the business, if it was part of an accredited franchise group. Before signing any documentation, it is worthwhile ensuring that your financial institution will come to the party and lend you the required amount against the business and against your other assets.

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Unlocking dreams: BRISBANE AND MELBOURNE EXPOS

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he Brisbane and Melbourne Franchising expos are right around the corner, and are the place to be if you are after more information on buying a franchise. The Brisbane show will be held from July 23-24 followed by Melbourne: August 26-28.

If you have been considering buying a franchise, but want to know more about how it works - the expos will be showcasing a number of household brands and up and coming ones too.

THE SKY’S THE LIMIT

The franchising industry is still growing, despite being a mature sector. In the five years up to 2015-16 there is an expected annualised growth of 2.8 percent. In the five years through to 2020-21, growth will be a steady 2.3 percent. This will take the sector’s franchisor revenue to $192.6 bn. Bruce Billson, executive chairman of the Franchise Council of Australia (FCA), will be at the Melbourne and Brisbane expos. “I’m excited about strengthening the FCA’s engagement with franchisors and franchisees and continuing to build confidence in franchising as a proven and effective model of doing business,” says Billson. “Franchising is a dynamic business model that provides franchisees with the chance to own their business, but with the knowledge and resources of your franchisor behind you,” he adds.

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Billson emphasises the importance of potential franchisees researching before investing in a franchise, and the expo will be a hub for buyers to talk directly to those involved in the franchise sector. “Franchisees should also make time to attend the free FCA seminars featuring successful franchisees and franchisors from different brands sharing their franchising journeys,” he says. Fiona Stacey, exhibition manager, says “The shows are a great place for visitors to meet face to face with business owners and operators; it also is where

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they can compare all the opportunities available as well as speak to experts in the industry (FCA, consultants, advisors).

New franchise systems will be exhibiting as well as the well-known brands. It’s the place to find the franchise systems of the future

“From seminars they can learn about what franchising is, if it is a type of doing business that will suit them, and what makes franchising work. They can hear from franchisees in the panel sessions giving firsthand experience which is invaluable for them. “New franchise systems will be exhibiting as well as the wellknown brands. It’s the place to find the franchise systems of the future.” Her advice to visitors is simple. “Spend a minimum two hours in the show, be sure to visit the FCA stand at the front, research the exhibitors before you come (the names /

websites are on our website), time your visit with the seminars that you want to attend (also on the website), and ask lots of questions of exhibitors.” Aside from being available to talk to potential franchisees at the exhibition, the FCA has a range of resources available to assist potential franchisees to begin their journey. The FCA website at www.franchise.org. au provides some useful background information and links to further resources, including Griffith University’s free pre-entry online course. There is a comprehensive web based listing of professional advisers and franchise systems at the official online directory, www. franchisebusiness.com.au

WHO IS EXHIBITING? Among the featured franchises, below are some of the

Bedshed franchisees sleep well.

brands that will be exhibiting at the expos: BRISBANE: ✱ Degani ✱ endota spa ✱ GeoWash ✱ Minuteman Press International ✱ Poolwerx ✱ Property Club ✱ Sharetea ✱ The Coffee Club Franchising ✱ WH Smith Franchising ✱ Xpresso Mobile Cafe MELBOURNE: ✱ Cafe2U ✱ Fastway Couriers Melbourne ✱ Ferguson Plarre Bakehouses ✱ Lenard’s Chicken ✱ Mail Boxes Etc ✱ WH Smith Franchising ✱ Degani ✱ Smartline Personal Mortgage Advisers ✱ Snap-on Tools ✱ The Leather Doctor

Independent research shows Bedshed franchisees are more financially satisfied than 84% of the franchising sector. You get the freedom and flexibility of being your own boss but with the support of a franchisor behind you with over 30 years of experience. Let Bedshed take the headache out of financing your new business with our flexible finance support options. Get a better lifestyle at bedshed.com.au/franchising or call Rod Parker on 0419 494 480 or 03 9439 5594.

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IN DEPTH BRISBANE BASE ZERO Base Zero is a niche mobile rock climbing franchise and is debuting at the show. The initial investment cost ranges from $85,000 + GST to $175,000 + GST depending on territory, existing client base and value of equipment purchased. The model includes e-learning, territory training. The network support office provides a dedicated team for operational support, allowing franchise partners a flexible three to four day work week. A franchise term is initially five years, with two further options to renew. THE PROPERTY CLUB The Property Club specialises in investment education,

detailed property research and quality support services for their members. A franchisee licence is $49,000 per 100,000 population territory. The licence term is for a period of five years with a renewal option at a nominal fee. Franchisees must be experienced as a property investor, selfmotivated, honest, have an entrepreneurial spirit and be customer oriented. LAVA COFFEE Lava Coffee is an Australian-owned specialty coffee franchise. Its mission is to serve the highest quality espresso based coffee and creating communities in non-traditional locations. Investment levels range from $30,000 to $50,000, which covers fit out costs, training, and an initial opening pack. Royalties are a flat weekly fee of $350 +

GST. The franchise term is five years with an option for another five. If you have a passion for good coffee and customer service, this may be the franchise for you. CAR CARE Car Care specialises in mobile car detailing with operations across the country, championing the work/life balance. Franchises are $46,200 (excludes van) for a 10 year term (an initial five years plus possible renewal), and are inclusive of detailing skills, marketing, sales and basic business training. Buyers need to have a willingness to work, a customer focused attitude and be able to follow a proven business model. PIZZA TEMPTATIONS Pizza Temptations has big goals — to be the biggest

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pizza chain in Australia, and offers proven marketing strategies and recipes as well as the biggest point of difference— dessert pizzas. The initial investment cost ranges from $100,000 to $200,000, depending on site location. The term is a five year franchise agreement with an option to renew. Franchisees receive on-going support with one-on-one coaching from the network.

people with bad credit ratings a chance to own a car on a simple payment plan with no interest charges. Initial investment to purchase a franchise is $60,000 for a five year renewable term. The model includes IT, marketing and training support. Franchisees typically have a motoring or finance background, and are husband/ wife or father/son teams.

IN DEPTH MELBOURNE

Choice Home Loans is a franchised mortgage broker that works with more than 30 banks and credit providers and a full suite of residential and commercial lenders. The initial investment ranges from $7,500 to $15,000 for an ongoing term duration, and the franchise model business planning

RENT 2 OWN CARS Rent 2 Own Cars (R2O) is a national and soon to be international franchise that taps into a niche market in the retail automotive industry. R2O allows

CHOICE HOME LOANS

and coaching support from a business coach, training, a generation program, national sales support, marketing, recruitment and IT support. Ideal franchisees are experienced financial services professionals, mortgage brokers or those simply looking to own their own broking business with a reputable brand. A strong sales acumen and the drive to grow a sustainable business are desirable. UFC GYM The UFC gym franchise offers mixed martial arts as its niche, with the inclusions of a standard gym. The initial cost of investment is $400,000 to $700,000 for a 10 year term, which includes sites with areas for equipment

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Spend a minimum two hours in the show, be sure to visit the FCA stand at the front, and research the exhibitors before you come

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Visit www.propertyclub.com.au/ property-club-business-opportunities/ Call 1300 663 282

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Franchising is a dynamic business model that provides franchisees with the chance to own their business, but with the knowledge and resources of your franchisor behind you

and facilities. Franchisees are provided marketing, social media, consultant support. Head office supports franchisees but the model is also designed to empower franchisees’ leadership and to drive profits. Ideal franchisees have a basic understanding of business, some idea of the fitness industry, but more importantly a real passion for the UFC brand. EXPRESS BUSINESS GROUP Express Business franchises specialised services in a range

of categories, including home services, residential and commercial, wellness and development, cleaning, professional services, and maintenance. The initial investment cost of a franchise ranges from $5,950 to $10,000 for a term duration of five years. The model includes all initial equipment, marketing materials, thorough training, and ongoing support from the network. Franchisees need the drive and motivation to be their own boss. In some cases, licensing or qualifications are required however Express Business assists franchisees during this process.

AUSSIE One of Australia’s leading mortgage brokers, Aussie franchises start from $6,500 with a term duration of 10 years. The model includes business, sales, marketing and recruitment support from the network, as well as training programs. Franchisees can leverage Aussie’s well-known brand and build their own flexible, rewarding and successful businesses without capped commission. Successful franchisees come from all backgrounds and do not necessarily need a finance background.

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The Brisbane expo will be held on the 23rd – 24th July 2016 at the Brisbane Convention & Exhibition Centre, and the Melbourne show will be held on the 26th- 28th August 2016 at the Melbourne Exhibition Centre. Both events will run from 10am-5pm. To register for free tickets at the shows, use the code FMG. Visit www. franchisingexpo.com.au

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Sweet

SATISFACTION

elicious iced treats, sugared delights, indulgent confections…we love our sweet treats and the franchise sector has responded with popular chains dishing up classic and innovative taste sensations for our delectation, writes Sarah Stowe. SAN CHURRO

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GELATISSIMO

That’s good news for potential franchisees wanting a slice of their own dessert business with a well-known brand as a key ingredient.

we’ll be talking about sugar for a while.” So what impact does this have on the sweet treats retailer?

Michel’s Patissserie in its portfolio, has identified the pressure on food retailers to provide healthy options for consumers.

But with Australian society showing an increasing focus on healthy eating, what about the anti-sugar consumer?

Stan Gordon, franchisor of Trampoline and Cold Rock Ice Cream, says “There is no denying that a war on sugar has been declared and people are looking for the ‘better for you’ options.”

“It seems the thinking for most consumers is along the following lines: “If I’m healthy most of the time then when I do have a blow-out I can afford to really have a blow-out!”

However, he’s upbeat about this apparent obstacle.

That leads confectioners, pastry chefs, ice cream and gelato makers to focus on the quality and authenticity of ingredients so consumers can revel in the indulgence of their treats.

Lauren Bandy, senior nutrition analyst at Euromonitor, isn’t concerned. “Generally, we’re not seeing a strong anti-sugar movement,” she says. “However the mainstream media continues to talk about the effects sugar has on health, and the government looks at advantages and disadvantages of sugar tax, so it’s unlikely to go away. “Ten years ago we were all talking about fats, but I think

“This presents us with a fantastic challenge, as we believe consumers still want treats, but they don’t want to see artificial flavours or high amounts of sugar on the label.” Retail Food Group, which includes Donut King and

based on a family recipe. But that doesn’t stop the business from innovating. “We’re trying quite a few things, releasing something new every month,” explains Fred Pose, franchise development manager. While the innovations drive social media, there is a direct impact on store sales too, says Pose. “People come out to taste and see what we’re creating.”

GELATISSIMO

And they don’t stop with a taste-test. Customers trying out the new, quirky flavour will also purchase their favourite as back-up, he explains.

Gelatissimo is the Aussie brand built on Italian heritage. Its award-winning gelato is

Changing consumer behaviours are boosting the business.

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TRAMPOLINE

“Dessert is becoming its own food location, it’s exciting. We have to lift up the game, make it compelling.” In a growing marketplace, eating at home or at another venue and then heading off to a dessert outlet for the final sweet touch to the meal is increasingly common. “We are the occasion,” Pose suggests. In metro areas independents offer a personal perspective on the café and dessert scene, perhaps something a little more atmospheric and quirky. But while good operators can be worthy competitors, “not many are doing it really well,” suggests Pose. “We can be more consistent.” Gelatissimo leverages its strong branding, communicating with its customers and reaching a broad audience which drives people to the stores. The good news is that costs are becoming more reason-

able. “Our cost of goods is pretty good, and what we are seeing in rent is that landlords are taking a reality check and making it a lot easier to open and maintain a business,” says Pose. Casual dining might be a strong trend in the fast food sector but Pose believes the high street is still the prime location for Gelatissimo sites. “We have a few outlets going into casual dining that we are trialling but the high street works really well for us.”

BASKIN-ROBBINS General manager David Jordan joined Baskin Robbins two and a half years ago. “We’ve seen such changes. We were still looking at the business of dessert as transactional rather than experiential. We talked about experience but it was not part of our fundamentals.” One of the challenges Baskin-Robbins faced was the perception of outlets as takeaway stores so a fresh

design with a café ambience has been unveiled. “The QSR market has had a very challenging year in sales trends. It comes back to the fundamentals of offering a good product and service. There will be more and more operators coming in. I really believe where the challenge in retail is to build a great team, stick to standards, focus on customer service and consistency.

recognise what people want – it’s the convenience factor. Now some of the best restaurants do home delivery. If we do it we have to do it properly, we have to execute well. “People are willing to pay for quality but they will shop around so store brand loyalty is harder to maintain.” Customers want quality and value and authenticity – at the right price, he says.

“We have to stop and ask ourselves, are we delivering a great experience? If we’re not, any dollars spent in drawing customers to our stores are wasted.

TV shows and media coverage have brought cuisine creativity to the fore, he says, with food blogs adding to the awareness of high standards of presentation.

“We are looking at larger cafes, express stores with one cabinet, kiosks, vans, carts.

“Any consumer can be an expert. Technology has been a wonderful device to bring people together to talk about food, and share great experiences, using pictures and words to communicate about food.

We recognise it’s going to get tougher, so we are looking at less conventional ways to do business.” Baskin-Robbins might add in home delivery as a service. “We have the opportunity to

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“People are looking for something a little different, something they know but with a twist.

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Dessert is becoming its own food location. We have to lift up the game, make it compelling

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Tea has regained popularity as an ingredient. Then there are the old favourites: butterscotch and salted caramel. Innovations such as savoury tastes – bacon for instance – are mixing up the savoury/ sweet flavours.

“We understand what works for us, we’re storefront, late night trade. We’re allowing franchisees to redesign to suit store demographics or the store façade. We’re ok with franchisees having individuality.

ST LOUIS HOUSE OF FINE ICE CREAM AND DESSERT

“We are happy and prepared to adapt the menu slightly for particular locations.”

Inspired by the atmospheric cafés of Paris with their delicious desserts, the St Louis chain is headed up by franchisor George Karamalis. He believes today’s customer has high expectations of a dessert café.

Innovation in desserts include Archie’s cookie crunch – a meringue and shortbread dessert in a tall glass, ice cream flavours Baileys, pretzel, and salted caramel, and take-home packs might come in for winter.

“Social media plays a huge part, because customers are able to share what they enjoy. But it’s not a one-way street, they also share what they don’t enjoy.” So the culture and the experience is what counts, he says.

While people want to eat healthy meals they have come to a happy compromise – eat well during the week, then indulge with cheap meals and decadent desserts.

“We always try to adapt and have vegan, low sugar options, try to cater for all types.” Karamalis is resisting the temptation to be drawn away for the core business. St Louis is introducing a small lunch offer but, he says “we don’t want to take away from what we do, we remain and ice-cream and dessert bar”. “We’re about to employ an ice-cream specialist from Italy, who will focus on the artisanal, craftsmanship aspect of the business. “We’re not prepared to cut corners on our quality. We have preferred suppliers for cakes and we distribute ice-cream to stores. We make fresh daily, that’s important, it’s not shelved. “We want customers to feel they have had value for money

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and that they have walked out of a French ice-creamery.”

COLD ROCK AND TRAMPOLINE Stan Gordon, CEO of Franchised FoodCo (which includes the dessert brands Trampoline and Cold Rock Ice Cream) says the hybrid dessert remains a popular, and quirky, option for consumers. Think Cruffin (a mix between a muffin and a croissant) and the Cronut (a croissant and donut). Customers are harking back in time too, he believes. “In Australia, nostalgia still runs deep in dessert desires for consumers, with adults wanting to reminisce about their favourite childhood classic candies. “We are always very mindful of keeping the balance

between serving classic items, which keep our customers coming back for more – while also catering to the appetite of those looking for new and novel items. “Seeking out and listening for news on emerging global food trends is critical; I spend a fair portion of the year travelling internationally to make a note of what is taking off overseas.” However, sweet treat success is not achieved solely through flavour. “Consumers will always spend their dollar at a place that they can relate to; that value is perceived and that their experience is enjoyable,” says Gordon. He believes achieving digital engagement is similar to customer engagement in-store: give the customers a great experience.

“We listen to our customers; and we keep an eye on how they’re engaging with our brands to ensure that we’re hitting the right notes. “The beauty of social media advertising is that you can track the impact of your investment and how people are responding, but you have to be prepared to make ongoing modifications to ensure your brand is feeding the consumer’s appetite.”

MOVENPICK Five years ago Movenpick was just an ice-creamery with customers purchasing on impulse, wandering down the street with the ice-cream. It was classic, European style. Now, says country manager Dennis Khoury, the Australian market has shifted to a dessert experience. It’s very

social, no-one goes to ice-cream boutiques alone. “We’ve become an evening business, it’s all about night time.” The big trend is the dine-in immersive experience. That’s had an impact on the menu too: it’s all about sharing plates. “Gone are the days of each person buying something individual for themselves. Now the group wants to share. “Innovation is critical. It used to be every two to three years, now it’s twice a year, summer and winter. We’re very lucky our ice cream is traditionally made for fine dining restaurants. We’ve always had items from great innovations to be used as dessert creations.” It is important to stay focused in the face of increasing compe-

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ST. LOUIS

Q&A: DONUT KING AND MICHEL’S PATISSERIE 1. What are the trends in the dessert market? The dessert market is seeing a hybrid trend, with local boutique stores and larger brands creating unique flavours by combining two different nostalgic products. For example, at Christmas time Donut King released the Fruit Mince Donut. Decadence is another key trend but a strange dichotomy, with the pressure on food retailers to provide healthy options for consumers. 2. How can a dessert brand make its mark in social media today? Engaging content and visually appealing imagery is a key driver for social media today. To amplify engaging content it is important to invite collaboration with key influencers, or invite audiences to be part of the new product development process by sharing new products and flavour profiles, then consider seeking the input from online audiences. 4. What role does innovation play in the menu? We are becoming a nation of foodies and so it is essential for national brands to remain nimble and constantly reinvent themselves. Personalisation has also become very popular in today’s market. 5. What are the challenges in food retail right now? Our customers are increasingly interested in street food vans and food markets. These small operators are nimble and constantly experiment with their offering. To mimic this innovation and speed to market is very difficult; our very size and operating processes making it hard to respond quickly to market demands. The key then is to be one step ahead of small independents by predicting trends well ahead of time and be first to market.

MOVENPICK

6. What’s happening with rents, labour and cost of goods? All are increasing and creating tremendous pressure on store owners to survive. It is important not to lose sight of this fact for a franchisor. While we cannot influence these external factors, we can do everything possible to provide franchisees with a competitive edge in innovative marketing and product development. BASKIN ROBBINS

7. What can franchisees expect from your franchise systems? Franchisees have access to a world class training facility. We also support them with marketing, operations and provide advice and assistance through our Franchisee Care Centre. Ongoing, our franchisees can expect best in class strategic marketing effort, ensuring that the brand they have bought into remains fresh and appealing to our target audiences. Our marketing teams provide big picture strategic marketing support as well as smaller localised marketing support to ensure visibility for each franchised store in their local community.

JUL/AUG 2016 | 54 | WWW.FRANCHISEBUSINESS.COM.AU

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tition, says Khoury, and not be everything to everyone. There are three different retail formats: the kiosk, parlour, gallery – small, medium, large – and it’s essential to get the right store in the right location. You can’t put a gallery store everywhere, he adds. And of course as with any food business, franchisees have to be able to manage rents, labour and cost of goods. “They have to be able to manage on a daily basis, so it’s not a model suited to investors. You have to manage it closely, and an owner-operator is generally able to manage quite easily,” says Khoury. “With a Swiss company, when you think Swiss, you get world class precision. Our support is world class, the level of support and the detail execution. “Growth is slow and steady. Movenpick wants everything to be perfect. We’re working in the super premium category.”

SAN CHURRO “More than ever our customers want to know where the product comes from,” says franchisor Giro Mauricci. There’s an increasing appetite for knowledge; the customer wants to know ‘why I should feel good about the product’. So at San Churro, the way forward is about being transparent. “Telling people the story, making a huge song and dance about something we’ve taken for granted,” says Mauricci. “Our beans are Fairtrade, and we know the farmers in PNG. This might not be at the forefront of the decision making process but it is an important element.” When it comes to the menu, looking outward is important.

“Food is very much like fashion: overseas influence, media, and customer tastes. We’re all connected via Instagram and Facebook. Food is so visual, we love to share, and talk about what we’re eating. “We’re lucky we’re not selling a commodity, we’re selling a treat. People can have a bit of fun on social media.” Today’s menu is quite different from the menu served up two to three years ago – 20 to 30 percent is new, says Mauricci, and the business is focusing on increasing the number of new items. “This year we’re seeing a consciousness about functionality – things like coconut and agave syrup, dairy free options which we’ve been looking at. There’s more interest in alternatives.” There’s a balance though: overcomplexity does no favours to the franchisee, he suggests. “We use our size to achieve economies, something that is more problematic for smaller systems. The leverage we have compared to the mum and dad stores trying to negotiate, we’ve got that on our side. We have a pretty good relationship with landlords, and understand what a likely turnover is going to be, we’re quite comfortable with that." So what does the San Churro franchise offer franchisees? “We’re heavily invested in support. We have four business development managers across 50 stores. We have an eco-system of suppliers feeding us their best ideas each week. We have six in our marketing team. “We make hefty investments in longevity. We’re run by the founder and some partners, not private equity, so we’re driven by doing the right thing by the franchisees.” JUL/AUG 2016 | 55 | WWW.FRANCHISEBUSINESS.COM.AU

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A DIGITAL DIRECTION L

ogistics is all about moving things from A to B. Wheels, a sense of direction, and a delivery sheet used to be core elements of the business – they still are, of course, but times have changed and technology has had a significant impact on the courier market, writes Sarah Stowe.

JUL/AUG 2016 | 57 | WWW.FRANCHISEBUSINESS.COM.AU

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Fastway Couriers early on spotted the potential of online retail and acted accordingly. It launched Parcel Connect, a system of delivering parcels to third party locations for collection by the recipient at times convenient to them. Franchisees now turn their relationship-building skills honed with their regular business customers to working with local firms. Just this year Fastway Australia and New Zealand business was acquired by global giant Aramex, and this Middle East based company has brought new capabilities to the logistics process. CouriersPlease, now owned by Singapore Post, has also turned its attention to delivering maximum convenience to the customer, and has updated systems and brought in initiatives designed to optimise business opportunities for franchisees. As CouriersPlease CEO Mark McGinley explains, “We are continuing to develop our ecommerce ecosystem of alternative pickup and delivery locations. With our partner HUBBED, which has built

a sophisticated network of newsagents, we have rolled out over 400 alternative delivery locations nationwide wide.” The POPStation locker network is another initiative, points out McGinley. “We have recently signed agreements with a range of partners including Westfield, Stockland and Lendlease that will provide more choice and convenience for retailers and consumers alike. “E-retailers will be able to fully integrate these options at checkout on their shopping carts. In turn, this will allow our franchisees to deliver multiple parcels to a convenient location rather than perform many futile deliveries to residential addresses,” he says. Whilst the rise of e-commerce has led to an increase in parcel traffic, it has also caused a dramatic increase in residential deliveries, says McGinley. “Surveys show that up to 30 percent of first time deliveries are unable to be effected because the receiver isn’t at the address provided. This is why CouriersPlease is investing so

much in providing consumers with multiple delivery options. “Consumers want to receive their parcel at a time and location of their choice, it is incumbent on the carrier to provide that choice. Increased traffic congestion and the reduction in loading zones are also challenging for the modern courier franchise." He believes the POPStation smart lockers and the network of newsagents is a solution to these challenges. “Our core customer base is made up of thousands of small and medium sized entities mixed with an increasingly growing number of large e-commerce customers.” Both CouriersPlease and Fastway have historically been business-to-business carriers, but the shift to an e-retail focus recognises that the consumer is now the most important component in the logistics chain. That view is echoed by Othman Aljeda, CEO of Aramex. “New Zealand and Australia are two of the most rapidly

JUL/AUG 2016 | 58 | WWW.FRANCHISEBUSINESS.COM.AU

growing e-commerce markets in the region and by acquiring Fastway we can serve more businesses and consumers online and through our strengthened distribution network.” Aljeda said the acquisition would deliver significant competitive advantages for Aramex, for customers and for Fastway’s franchisees. “We’re excited to add Fastway to Aramex’s global network. The company has a strongly performing business, a wellrecognised brand, a leadership position in Asia-Pacific, an excellent management team and a large global customer base. “Our customers and franchisees will benefit from increased efficiencies, productivity and reach and the acquisition will provide Fastway’s Australian operations instant access to a global network that will foster greater innovation and collaboration.”

EXPANSION PLANS Fastway Courier’s structure embraces both local couriers and regional couriers who work to a hub and spoke model. Both

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sets of franchisees are “tremendously positive” about the new ownership and all that follows from acquisition by a global business, says Richard Thame, CEO of Fastway Australia. The further expansion of the Fastway brand into regional areas is underway with two new couriers appointed in NSW towns Tamworth and Orange and opening up their businesses in July. Next stop is regional Victoria and the Northern Territory. “One of the reasons we can do this is there is so much inbound online business,” says Thame. Couriers Please has expanded its regional footprint into Perth, Coffs Harbour, Albury, Cairns and Darwin, pushing the fleet size to more than 700, an increase of 10 percent on last year.

“Our franchisees operate within a defined geographical territory. These territories are exclusive to that franchisee who derives their income from every parcel picked up or delivered. The more parcels they pick up or deliver, the more money they earn. Franchisees can sell and market our services themselves or, if they are too busy, they can rely on the support of our telesales and field sales teams to help develop their territory,” explains McGinley. At Couriers Please, contracts are open ended and automatically renewed each year. “Our franchises sell for between $5000 and $200,000 depending on the territory. Of course each franchisee will also need to lease or buy a van. Each Couriers Please

franchisee should have, as a minimum standard, a late model two tonne van.” While the average tenure of a Fastway Couriers franchisee is five years, the franchise agreement is perpetual – which has its own advantages.

“Having been owned previously by NZ Post and, since December 2014, by Singapore Post, CouriersPlease has always combined industry best practice with leading technology and innovation. Our customers trust us with their business and we take great pride in that.”

“Once you’ve invested, it’s yours, so you ultimately benefit from the sale,” says Thame.

WHAT DOES THE FUTURE LOOK LIKE FOR A COURIER BUSINESS?

The changing nature of the business means franchisee recruitment is not targeting existing couriers. What is important to the business is a franchisee with communication skills and an aptitude for technology. There is diversity across age, gender and cultural background, he says.

Thame looks ahead five years: “We will have adopted crowdsourcing, giving people the ability to grow their small mobile business into a huge business.

McGinley believes trust is the greatest strength of Couriers Please.

“Of course traffic will have a big influence on how we structure the business and place the depots. “We’ve seen some pretty rapid changes,” he says. And

GET THE RIGHT ADVICE BEFORE YOU COMMIT FINANCIALLY Whether a Franchisee or a new Franchisor getting the right advice may save you considerable money and heartache in the future. Robert Toth and Marianne Marchesi have over 30 years of specialist franchise knowledge and experience. :H DFW IRU ORFDO DQG LQWHUQDWLRQDO )UDQFKLVRU·V DQG SURYLGH À[HG fees based on the scope of services.

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JUL/AUG 2016 | 60 | WWW.FRANCHISEBUSINESS.COM.AU

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the changes are not over. “You’ll see private companies putting up a viable challenge to traditional postal operators,” he predicts. McGinley is also upbeat about the future. “It is a very exciting time to be a courier. It is an extremely dynamic and innovative industry. In the last few years we have seen the rise and proliferation of online courier aggregators, the emergence of crowd sourcing parcel delivery companies, the growth of global eCommerce giants like Alibaba and the ongoing development of drone technology and driverless vehicles. “With the support of our parent company, Singapore Post, we believe that Couriers Please and our franchisees are well positioned to take advantage of this new landscape.”

DELIVERING THE BUSINESS The capacity of the courier industry to compete against the postal services sector is going to shape its revenue growth, IbisWorld predicts. While courier fi rms have made their mark in the B2B marketplace, regulations limit operators to compete on service rather than price. And with no room to move on price, couriers are very much in second place when pitted against Australia Post in the consumer landscape at the moment. However, IbisWorld suggests potential deregulation could give couriers a lift over the next five years. The digital world has had a mixed impact: while firms are now less likely to need to transport documents that can be shared digitally, the growth of online shopping has proved a new opportunity for the courier sector.

It’s an increasingly competitive market yet profit margins are expected to rise slightly over the next five years because of greater demand and the exit of unviable operators. Most businesses are small, localised fi rms. The major players are outside the franchise sector – Toll Holdings, DHL, TNT, FedEx and UPS – but together they account for less than 40 percent of the market share. The IbisWorld report highlights technology and systems as paramount to give a courier fi rm a competitive edge, helping with: data fl ow, information access, fi nancial control, route scheduling, rostering and tracking. SOURCE: COURIER PICK-UP AND DELIVERY SERVICES IN AUSTRALIA, MARCH 2016, IBISWORLD

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onvenience is a strong influence for today’s consumer, even when it comes to coffee. Increasingly coffeedrinkers are seeking a handy solution for their caffeine hit, whether that’s at the office, or out and about, writes Sarah Stowe.

So coffee franchises are on the move. Mobile coffee chains have already built quite a reputation across Australia and beyond; now the drivethrough is strengthening its presence. We hear from five brands about their business model and what is driving customer engagement: Gloria Jean’s Coffees and Zarraffa’s Coffees have both embraced the drive-through model; Cafe2U, The Coffee Guy and Xpresso Mobile Café are bringing business to the customer.

THE DRIVE-THROUGH WHAT’S MORE IMPORTANT, COFFEE QUALITY, SPEED OF SERVICE OR THE MENU? GJC: Each of these elements are equally as important to stay relevant in the market and consistent to our customers. The growing coffee trend in Australia means customers are expecting faster service and a convenient alternative to traditional coffee shops. Quality remains a high priority in our business strategy. We source, roast and distribute our own specialty coffee blends from our Australian based roasting facility, ensuring that our consistency to quality is met nationally. ZC: For us it’s all of these factors equally. We believe the popularity of our drivethroughs is due to the basics; the right balance of speed of service and great coffee, combined with a good offering; something we’ve always strived to deliver on.

Our mantra is to deliver an ‘individually perfect cup of coffee…every time’ and for many of our customers their perfect cup equals not getting out of their car. HOW CAN TECHNOLOGY IMPROVE BUSINESS OPERATIONS IN THE DRIVETHROUGH MODEL? GJC: Leveraging technology through a digital platform to either enhance customer experience or drive greater effectiveness within the drive-through business operating system, is vital - digital initiatives are a key driver for consumers. The business continues to enhance to IT and digital platforms. ZC: Technology is certainly important to a successful drivethrough operation, assisting with speed of service but none of that matters if the fundamentals of our business – great product and service – are not delivered on. All of these ingredients build success. WHAT ARE THE OPERATING COSTS AND WORKING HOURS? Cost considerations GJC: attributed to the drivethrough business model, ultimately depend on the size of the business. At the drivethrough customer convenience is a key part of the experience so our drive-through models normally operate for a longer span of hours to best cater for the needs of the customer. ZC: Output is naturally higher than traditional stores and given our opening times of 5am – 10pm, for most drive-through sites,

JUL/AUG 2016 | 65 | WWW.FRANCHISEBUSINESS.COM.AU

wages and utilities are a large factor in operating costs. That being said, the ability to produce higher yield through more customer service points generally balances this equation. WHAT CAN BE TAUGHT IN TRAINING, AND WHAT CAN ONLY BE LEARNED ON THE JOB? GJC: New franchisees have the opportunity to attend Coffee University which typically runs for six weeks. The on-site training facility is located at Retail Food Group’s world class training academy in Sydney, and delivers professional training on all aspects of running a Gloria Jean’s Coffees franchise from making the perfect coffee, to business management skills, the training includes hands-on coffee house experience with a dedicated and expert learning and development team. Organically, franchisees who have been exposed to the hands-on operations of the business for some time, will develop natural customer service skills and principles to suit their individual business and adjust to the location and clientele. ZC: The rise of drive-throughs has taught us a lot about our business, and preparation is a critical factor. Theoretical and practical training has its place prior to opening a drive-through but there really is no substitute for what you learn ‘on the job’. Multiple coffee machines and point of sale operations, servicing both the instore and drive-through customer demands - balanced with the delivery of the same high quality of product that we are renowned for - all create a higher level of output with its own set of issues and demands. This is something even seasoned store operators struggle with in opening a new drive-through.

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THE COFFEE GUY

WHAT MAKES FOR A SUITABLE DRIVE-THROUGH SITE?

WHAT DOES IT COST TO BUY?

GJC: Location, site selection, people equation, team capability, local marketing, community involvement, and ongoing product innovation.

GJC: The investment into a Gloria Jean’s Coffees drive-through model is more significant than a coffee house and does vary depending on the size of the site.

ZC: Excellent road access and ingress/egress to the store, with high visibility to passing traffic. These factors add to the convenience or our businesses and allow our customers the minimum interruption to their commutes - to work, school and play.

ZC: There is a difference between the cost of our traditional store sites and drivethroughs, simply because they produce a higher output. As we expand our footprint in Queensland, NSW and Western Australia we are looking primarily at opening drive-through stores. Investment is approximately $800,000+ (plus GST).

DOES THE COMPANY PURCHASE THE SITE FOR A DRIVE-THROUGH OR IS IT LEASED? GJC: At this stage, the sites of Gloria Jean’s Coffees drivethrough locations are on based on a long-term lease arrangement. We actively work with our development partners to help identify the best locations and enter into lease arrangements to facilitate the business operation. ZC: We undertake both options, purchasing sites where it suits, via our sister company, Tonken Property Group Pty Ltd.

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THE MOBILE VAN WHAT’S THE BIGGEST CHALLENGE? C2U: The biggest challenge experienced by the mobile coffee business is the perception that independent cafes serve a better quality coffee than those in the mobile realm. TCG: A benefit rather than a challenge for The Coffee Guy, is that its mobile platform removes the cost and complexity of running a traditional café due to its static nature and low cost start-up. XMC: In the mobile café game, the biggest challenge

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XPRESSO MOBILE CAFE

is evolving the daily run to ensure the best return on time. That is, servicing the customers that consistently deliver the numbers rather than the ‘stops’ that are a little more hit and miss. Ultimately the goal is to have a 10-15 stop daily run as opposed to a 20-25 stop daily run. Time is money. WHAT ARE THE OPERATING COSTS AND WORKING HOURS? TCG: Business hours are generally Monday to Friday and work on the weekends is usually limited to the morning, however remains at the discretion of the owner. The cost considerations are limited to vehicle costs (rego, service, insurance and fuel), franchise fees (marketing and advertising), loan repayments and stock control. XMC: The operating costs for an Xpresso Mobile Café including cost of goods, fuel for the van, a weekly gas bottle, insurance and the weekly

franchise fee is 33 percent. We can have a new franchisee on the road inside of seven weeks once finance is lined up. Franchisees generally start at about 6:30am and knock off around 1pm although we have franchisees earning another $15,000 pa simply by working through to 3pm. WHAT’S MORE IMPORTANT: COFFEE QUALITY, SPEED OF SERVICE OR MENU? TCG: Within such a high demand market with plenty of choice and knowledge by customers, the quality and convenience of coffee is critical. Speed plays an important part as no one likes to wait too long for their coffee. The Coffee Guy overcomes this barrier as all vans are customisable, designed and built to maximise efficiency. XMC: Quality wins every time. It builds trust. Our coffee is consistent in quality and price due to our partner-

ship with Di Bella Coffee and its Crop to Cup green bean buying program. Customers will always wait a little longer if they know the coffee they are paying for is consistently awesome. For sure, a large menu offering can slow service however Xpresso franchisees benefit from having access to a flexible menu system that allows them a robust or simple menu. Essentially, key menu items coupled with hot and cold beverage items will increase turnover and net profit. HOW CAN TECHNOLOGY IMPROVE BUSINESS OPERATIONS? C2U: Being able to communicate with customers through social media, EDMs and other platforms are key components to operating in a digital society. Our mapping technology has also significantly contributed to the success of our franchisees as they navigate their way to improved business operations and location selection

JUL/AUG 2016 | 68 | WWW.FRANCHISEBUSINESS.COM.AU

by use of this system. A point-of-sale system has been introduced for the franchisees to improve business operations. TCG: The van itself offsets low emissions and offers better fuel efficiency, it utilises an alternative gas power source to alleviate unnecessary start-up and running costs and also contains a GPS tracking system to improve the route. The vans are constantly evolving to adapt to the industry and new technologies and to stand apart from the competitive market. From an operational perspective, technology has improved efficiencies through allowing customers to pre-order their daily brew via an app which has an inbuilt GPS notifier so that customers know when the vehicle is on route to their destination. XMC: Immensely! Xpresso Mobile Cafés each have an electronic beacon that

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In the mobile cafe game, the biggest challenge is evolving the daily run to ensure the best return on time

signals regular customers of the approach of the van and can push out a message to highlight menu specials of the day/week. It doubles as a customer loyalty system. It is mandatory for all franchisees to have mobile electronic payment facilities (EFTPOS): it’s an expectation in today’s increasingly cashless society. WHAT CAN BE TAUGHT IN TRAINING AND WHAT CAN ONLY BE LEARNED ON THE JOB? C2U: In face-to-face training franchisees are taught everything from the picking process of the beans to texturing milk to suit different coffee types. The key element to this successful strategy is that classroomstyle training is transferred into practical operational capabilities, to ensure our baristas are able to build up

a core customer base within a month of being on the road. TCG: Adjusting to the clientele base and challenges out in the field can only be learned on the job and by experience. This includes any traffic issues and parking logistics, which is something the franchisee must overcome during their daily run. XMC: There is a science in making a great espresso coffee. Our initial training involves some Internet based learning modules and then a visit to the Di Bella Coffee training and roasting facility in Brisbane. This isn’t just texturing milk for two days but rather learning the mechanics and science behind producing awesome espresso coffee every time. The on-the-job training focuses on coffee sampling and customer interaction

with the ultimate goal of producing the daily run sheet for the new franchisee. HOW CAN YOU HANDLE COMPETING MOBILE FRANCHISES? TCG: For a franchisee to successfully reach their business potential, a minimum of 25-35 stops a day is desired and achievable. Most of our territories contain about 3,000 businesses as identified by our mapping technology, so franchisees are able to identify the key, target business within the territory. By approaching the right customers and securing quality over quantity, The Coffee Guy is able to capture regular business and own their part of the market. XMC: We don’t see them as competition. The true competition is a coffee machine

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inside an office. Yes, there are plenty of other coffee vans in the field and from time to time, we cross paths. Our approach is to work together and cross refer leads etc. There is always enough business in every territory for another mobile café. HOW ARE MOBILE TERRITORIES CREATED? C2U: There is a very detailed and scientific mapping process of each region which ensures that every franchisee can identify customers in their area to deliver the product direct to customers. The mapping technology, combined with advanced demographic data, has the ability to locate hot spots of small to medium sized offices, industrial areas and work sites that are ideal for our franchisees to target and skew their

daily coffee run. The system provides granular detail on every business within any one territory, including the industry classification and number of employees.

ing arrangements, and reviewing the equipment and vehicle layout to gain every possible advantage

franchisees as self-generated advocacy is the greatest indicator that there is a strong degree of satisfaction amongst this type of business system.

XMC: Critically important; it builds relevance and stops a brand stagnating. Today’s mobile coffee industry is chalk and cheese compared to the early 2000s.

TCG: The territory is mapped out to allow the franchisee to potentially run up to two vans successfully in the catchment area and also allows for potential competition.

Franchisees are also encouraged to attend local community based events and spark interest through printed handouts. XMC: Spend a whole lot of money on measureable marketing tools; the Internet and Google predominantly.

HOW DO YOU PROMOTE A MOBILE COFFEE BUSINESS?

HOW IMPORTANT IS PRODUCT DEVELOPMENT AND INNOVATION?

TCG: Every franchisee contributes to a marketing fund that is used to run marketing and advertising initiatives such as newspaper, radio, direct mail and outdoor advertising within relatable areas in order to build new clientele and create brand awareness.

Product developC2U: ment and innovation is an important component. The brand’s strategy and focus is always to improve franchisee return on investment by providing an improved product range, increasing profit margin on products by leveraging the network of Retail Food Group’s purchas-

Whilst this benefits the franchisor, it also helps each individual franchisee get cut through in a competitive market. Franchisees are stepped through a detailed marketing kit that fully explains how to promote their business within their territory. Ultimately, it involves targeting customers with a sample of the product.

The business also relies on word-of-mouth and faceto-face interactions by the

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JUL/AUG 2016 | 71 | WWW.FRANCHISEBUSINESS.COM.AU

2013 Years featured Top 2014 inFranchise 2015 Awards

13 26 13 viphomeservices.com.au

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In the

BUSINESS of

beauty

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he beauty clinic can be a retreat, haven, and re-energiser. Many of these spaces are franchised brands specialising in facials, massages, hair removal, and general grooming. If you’re looking to buy a beauty business, this overview is a must read, writes Noha Shaheed.

IBISWorld’s most recent report on the hairdressing and beauty services industry states that the sector has “expanded over the past five years, propelled by greater demand for beauty treatment services due to income growth and the emergence of new markets.” Expansion of high cost treatments such as laser hair removal and skin treatments like microdermabrasion has driven growth and revenue. IBISWorld forecasts industry revenue to increase at an annualised 2.4 percent over the next five years to 2020. The report also reads that the beauty and hairdressing industry is highly fragmented with low barriers to entry. It is also highly competitive, with a large number of small operators, and high entry and exit rates. The battle for customers has pushed down prices, forcing many inefficient operators out of the industry.

KEY TRENDS ON THE GROUND The key trends among the featured brands were that customer experience is a paramount, using aesthetic equipment, and certified specialist treatments is a basic requirement of the model, as well as developing a strong reputation amongst clients. Customer referral is also a driver for client growth. A key misconception is that the industry is free of challenges and a highly glamorous career choice at all times. JUL/AUG 2016 | 73 | WWW.FRANCHISEBUSINESS.COM.AU

LASER CLINICS AUSTRALIA Specialising in candela laser hair removal services and cosmetic injectables, Laser Clinics Australia (LCA) targets a core demographic of teenage girls to women and men in the 50s bracket. Tim Sinclair, general manager, says that LCA entered the industry six years ago with four brand value propositions: treatments that work, convenience, safety and value. Trends in the US and Europe are important in the development of services, particularly for cosmetic injectables. Sinclair says the brand is across the trends from equipment suppliers. Franchisee profitability is encouraged with LCA’s unique franchise model; 50 percent company ownership, and 50 percent franchisee ownership. “If the franchisee doesn’t make money, we don’t make money,” says Sinclair. LCA franchises run an owner/operator model, meaning that franchisees need to work in the franchise. Multi-unit franchising requires franchisees to physically work across all their outlets. Sinclair says that word of mouth and subsequent special offers to clients drives growth. And sites also play a part.

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“The majority of clinics are in shopping centres and high foot traffic areas with high visibility,” says Sinclair.

If the franchisee doesn't make money, we don't make money.

His advice for potential franchise buyers looking for a beauty franchise is to look for high demand systems and speak to existing franchisees.

An LCA franchise starts at an initial investment cost of $420,000 (with 50 percent share with the company) for a five to six treatment room clinic. Initial costs cover starting franchise fees, fit out, furniture, IT set up, equipment, retail and professional stock.

“Weigh up the competitive offers in the same space,” he advises. NIRVANA BEAUTY Offering unisex beauty treatments targeted at the younger generation, Nirvana Beauty’s brand value proposition focuses on personalised treatments and results. Services include laser hair removal and non-surgical face lifting and body shaping.

“We now offer the option for the clinic to apply for finance on the laser equipment.” Sinclair says the major challenge that comes with being a franchisee are that the lifestyle benefits of running a business are not upfront, so there are some hard yards at the start, especially when managing a single gender workforce (female) in the 18-25 age bracket. He adds that common misconceptions about buying a beauty franchise are that a beauty background is needed.

“Franchisees have access to the brand’s reputation and great systems in place,” says Suzan Akil, co-founder and operations manager. “We are always introducing new treatments,” she adds.

In fact, he says an ideal franchisee is passionate about service, understands the importance of selling, has good people skills, and understands business fundamentals.

“(But) we don’t just follow trends; we do a lot of research around a trend to see if it really works.”

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JUL/AUG 2016 | 74 | WWW.FRANCHISEBUSINESS.COM.AU

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Franchisee profitability in her view is about optimising the single unit franchise, and growth from Nirvana’s loyalty program and client referrals. Consistency is also important. “Popular treatments such as face lifts, waxing and laser hair removal are here to stay,” says Akil. “The bottom line is results.” Ideal franchise sites are not necessarily shopping centres but areas with ample parking and high foot traffic. Franchisees are preferably familiar with the beauty industry and have business experience. The initial investment cost of a Nirvana Beauty franchise is $500,000 and the model offers a full franchise to buyers, or the choice to own a 51/49 percent share with the company. Marketing support is also provided from the network. Akil’s advice for potential franchisees considering the beauty industry is to do their research, understand the industry, and be passionate about the business. She

says that franchisees should be aware that business hours can mean weekend work. “Potential franchisees need to be committed and put in at least 38 hours a week,” she says. ESSENTIAL BEAUTY Essential Beauty offers a number of beauty services including body piercing, hair removal, waxing, tanning, semi-permanent makeup and teeth whitening. Tony Maiello, owner, says the key consumer demographic is the 25-54 age bracket. He adds that franchisee profitability is sustained by margins: “by looking at margins and not engaging in price wars.” Single or multi-unit growth also depends on the franchisee. “Multisite operation requires a special type of franchisee that has grown with the system and understands business well,” says Maiello. “Operating and maximising profit in the

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single franchise is equally as challenging.” Essential Beauty also has a loyalty program, but differentiation in product is key to the brand. “Laser hair removal is no longer a specialist treatment and many people are “commoditising” this service to a point where “churn” of both clients and employees is occurring. “We prefer to leave that to other salons who like price matching one another,” says Maiello. The initial investment cost of a franchise is $220,000. Franchisees can benefit from proven systems which undergo continual development by the network. Maiello says that franchisees should also be aware that a challenge that comes with being a franchisee is that some decisions are made by the franchisor. He says a common misconception about buying a beauty franchise is that “it’s all glamorous and you don’t have to work on or in the business.”

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Maiello says ideal franchisees are those who have a desire to learn and excel in what they do. “We have had beauty therapists who have not done as well simply because their attitude wasn’t right.” His advice to potential franchisees is to choose a brand that has a reputation and has been operating for a long time. BRAZILIAN BEAUTY Dedicated to ensuring clients “own their own style of beautiful”, beauty franchise Brazilian Beauty is set for a major brand refresh in June this year which will expand its service offering from the main hair removal, skincare and therapy services. Francesca Webster, CEO and founder, says the 97 percent of clients are female and their experience is key to the brand. “At Brazilian Beauty, it’s all about the customer experience and journey. “Even though the beauty industry isn’t heavily regulated, we always try and follow best practice,” she adds. Although the brand considers the many

trends in beauty treatments, they are then selected based on their safety, affordability and suitability for clients and alignment with Brazilian Beauty’s core values.

meetings with franchisees, as well as on-going training of team members. “We’re constantly reviewing what we do and how we do it,” says Webster.

Franchisee profit sustainability in her view comes from mastering the customer experience and owners aligning with those brand values and systems in place. Multi franchising depends on the skills of the franchisee, but Webster says both single and multi-franchising are profitable.

She says some of the major hurdles of being a franchisee are managing a team, bookkeeping, and reporting on a business if they don’t have experience in these tasks. There is also a lot of effort needed to keep a salon neat and tidy.

“We do have a loyalty program and I think it’s one of the many touch points which make the customer come back and return time and time again,” she says.

“A misconception about a beauty franchise is that it all just happens by itself, but it’s actually quite structured with systems and processes,” she says.

“Seventy percent of our clients return to our business every four to six weeks.”

An ideal franchisee is someone who can be a great mentor to their teams, is passionate about an organisation and can add value to customer service.

As for ideal sites, Webster says the model is designed to be a destination in itself, easily accessible with parking. Sites need to meet appropriate rental costs to maximise profits. The initial investment cost of a Brazilian Beauty franchise is $300,000. The franchisor takes care of site selection, training, staff recruitment, shop fitting, and $30,000 cash in the bank the franchisee needs to start the business. The network also offers accounting and operational support, monthly JUL/AUG 2016 | 76 | WWW.FRANCHISEBUSINESS.COM.AU

“Potential franchisees should research all of the different franchise systems,” advises Webster. She also suggests potential buyers should review profitability, spend some time researching in the environment with different brands in the industry, and find a business whose values and responsibilities match the franchisee.

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OPERATING FOR OVER

16 YEARS in 13 countries

Shaun Birley,

NATIONAL AFFILIATIONS

OUR AWARDS

Franchisee Sydney

G L O B A L

R E A C H

Phone: 1300 469 773

W I T H

P E R S O N A L

email: sales.au@inxpress.com

T O U C H

www.inxpress.com.au

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ELLA BACHÉ Ella Baché has been operating in Australia for over 60 years, and its franchise model is approaching its 15 year anniversary. Debbie Parry, franchise development executive, says that the brand’s niche is to educate and provide non-invasive skin treatments. “As a company there is a large focus on brand and local area marketing to drive clients through the doors of the franchise salons,” she says. “As a company we don’t follow trends as they can be transient.” “(However), it’s important to keep up with the changing needs of customers as we continue to offer a complete skincare solution.” Parry says franchisee profits are sustained through the support of Ella Baché’s business managers, as well as assistance with lease negotiations to ensure rent costs are kept to a minimum. She believes that the right site is key to driving growth, and ideal locations include a strip in a local community or a large shopping centre with guaranteed foot traffic. The initial investment for a brand new site is $300,000-$350,000 inclusive of site selection, design, fit out, equipment, opening stock and franchise fees. Benefits

include business manager training, product and treatment training, marketing launch, site selection, salon design, and build project management. “Ella Baché is a third generation family company and we treat franchisees as extensions of the family, (and) provide as much support as possible to gain success,” explains Parry. However, she identifies the main challenges of running a franchise as the balancing between entrepreneurial spirit and the requirement to work within the parameters of a franchise network. Franchise buyers need to realise that it is hard work, and the first few years involve a lot of groundwork. “An ideal franchisee is someone with passion for the industry,” she says. “We do look for people that have a solid work or business background that can bring the right skills a business needs, though no beauty background is required.” She advises potential franchisees to do their research and understand that franchising is a long partnership between the franchisee and franchisor, so buyers should ask questions to find the right network. JUL/AUG 2016 | 78 | WWW.FRANCHISEBUSINESS.COM.AU

KEY SUCCESS FACTORS OF THIS INDUSTRY FROM IBISWORLD SOURCE: IBISWORLD INDUSTRY REPORT HAIRDRESSING AND BEAUTY SERVICES IN AUSTRALIA DECEMBER 2015

✱ Links with local health professionals: beauty salons benefit from client referrals from local doctors and dermatologists. ✱ Use of specialist equipment: having specialist equipment allows salons to provide valueadded, higher priced services. ✱ Access to highly skilled workforce: maintaining and updating the skills of beauty therapists is key to staying on top of new beauty treatments. ✱ Proximity to key markets: salons benefit from easily accessible, high-income, high traffic sites with parking. ✱ Having a loyal customer base: satisfied, returning clients can attract new customers by referral. ✱ Marketing of differentiated services: salons can avoid price wars by offering quality higher priced services.

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PHOTO BY SCOTT WEBB, UNSPLASH

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SURVIVAL of the

FITTEST T

he rise of health awareness in Australia during the last five years has resulted in a higher demand for health clubs and studios, reports Noha Shaheed. Analysts have identified the $1.4bn fitness industry as a mature one, which is set to grow at a compound annual rate of 3.5 percent in the next five years. So how do franchised fitness brands make their mark? A recent IBISWorld report about Gym and Fitness Centres in Australia states that the industry has transformed considerably in the past five years, and is heading for healthy growth. The emergence of 24/7 gym chains have resulted in exponential growth as consumers are attracted by their value for money and accessibility. However, the report indicates that the fitness industry is mature and a saturated market: “gym memberships are expected JUL/AUG 2016 | 81 | WWW.FRANCHISEBUSINESS.COM.AU

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to grow at a slower rate as most consumer markets have already been tapped by niche gyms catering to all segments of the population.”

as a share of revenue over the past five years. However, market saturation also accounts for scattered gender specific gyms and the specialist studio model which includes yoga and martial arts studios.

do influence the model, local offices have autonomy over the franchise offering. “UFC offers something unique to the market, but we offer members everything available in the industry under one roof,” says Maz Hagemrad, CEO.

We believe the days The rise of the 24/7 gym has proven to be a major competitor So where do franchised brands He says the model is positioned of lock in to the traditional, full-service stand in the sea of competitors? between the low budget and contracts are club, renowned for costly, premium levels. lock-in contracts. The main How do they provide a niche “We are like a hamburger with gone. We differentiator is providing offering to consumers? the lot,” he adds, laughing. choice for clients by providing haven't had affordable, flexible member- And how do franchisees Market recognition and attachmaximise profitability? ships with free cancellations. ment to the brand is also contracted fruitful. Although multi sites Smaller gyms are able to UFC GYM AUSTRALIA are encouraged, the value of memberships provide more affordable memberships to consumers Casting its net wide with optimising long term growth because they employ fewer members from 18-55 years, the in the single franchise is more since 2007 A TALE OF TWO GYM MODELS

staff, while 24-hour gyms tend to be unstaffed for periods during the week, and generally do not provide classes. These factors have helped to reduce labour costs

Ultimate Fighting Champion (UFC) gym franchise offers mixed martial arts (MMA) as its niche, with the inclusions of a normal gym. Although the brand’s US presence and trends

desirable.

Hagemrad says franchisee profitability largely comes from membership, brand equity, and merchandising driven by the

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http://www.famousfish.com.au/franchising.php JUL/AUG 2016 | 82 | WWW.FRANCHISEBUSINESS.COM.AU

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brand. Members are not locked into contracts and can pay month-by-month while using the membership at any UFC club globally. “Memberships are designed to be transparent and easily managed,” says Hagemrad. However, he believes the right site is also an aspect of success. UFC franchises tend to be 800 to 200 sq m sites with high visibility, accessibility and parking. He says that contrary to popular belief about fitness franchises, potential franchisees need to understand that UFC clubs are not heavily laden with equipment, but financing is available for equipment as they are assets for the business. The initial investment cost of a UFC franchise ranges between $400,000 to $700,000, which

includes sites with portions for equipment, cardio, functional training, the octagon (the fighting ring) and martial arts. Franchisees are provided marketing support from the US head office, social media support from the Sydney head office, and a consultant visiting monthly/bi monthly. Hagemrad highlights that although head office will support the franchises from signing to securing the site, the model is designed to empower franchisees to take leadership and drive profits. Together with the model, the UFC brand is more than 20 years old. Some challenges that come with buying a UFC franchise are aligning with the culture and providing top quality delivery of services. Having access to plenty of financing does not compensate for franchisee ability to fit within the system.

Ideal franchisees have a basic understanding of business, some idea of the fitness industry, but more importantly a real passion for the brand. PLUS FITNESS Boasting the 24/7 gym concept, Plus Fitness offers all hours access and no lock in contracts. Nigel Miller, managing director, says the brand was one of the first chains to take this approach. “We believe the days of lock in contracts are gone. We haven’t had contracted memberships since 2007,” says Miller. By offering a combination of the right level of service, and convenient, well maintained clubs, he says there is a low member attrition rate. Personal trainers are available to members who can also undertake as well as six week check-ins.

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Franchisee turnover comes from membership, offering classes, and recovery drinks. Although local and international trends are important in shaping the franchise model, Miller says that Plus Fitness determines trends are fads and which are sustainable and able to be implemented. Although the brand does not currently have a loyalty program, a new facet of member support is on its way in the form of a virtual trainer. And sustainability is a big part of franchisee success in multiunit franchising too. However, Miller warns against rushing into multiple units. “I think you need to master the single franchise first,” he advises. Good street frontage and parking are preferred for gym sites, while rent costs

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practices like disciplined handling of cash flow and developing franchisee passion. Although multi-franchising depends on the owner, Blythe says more than one site can offer greater leverage, buying power, and opportunities to provide more classes to yoga teachers. Ideal locations are those with ample parking and situated in rent-friendly homemaker centres. The franchise model costs an initial sum of $20,000, which includes fit out by the franchisor, a 10 percent royalty over the term, and no marketing levy. Blythe is quick to reject the view that the business appeals to “yogis”, when it is suitable for people of all abilities. need to align with the benchmarks of the brand.

Yoga is a $27bn a year industry across the world and $1bn here in Australia. And it's largely untapped as a franchising model

Miller says challenges associated with being a franchisee include finding a work/life balance that meets franchisee expectations. At the end of the day a franchise is “still a business” that “needs to be managed.” Ideal franchisees can learn technical skills on the job, but would benefit from some business experience. Passion and enthusiasm also go a long way. “Spend some time in an existing gym franchise,” Miller advises potential franchisees. The initial investment cost of a turnkey Plus Fitness franchise is $249,000 for a 250 sq m site, inclusive of equipment, and marketing support from the network. Franchisees can opt to buy or lease fitness equipment. “Approximately 60 percent of the initial investment cost is for tangible items (including gym equipment) and these can be acquired under a lease arrangement with one of our finance partners,” he adds.

ELEMENTAL HOT YOGA This yoga studio offers niche services to the core demographic of 35-45 year old women, also inclusive of 25-35 year olds. Director Linda Blythe says Elemental offers hot yoga with clean and cutting edge technology. “Yoga is a $27 bn a year industry across the world and $1 bn here in Australia. And it’s largely untapped as a franchising model.” Trends also play a part in the studio’s offering. “We definitely do look at US trends,” she explains, but they do need to fit in with Aussie culture. Franchisee profitability under the Elemental Hot Yoga model is sustained through an affordable, well-valued membership system which Blythe says is easy to sell. Clients can choose from three month, six month, and annual terms. There is also a loyalty program driven by the marketing department, and 40 percent of memberships come from customer referrals as a result of loyalty programs. The model also focuses strongly on promoting sustainable business

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“Franchisees need to have a love of seeing people transform in a healthy, happy way,” she explains. A business background is also helpful, and the need to build a community amongst clientele. Her advice to potential franchisees considering a fitness franchise is to be sure to explore the various types (gyms, swim schools, other studios), be aware of the behind-thescenes responsibilities like managing the accounts, and to do their due diligence. She also advises franchise buyers to find out what makes a successful franchisee. Blythe says potential franchisees should “be prepared to hit the pavement” especially at the beginning, and not to expect growth simply from the brand. Buyers need to to not assume success is guaranteed and be aware they can come in as investors with a working manager in place. JETTS GYM Jetts Gym is a 24/7 gym marketed to members of all ages, both men and women from 14 to 80+.

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“Jetts was the fi rst 24/7 operator in Australia, and the fi rst to offer no lock in contracts as standard across all memberships,” says Brendon Levenson, managing director. He says the brand’s unique selling proposition is to allow members to work out on their terms with access to more than 270 clubs and cancel without any hassle. Revenue is driven primarily from membership fees, with more than 85 percent of members paying on a fortnightly direct debit in advance. Jetts’ partnership with Virgin Velocity has enabled members to earn frequent flyer points by both joining and attending the gym. The partnership was launched back in 2014. “Our operational support team work with both business owners and club managers

to ensure they are delivering these standards to maximise their club membership and in turn their revenue and profitability,” he explains. Levenson says the brand has proven to be an equally suitable business for single site owners, or multi-unit owners who own three or more clubs. “We typically do not see any performance differences where we have a single site operator or a multi-site operator, where they are both committing the same time, resources and skill to the business.” As for fitness trends, Levenson says that Jetts has a mantra of “rarely first, never last” when implementing new concepts into the model. This means the brand is typically reluctant to jump straight onto the next big thing, but when a trend shifts into the norm, investment and implementation follow.

The initial investment cost of a Jetts Gym franchise is $550,000 to $700,000 specific to factors including size of location, fit out and starting capital required. Accredited funding is also available from Westpac which can provide new franchisees financing solutions specific to establishing the business. Sites are also key to the business. “If number one is having the product proposition of 24/7 access and no lock in contracts, then having a great location is a close number two.” Ideal Jetts Gym sites are typically in shopping villages or main street locations close to people’s homes.

franchisee comes with challenges and opportunities. Although franchisees can be constrained by the rules of the franchise system, their access to a business blueprint and strong brand can drive growth. “One of the biggest misconceptions is the “build it and they will come” mentality that I have seen in our industry, particularly in the 24/7 sector,” he admits. Ideal franchisees are everyone from ex-CEOs, fi nance executives to personal trainers. A common trait in the best operators is that they have a genuine care factor for their team, members and community. A HUSBAND & WIFE TEAM

“Our leases are typically five to seven years in duration, so it is a long legacy to leave if you get it wrong,” he adds. Levenson says that being a

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Coming from a marketing background, Janelle Rock and her husband John own Jetts franchises in Kingsway and Bunbury (Western Australia).

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“I have always lived an active lifestyle and when this opportunity arose, I saw it as a good fit for me and my background,” she explains. She and her husband had looked at many different brands and decided in 2010 that a Jetts Gym was the way to go. “The Jetts values are closely aligned with our own values and you feel like a part of the family – which is very important to us,” says Rock. “As a Mum, I wanted a franchise that stimulated my business side, whilst still allowing time for the most important job!” ENVIE FITNESS Targeting the female market between 25 to 45 years, EnVie Fitness offers women a health club with a range of workout options, childcare facilities, and extended hours. David Hundt, CEO, says that the niche franchise strategically appeals to women for whom working out at a traditional facility can be intimidating. “We emphasise the no judgement aspect,” he says. Hundt says fluidity is key in today’s market. Monthly and long term memberships are available. Personal training and group fitness opportunities, including yoga, Pilates, and Zumba are also part of the mix. EnVie’s loyalty program also promotes franchisee growth. “Our loyalty program for our members is focused on retention and referral,” he says. Hundt says that franchisee profitability lies in optimising the single franchise. “We found that multi franchising requires very different skills.”

JANELLE AND JOHN ROCK

There is no one perfect location as it depends on the market – whether the main net consists of working women or mums. Clubs are generally in close proximity to shopping centres and supermarkets.

says top-of-the-line service is required for success.

will improve the client experience and help prevent injuries.

“A common misconception about fitness franchises is that it is not as much hard work as other types,” he admits.

2. Easy accessibility Sites close to target markets are important to attract time-poor customers.

“Ideal sites are on their daily flight path,” he explains.

Hundt says that ideal franchisees are those who value the fitness experience or enjoy running a business. Franchise buyers tend to be in the 30 to 45 year bracket.

3. Competitive pricing Gyms and fitness clubs must have appropriate pricing and cost to compete in a highly competitive market.

As for trends, EnVie is a global fitness franchise with three million clubs in the US. “We tend to be on par with the US,” says Hundt. The turnkey franchise model starts at an initial investment for $70,000 to $100,000, which includes support from digital marketing, development managers, and sophisticated automation from the network. Hundt says franchisees can be challenged by lead generation and the behind the scenes work required to run a business. In a competitive industry, he

“Understand it’s a commitment,” he advises. “And make sure it’s something you want.”

SPOTTING A SUCCESSFUL FITNESS FRANCHISE According to the latest IBISWorld report, there are a few key factors that lead to success in the fitness industry. 1. Well-maintained facilities Ensuring facilities and equipment are well looked after

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4. Provision of valueadded services Clubs that provide add-on services can gain an advantage over their competitors. These may include nutritional advice, flexible hours and childcare facilities. 5. High market profi le Health clubs with a high profile find it easier to attract customers. Establishments can gain credibility through a partership with a relevant sporting association or organisation.

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f you’ve got a taste for Vietnamese cuisine, then news that the Roll’d chain has recently opened its 40th outlet might spark some interest – particularly if you are considering investing in a food franchise.

The Castle Hill, Sydney outlet is just the latest in a stream of openings, with a focus on New South Wales. There’s a mix of company owned and franchised outlets in the group, as co-founder and head of product develoment Tin Ly explains. “We thought franchising was the way to go from the seventh store. We had the belief that if people invested it would be successful.” Armed with a great idea, a vision and plenty of determination the team at Roll’d has built a network of fast food restaurants with a twist.

“We encourage really great customer service.” chisees who stuck with the system through its teething stages, it’s been worthwhile and they are now reaping the benefits of their perseverance. “Operations are streamlined, now we have carrots shredded and meat sliced to our specifications. [When you are smaller] it’s hard to get suppliers to work on projected sales but now we have buying power. Our supplier partners have been great, working to our specifications.”

HOW TO MAKE FAST FOOD GOOD What customers are looking for is food quality and speed of service, says Ly.

But it wasn’t all a smooth run. The franchise business took some time to get the operations and supply chain systemised. For the fran-

and vegetables right so when customers come in, it’s easy to put the meals together.

“It’s hard to do fresh meals fast, it’s a challenge. “We spend lots of time on getting the portions of meat

And to achieve this demands a high staff presence at busy periods – up to nine members of staff at some stores over lunch. Before lunch there is a maximum of three staff prepping and cleaning. “We reduced the labour but sales started to come down,” reveals Ly. Fewer staff also resulted in diminished accountability across the staff. So the business restructured and refocused and looked to provide a speedy solution to orders to counter negative perceptions about queues. The result is a restaurant with three Point of Sale stations where orders are placed and paid for. The order goes straight to the kitchen and a printer docket station at one of several distinct serving posts.

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Customers should receive their meal within a few minutes. There is a pho soup station, a bread roll post and a cooking station. Accountability is key even at this time-pressured point: shift leaders are required to sign off on both the order and the quality of the food served. “We will continue to find ways to innovate,” says Ly.

GROWING THE BUSINESS There are 25 more stores planned this year. About 60 percent of these will start as company-owned outlets until the right franchisees are found. The best performing stores are sited in Brisbane and Sydney airports, Sydney CBD and Chadstone. “Whether these are best for franchisees depends on the lifestyle they want – CBD outlets give them weekends off. But shopping centres mean better access to young staff,” explains Ly.

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lifestyle they want – CBD outlets give them weekends off. But shopping centres mean better access to young staff,” explains Ly. The store in O’Connell Street, Sydney, has been open two years and now handles up to 700 transactions a day; 80 percent of the revenue comes from sales between 12 and 2pm. Roll’d tried serving a breakfast menu but it hasn’t brought in the customers. Instead the stores can extend what is essentially a lunch time offer and stay open for dinner. The newly opened Perth outlet in a dining precinct is seeing stronger sales in the evening. Stores commonly close at 5pm, some choose to shut at 6pm, the O’Connell store stays open till 9pm some nights to operate the home delivery service. This increasingly popular concept in the hospitality arena is proving successful for those Roll'd outlets piloting the service.

Customers can order online through the Foodora delivery business. “We looked at building our own model for home delivery but we outsourced instead,” says Ly. “You can work to your own schedule. It takes two people to prepare the food, it is not labour intensive.” So the decision of whether or not to take on home delivery service comes down to revenue versus labour and time. International expansion has been planned since last November, and the first stage in this global outreach will be a store opening in Manila in the Philippines. “This is a dense population and they love branded food. Great place to take our brand. We though the US or London but they are very tough markets.” A master franchise agreement for the Philippines has been signed with The Cravings

Group, a business with 15 restaurant brands across different cuisines.

LEADING THE CHARGE “We want to be a globally recognised brand in all major cities, like Boost Juice but in the Vietnamese space,” says Ly. “To bring food to everyone, that’s not hidden away. “For years Vietnamese food used to be just in Asian communities, with a stigma of bad service and dirty restaurants. But if you go to Vietnam the service is fantastic.”

be better than us. “Our strategy is to open quickly and take market share while we can.” The development of Roll’d has been reflected in changing business beliefs. “We are focused now on being a company. Previously we had a small business mentality. Now we have people who can give advice. We have construction, design and network (corporate leasing) managers. “We created an internal management development program."

While the brand is seen as fast food, Ly says there is a perception that fast food means cheap food but this isn’t sustainable with fresh ingredients.

Marketing is better timed to fit seasonal choices and the strategy and goals are clearer now, says Ly.

“The food trends show that customers are willing to pay a bit more for real food.

A big social media presence is boosted with media interviews in print, on TV.

“This has been lots of new funky Vietnamese in Melbourne, but no-one is doing the same.

Work ethic is very important to the business. “There is no success if you sit at home waving your wand hoping it will happen,” says Ly.

“There will be one day, and may

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Mum-friendly franchise set for

GROWTH T

he home organisation franchise Home Sorted is targeting the working mum looking to run a business with flexibility.

In the business of de-cluttering bedrooms, home offices, kitchens, laundries and bathrooms, Home Sorted specialises in planning and reorganising homes. Starting with a home visit for an initial consultation and measure, a tailored action plan is then created for the client. Nina Rosace, CEO, says the brand is looking to expand across the country, with a goal to set up four new franchises in every state in the next 18 months.

business” opportunity to cater for busy working mums.

“Being a mother myself I understand the constant demands, commitments and pressures that are placed on mums to have it all,” she says. “Working mums need freedom and flexibility.” She says her franchisees can commit to as much or as little work as they need in a professional yet affordable business.

“Demand for the service is out there,” says Rosace, adding that she has had enquiries from Cairns to Perth.

“They can set up a home office and schedule their external home organising work into times and days that suit their family best,” she explains.

Rosace has owned the business for almost 12 years, and the demand for mum-friendly jobs inspired her to tap into a “niche

The initial investment cost for a Home Sorted franchise ranges from $14,990 for a three year term (with no renewal

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fee), and $17,990 for five years. The franchise model comes with national marketing support, a new Customer Relationship Management (CRM) system, and local territories. So who is an ideal candidate? “Mothers are valuable assets to the workforce and this home-based franchise is specifically designed to assist them with building a strong and unique business model,” says Rosace. She adds that although business and home organisation experience is not necessary, franchisees tend to be organised and have great communication skills to drive their client base. “Ideal franchisees need to be hungry to run a business.”

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Community

spirit PROVES A

WINNING STREAK

LEFT: SHERWIN DJAMIL WITH FCA CHAIR BRUCE BILLSON

ow one franchisee found his business was a channel to help the homeless

Winning the NSW/ACT Franchisee Community Responsibility and Contribution Award for 2016 is important recognition to Sherwin Djamil (the franchisee of two Soul Origin stores at Westfield Parramatta) of his work with Parramatta charity, Homeless Connect. JUL/AUG 2016 | 95 | WWW.FRANCHISEBUSINESS.COM.AU

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GIVING BACK TO THE COMMUNITY “It means the world to me that I can say I’m a business owner that loves to give forward and contribute,” says Sherwin.

It means the world to me that I can say I'm a business owner that loves to give forward and contribute

“I’m quite overwhelmed because I’ve been given a lot, and I need to give forward. I’ve been raised to appreciate what I have, and this is a gift.” Djamil has been in business for about three years, and in that time built up two outlets in Parramatta which are staffed by a team of 28 people. It hasn’t all been smooth sailing. “The fi rst year was a big learning curve, and I was very narrow minded. It was all about me, me, me and my shop. I made some mistakes and took some advice, and then I decided to do the

opposite to what I had been doing. The focus was on what I could give.” So when last year he was invited to participate in the Homeless Connect charity as a food supplier to serve homeless people at risk, he jumped at the opportunity. And he wanted to do more than the minimum. “I didn’t want to feed stereotypical food and give them soup. We are all about generous giving at Soul Origin and a memorable customer experience, so I decided to give them salads and coffee. We gave away 1000 salads and about 300 coffees.” Staff from both stores volunteered their time to serve the food alongside Djamil and his

wife, who works with him on the business. The experience was so valuable for Djamil and the team that he is lining up to participate in this year’s event – but to raise the bar yet higher.

FULFILLING THE DREAM For this former barista, the capacity to add value to people’s lives is an important part of his role as a business owner. He came to Soul Origin through connections – he already knew the general manager Chris Maverecic from previous dealings with the business when he had helped set up stores – and was familiar with the brand. So when the opportunity came up to take on his own

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franchise within the network, Djamil leapt at it. “Why? It’s the culture, why they do what they do. They allow people to grow and bring out the best in them.” Djamil says Mravecic didn’t talk about business growth or money. “He said, ‘we primarily build our business on relationships,’” explains Djamil. The stars were aligned, he says. The support offered by a franchise system was a key attraction when deciding to become a small business owner. “At first it seemed like an obstacle [to become a franchisee] because I’d never been a business owner before. But I realised that it was an opportunity and I wasn’t alone.

“We all dream about our own dream café. But with Soul Origin I have a support system. What’s better right now? No real support system, just me and my wife setting up?

important. If you are going to jump on their vessel, you want to know where they are going. It’s not just where but who’s driving the rudder on the boat, because they can steer it wherever they want.”

“Soul Origin helps with the shopfit, trains you and guides you through it.”

It is also essential to build relationships with the support team and know what their goals are, he suggests.

The next step is in line with the brand’s philosophy of allowing people to grow. “I’ll be looking for more space to grow the [work] family and serve others, that’s our purpose. That will mean more stores. The more we get we have to give.” In just three years with the business Djamil believes he has learned a lot. “I’ve learned that the vision of the franchisor is very

“I’m in for the long term. I say that confidently because I’ve heard Chris and the team talk about their goals for 15 to 20 years. If they’re going to be here, I’m going to be around. “What is very, very important, this experience has taught me that belief in people is very powerful. Soul Origin has empowered and entrusted me, and I grew. That’s what I want to do – give people space and help them grow.”

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GEN Y SPILL THE BEANS

ranchising spoke to Gen Y franchisees about their experiences buying and running a franchise.

HOTONDO HOMES JON AND LYNDSEY CLARKE This husband/wife duo are the newest and youngest members of the network at 24. Q. WHICH FRANCHISE DO YOU OWN AND WHERE? A. Hotondo Homes Central Coast, located in Gosford, New South Wales.

Q. WAS YOUR AGE EVER A CONCERN WHEN YOU CONSIDERED JOINING THE FRANCHISE? A. Not really, we obviously knew it would be a factor but we didn’t feel it would stop us from joining the franchise. We both believed in ourselves and knew we could do it, so there was no reason to be concerned. Q. HAVE THERE BEEN ANY CHALLENGES BASED ON YOUR AGE? A. Absolutely, we already have! The biggest challenges come with the assumption that because we are young, we don’t know anything or have little/no experience,

and it has happened quite a bit. All it does for us is ultimately fuel our motivation and drive to prove how capable we are. Q. HOW VALUABLE IS IT TO HAVE A RANGE OF GENERATIONS WITHIN THE BUSINESS/NETWORK? A. We believe it’s extremely valuable because there is a range of generations in the clientele attracted to the brand. Franchisees become the faces of the network and the brand, if these faces all seem to be within the same age group and demographic the brand as a whole doesn’t seem as approachable. Different generations also bring different knowledge

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and experiences, and a totally different approach to the job at hand which we know will be extremely handy as different challenges start to arise. Q. AS MEMBERS OF GEN Y, WHAT DO YOU THINK YOU CAN BRING TO THE TABLE? A. I guess as part of the technology generation we have a different skill set in presenting to or engaging our clients in our office and showroom. I also think we can easily adapt to change, new technologies and updates which some others can sometimes struggle with. Most importantly we bring fresh thoughts, ideas and

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ON BUYING A FRANCHISE insights to the table. Some of us can be more open to experimenting or changing our methods and tactics.

BAKERS DELIGHT – ALEX DILLON Dillon bought a Bakers Delight franchise at the tender age of 24. Q. WHICH FRANCHISE DO YOU OWN AND WHERE? BAKERS DELIGHT CASUARINA, NT A. What do you like the most about being a franchisee? The support system behind you allows you to focus on growing the business and not get tied down with the menial tasks.

Q. HAVE THERE BEEN ANY CHALLENGES BASED ON YOUR AGE?

Q. DID YOU EVER DOUBT YOURSELF BASED ON YOUR AGE?

A. Sometimes people don’t take you seriously, for example when applying for credit applications. I overcame this by being persistent and following up until what you need is done. Another challenge is employing people who have children your age or older. The key to overcoming this is to show your knowledge and enthusiasm, so that they can see who you are and what you are about. Then they can believe in what you are trying to achieve. In the end, you always have the area managers and existing franchisees who can support you and make sure you are on the right track.

A. No, not at all. That was all a part of the fun, proving people wrong. Age isn’t against me, it works for me. I have the enthusiasm and motivation of someone who is young and fearless and the physical fitness to work as many hours as needed. Q. HOW VALUABLE IS TO HAVE A RANGE OF GENERATIONS WITHIN THE BUSINESS/NETWORK? A. It’s very important. You need the older more experienced franchisees as they have the history and previous knowledge of the business, what works, what doesn’t work

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in terms of local marketing, equipment, merchandising etc. They can feed that information down to the new younger franchisees, whilst the younger franchisees bring new and innovative ideas in with them. Q. WHAT ADVICE DO YOU HAVE FOR OTHER YOUNG PEOPLE WHO OWN OR ARE CONSIDERING BUYING A FRANCHISE? A. It’s not a get rich quick scheme, you need to work hard and build relationships in your community over time to build the brand. Don’t doubt yourself and don’t be scared to really use those really knowledgeable people around you. Soak up as much of it as you can from experienced fran-

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FROM LEFT: SALLY ILLINGWORTH, JON AND LYNDSEY CLARKE, LUKE CAMILLERI, AND ALEX DILLON

chisees, area managers and regional managers.

SMARTLINE - LUKE CAMILLERI Q. WHICH FRANCHISE DO YOU OWN AND WHERE?

A. I came into franchising on recommendation from an older friend who had been a franchisee for 10 years. Her presence was so valuable as a mentor in the same industry. Mentors in all walks of life are valuable for their insights.

Q. WHAT DO YOU LIKE THE MOST ABOUT BEING A FRANCHISEE?

Q. WHAT ADVICE DO YOU HAVE FOR OTHER YOUNG PEOPLE WHO OWN OR ARE CONSIDERING BUYING A FRANCHISE?

A. Defi nitely the support from head office. Smartline brings everyone together and the support that comes from that has been sensational.

A. You have to work hard, everything is hard work. Especially in the first few years, there are long days, late nights, and weekends at work.

A. Chiswick, New South Wales.

Q. HAVE THERE BEEN ANY CHALLENGES BASED ON YOUR AGE? A. Definitely the financial side of things initially. I had a mortgage and I was single when I bought my franchise at 28 years old. I was also trying to have a social life, so it was difficult making sure there was enough surplus in the account. It can also be intimidating when you’re working with older, more successful people in the network.

CRUST PIZZA – SALLY ILLINGWORTH Q. WHICH FRANCHISE DO YOU OWN AND WHERE? A. Crust Gourmet Pizza Bar Parap in Darwin, Northern Territory. Q. WHAT DO YOU LIKE THE MOST ABOUT BEING A FRANCHISEE?

A. One hundred percent! There were times when I was smacking my head against the keyboard, thinking I wouldn’t succeed or I would let people down. I didn’t want to be embarrassed.

A. It is a genuine pleasure being a franchisee for two principal reasons. The first is that it has been a rewarding aspect of my career to be given the opportunity to expand the Crust Pizza brand into the Northern Territory market (where I grew up) and to further develop my understanding of operating a quick service restaurant.

Q. HOW VALUABLE IS TO HAVE A RANGE OF GENERATIONS WITHIN THE BUSINESS/NETWORK?

The second is now I truly understand the value of a franchise network whereby the level of support, education,

Q. DID YOU EVER DOUBT YOURSELF BASED ON YOUR AGE?

direction and strategy administered by the franchisor is invaluable. I have received an immense amount of value from becoming a franchisee. For example, I have learnt an incredible amount about business management, market research, marketing, product development, department interdependence, business strategy and so much more! Ultimately, I admire most the diverse range of expertise (people) that I can leverage on to successfully develop and operate my business. Q. HAVE THERE BEEN ANY CHALLENGES BASED ON YOUR AGE? A. At the age of 18, I officially became the fi rst franchisee to open a Crust store in the Northern Territory and the youngest franchisee in the Crust network. Being a young franchisee came with a few challenges including, external suppliers not wanting to partner or do business with me due to my age. I didn’t let this bother me and found other suppliers who didn’t consider age to be a business barrier. It has always been important for me to disregard any criticism that may be made based on my age. I had a clear vision of what I want to achieve and know the path I need to take to get there. Q. DID YOU EVER DOUBT YOURSELF BASED ON YOUR AGE? A. I have never for a second allowed myself to doubt my individual potential based on my age. I strongly believe that

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if you fail to maintain selfconfidence, it will adversely affect your ability to progress professionally and personally. Q. HOW VALUABLE DO YOU BELIEVE IT IS TO HAVE A RANGE OF GENERATIONS WITHIN THE BUSINESS/NETWORK? A. The prospect of having a range of generations within a business is invaluable if that respective business endeavours to experience a great term of success! This analogy applies to businesses of any size. The prevalence of equity within a business’s trajectory will effectively attract a diverse range of people who perhaps have the potential to benefit the business. Every business requires a diverse team to be successful as every individual brings something different to the table. Q. WHAT ADVICE DO YOU HAVE FOR OTHER YOUNG PEOPLE WHO OWN OR ARE CONSIDERING BUYING A FRANCHISE? A. We all have the opportunity in this life to make a dream become a reality but you have to be willing to sacrifice what you are for what you will become and when things are tough, keep going. I encourage all young people to not limit themselves to anything, work hard, don’t follow the crowd and challenge the status quo! If you’re considering purchasing a franchise do your research and set yourself realistic goals and be sure to partner with a brand that you believe in!

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FAMILY FORTUNES

ngrid Alexander and her husband Stewart from Bedshed Morley and Malaga are an example of a family which has managed succession in franchising.

After being involved with Bedshed for 11 years, Ingrid and Stewart saw the opportunity of asking sons Simon and David, who were 32 and 27 respectively at the time, to join the franchise.

grated into the business. Ingrid and Stewart feel comfortable in all that Simon and David have accomplished and are responsible for, despite coming across a few challenges.

“Stewart and I were looking for a way to safeguard all that we had worked for, and absolutely loved the idea of incorporating Simon and David into the business,” says Ingrid.

“It’s only normal that people are going to disagree on certain things, particularly if those people are your family. While we may not always share the same opinion, we have a clear policy of collaboration and straight talking. This works for the business and our family.”

“At the time, neither of our sons had any previous retail experience, Simon had worked as a mechanic, and David as an IT management consultant, so we knew we would have to invest quite a bit of time in getting them properly trained and up to speed,” she says.

COMMUNICATION IS KEY Seven years down the track, and with Bedshed’s support, David and Simon are fully inte-

Ingrid says that when it comes to making those final decisions, everyone has a say. Whether that is around stock purchases or who attends the next Bedshed buying trip, the family will engage in clear and open communication to find their ideal solution. “This process of honest and to the point communication has really helped us to address any issues that come up,” she said.

PLANNING FOR SUCCESS Both Simon and David are now completely involved in and responsible for the day to day running of both stores, giving Ingrid and Stewart the peace of mind to know that when they are no longer able to work, things will run just as smoothly without them. As for how Simon and David share responsibility, Ingrid says they are, and will continue to be, equal partners within the business. “The equal share of responsibility between the boys is something that was crystal clear from the outset. Both are happy and see the benefits of this decision and way of doing business.” Once Ingrid and her husband cease to work in the stores, they will still receive an agreed income from the business. However the family expects the transition process to be a very gradual one with no clear-cut handovers, a process which Bedshed has supported.

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While Simon and David haven’t invested any capital into the business, systems are in place to ensure that complete ownership of the franchise stores goes equally to both of them when Ingrid and her husband finally step away. Gavin Culmsee, general manager of Bedshed, says “All franchisees have to go through a formal selection and approval process, and David and Simon were no different. However, the process was made easier by the personal relationship we have with all franchisees – we already knew both David and Simon, so this made the decision to allow them to join Bedshed very easy.” All in all, Ingrid’s example of succession works off a system of family love, trust, and a bit of forward planning. “The family are always there to support each other and to bounce around thoughts and ideas when needed. We love working as a team, and are thrilled with all we have achieved,” says Ingrid.

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LEGALESE

Can I rely on my franchisor for my employment policies? BRENTON ALLEN is a lawyer at MST Lawyers

hen you buy a franchise you tap into many aspects of the franchisor’s business. But the relationship between franchisor and franchisee is one akin to an independent contractor relationship, whereby each party remains principally autonomous and responsible for the legal ramifications of their own conduct.

During 2015 and 2016, a number of reforms have been proposed at a parliamentary level, including: 1. Greens MP Adam Bandt introducing the Fair Work Amendment (Recovery of Unpaid Amounts for Franchisee Employees) Bill in October 2015, attempting to give employees a legal right to recover wages directly from the franchisor in circumstances where an employee has been underpaid by its franchisee employer; and 2. the Coalition’s pledge to, if re-elected, implement its ‘Policy to Protect Vulnerable Workers’ which would introduce new offence provisions in the Fair Work Act holding franchisors liable for breaches of the Act by its franchisees, if the franchisor should have been ‘reasonably aware’ of the franchisee’s contraventions. As the law currently stands, franchisors are not legally required to assist franchisees to comply with their workplace obligations and, as a consequence, franchisees are not able to rely upon their franchisor for assistance with implementing employment policies in their workplace.

tions and decide whether employment policies will be of value to their business. If so, well drafted employment policies can benefit franchisees by: 3. providing a platform for which expectations of employee behaviour can be identified and managed (in effect, giving your business grounds to performance manage and/or terminate employees); and 4. reducing the risk of non-compliance with state based occupational health and safety laws (provided, for example, a workplace health and safety policy is distributed and enforced against staff). An effective employee handbook should cover a wide array of situations that may arise in the workplace, including: ✱ workplace health and safety; ✱ bullying and harassment; ✱ use of company property; ✱ use of internet and social media; ✱ smoking; and ✱ work attire

Some franchisors may choose to offer assistance and advice to their network, however, franchisees, as independent business owners, are ultimately responsible for compliance with Australian workplace laws and will be liable for the legal consequences of any failures to comply.

The recent case of Romero v Farstad Shipping (Indian Pacific) Pty Ltd demonstrates that employers need to think carefully about the wording of their policies. In this instance, the Court awarded damages against a company that failed to follow the appropriate investigative procedure outlined in its employee policies which were held to be contractual in nature.

So franchisees should ensure they understand their legal obliga-

As a consequence, it is suggested that franchisees take on board the

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Court’s fi ndings and consider the following suggestions if introducing employee policies: 5. the policy should contain moderate language and not be presented as a formal contract (in addition, an employment contract should state that the policies do not form part of the worker’s employment contract); 6. the policy should, for the most part, contain expectations of employee behaviour. There is no need to specify any procedure unless this ensures compliance with a particular law (for example, a grievance procedure to address complaints about workplace bullying may be appropriate to mitigate a company’s OHS risk, however, rigid procedures that mandate the company’s adherence to, for example, a certain disciplinary procedure in circumstances of employee misconduct should be avoided); and 7. Finally, franchisees should be aware that employee policies are only effective to the extent that they are reminded, distributed and enforced against staff. For the time being, franchisees are left to their own devices in ensuring compliance with Australian workplace laws and instruments that apply to their industry. This can, in many ways, be effectively managed by seeking appropriate legal advice as to Australian workplace laws and the obligations imposed on employers and implementing appropriately worded employment policies.

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YOUR ESSENTIAL GUIDE TO BUYING A FRANCHISE | WWW.FRANCHISEBUSINESS.COM.AU SEP/OCT 2015 VOL.28/NO.5

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FRANCHISING

Franchising Franchising Franchising YOUR ESSENTIAL GUIDE TO BUYING A FRANCHISE | WWW.FRANCHISEBUSINESS.COM.AU JAN/FEB 2016 VOL.29/NO.1

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OPINION

Is there a franchise system for everyone? ANDREW TERRY Professor of Business Regulation, The University of Sydney Business School

omething for everyone! That’s an overworked cliché for sure– commonly claimed but less commonly true. Is it true for franchising? Is there a franchise system for everyone? Well, yes and no.

Let’s take the “no” case first. While the credentials of franchising as a proven system for business operation have been repeatedly and consistently demonstrated it is not for everyone. It is the inevitable reality that successful franchising is underpinned by the formulation of and adherence to systems. The success of franchising is driven in large part by formulaic consistency. This demands that franchisees operate their own business in strict compliance with the franchisor’s system. Franchisees inevitably renounce a large degree of independence. They must be entrepreneurial enough to invest their own resources - fi nancial and time – in a franchised business but at the same time intrapreneurial enough to operate within the often rigid confi nes of that franchise. This is not for everyone. Franchisors should be smart enough to assess whether the prospective franchisee has the capacity to work within a system (and may use psychological or other testing for this purpose) but the responsibility is ultimately that of the prospective franchisee as the consequences of franchisee failure fall more heavily on the franchisee than the franchisor. Good franchise systems offer prospective franchisees proven concepts, proven brands, proven systems, proven training and proven support mechanisms which should significantly increase the opportunity for successful and profitable business operation in comparison with independent business operation. What a franchise system cannot guarantee is that the prospective franchisee is the right ‘fit’ for the business. Good franchisors understand the importance of this and will attempt to ensure that from all perspectives – personality, business affi nity, commitment to the business, fi nancial resources – the prospective franchisee fits the profi le. But it is the individual himself or herself who better

understands not only their own hopes, dreams and aspirations but also their limitations. The ‘yes’ case is probably more true for franchising than it is for most other contexts in which the ‘something for everyone’ claim is made. Franchising is characterised by massive diversity and choice. In Australia a prospective franchisee has at least 1200 different systems to choose from. Franchising may have been introduced to Australia by the colonising US fast food systems – McDonald’s, KFC, Pizza Hut – but its influence has quickly spread beyond fast food to, with very few exceptions, all consumer goods and services, most business to business services and, increasingly, professional services. The diversity is not only in relation to the particular business sector in which the franchise operates. It extends to diversity in the manner in which franchise systems operating in the same industry sector differentiate their offerings and implement their business concept. But there’s more! There is massive diversity in entry costs, sophistication, size and scale, hands-on commitment and indeed every other aspect of business operation. Prospective franchisees have a choice of joining large established systems or small entrepreneurial systems. Prospective franchisees have a choice of acquiring an established outlet or developing a greenfields location. Prospective franchisees have a choice of acquiring the rights to operate a business from a single site or from a territory which can be developed through multiple sites or mobile operations. It follows from the above that probably there is something for everyone. The challenge for the prospective franchisee is not the lack of choice but the abundance of it. All of Australia’s 1200 franchisors are in the market for franchisees – in fact such is the competition among franchisors for franchisees that recruiting quality franchisees is reported as the greatest recurring problem for franchisors. A fast food franchise system faces direct competition from other fast food franchise systems in attracting consumers but at the level of recruiting franchisees each fast food franchise system is in competition not only with other fast food systems but with all franchisors. Prospective franchisees should recognise this: it’s probably the last time they hold the aces!

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Dream to start your own Business? The Business Behind Your Business Graphic Design & Web Services Printing & Copying Services Packing & Shipping Services Mailbox Rental Services Business Support Services Marketing Solutions Services

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www.postnet.com.au / www.postnetfranchise.com.au

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LEADERSHIP

THE GROWTH MINDSET

and you

GREG NATHAN is a psychologist, keynote speaker, author and international expert in franchising relationships, and the founder of the Franchise Relationships Institute

e regularly conduct surveys on how franchisees feel about a range of important areas. I was recently sharing the results from one of these surveys with a team of franchisor executives. One interesting finding was a significant increase in franchisee expectations around the services the franchisor was providing.

I asked the CEO how he felt about this, expecting a defensive response. Instead he said he welcomed it. “If we are raising our expectations of them, why shouldn’t they raise their expectations of us?” he said “It can only make us stronger and better”. This attitude of seeing challenge as a good thing reflects what Stanford University psychologist, Carol Dweck, calls a growth mindset. Dr Dweck has devoted most of her life to researching why some people get defensive and give up when faced with challenges, while others thrive with a “bring it on” attitude. In one of her studies with young children she discovered those who were told they performed well on mathematics tests because they were smart, tended to give up trying when the tests got more difficult. They wanted to protect their image of being smart by avoiding tasks where they may not yet have the ability to be successful. Dr Dweck calls this tendency to believe our level of success is determined by fixed traits or abilities, as having a fixed mindset. Another group of children were taught their brain is like a muscle that gets stronger when it is exercised (which is actually true).

When this group performed well on the easier tests they were told this was because they must have worked hard. Interestingly, the children in this group were more likely to persevere until they solved the more difficult tests. Like the franchisor CEO, they saw the bar being raised as a positive challenge, adopting what Dr Dweck calls the growth mindset.

HOW DO YOU MEASURE UP? Here are three characteristics of people with a growth mindset. How does this compare to your approach to life? They see effort as being necessary for achieving mastery. And they appreciate the harder and longer you work at something, the better at it you are going to get. They welcome challenges and difficulties as a way of building strength and capacity. Rather than being discouraged by failure, they persist and treat it as an opportunity to learn. They are inspired by the excellence and achievements of successful people. Rather than experiencing jealously or falling for the “tall poppy syndrome”, they seek to learn from these people.

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How did you go? Do you spend your energy trying to look smart in the eyes of others, and avoid challenges beyond your current level of ability? Or are you putting in the work to constantly get smarter and do things better?

IMPLICATIONS FOR FRANCHISORS AND FRANCHISEES Franchisors and franchisees have different but complementary responsibilities. On the one hand the franchisor is responsible for delivering good leadership and providing a proven business model with relevant support. Franchisees on the other hand are responsible for managing their sales and costs, delivering a great customer experience, and participating constructively in the franchise program. It is vital for the success of a franchise network that both parties carry out their respective responsibilities with passion and commitment. This means regularly seeking feedback from each other and looking for opportunities to improve how they do things. It also means not giving up when the going gets tough, as it will from time to time. In other words both franchisors and franchisees need to cultivate the growth mindset. Every credible book on success I have ever read emphasises a simple truth that the most important human quality of all is perseverance - continuing to turn up and put in the required effort. The growth mindset shows us why this is important and how to put it into practice.

Specialised-FP

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■ ■ ■ ■ ■ ■ ■ ■ ■ ■

THINGS TO CHECK BEFORE YOU INVEST BEFORE YOU PURCHASE YOUR FRANCHISE YOU NEED TO TICK OFF ALL THE MUST-DO ITEMS. CHECK THE FOLLOWING:

Are you confident in the franchisor?

Have you seen a disclosure document?

Have you evaluated the financial returns?

Do you know all the expenses franchisees are required to pay?

Have you worked out your operating costs?

Do you know the term of the agreement?

Is the business operating from fixed or mobile premises?

Are you working within a territory? If so, is the area exclusive?

Are you restricted in your product purchase?

Are you required to reach a minimum performance level?

■ ■ ■ ■ ■ ■ ■ ■ ■ ■

What are the franchisee and franchisor obligations?

What training is available and who pays for it?

Who owns the intellectual property and what is licensed to the franchisee?

What marketing will the franchisor implement?

Who pays for the marketing?

What is the dispute resolution process?

Do you know what it is like to be a franchisee?

Can you assign the franchised business?

How can the franchisor or franchisee terminate the Franchise Agreement?

What restrictions are there on the franchisee and guarantor operating a similar business?

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GLOSSARY

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: a thorough examination of the franchise business before purchase. 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. FRANCHISE AGREEMENT: the business contract between the franchisor and franchisee. FRANCHISEE: an individual who runs the franchised business using the intellectual property of the franchisor. FRANCHISE FEE: this is an up-front cost paid to the franchisor and covers the use of the brand name and operating system required to operate the business. FRANCHISOR: grants permission to the franchisee to conduct business using its intellectual property; brand name, methods of operation and marketing. FRANCHISE TERM: this 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. GREENFIELD new site.

SITE: a brand

LICENSE: the right to use intellectual property in business, such as sales rights in a territory, manufacturing technology or access to a trademark. A license is not the same as a franchise. LOCAL AREA MARKETING: [LAM] this is marketing the franchisee is responsible for conducting in the franchise territory or designated marketing area. MARKETING AND ADVERTISING LEVY: a regular flat or percentage based fee paid into a centralised advertising or marketing fund. MASTER FRANCHISEE: a 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. MULTI-UNIT FRANCHISEE: a franchisee granted the rights to operate 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: 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 for a further

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term. This process is bound by the Franchising Code of Conduct and there is no automatic right of renewal. 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. 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. THE FRANCHISING CODE OF CONDUCT: a mandatory Code that governs franchising in Australia and 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). 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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