Franchising January February 2016 by Cirrus Media

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FRANCHISING

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

JAN/FEB 2016

Spicing up A FAST FOOD

FAVOURITE

AUS $6.95|NZ $7.95

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

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CASUAL DINING, RETAIL AND FOOD TRENDS, FINANCIAL SERVICES

CLOCK WATCHIING: HOW LONG DOES IT TAKE TO BUY A FRANCHISE? P.20

PROFIT SOURCE: FIND THE RIGHT BUSINESS OPPORTUNITY P.24

FUND THE FUTURE: RAISING FINANCE TO BUY A FRANCHISE P.28

FR1116_000_ZOO

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YOUR FRANCHISE. YOUR MUSIC.

Zoo Music brings you the very latest in custom branded background music perfect for your franchise. With a Zoo Music digital media player, you can stream thousands of quality tracks relevant to your business style. Simply choose from our pre-programmed playlists, or work with our music team to design a format that is right for you. With options to play branded ID's or messages in between songs, you'll have your very own music channel. So relax and let the experts at Zoo Music develop a program for your business and experience the effect great music has on your customers.

ive Inclus CA of PP ce Licen Fees

zbm.com.au

THE ZOO BUSINESS MEDIA GROUP

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CONTENTS

COV E R STORY

12 FUTURE BITES

52 10 THINGS TO RESEARCH

16 7 THINGS TO CONSIDER

The Australian Competition and Consumer Commission highlights the must-do elements of researching your potential franchise

Trends in food and drink for 2016

BEFORE YOU BUY

Give yourself the best chance of success check out these essentials

20 HOW LONG DOES IT TAKE TO

BUY A FRANCHISE?

BEFORE BUYING A FRANCHISE

58 A CASUAL AFFAIR

Casual dining sits between fast food and traditional restaurants - and it’s a growing trend

Jason Gehrke from the Franchise Adivsory Centre considers the purchase process

24 A PROFITABLE FUTURE

Will you be able to improve the profits of an underperforming franchise?

HOW DO I RAISE FINANCE FOR MY FRANCHISE PURCHASE? Be sure you have access to adequate funding when you are ready to buy a business

32 THE LEGAL COSTS

Take a look at what you will need to pay your lawyer

SPICING UP A TRUE ORIGINAL

36 HOW TO GET SUPPORT...

and when to stop asking for it. Bill Lockett reviews how much back-up you can expect

REGULARS

5 6 106 108 110 112 113 114 115 122

WELCOME INSIGHTS

GLOSSARY CHECKLIST LISTINGS ADVERTISERS INDEX

74 GREAT EXPECTATIONS

We look at what’s happening in the retail sector right now

80 WORKING WITH NUMBERS

Fancy your talents in the numbers game? Why not investigate a franchise opportunity in financial services?

WINNER

SKETCH DIRECTORY

Why our senior citizens are a booming business opportunity

88 TIPS FROM A TROPHY

LEGALESE LEADERSHIP

68 AGEING GRACEFULLY

Snooze franchisee Russell Cooper shares his tips on running a great business

42 5 STEPS TO START-UP

92 THE BREAD WINNERS

46 GET FRANCHISE-READY

95 5 THINGS I WISH I KNEW

What you will need to do to establish your new business

Your franchisor can train you to be competent and confident to open your own franchise business

JAN/FEB 2016 | 3 | WWW.FRANCHISEBUSINESS.COM.AU

Award winning bakery franchisees Britt and Ben Diggins

A Snap-on Tools franchisee reflects on what’s worth knowing before you buy a business

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2013-11-28T16:00:44+11:00

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( WELCOME )

nvesting in a franchise could be your next best move. It’s the perfect route for anyone wanting to enter the field of business ownership without all the stresses and strains of striving to achieve on your own.

Franchisors who provide a strong level of support are highly valued; after all, training, support, a brand name and an established business format are key attractions to franchise buyers. Support is such a broad term that it is advantageous for any potential franchisee to pin down the franchisor to what form this support takes – and where their boundaries lie. So in this edition we take a look at how to get the most from your franchisor without overstepping the mark. It is crucial for any franchise buyer to spend an appropriate amount of time researching the franchise, the franchise team, the specific business opportunity before committing themselves. But how long is appropriate? Jason Gehrke from the Franchise Advisory Centre shares his analysis of how long it takes to buy a franchise, and a nifty formula that can guide you on the time you spend on your due diligence process.

both these issues in this edition. Of course with the myriad choices available in the franchising sector it can take time to source exactly the right business in the right market. Investing in the hospitality sector remains hugely popular, and that could mean buying a fast food outlet or a mobile coffee business, purchasing an established juice store or a brand new salad bar; it could mean tracking down the latest trends and putting your funds, passion and skills into building a new business in an emerging sector. In this issue we share a forecast of what’s new and exciting in the food and drinks arena in our industry report, and we look at how casual dining is gaining ground. Our cover story reflects on how Oporto is embracing the future with a brand new look and a re-focusing on the iconic products that put the business on the map 30 years ago.

The Australian Competition and Consumer Commission, which regulates the Franchising Code of Conduct, highlights 10 steps to take before you become a franchisee. You can read this guide on page 52.

Make the journey easy – visit our one-stopshop website www.franchisebusiness.com. au for news updates, expert advice and a comprehensive directory of franchise brands and the businesses for sale.

There are legal costs to consider when approaching the purchase of a franchise, and of course the vital issue of raising the funds to buy the business, and we address

Whatever the path you take into business ownership we wish you the best of luck with your journey in 2016. It will be an exciting time.

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

CLIENT SUCCESS MANAGER Kim Church P: 02 8484 0731 kim.church@cirrusmedia.com.au

ART DIRECTOR Louis Santos designer2@cirrusmedia.com.au

PRODUCTION CO-ORDINATOR Tracy Engle P: 02 8484 0707 tracy.engle@cirrusmedia.com.au

NATIONAL SALES AND MARKETING MANAGER David Strong P: 02 8484 0905 david.strong@cirrusmedia.com.au BUSINESS DEVELOPMENT MANAGER Jesse Hopwood P: 02 8007 3113 jesse.hopwood@cirrusmedia.com.au

SARAH STOWE EDITOR

For subscription enquiries call customer service: 1300 360 126 ISSN: 1321-408X

With the myriad choices available in the franchising sector it can take time to source exactly the right business in the right market

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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, 2014

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INSIGHTS

SEARCH. DISCOVER. SUCCEED FranchiseBusiness has unveiled a fresh new look for its one-stop-shop online. The revamped website will allow you to easily search for essential news and advice, discover brands and franchises for sale, and take the next step towards succeeding in your goals to own your own business. The website is packed with more than 1600 brands showcasing their business models on our site; in excess of 6600 actual franchises for sale; and an evergrowing portfolio of relevant expert advice, profiles and information that already includes more than 6500 articles. And it’s so easy to find just what you are looking for.

Muffin Break and Croc’s in partnership A new strategic partnership between two franchised chains will see Muffin Break cafes housed in Croc’s Playcentres.

Check out the following: ✱ the intuitive inter-face with touch button access to all the information you need ✱ easy navigation ✱ vital information on the brands and businesses that interest you ✱ the ability to shortlist your favourite franchises for sale ✱ simple and direct connection with franchisors. Whether you are looking for the latest news, want to find a franchise brand or a business for sale, seek expert advice or a franchise service like an accountant or lawyer, our website will take you one step closer. Make sure to visit: www.franchisebusiness.com.au

All new Croc’s Playcentres will include a Muffin Break bakery café, with existing partners having the opportunity to convert their current cafés.

Playcentres. It allows us to be part of the growth in leisure centres, creating a home away from home for the family and the perfect place for mum to entertain her kids whilst enjoying some quiet time.”

Muffin Break franchisor Foodco will provide Croc’s Playcentres with management, development and operational services to accelerate the national rollout of the joint venture.

Lawrence Cusdin and Brett Aldons established Croc’s Playcentres in 2008. Today the business has 12 locations across Victoria, Tasmania, Western Australia and South Australia with an additional 12 locations expected to open in the next 12 months.

Managing director of Foodco, Serge Infanti, and executive director, Robert Fitzgerald, will join Croc’s Playcentres board of directors. Foodco will also hold a financial interest in the Croc’s franchising business.

Brett Aldons, director of Croc’s Playcentres said, “Having a branded bakery café within a playcentre is a huge positive within an industry which has traditionally provided low quality food and service standards.”

The joint venture follows a pilot store, Croc’s Playcentre Reservoir Melbourne, which opened in April 2014. This pilot store showed a significant lift recorded in food and beverage sales compared to a typical store.

Muffin Break has a range of healthy options including gluten free, dairy free and lower carb which the company wants to incorporate into Croc’s Playcentres children’s menu.

Infanti said “We’re excited at the opportunity to work with a dynamic channel leader like Croc’s

“This unique opportunity allows us to expand the brand outside the traditional footfall and takes our efforts to a new customer base,” said Infanti.

JAN/FEB 2016 | 6 | WWW.FRANCHISEBUSINESS.COM.AU

FR0715_000_CAS Advertisement275x205.pdf

CMY

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23/06/2015

9:54 pm

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INSIGHTS

7-Eleven franchisees sign agreement

STAFF EMPLOYMENT ISSUES AT PIZZA CHAINS Franchise chains are in the headlines over workplace regulation. Both Pizza Hut and Domino’s are making news over employee contracts. Domino’s has told staff that all casual employees with supervisory roles or those working in stores, will be offered permanent part-time employment. However, news.com.au reports that the casual employees (many of whom are teenagers at school) have no choice in the matter with staff told at one store they had to sign the contract or they would not get any more shifts.

A new franchise agreement has been rolled out to more than 90 percent of 7-Eleven Stores. The new agreement includes a range of financial benefits as well as increased compliance, governance and oversight initiatives that are part of a broader strategy to maintain the chain’s market position. 7-Eleven interim CEO Bob Baily said the overwhelming majority of franchisees signing up to the new agreement was a positive step forward.

“7-Eleven and our franchisees are working cohesively to ensure our stores are good places to work and provide customers with the service, products and great value deals they have come to expect. “An important aspect of the new agreement is a commitment to increased compliance, governance and oversight arrangements relating to store operations and workplace obligations,” Baily said. Franchisees yet to sign the new agreement have until 1 February 2016 to do so.

“You’re looking to increase profit in the business you buy. However, it’s not enough just to see a business that doesn’t make much money, and think you’ll do okay. Before you buy you will want to identify that improvement actually is possible” Kate Groom, SmartFranchise

JAN/FEB 2016 | 8 | WWW.FRANCHISEBUSINESS.COM.AU

In a statement Domino’s said this was contrary to what was instructed to corporate store managers. The national policy means a pay cut from casual rates but provides workers with entitlements such as annual leave, redundancy and notice of termination. A Domino's spokesperson told news.com. au that the move was geared to securing employment and providing certainty and training for staff. At competitor fast food chain Pizza Hut franchisees are coming under fire for using fake contracts to pay delivery drivers under the award wage and offer no superannuation or WorkCover. According to Fairfax Media, delivery drivers may be receiving as little as $12 an hour – the current hourly rate for delivery drivers is $20.35 for full timers, or $25.44 for casual staff. Some franchisees within the Pizza Hut network are believed to be using contracts that require the driver to supply the car and pay the costs of fuel, insurance and vehicle maintenance. A spokeswoman said this was out of step with Pizza Hut’s business practices. “Pizza Hut with its franchisees have negotiated a national enterprise agreement with the Shop, Distributive and Allied Employees Association which includes rates of pay for drivers and team members.”

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BE IN BUSINESS WITH THE BEST SNAP-ON TOOLS IS ONE OF THE LARGEST AND MOST SUCCESSFUL FRANCHISES IN THE WORLD AND HAS BEEN OPERATING IN AUSTRALIA SINCE 1988. Snap-on Tools invites you to take our online Discovery Tour to find out if weâ&#x20AC;&#x2122;re the right business for you. Visit www.snapontools.com.au/franchise

To learn more phone LES COPPIN - 0419 609 794 Franchise Recruitment Manager

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INSIGHTS

Rolld adds new business models Vietnamese food is on the move, with the Rolld franchise chain opening new outlets and unveiling two fresh store concepts. A kiosk and a casual dine-in are the latest developments. The kiosks are a pared back version of the Rolld format but

WHO’S NEW? NOW: The first New Zealand club for Aussie gym franchise Plus Fitness has just opened in Christchurch with two more territories already sold. Ten further outlets are planned for 2016. The new chief at Anytime Fitness Australia is an international fitness executive with more than three decades’ experience across club chains. Arthur McColl has been vice president for Living Well, and was most recently chief operating officer at LA Fitness in the UK. Anytime Fitness has just opened its 3000th global club. COMING: Asia’s homegrown fast food giant Jollibee is set to open its first Australian outlet in 2017.

designed to be visual theatre with colourful display cabinets taking up the majority of the shop front space and a large rolling and food preparation area.

extended menu will include a new soup range, rice, pancake, grills and introduce a share plate selection of rice paper rolls, spring rolls, salad, chicken ribs and prawns.

Marketing director Christina Murrell said “The Rolld Kitchen brand is to address a huge demand from our loyal customers about casual dining, especially for families.”

At the other end of the eating spectrum, the Rolld Kitchen is all about casual dining. An

The first dine-in outlet was set to open in December in Perth, Western Australia.

✱ Read more about the casual dining sector in our feature A Casual Affair on page 58.

The franchise chain offers a menu of Filipino food with an American twist – breakfast, burgers, chicken, noodles, rice meals, sandwiches and sides, kids meals.

This is the fourth award win for Pizza Capers this year with the brand awarded the Canstar Blue pizza satisfaction award earlier in the year as well as the Roy Morgan Quick Service Restaurant Customer Satisfaction Award in March and the Entertainment Book Gold Award for Informal Dining.

taking home a gold award in the chain store/franchise (espresso) category for its exclusive signature blend.

Home delivery, drive through outlets and 24 hours service are part of the Jollibee package.

IN BRIEF Pizza Capers has claimed the top prize in customer satisfaction winning the Roy Morgan Award for Quick Service Restaurant of the Month for the second time this year. The franchise chain topped the Quick Service Restaurant category with outstanding levels of customer satisfaction as judged by 50,000 consumers nationwide.

The Coffee Club has announced a major partnership with Netball Queensland. 1n New Zealand the business is celebrating 10 years of trading. In the decade since the first store launched in Wellington, another 56 outlets have been opened. And in Australia, the café chain has outclassed more than 50 competitors at the Golden Bean Coffee Awards,

People who are buying a business for the first time should be prepared to invest one hour of time for reading, research and learning per $1,000 to be invested in the business

FAMILY FIRM TURNS TO FRANCHISING Graffiti removal and prevention is at the heart of the latest business to turn to franchising, a 37 year old family firm that is looking for its first franchisee, Graffitieaters. The Melbourne-based secondgeneration business has spread interstate with branches and sub-contractors catering for council, commercial and residential customers. Now it wants to achieve more with franchise partners. Franchisees will sign up to a non-exclusive territory and have the chance to grow the business through a three-tier model. The first stage is a mobile, single van business providing primary graffiti removal services. Successful franchisees have the option to then expand into the advanced services with a second or third vehicle. The top level is multi-territory.

Jason Gehrke, Franchise Advisory Centre To invest in the business will cost $180,000 +GST and that includes a custom-built, branded vehicle. JAN/FEB 2016 | 10 | WWW.FRANCHISEBUSINESS.COM.AU

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FUTUREBITES A

uthentic, artisan, natural and sustaining are words to inspire as we look ahead to the next 12 months and imagine how the hospitality industry can and will embrace these terms. A dozen trends will inform the food and drinks sector in 2016, according to a report from market research firm Mintel. FROM INSIDE OUT FROM INSIDE OUT

ARTIFICIAL ARTIFICIAL ARTIFICIAL: PUBLIC ENEMY NO.1 The customer demand for natural and recognisable ingredients means a farewell to artificial ingredients. Franchised food brands that ignore the trend do so at their own peril. In action: menu transparency, back to nature.

BASED ON AJAN/FEB TRUE STORY GOOD ENOUGH TOTO TWEET BASED ON A TRUE STORY GOOD ENOUGH TWEET 2016 | 12 | WWW.FRANCHISEBUSINESS.COM.AU

ECO ECO ECO IS THE NEW REALITY

FOR EVERY BOD FOR EVERY BO

Concern over our natural environment puts the focus on sustainability it’s relevant for the common good, and good for the bottom line. In action: food and drink supplies, food waste. What’s the franchisor’s sustainability program? How environmentally aware is the chain?

TABLE FOR ONE TABLE FOR ONE

DIET BYBY DNA DIET DNA

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FROM INSIDE OUT

ARTIFICIAL

ECO

BASED ON A TRUE STORY

Authenticity counts. Consumers will find their way through the soft-sell to products and services with genuine claims. You can’t fake it till you make it any more. have to have GOOD ENOUGH TO TWEETYou just TABLE FORheart. ONEIn action: artisan products, inspirational stories, ingredients that make sense. What’s really TABLE FOR ONE BY DNA behindDIET the franchise brand?

GOOD ENOUGH TO TWEET

ALTERNATIVES EVERYWHERE

INSIDE OUT

N A TRUE STORY

FROM INSIDE OUT ARTIFICIAL FROM INSIDE-OUT

ARTIFICIAL ECOEVERYWHERE ALTERNATIVES ALTERNATIVES EVERYWHERE

ECO FORSHEDS EVERY BODY FAT STIGMA FOR EVERY BODY

Beauty comes from within, and

The fitness crossover – the

beyond wellness to boost their personal appearance through diet. And that means packaged goods with a potent formula such as collagen or probiotics. In action: nutritional drinks and merchandise for in-store and takeaway consumption, marketing initiatives. Great for BASED ON A TRUE STORY GOOD ENOUGH TO TWEET healthy eating outlets; a new source of merchandise in spas and beauty clinics?

an accepted part of our eating programs leads to a demand and drinking habits now as for food and drinks that offer non-dairy milks, along with sustenance. Sports nutrition, protein alternatives, make it hydration, energy boosts… into the average household’s In action: merchandise and shopping basket and increas- marketing that matches the ingly on to the café menu. In consumer goal of greater action: protein replacements as activity: gyms, personal an alternative on a traditional training, health and wellbeing GOOD ENOUGH TO TWEET TABLE FOR TABLE FORthe ONE DIET BY DNA menu; consider rise of the opportunities. Refl ect ONE on the veggie takeaway chain Lord of ubiquitous FitBit and Anytime the Fries. Fitness’s member program.

The SHEDS ‘why bother’ soya latte is EAT now consumers are looking FAT consumer of fitness ALTERNATIVES EVERYWHERE STIGMA WITHembrace YOUR EYES

JAN/FEB 2016 | 13 | WWW.FRANCHISEBUSINESS.COM.AU

FOR EVER

FOR EVERY BODY

ON ASTORY BASED BASED ON A TRUE TRUE STORY

BASED ON A TRUE STORY

ARTIFICI

EVERY EATFOR WITH YOURBODY EYES

E-REVOLUTION E-REVOLUTION: FROM CARTS TO CLICKS Digitial disruption is part of the shopping landscape with online purchasing, apps and delivery services an essential part of retail today. It’s encroaching on to the hospiDIETtoo. BY DNA tality space In action: Domino’s Pizzas mobile ordering.

GOOD ENOUGH

DIET BY

FAT SHEDS ST

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MTIFICIAL INSIDE OUT

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ECO OUT FROMARTIFICIAL INSIDE

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FOR EVERY ARTIFICIAL ECOBODY

ECO STORY BASED ON TRUE FORAEVERY BODY

FOR EVERYTO BODY GOOD ENOUGH TWEET

FROM INSIDE OUT ARTIFICIAL ALTERNATIVES EVERYWHERE OUGH TO STORY TWEETBASED TABLE FOR ONE BY DNA ON A TRUE STORY ENOUGH TOONE TWEET TABLE FOR ONE N A TRUE GOOD ENOUGH TO TWEETGOODDIET TABLE FOR DIET BY DNA GOOD ENOUGH DIET BY DNA TABLE FOR ONE TO TWEET

Ancient grains and superfoods More and more people are We’re cooking more, and we are fashionable additions to the eating alone. That means want to celebrate our successes. menu as consumers turn away appropriately-sized meals, and Who knew that ‘plating up’ from manufactured foods and offers to attract single diners. would be a term heard in look for diets that hark back to In action: deals and meals our own kitchens? As the a simpler time or offer nutri- that make it easy to choose a consumer keeps an eye on tional solutions through match- takeaway option. While it’s a the visual presentation of a making with personal physiol- challenge for pre-packaged dish to share on social media, ogy or genetics. In action: back retail, franchises are wellthe challenge continues for to basics, superfood salads, versed in this. hospitality venues. In action: power-punching BASED ON A TRUEjuices STORYand GOOD ENOUGH TO TWEET DS STIGMA EAT WITH YOUR E-REVOLUTION ALTERNATIVES EVERYWHERE SHEDS STIGMA EAT WITH YOUR EYES excellent standards ofEYES food and ofFAT course, the paleo diet that VES EVERYWHERE FAT SHEDS STIGMA EAT WITH YOUR EYES E-REVOLUTION service, the importance of a is making a mark on the café brand’s social media presence. scene. How does the franchise brand spread the word? And can the franchise tap into the at-home cooking trend with recipes and ingredients? HOT PLATES

ECO FAT SHEDS DIET BYSTIGMA DNA FAT SHEDS STIGMA

We’re all a little more fatfriendly now, with a focus on what good fats provide for our health. Identifying the nutritional warriors in the fat arena can help add choice to the menu and dollars to the till. In action: promotional opportunities such as avocado as an add-on in Subway meals, and educational marketing. TABLE FOR ONE

E-REVOLUTION

TABLE FOR O

FOR EVERY BO EAT WITH YOUR E

DIET BY DNA

In the US, the National Restaurant Association has pinpointed the following 20 trends: 1. Locally sourced meats and seafood

ALTERNATIVES EVERYWHERE

FAT SHEDS STIGMA

2. Chef-driven fast-casual concepts 3. Locally grown produce 4. Hyper-local sourcing

5. Natural ingrediens/minimally process food 6. Environmental sustainability 7. Healthy kids meals 8. New cuts of meat 9. Sustainable seafood 10. House-made/artisan ice cream 11. Ethnic condiments and spices 12. Authentic ethnic cuisine 13. Farm/estate branded items 14. Artisan butchery 15. Ancient grains 16. Ethnic-inspired breakfast items 17. Fresh/house-made sausage 18. House-made/artisan pickles 19. Food waste reduction and management 20. Street food and food trucks

JAN/FEB 2016 | 14 | WWW.FRANCHISEBUSINESS.COM.AU

EAT WITH YOUR EYES EAT WITH YOUR EYES Innovation and artistic presentation wow consumers who are adventurous in their tastes and want to share their menu choices through social media posts. In action: how beautiful is the food? What is the franchisor doing to provide inspiration and innovation on the plate?

E-REVOLUTION

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++o t t n a __w

spice up yOur career? become an OPORTO franchisee! Serving delicious mouth-watering grilled Portuguese chicken and burgers since 1986,Oporto is an Australian owned business with a network over 140 great locations within Australia and New Zealand. With an average of 15 new stores opening every year, Oporto are

looking for people who are passionate about serving amazing food, providing exceptional service and are hungry for success! Does this sound like you? Yes? Then we want to hear from you. Apply now to be a part of the amazing, progressive and dynamic Oporto team.

oporto.com.au/franchising

Bangers & Tash Pty Ltd. studio@bangersandtash.com.au

Contact: Client:

Jo Dickison Oporto

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THINGS

TO CONSIDER BEFORE YOU BUY

ou have decided to buy a franchise and the statistics are in your favour – you are much more likely to build a successful business when you have the backing of a proven system, training and support. But success is still not guaranteed and what you do between making that decision and signing the contract will be crucial to your future.

2. CAN YOU AFFORD IT? Banks may lend up to 60 percent against certain franchises, but not many. In the vast majority of cases they want ‘bricks and mortar’ security such as substantial equity in your home or an investment property. You also need enough working capital to cover at least the first year of trade. “An experienced accountant can help you to work out the figures and your options,” says Garber-Rosenzweig.

3. IS THE FRANCHISE SOUND? 1. IS THIS THE RIGHT FRANCHISE FOR YOU?

Due diligence is essential.

Running a franchise is very different from having a job. If you have never run a business before, you could be surprised by just how long and hard you need to work, particularly in the first couple of years.

“You need to consider the financials and, if you’re buying from an operating franchisee, the trading history,” says Garber-Rosenzweig. “A franchise lawyer can help with necessary searches and other research.”

“It’s very important to do thorough research into what is involved and the impact it will have on your family and your lifestyle, “says Garber-Rosenzweig. “For example, you may love the idea of having a bakery, but is it realistic for you to get up at 3am every day and work seven days a week?”

4. DOES THE FRANCHISE LIVE UP TO ITS PROMISES? The best source of information about the franchise itself is current and past franchisees – and not just those recommended by the franchisor.

JAN/FEB 2016 | 16 | WWW.FRANCHISEBUSINESS.COM.AU

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If you do make a decent profit, you could end up paying tax at the highest tax rate on your income. With a company structure you are less exposed as an individual and you could pay less tax

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“Ask them whether they’re getting the support and financial returns they expected,” says Garber-Rosenzweig

5. COULD THERE BE A PROBLEM WITH THE PREMISES? If you’re taking over leased premises, there’s no guarantee that the lease will be renewed at the end of the term or that, if it is, the landlord won’t substantially increase the rent. Consider how long the lease has to run and your options in the worst case scenario.

6. IS YOUR BUSINESS STRUCTURED FOR SUCCESS? Unless you’re setting up a family business or in partnership with friends, you will generally have the choice of operating as a sole trader or a company.

“Becoming a sole trader is simpler and cheaper but I strongly recommend against it due to a high degree of personal exposure,” says Garber-Rosenzweig. “And, if you do make a decent profit, you could end up paying tax at the highest tax rate on your income. With a company structure you are less exposed as an individual and you could pay less tax.”

7. ARE THE DOCUMENTS IN ORDER? Your funding is in place and your accountant has given the go-ahead – now it’s time for your lawyer to review, negotiate and finalise the legal document before you sign. If you have worked with professional advisors from the outset, done thorough research and listened to your head as well as your heart, there’s every chance you’re signing up for success. BY DOMINI STUART

JAN/FEB 2016 | 18 | WWW.FRANCHISEBUSINESS.COM.AU

FR0116_000_CHE

2015-11-20T09:54:27+11:00

Want to make a clean break? Build your future with Chem-Dry Chem-Dry is the world’s largest carpet cleaning franchise, and has been helping Australian’s realise their dream of business ownership since 1986.

Franchises available in all capital cities & regional centres

Our unique, hot-carbonated water extraction method, combined with best in-class products and services, and unparalleled training and support, make it impossible to find a better cleaning franchise opportunity. No experience is necessary, as Chem-Dry provide comprehensive training on all aspects of the business. Our on-going marketing and operational support will ensure that you are able to enjoy the flexibility and lifestyle benefits that owning your own successful business can provide.

1800 243 637 chemdry.com.au

If you’re ready to make a clean break with your own Chem-Dry franchise, simply fill out the information form on our website, or call our franchise business info line on 1800 243 637.

FR0116_020

2015-12-17T14:54:24+11:00

How long does it take to buy a

FRANCHISE? BY JASON GEHRKE Jason Gehrke is a director of the Franchise Advisory Centre and has been involved in franchising for 25 years at franchisee, franchisor and advisor level. He provides advisory services to both franchisors and franchisees, and conducts franchise education programs throughout Australia.

nyone considering buying a franchise should recognise that the process takes time. The amount of time will vary from one individual to another, but should never be rushed or involve shortcuts or else the franchisee will make a poor decision and potentially lose their investment.

JAN/FEB 2016 | 20 | WWW.FRANCHISEBUSINESS.COM.AU

FR0116_021

2015-12-17T14:54:58+11:00

A significant proportion of people who are attracted to franchising are first-timers in business who are drawn by the branding, support and infrastructure provided by a franchise that takes the pain out of reinventing the business wheel. Without prior experience in business, the only frames of reference in their decision-making processes are other major acquisitions, such as the purchase of a car or a house, both of which are seen as extensions of the buyerâ&#x20AC;&#x2122;s personality, and therefore are emotionallydriven investments. But like buying cars and houses, buying a franchise is also driven by the desirability of the concept, its availability and cost, with each of these factors impacting how long it takes to buy a franchise.

business, or a greenfield site (ie. one that is yet to be opened). Should a buyer be interested in looking for a business beyond their home location, and prepared to relocate (for either a sea, tree or city change), then the same problem arises: what greenfield or existing businesses of the franchise are available in that location? If there are none, or none available on such terms that suit the potential buyer, then the buyer may actually change their preference and look at other offers if their location requirement canâ&#x20AC;&#x2122;t be fulfilled. In certain circumstances, and usually only for exceptional franchise brands or offers, will potential franchisees move to a location chosen by the franchisor.

DESIRABILITY

THE QUESTION OF TIMING

Potential franchisees often gravitate toward business opportunities with brands that they have experienced as a customer. For example, an avid coffee drinker may consider becoming a coffee-shop operator, partly because of their interest in coffee and their affinity for the coffee-shop environment.

Closely linked with the issue of location is that of timing.

The relative desirability of a franchise to a potential franchisee will be as unique as the individual themselves. Aside from the customerâ&#x20AC;&#x2122;s perspective of a brand as a business opportunity, some potential franchisees who have never been customers of a brand may still consider its business potential, usually because they already work in the industry in which the franchise operates. For example, a lending officer working for a bank may consider becoming a franchisee of one of the mortgage broking brands. In this case he is not (and may never have been) a customer of these brands, but instead can transfer his existing industry skills, experience and community network to a broking business in the hope that he will enjoy greater rewards as a business owner than as an employee of a bank. While some franchise candidates already know what industries or franchise brands interest them when they commence their search journey, many have no idea and so must take the time to explore more broadly before working out what they find desirable as a future business opportunity.

AVAILABILITY The availability of a franchise offer to suit a potential franchisee will depend on two variables: location and timing.

Potential franchisees can take as little as three months to identify an opportunity and sign a franchise agreement, while in some cases it can take as long as three years. For most potential franchisees, the journey from start of the search to their first day of trading in their new business takes about six months. A potential franchisee may be interested in a specific location for their chosen franchise, and may be prepared to wait for a greenfield or existing franchise to become available. Waiting for the site (rather than assessing different franchise brands) then becomes the main issue that determines timing. Sometimes potential franchisees have timing issues of their own, such as their current employment situation (ie. an employment contract ending or a redundancy package to be offered in future). Another factor may be a change in family or health circumstances, such as the birth of a child or the develolpment of a health condition by the potential franchisee or a member of their family which could delay their ability to start a business. Potential franchise buyers may be prepared to wait up to a year or more for their preferred franchise to become available in their desired location. This may be more likely for site-dependent retail rather than mobile services franchises, and linked to the overall investment level and potential returns associated with the business (ie. The greater the investment level and potential for associated profits, the longer a potential franchisee may be prepared to wait for an opportunity to become available).

LOCATION Most potential franchisees will look for a business opportunity close to their home base, and generally within a 20km radius of where they currently live. The opportunity can take the form of an existing

Potential franchisees should take as much time as they need to evaluate the franchise offer and the franchsior. Any attempt by the franchisor to rush a potential franchisee through the recruitment process will only cause problems for both parties later on, and poten-

JAN/FEB 2016 | 21 | WWW.FRANCHISEBUSINESS.COM.AU

Potential franchisees may be prepared to wait up to a year or more for their preferred franchise to become available in their desired location

FR0116_022

Due diligence time can also include hours spent with advisors, time spent in the business as part of the research and time spent speaking with current and former franchisees

2015-12-17T14:55:41+11:00

tially result in fatal oversights by the franchisee that may subsequently result in the complete loss of their investment.

HOW DO COSTS AFFECT TIMING? Once location and timing have been taken into account, the next major consideration is cost. What can the franchisee afford? How much will they need to borrow without overextending themselves? Has the franchisee prepared a business plan that can demonstrate an acceptable return on their investment? Cost can influence a potential buyerâ&#x20AC;&#x2122;s preference for location and timeframe. For example, a high cost option may become available in the desired location in a yearâ&#x20AC;&#x2122;s time compared to a lower cost option in an adjacent area that is available now.

WHAT IS DUE DILIGENCE? Potential franchisees know that they should undertake due diligence before buying a franchise, the only problem is that most people donâ&#x20AC;&#x2122;t know what kind of due diligence they should actually do. In simple terms, due diligence is the research a reasonable person should undertake before committing to a transaction. The more money involved in the transaction, the more research should be done. Appendix Two of the Franchising Code of Conduct specifically highlights that potential franchisees can learn more about how to conduct proper due diligence by undertaking a free online course endorsed by the Australian Government at www.franchise.edu.au/ education.html. The Franchise Advisory Centre recommends, as a

general rule, that people who are buying a business for the first time (or buying one in an industry which is not familiar to them) should be prepared to invest one hour of time for reading, research and learning per $1,000 to be invested in the business. This formula links the amount of time on due diligence with the amount to be invested - the more expensive the investment, the greater the amount of due diligence required. The formula is highly effective in determining how much time should be spent researching a franchise before jumping in boots and all. The due diligence time can also include hours spent with professional advisors (lawyers, accountants and business consultants whose advice should always be sought prior to buying either a new or existing franchise), time spent in the business as part of the research, and time spent speaking with current and former franchisees, customers and suppliers to the business.

THE BOTTOM LINE How long it will take to buy a franchise depends on the individual involved, and the desirability, location, availability and cost of their chosen franchise. Potential franchisees should always take their time to fully investigate a franchise by undertaking comprehensive due diligence beforehand, which includes preparing a business plan. By linking the amount of time spent on due diligence to the amount of money to be invested in a franchisee, a potential franchisee can estimate how long it will take to make an informed decision in buying a franchise, and should never, ever take shortcuts or compromise their due diligence to rush into an agreement, no matter how good the offer.

JAN/FEB 2016 | 22 | WWW.FRANCHISEBUSINESS.COM.AU

FR1115_000_CHEE

2015-10-26T10:33:43+11:00

Love your work! Make it a reality with The Cheesecake Shop.

Many people just dream about doing a job they love. Why not make those dreams come true by owning a franchise in The Cheesecake Shop. You can be your own boss! Bake tasty masterpieces all for the world to enjoy! And most of all you can enjoy your days working with those you love.

cheesecake.com.au/franchise

FR0116_024

2015-12-17T14:53:23+11:00

A PROFITABLE VENTURE

o you have what it takes to improve the profit of an underperforming business? Some people seem to have a natural ability to apply their skills to improve the financial performance of a business. If that’s you then finding a ‘bargain business’ and improving it might be a good path for you. KATE GROOM Co-founder of The Franchise Accountant’s Network and Smart Franchise. Together with her business partner, Peter Knight, she helps franchisees learn how to make wise fi nancial decisions

John and Ellen felt they had done well running their two franchise businesses. Several years ago they’d stretched themselves financially and bought into a new franchise system. After a few years the business was making a healthy profit and they were able to build up their financial reserves. Thinking about how to invest their savings, John and Ellen saw an opportunity that excited them. Another business in the franchise network was available to buy as the owner wanted to retire. John and Ellen decided to buy it, and try their hand at building JAN/FEB 2016 | 24 | WWW.FRANCHISEBUSINESS.COM.AU

up another business. The business was a little run down, and sales were far below what they had been achieving in their first store. However, they were sure they could improve sales and make a much better profit. So, John and Ellen sold their first business and purchased the resale (after negotiating a good deal). They spent some money on renovations, trained the staff, and introduced new operations procedures. Soon their efforts paid off through higher sales and better margins. After a year or two the new business was very profitable. After a few years it was time for them to sell the business and try their hand at something new. But had they made money from that second business? Yes they had! The profit over the years they owned the business, plus what they sold it for, added up to quite a lot more than they had paid for the business. They thought it was definitely a worthwhile investment, and

FR0116_025

2015-12-17T14:53:23+11:00

they had learned a lot from building up the business. Improving an underperforming franchise can be a great way to make a profit. But not every franchise that’s on the market is one with opportunity to improve, so how can you spot one where you can potentially make a healthy gain on your investment? Over the years I’ve seen some people do very well by taking on an underperforming franchise. Here are some things to look out for, based on those experiences.

YOUR SKILLS AND SITUATION The first thing to do is consider whether business improvement is your area of expertise. Be wary if you don’t have any experience with deliberately improving results in an established business. In this case it might be best to purchase a new business, or one that’s already doing well so you can learn without having to fix too many problems.

Have a good think about your skills and what sort of work you like to do before you snap up what you think is a bargain

In franchising, it’s quite common for successful franchisees to be encouraged to purchase a second underperforming location. But this isn’t for everyone. Just because you can run one business well doesn’t mean you can do so with two - especially when one is a poor performer. So, have a good think about your skills, and what sort of work you like to do before you snap up what you think is a bargain. If you believe you’ve got what it takes to improve the performance of an underperforming business, the next stage is to identify a good one to buy. At the heart of this, you’re looking to increase profit in the business you buy. And since profit improvement comes by increasing revenue and controlling costs, what you are looking for is a business that gives you the opportunity to do this. However, it’s not enough just to see a business that doesn’t make much money, and think you’ll do okay. Before you buy you will want to identify that improvement actually is possible. You’re looking for opportunity and will need a good idea of what you’ll do to improve the business.

OPPORTUNITIES Your starting point is to seek out a business in which there are opportunities to improve. Look for one where financial results are below what other comparable businesses are achieving. Sales revenue is the first thing to consider. In most franchise businesses, the best opportunity to increase profit over a sustained period comes from increasing sales revenue. So, look for a business where there is room for improvement in sales revenue of the business. Apart from sales, there are two other key areas of JAN/FEB 2016 | 25 | WWW.FRANCHISEBUSINESS.COM.AU

FR0116_026

Can you reduce wages by better rostering of staff or by using permanent staff rather than paying high casual wages

2015-12-17T14:53:23+11:00

opportunity: cost of goods sold and wages. Opportunities arise in a business where performance in these three areas is below the franchise system average. In other words, the business you are considering is making lower sales, lower gross profit and spending more on wages than other similar businesses.

STRATEGIES Once you’ve identified that an opportunity exists to increase sales and reduce costs, the next question is “How will I improve financial performance?” This means having a good idea about what specifically you can do to improve performance. For instance… What new initiatives could you introduce that will increase sales? How can you reduce waste to reduce cost of goods sold? Can you reduce wages by better rostering of staff or by using permanent staff rather than paying high casual wages? Some answers may be within the franchise system. Perhaps the existing franchisee isn’t applying all the franchisor’s recommended practices. But don’t leave it at that. What are your skills in business management and how could you use them to improve this business?

WHAT TO WATCH OUT FOR Not every business that seems to be a bargain ripe for improvement is actually a good buy. Here are some things to watch out for when you’re looking for a franchise

where you can increase the profit, and make a healthy return on your investment. WILL YOU HAVE TIME TO MAKE THE NECESSARY IMPROVEMENTS? It will probably take several years to reap the full benefit of your better management. Meanwhile franchise and lease terms are limited, often with no guarantee of renewal. So, if there are only a few years left on the franchise agreement and you can’t be sure it will be renewed it might be best to give pass up the opportunity. ARE THERE ADDITIONAL COSTS IN SIGHT? A purchaser will often need to spend money to improve a business they buy. For instance to replace old equipment, or renovate the business premises. However, you should bear in mind extra costs when you’re deciding how much you’re prepared to pay for the business. IS THE FRANCHISE SYSTEM A ‘BAD BET’? Not every underperforming business can be improved. So, watch out for businesses where you can’t see evidence that better performance is possible. For instance, if most of the franchise network has low profit or poor sales performance. If business improvement is your thing, buying an underperforming franchise business can be a great way to profit from your skills. As with any purchase of a business it’s important to carefully consider the financial aspects before you buy, and get a sense that your dream can come to reality. These tips will help you do that - and good luck in your business ventures!

JAN/FEB 2016 | 26 | WWW.FRANCHISEBUSINESS.COM.AU

FR0116_000_SNO

2015-11-20T10:04:14+11:00

JOIN THE

DREAM TEAM

Vendor finance now available* *Available to approved applicants.

We are looking for dynamic people who love dealing with others and are passionate about retailing. The Snooze brand has a strong history of over 40 years in retailing and has built a very solid franchise system. We provide franchise partners with a stable platform to start their business and offer support across the entire business including: • Marketing and Promotional Support

• Product Development and Buying Power

•P roven operating system that includes comprehensive product and sales training usiness Management support from our on the ground •B field team • Assistance in site selection and property negotiations • Business finance available to approved applicants

For more details visit snooze.com.au or email franchising@snooze.com.au or call the Support Centre on (03) 9830 4166

It’s amazing what a little snooze can do. snooze.com.au

FR0116_028

2015-12-17T14:51:16+11:00

How do I raise finance for my

FRANCHISE PURCHASE? JAN/FEB 2016 | 28 | WWW.FRANCHISEBUSINESS.COM.AU

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2015-12-17T14:51:16+11:00

JAMES SCURR James is founder and managing director of franchise fi nance specialist Cashfl ow It. He has also been a multi-unit franchisee of a number of Australian franchise brands.

ou’ve been researching franchises for months and you’ve found the one that’s right for you. You’re excited, you’re drawn to what the franchise offers, the financial returns are sound and you are about to put down a deposit and move to the next stage. But are you sure you have access to adequate funding to purchase the franchise?

DO YOU HAVE CAPITAL? It’s long been touted as the biggest obstacle to starting a new business or franchise and since the GFC, it has become even more difficult to obtain the funding required to open a new franchise. Unless you have considerable equity in property and plenty of cash to contribute, most potential franchisees will need finance to assist them in opening a franchise business. There are essentially two broad categories of funding to consider: debt funding; and equity funding. Debt funding involves raising money that will be paid back with interest over time. It usually comes from banks and other financial institutions, it could come from family or friends, and in some cases vendor finance with the franchisor can be arranged. Equity funding involves money raised through offering part ownership of your business. Equity partners become an owner along with you and will enjoy the potential upside through profits and capital growth, but they will also suffer the potential downsides should the business fail. Sources of equity funding may include business angels, family and friends, venture capitalists or even crowdfunding. My experience as a franchisee for the first time back in 2001 was a mix of debt and equity: a loan from my parents, some funding from the bank and every cent I had ever saved up. I put everything on the line and, combined with some hard work and long hours, it paid off well.

FACTORS TO CONSIDER So what is the right way for you? There are a number of factors you should consider

first to help answer this. 1. Is the franchise you are buying an accredited franchise system of a bank or any other lender? 2. Do you own any property? 3. How much of your own cash do you have saved that can be contributed to the franchise? Franchise accreditation offered by lenders typically recognises the strength of the brand to offer a pre-approved percentage of the purchase price or dollar figure for the business. This can be one of the most hassle-free ways to obtain funding as the hard work has been completed between the lender and your franchisor. Unfortunately however, bank accreditation is not a guaranteed approval. There may still be specific criteria you have to meet and banks typically have franchise group exposure limits in place for each brand or industry. Furthermore, the amount you can access through accreditation may still not be sufficient for you to complete the purchase. While loan to value ratios vary, the average bank accreditation will allow lending of 50 percent of the purchase price of a franchise. Given many franchises can reach values in the hundreds of thousands of dollars, this can mean significant savings are required, and can often still result in a shortfall. There are suggestions that only about 20 percent of the franchise systems in Australia are accredited with a major bank. So where do you go if the franchise system you are buying is not accredited? Do you own any property? Whilst some banks and lenders advertise unsecured business loans, it is rarely the case that they JAN/FEB 2016 | 29 | WWW.FRANCHISEBUSINESS.COM.AU

Debt funding involves raising money that will be paid back with interest over time. Equity funding involves money raised through part ownership of your business

FR0116_030

It’s easy to get blinded by the excitement of buying your own franchise and simply sourcing whatever funds are needed to buy it. Borrowing 100 percent of the purchase price is generally courting disaster

2015-12-17T14:51:16+11:00

will lend money without an asset as security. Banks like to have their capital nice and secure in the event that something goes wrong to ensure they can recover the debt. If you have a reasonable amount of equity in property, it will be much easier to secure the required funding. The reality is, however, that home ownership is becoming increasingly difficult for the next generation of business owners. If you don’t own property, don’t despair; there are still options. A number of second tier lenders and specialist equipment finance companies do not require property ownership; rather the assets that they fund will act as security for the loan. In this instance, however, potential franchisees should do their research and understand that the cost of funding will be higher than a loan from a bank secured by property. You could also consider a second tier lender for any shortfall after savings and bank funding have been accounted for. It’s easy, however, to get blinded by the excite-

ment of buying your own franchise and simply sourcing whatever funds are needed to buy it. Borrowing 100 percent of the purchase price is generally courting disaster. Servicing the debt in such a scenario is very difficult, especially in the first six to 12 months of operations when you are still establishing yourself and your business. Potential franchisees should give significant consideration to the amount of their own savings they are willing to contribute. Lenders like to refer to this component of the transaction as “hurt money”. This is the money that you contribute from savings that will “hurt” if the business fails. If you have come up short, then instead of more debt consider your options with equity. It might be smarter to see if any family, friends or other investors can contribute some funds and become part owners in the business. Instead of having to repay the debt, they will own a piece of the business.

JAN/FEB 2016 | 30 | WWW.FRANCHISEBUSINESS.COM.AU

FR0915_000_DOM

JOIN AU

2015-09-09T14:14:46+10:00

JOIN AUSTRALIAâ&#x20AC;&#x2122;S #1 PIZZA brand A proven brand with over 564 locations Australia wide. Almost double our nearest competitor.*

Undisputed leaders in online ordering. Australia and NZ's first and most advanced mobile ordering apps.

Ongoing training and support for franchisees and their teams. State of the art digital store management tools in the hands of every franchisee.

Innovative digital marketing with millions of customers assessable via email and social media.

*Dominoâ&#x20AC;&#x2122;s store count 564, Pizza Hut store count 302 as at June 2015. Source GapMaps Pizza Sector Report June 2015.

LIMITED FRANCHISE OPPORTUNITIES AVAILABLE, GRAB YOUR SLICE NOW! Call 1300 131 888 or visit: dominos.com.au/franchising

FR0116_032

2015-12-17T16:47:50+11:00

LEGAL COSTS IN BUYING A

FRANCHISE BUSINESS

hen buying any business, the costs involved extend beyond just the purchase price for the business. This is equally true for a franchise, writes Elizabeth Gore-Jones principal at Franchise & Business Lawyers

Amongst the costs you can expect to incur in the purchase are the legal costs of the acquisition. As a buyer of a franchise business your lawyer will usually: 1. Review the proposed contract of sale, explain your rights and obligations under the contract and negotiate any necessary changes especially those that will give you a right to terminate without penalty JAN/FEB 2016 | 32 | WWW.FRANCHISEBUSINESS.COM.AU

if, for instance, you are not satisfied with the franchise agreement or the franchisor does not agree to grant you the franchise. 2. Review the lease, prepare any disclosure statements under the applicable retail leases legislation (if this is a retail lease), review the landlord deed of covenant and prepare the deed of assignment of lease. 3. Review the franchise agreement, provide you with advice about the franchise agreement and undertake

FR1113_000_SUB

2013-09-19T14:58:54+10:00

FR0116_034

Search fees are usually relevant if the business is a food business as this usually requires a council inspection

2015-12-17T16:48:46+11:00

any necessary negotiations on your behalf. 4. Undertake due diligence enquiries which will incur search fees. 5. In the relevant States or Territories prepare stamp duty declarations and attend to stamping of the documents. 6. Attend to any adjustments to the purchase price including for employee entitlements. 7. Liaise with your bank or fi nancial institution if you have obtained fi nance. 8. Attend to settlement.

LEGAL FEES Again, your legal fees will vary depending upon the type of business and of course are variable between law firms. For a standard transaction (as an indication only) you should allow between $5000 and $6000 plus GST. However, for a larger more complicated business transaction (for example a restaurant) you could allow somewhere between $10,000 and $15,000 plus GST.

There is actually quite a lot of work to undertake regardless of the size, price or type of business.

SEARCH FEES Search fees are usually relevant if the business is a food business as this usually requires a council inspection to ensure the premises are compliant with council regulations.

LICENSES You may also need a number of licenses to operate your business and there may be licence fees associated with those. These licenses will vary according to business type and local council. Some examples of licenses you may need include:

STAMP DUTY

✱ Music – in order to play music or the radio in your business you need to obtain a licence to ensure the artists are compensated ✱ Business name registration ✱ Food hygiene licence – required for the preparation of food in your business ✱ Trade waste licence – for food businesses and other businesses with trade waste ✱ Signage and advertising – required by some local councils ✱ Outside dining permits –dependent upon the council.

Stamp duty is not payable on the purchase of a business in all States or Territories. However, if stamp duty is payable, it is calculated on the purchase price so you should ask your lawyer what the cost will be as it is variable.

When you engage your legal advisor you should ask them not only for a quote as to their costs but also the hidden extras such as stamp duty, search fees and licence costs.

There are other factors which will impact upon the search fees such as the entity selling the business. If you are buying a food business we generally suggest you allow about $600 to $700 in search fees. If it is not a food business then your search fees should be about $300.

JAN/FEB 2016 | 34 | WWW.FRANCHISEBUSINESS.COM.AU

2014-04-23T11:39:51+10:00

ificial flavour s art

FR0514_000_GEL

a rtif

l icia l c o

taste the

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

gelatissimo.com.au

FR0116_036

2015-12-17T14:48:47+11:00

HOW TO GET SUPPORT AND

when to stop asking for it

ow can you make the most of your franchisor without upsetting the relationship? Many people invest in a franchised business because they know that they will always have someone else to refer to, if they have a problem in the operation of the business. This is one of the benefits extolled in marketing material from franchisors, as they try to convince you to invest in their particular franchise.

But what is the reality? Franchisors may enjoy their role of supporting and advising franchisees, but there are only so many hours in a day and they need to balance all aspects of their role. They will have the best intentions when they are talking to prospects about the level of support provided, but how can you tell if you will be supported by the franchisor?

BILL LOCKETT Is a consultant at Franchise Systems Group. He has a strong retail background and joined Franchise Systems Group (FSG) after 40 years international experience in senior management positions with major retailers including David Jones and Selfridges.

If you have taken appropriate advice before buying your franchise you should be able to ascertain the level of support you will get. Especially if you have talked with several existing franchisees within the business. Ask specific questions about the support they currently receive and whether they are satisfied with it. You will gain a great deal of understanding from the way your initial enquiry is handled and the total recruitment process that takes place. Many problems

JAN/FEB 2016 | 36 | WWW.FRANCHISEBUSINESS.COM.AU

FR0116_037

2015-12-17T14:48:47+11:00

occur in franchising because of a bad fit between the franchisee, franchisor and the business concept. A good franchisor will be very careful about who is granted a franchise and will allow the prospective franchisee time to make their decision. They will provide you with all the information required to make a decision. They will also ensure that you fit the profile of an ideal franchisee in their system. This will help the buyer greatly, because if you are not going to be a good fit, you need to know before you hand over your money. This due diligence is critical for both the franchisee and franchisor. The franchisee does not want to risk hard-earned money by selecting the wrong franchise model. The franchisor wants to ensure the incoming franchisee is trained thoroughly and is competent to run their business effectively, with minimum supervision. The training program should be comprehensive and include on the job as well as classroom training. Hopefully you will have had chance to experience time working within a franchise location to ensure this is something you really want to do. It is at this stage the franchisorâ&#x20AC;&#x2122;s expectations about the support they provide will become clear. The training programs will generally follow what is contained in the operations manuals. The manual is a goldmine of information and the franchisor will expect that you will have absorbed the material, so that you will not need to continually call head office with a query. Most franchisors will provide staff to assist franchisees with the launch of their franchise. This ensures the operation starts out in the correct way. The length of time for this assistance will vary according to the type of business and how well the franchisee has understood the system and is able to follow it.

ONGOING SUPPORT By this time the franchisor could well expect that the franchisee will be able to run their business by following the system and referring to operations manuals if they need a reminder of what to do in various circumstances. The franchisor will feel that they can focus on other pressing matters, such as the recruitment of new franchisees. They will

be following their vision for the growth of the business and have less time to devote to franchisees within the system. Many franchisees will expect the warm feelings they get when being part of the franchise family to continue for longer than the franchisor may consider reasonable. This is the dangerous time when franchisees can feel abandoned. Franchise relationships are far more complicated than most imagine, so the good franchisors will commit to continually support the system. This assistance can differ considerably between systems. Some franchisors sustain the entire system, providing materials, training and ongoing support. Others simply offer advice and guidance. Either level works provided the franchisee knows up-front what to expect. What is your role as a franchisee, to help yourself, without constant reference to the franchisor? 1. Continually keep in communication with the franchisor, just as you did when you started. 2. Work diligently in your location. It is your investment and your future. 3. Listen to advice from the franchisor and his team. 4. Learn from other successful franchisees. 5. Do your homework. Embrace your JAN/FEB 2016 | 37 | WWW.FRANCHISEBUSINESS.COM.AU

Franchise relationships are far more complicated than most imagine, so the good franchisors will commit to continually support the system

FR0116_038

Relationships depend upon dialogue so it’s important that dialogue is encouraged

2015-12-17T14:48:47+11:00

industry, find out what is going on and become an expert. 6. Build the business and develop strategies to get more clients. 7. Try to make the franchisor appreciate your input, so when you call for help, they will ready to provide it. 8. Recruit staff that smile and are passionate about your business. You can train them in basic systems, but cannot train attitude, optimism or honesty. 9. Make royalty payments gladly. When you first looked at the franchise opportunity, you chose to invest after you understood the royalty payments and your potential profits. Profit is not a dirty word…not for the franchisee or franchisor. 10. If you think you are losing your passion or drive, get out with a profit. It can be done, but only when sales and profits are up, not when they are trending down. Whatever the level of support, the franchisor must be committed. For example, simple things such as returning phone calls are a must. Having knowledgeable people available to answer any type of call can also be essential as well as simply listening to the franchisee and providing guidance.

The franchisor can provide even more support talking to the franchisee on a weekly basis, sharing business success experiences from other franchisees and being willing and available to listen to challenges. Working with the franchisee to set goals, create plans and develop business strategies is yet another level of support.

EFFECTIVE COMMUNICATION The key to being a good franchisor starts with communication. This does not mean just the occasional newsletter and a visit from the field representative. In today’s technological society it is too easy to rely on the internet for all our communications. But in franchising that can be a big mistake. We have all seen well-intentioned e-mails cause no end of problems when they are misinterpreted. Relationships depend upon dialogue, so it’s important that dialogue is encouraged in every aspect of the relationship. Good franchisors will create different methods for constructive dialogue within the system. Annual conferences, regional meetings and Franchise Advisory Councils all provide avenues for this two-way communication. This allows the franchisor to share trends and information with

JAN/FEB 2016 | 38 | WWW.FRANCHISEBUSINESS.COM.AU

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franchisees, including regulatory and compliance updates, benchmarking and best practice. It also offers franchisees the opportunity to learn from each other and share â&#x20AC;&#x2DC;war storiesâ&#x20AC;&#x2122; about difficulties they have overcome. It is also critical for the franchisor to be available for franchisees. The franchisor should ensure each franchiseeâ&#x20AC;&#x2122;s query is answered on the same day, by themselves or one of their support team. To be really effective, the communication needs to be honest. While there are some things a franchisor may choose not to share with franchisees, the key to a long-term relationship is trust. This starts with openness and honesty. If a franchisor is found to have lied just once, this trust can be destroyed. The good franchisor will genuinely care about the success of their franchisees. Good franchisee relationships start with a franchisor that is, first and foremost, committed to franchisee success. That commitment must spread through the total franchisor support structure. But no franchisor is perfect. Communication and relationship building can always be improved. If a franchisee understands that the franchisor has a vested interest in the success of all their franchisees, they will have a different understanding of the relationship. Just as it takes two make a marriage work, it takes two to make a franchise relationship work. The franchise relationship will depend on a clear definition of roles, consistency, openness, trust, honesty, support and a good fit for all parties.

JAN/FEB 2016 | 39 | WWW.FRANCHISEBUSINESS.COM.AU

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A SOCIAL ENGAGEMENT S

ocial media make it possible to reach hundreds or even thousands of potential customers, build your business and establish your reputation with the local community, all for little or no cost, writes Domini Stuart. And, these days, a social media presence is like a website – people expect to be able to communicate with the people they do business with and, if they can’t find you, they might look elsewhere.

“You can’t afford not to be having the conversation on social media,” says Tina Tower, chief executive officer of Begin Bright School Readiness and Primary Tutoring Centres. “But you must understand social media to use it effectively – and using it for marketing purposes is very different from just staying in touch with friends.”

Tower. “We also give them a suggested marketing plan for Facebook with ideas for topics. Some people follow it to the letter, some don’t – and some go above and beyond. The ones who do it well get a lot of their business from Facebook.”

STARTING THE CONVERSATION

PERSONAL CONTACT Begin Bright has a presence on all platforms including Twitter, LinkedIn and Google Plus but focuses most of its efforts on Facebook. “Our target market is mainly mums with young children and Facebook is where they hang out,” says Tower. “We have an overall brand page and all of our centres have their own page as well. The brand page is where we do things that are of interest to our broadest audience – things like education and promotions that apply to the whole of Australia. The individual franchisee pages are all about local engagement. For example, one franchisee recently posted an invitation to a toddlers’ Christmas morning tea – it’s a great way to communicate on that very personal level.” Few new Begin Bright recruits have used Facebook for business and some have never used it at all. “We provide everything they need to get started and manage their page effectively including social media manuals and training videos on our intranet,” says

“A big mistake a lot of businesses make is to use Facebook purely as a marketing tool,” says Tower. “It’s called social media because that’s exactly what it is – a way of engaging with people. When you’re starting out, post things that are of interest to you and your target market to get the conversation going and build your confidence. Then you can do some marketing – but, for every call-to-action-type post you should have at least 10 social posts to maintain the engagement.” It’s also important to remember that Facebook and other social media are public forums. “We have policies in place and we monitor the pages to ensure that nothing political, offensive or capable of dividing a community is being posted,” says Tower. “As we work with children, we also have to be very careful about the way we use any photographs of them in class or at a social event, for example. We teach our franchisees to be extremely careful about what they say and how they say it but, if you follow a few simple rules, Facebook and other social media are brilliant and proven marketing tools.”

JAN/FEB 2016 | 40 | WWW.FRANCHISEBUSINESS.COM.AU

It’s called social media because that’s exactly what it is - a way of engaging with people

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STEPS TO START-UP

ou’ve done your due diligence and decided on the right franchise for you – now it’s time to take care of the important details. Andrew Graham, national head of business advisory for RSM, highlights areas you need to consider.

THE BUSINESS STRUCTURE Before you sign the franchise agreement you need to establish the most tax-effective structure in which to acquire the business – a partnership, trust, company or hybrid structure. An experienced accountant will consider things like upfront deductibility of set-up costs, ongoing minimisation of tax liabilities and opportunities for splitting income in order to obtain the optimal tax position.

It’s vital that you discuss your needs with an advisor who is licensed to provide insurance advice, such as an insurance broker. Your advisor will help you to meet legal requirement in terms of workers compensation and public liability insurance. Business interruption insurance can help to cover ongoing costs if something like a flood or fire should prevent your franchise from operating for a period of time. You may also want to discuss personal income protection and, if you will be running the business yourself or playing a key role, insurance to cover costs incurred if illness or an accident keeps you from doing your job.

HUMAN RESOURCES OBLIGATIONS If you will have people working for you, you must have employee agreements or contracts in place which comply with National Employment Standards and relevant industry awards. Your franchisor should provide guidelines, procedures and details of your responsibilities.

BUSINESS REGISTRATIONS Once your business structure is in place it’s time to contact the Australian Taxation Office. You must apply for both a tax file number and an Australian Business Number (ABN) to register for the Goods & Services Tax (GST) and then confirm whether you will be paying GST on a quarterly or monthly basis. If you will be employing staff you need to find out whether you are required to register for Payroll Tax – the limits and thresholds for this vary from state to state. Your franchise agreement will usually include rights to use the franchise brand name and trademark but you may still need to register business trading names with the Australian Securities and Investment Commission.

INSURANCES Insurance is a critical component in your risk management strategy.

BUSINESS PROCESSES A cash flow budget for the first 12 months you’re in business will enable you to measure the actual return on investment and compare it with the initial estimated return. And, while a business plan isn’t always a requirement for acquiring a franchise, setting out what you want to achieve and establishing milestones along the way could help you to achieve your business goals. Graham says that, in his experience, those with a plan outperform those that don’t. You should also be clear about the business processes themselves – how you are going to record and monitor transactions for the purpose of reporting back to the bank or the franchisor or just as part of your good housekeeping – an overview of how your business is tracking and performing. BY DOMINI STUART

JAN/FEB 2016 | 42 | WWW.FRANCHISEBUSINESS.COM.AU

FR0914_000_DODO

2014-08-29T13:36:43+10:00

Dodo Connect is on a nationwide search for franchise partners Help us grow the hundreds of thousands of existing Dodo customers already enjoying our great value products and services.

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INTELLECTUAL PROPERTY and your franchisor JANE GARBER-ROSENZWEIG Principal at Gable Lawyers and a specialist in Franchising & Commercial Law.

ranchising is a method of systematically sharing the franchisor’s intellectual property to distribute goods or services. Before taking a leap of faith, a potential franchisee should understand what intellectual property is owned or licensed by the franchisor and what responsibility a franchisee has in relation to the intellectual property of the franchisor.

Before signing up to a franchise, a potential franchisee must, as part of their due diligence, ask the following questions: 1. WHAT INTELLECTUAL PROPERTY DOES THE FRANCHISOR HAVE? The most well-known types of intellectual property include trade marks, copyright, designs and patents. Although most intellectual property is registered with IP Australia, which is a government agency administering registration of all intellectual property rights in Australia, many intellectual property rights still exist in

their unregistered form. A potential franchisee should consider whether the franchisor has a well-established trade mark and brand clearly recognised by the general public. They or their lawyer should also check IP Australia’s register to ensure that the information provided in the disclosure document is correct. 2. HOW DO FRANCHISORS PROTECT THEIR INTELLECTUAL PROPERTY? Although it is commonly thought that franchisors own

their intellectual property, franchisors are often advised to register all their intellectual property in a separate company for asset protection purposes. Such a company usually has the same director(s) as the franchisor and the intellectual property is then licensed to the franchisor. If this is the case, the disclosure document must detail the owner of the intellectual property, if the franchisor is not the owner, and what licensing arrangements are in place between them. Franchise buyers are strongly recommended to carefully review the information provided by the franchisor in the disclosure document to understand the duration and conditions of the franchisor’s licence to use intellectual property and what impact it has on the franchise agreement. 3. WHAT RIGHTS DO FRANCHISEES HAVE? All of the franchisee’s rights and obligations in relation to running their franchise are contained in the franchise agreement. The franchisees must review all the conditions attached to the use of the franchisor’s intellectual property, its limitations and its duration.

JAN/FEB 2016 | 44 | WWW.FRANCHISEBUSINESS.COM.AU

4. WHAT HAPPENS TO THE FRANCHISOR’S INTELLECTUAL PROPERTY IF THE FRANCHISOR BECOMES BANKRUPT? It is imperative for potential franchisees to understand that if the franchisor becomes bankrupt, the franchisees may lose the rights to operate under the franchisor’s brand or use any of the trade marks or systems of the franchisor. The administrator or the liquidator of the franchisor would first try to sell the franchisor’s business to a third party and to assign all franchise agreements over. However, if this doesn’t happen then all the franchisor’s assets would be sold separately – and that includes the intellectual property, if it is owned by the franchisor. It should be noted that franchisees are not able to terminate their franchise agreements in the event of the franchisor’s insolvency or bankruptcy under the Franchising Code of Conduct; this right is only afforded to franchisors. Franchisees should ensure that they are fully informed about the franchisor’s intellectual property, how and what parts of it they can use and the limitations imposed within the franchise agreement.

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2015-06-25T13:46:50+10:00

RULE THE ROOST. Red Rooster Franchise Opportunity. This is a real opportunity to be seized. Red Rooster is looking for self-motivated people to become owneroperator franchisees. If you’re a hard-working people-person, with a can-do attitude, you’re just the kind of person we’re looking for. You’ll find all the details on how to apply at

www.redrooster.com.au/franchise

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YOUR FRANCHISOR CAN TRAIN YOU TO BE

FRANCHISE-READY

JAN/FEB 2016 | 46 | WWW.FRANCHISEBUSINESS.COM.AU

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raining is an integral part of any franchise investment so it is worth investigating what you will get in the package. Domini Stuart looks at how franchisors can give you a head start.

One of the most persuasive reasons for choosing a franchise over going it alone is that, with a franchise, you can hit the ground running “Franchisors want their franchisees to succeed,” says Matt Fitzpatrick, national recruitment manager at Smartline Personal Mortgage Advisors. “That means making sure they’re ready to manage the business efficiently from the moment they open the doors.” In most systems, the initial training covers both theory and practice. “Our franchise partners need to know about everything from the most basic in-store operations all the way up to managing a team,” says Adam Neill, general manager of Boost Juice. “That requires a careful balance between classroom-style learning and hands-on experience.” At La Porchetta, the theory covers business basics such as policies and procedures, employment laws, marketing and occupational health and safety as well as areas specific to the food industry including food safety and responsible serving of alcohol. “Our franchisees also need to know everything about the practicalities of running a restaurant from developing rosters, making food, serving customers to leading their team,” says director and chief executive Sara Pantaleo. “That requires hands-on learning and field visits.”

INDUSTRY REQUIREMENTS Smartline franchisees must have a Diploma of Mortgage Broking from an accredited institution before they are able to begin operating. “This is an industry requirement and is quite separate from our franchisee training but it does mean they have a sound knowledge of the industry before they start our individual development program,” says Fitzpatrick. “We have an onboarding manager to help new franchisees organise the technicalities such as licences, professional indemnity insurance and accreditation with all of the different lenders. Then they have eight weeks of induction training at our head office in Sydney, which focuses on helping them to apply the knowledge they have gained by using our platforms to maximise the customer experience and market their business.” All Smartline recruits must write a business plan and, for the first three months of their business, they have weekly, face-to-face meetings with their state manager JAN/FEB 2016 | 47 | WWW.FRANCHISEBUSINESS.COM.AU

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to discuss their progress and tackle any problem areas. They also receive six months of business coaching from successful, qualified Smartline franchisees and, to supplement ongoing training, they have the option of repeating the coaching program at any time with the franchisor covering 50 percent of the cost. “There’s also an industry requirement than anyone new to the sector has a mentor for two years,” says Fitzpatrick. “At Smartline, this is a franchisee with a minimum of five years’ experience. And, although it’s not mandatory, we also team up the franchisees who are less experienced in the industry with an experienced buddy for their first year.” Smartline’s style of coaching and mentoring has been a major driver of its success – including being named Franchise of the Year for the seventh consecutive year by 10 Thousand Feet at the Topfranchise Awards. “That’s something we’re very proud of,” says Fitzpatrick.

ONGOING LEARNING Over the past couple of years Boost Juice has focused strongly on improving ongoing training. “What we learned was that our partners’ challenges change significantly over the first three

months so we now send trainers back in for three or four days at week 13,” says Neill. “We also provide ongoing training through our e-learning network and we hold cluster meetings where partners get together for regular training and discussions.” Pantaleo is a great believer in continuous education – she was one of the first to complete the Franchise Council of Australia’s Certified Franchising Executive (CFE) program, the only internationally recognised professional accreditation program for franchise executives. “We provide ongoing workshops, online forums and an annual conference, and I encourage our franchisees to take up opportunities for industry-specific training,” she says. “It’s a very good way of making sure you stay fresh and innovative in your work.”

WHAT TO EXPECT Most franchisors document the training a franchisee can expect – but how can you be certain it will live up to its promise? “The only way to find out for sure is to talk to people who have already been through the process,” says Neill. “We provide every incoming franchise partner with a list of names and contact numbers of stores in their local area and we encourage them to visit anyone else in our system.”

JAN/FEB 2016 | 48 | WWW.FRANCHISEBUSINESS.COM.AU

Most franchisors document the training a franchisee can expect - but how can you be certain it will live up to its promise

FR1116_000_SUM

2015-12-03T11:31:53+11:00

MAKE A HEALTHY BUSINESS CHOICE

JOIN SUMOSALAD, AUSTRALIA’S LARGEST HEALTHY FAST FOOD CHAIN, IN OUR JOURNEY TO MAKE AUSTRALIA A HEALTHIER PLACE.

“I bought two Sumo stores as I saw a great future with SUMO. I love how the whole team work together to make the brand better and better!” Victoria based multi-unit SumoSalad franchisee Emma Li

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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Potential franchisees need to think carefully about their willingness and ability to follow the system

Pantaleo and Fitzpatrick also recommend talking to existing franchisees. “A good question to ask is: “If you could go back in time knowing what you know now would you still choose the same brand?” says Fitzpatrick.

MAKING THE MOST OF IT? However comprehensive the training, it can only be effective if you’re willing to engage and learn. “Don’t fall into the trap, of thinking “I’ll learn that once I get started in the business”,” says Pantaleo. “Attend every day, take notes, review the material and come back with questions if something isn’t clear. And don’t be afraid to ask as many questions as you need to gain a genuine understanding of everything you’re being taught.” If you think you would benefit from extra training in certain areas, tell your franchisor – most will be happy to do what it takes to ensure you feel confident in your new role. “By the end of the training you should also know how the franchisor will keep you abreast of developments in the future and where you can find any information you need,” Pantaleo continues. “For example, we have an intranet where all communication and manuals live.” JAN/FEB 2016 | 50 | WWW.FRANCHISEBUSINESS.COM.AU

ENGAGE AND COMMIT The right attitude is crucial. “You must be prepared to be 100 percent focused and to leverage the training program to its maximum capacity rather than treating it like something you have to do to get the business,” says Neill. “I’ve spent 15 years in franchising and I’ve seen quite a few people ask if they can leave early, start late or whether they really need to do this day or that week’s training because they know what’s being covered and they have other commitments. This is where the red flags come up for me – not only in terms of their attitude to training but how committed they’re likely to be to other aspects of the business. We have been known to withdraw our approval for franchise partners who didn’t have the right attitude.” Some people think they already know how to run the business, others don’t engage with training because they think they could do it in a better way. “Franchising is wonderful way to grow a business you’re using a proven system,” says Fitzpatrick. “Before they commit, potential franchisees need to think carefully about their willingness and ability to follow the system and accept the guidance and support offered by the franchisor because the ones who do are the franchisees who do best.”

FR0715_000_YOU

2015-06-24T11:17:38+10:00

Grow your business through property investment with Property Club Franchises offered for the first time • nearly 5,000 Property Millionaires Club members and counting “Property Club is wholly dedicated to providing Australians with the opportunity of a better life through property investment. To celebrate 21 years in property, we are offering a limited number of Property Club franchises. This is a unique offer to be part of an organisation that has over 80,000 members and we’ve helped more people create million dollar property portfolios than any other property investment organisation with almost 5000 members now in our Property Millionaires Club. Take advantage of this exclusive opportunity by contacting us today.”

TRY E BEFOR YOU BUY

Kevin Young Founder and Director of Property Club

Visit www.propertyclub.com.au/

property-club-business-opportunities/ Call 1300 663 282 FRANCHISE FULL - New file.indd 1

3/06/15 4:30 PM

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THINGS TO RESEARCH BEFORE BUYING A FRANCHISE

uying a franchise can be an exciting and rewarding experience. Buying a franchise can also be a big financial step and a major lifestyle change. Make sure you are ready for the thrills and the spills by doing your homework before signing on the dotted line.

1. ASSESS YOUR SKILLS, STRENGTHS AND WEAKNESSES Not everyone is suited to franchising and not every franchise business will be your cup of tea. Franchising offers the opportunity to be your own boss with the support and security of an established business model. However, being part of a franchise means you have to play by the rules of the system. At last count, there were about 1160 franchise businesses operating in Australia, which means there is ample opportunity to choose a format which best suits you.

2. COMPLETE A PRE-ENTRY FRANCHISE EDUCATION PROGRAM The words of wisdom we often hear from established franchisees is that it pays to â&#x20AC;&#x2DC;go in with your eyes wide openâ&#x20AC;&#x2122;. A pre-entry franchise education program can help. Griffith University offers a free online education program for prospective franchisees. The program, funded by the ACCC, educates potential franchisees about their rights under the mandatory Franchising Code of Conduct as well as the practical side of running a franchise business. You can sign up at www.franchise.edu.au/pre-entryfranchise-education.html

3. GET PROFESSIONAL ADVICE Before investing your savings in a franchise opportunity, seek independent advice from a lawyer, business adviser or an accountant. This will save you a lot of angst further down the track. In fact, the Code requires you to provide a statement that you have sought this advice. Alternatively, you can sign a statement saying that you are aware that you should seek advice but have decided against it.

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4. MAKE SURE YOU RECEIVE AN INFORMATION STATEMENT, DISCLOSURE DOCUMENT, FRANCHISE AGREEMENT AND A COPY OF THE CODE It is important that you carefully review documents provided to you. These documents not only set out your rights and obligations but they will also give you key information to follow up. An information statement is a two-page document highlighting some of the risks and rewards of franchising. You should receive an information statement when you apply, or express an interest, in buying a franchise. A disclosure document contains key ﬁnancial information and details about the system. You should read this document closely as it covers things like franchise territory, online sales, site selection, payments and what

will happen when the agreement comes to an end. If you decide to become a franchisee, the franchisor must provide you with a disclosure document, as well as the franchise agreement and a copy of the Code at least 14 days before you enter into an agreement or make a non-refundable payment. The franchise agreement (contract) underpins each party’s rights and responsibilities. When signed, the agreement becomes a legally binding contract between the franchisee and the franchisor.

5. TAKE COMPREHENSIVE NOTES OF YOUR MEETINGS WITH THE FRANCHISOR. INSIST ON THE FRANCHISOR CONFIRMING ANY CLAIMS IT MAKES IN WRITING Don’t rely on purely verbal claims from a franchisor. Make sure the franchisor puts any claims in writing

JAN/FEB 2016 | 53 | WWW.FRANCHISEBUSINESS.COM.AU

BY DR MICHAEL SCHAPER Dr Schaper is Deputy Chair of the Australian Competition and Consumer Commission.

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so you can verify them. For example, if the franchisor talks about estimated earnings, insist that they put the figures on paper and ask for details on how they made the projections. This will enable your accountant or business adviser to crunch the numbers and verify the calculations.

6. SPEAK TO CURRENT AND PREVIOUS FRANCHISEES

See if you can work with an existing franchisee so that you are able to see how the business operates first hand, including turnover and staffing requirements

You should speak to as many existing and former franchisees as possible. They will provide you with the low down on how the franchise system works and whether they are satisfied with the level of support provided by the franchisor. Franchisors are required to provide you with the contact details of current franchisees as well as franchisees who have left the system in the past three years. If possible, see if you can work with an existing franchisee so that you are able to see how the business operates first hand, including turnover and staffing requirements.

7. RESEARCH THE FRANCHISE AND TRY TO VERIFY THE INFORMATION PROVIDED TO YOU Leave no stone unturned. Has the franchisor been involved in any recent court action? What sort of track record does the franchise management have? What else is happening in the industry? What are the demographics and spending habits of consumers within your area?

8. IF YOU WILL OCCUPY PREMISES AS PART OF YOUR FRANCHISE, MAKE SURE YOU UNDERSTAND YOUR RIGHTS AND OBLIGATIONS UNDER THE LEASE OR OCCUPANCY AGREEMENT Lease agreements can be contentious. Check whether the term of your retail lease corresponds with the term of your franchise agreement. For example, it may not be ideal to have a five-year lease but only a three-year franchise agreement.

9. CHECK CLAUSES ON TERMINATION, RENEWAL, END OF TERM AND TRANSFER OF THE FRANCHISE, AND MAKE SURE YOU ARE WILLING TO ACCEPT THEM Sometimes it pays to start at the end. A JAN/FEB 2016 | 54 | WWW.FRANCHISEBUSINESS.COM.AU

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Check whether the term of your retail lease corresponds with the term of your franchise agreement

franchisor doesn’t have to extend your agreement or enter into a new agreement. However, it does have to provide you with written notice of its decision not to offer you a new agreement at least six months before the end of your current agreement. The Code also spells out conditions around termination of the agreement.

10. IF THE DEAL ISN’T ACCEPTABLE, TRY TO NEGOTIATE A BETTER OFFER OR LOOK FOR A BETTER DEAL Be prepared to walk away if you are not completely satisfied with the information you have. And, be prepared to run the other way when someone claims you can make large amounts of money quickly and with little effort! THE ACCC ENFORCES THE COMPETITION AND CONSUMER ACT 2010, WHICH INCLUDES THE MANDATORY FRANCHISING CODE OF CONDUCT. SIGN UP TO THE ACCC’S FRANCHISING INFORMATION NETWORK AT WWW.ACCC.GOV.AU/FRANCHISINGCODE

JAN/FEB 2016 | 55 | WWW.FRANCHISEBUSINESS.COM.AU

FR0116_056

2015-12-18T08:44:06+11:00

The cooling off

PERIOD T

he Franchising Code of Conduct provides for a seven day cooling off period with a franchise agreement.

WHAT IS IT? When a franchise buyer signs a franchise agreement or pays a fee (whichever comes first), there is a seven day cooling off period that takes immediate effect. Under the Franchising Code of Conduct, the franchisee is entitled to be refunded the money paid (minus reasonable expenses) if they decide within that week to exit the franchise.

WHAT ARE THE EXPENSES? Costs incurred through any training undertaken by the franchisee are unlikely to be returned.

There will most likely be additional expenses too: ✱ Costs in store fit-out ✱ Equipment hire or purchase ✱ Cost of stock, uniforms ✱ Marketing material ✱ Bank, lawyer and accounting fees ✱ Any charges for business registration It is quite likely that a franchisee who chooses the cooling-off period to exit the franchise will be financially worse off than before they signed a franchise agreement.

WHAT ARE THE LEGAL ISSUES? Even though the franchise agreement is ended when the

cooling-off period is actioned, there will remain legal obligations in place. For instance, the now former-franchisee will be bound by any restraint of trade clauses or trademark use restrictions.

WHY USE IT? It’s a safety net for franchisees who realise they have made a serious error in their purchase. However, it shouldn’t be relied on as a get-out clause. When a franchisee signs up to a franchise agreement, they will have been given the appropriate documentation to review. That is the best time to decide whether or not the franchise is right for them. It is wise for anyone purchasing a franchise to seek legal and accounting advice from franchise professionals before signing an agreement.

JAN/FEB 2016 | 56 | WWW.FRANCHISEBUSINESS.COM.AU

A franchisee who chooses the cooling-off period to exit the franchise may be financially worse off

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2014-12-04T10:57:23+11:00

TAKE YOUR PICK! 2 business opportunities from Swimart. Work for yourself and be part of the Swimart success story.

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

1 Own

2 Own a Swimart

YOUR OWN Swimart Store

Mobile Pool Services business

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

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

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

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

swimartfranchise.com.au SWI2243-R

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A CASUAL

affair

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t’s a little fancier but not formal: casual dining is a family favourite and a more relaxed approach to sit-down eating that’s just right for our laid-back lifestyle.

There are signs that the casual eating segment is picking up the pace in Australia. In Queensland, for instance, real estate business Colliers International reported last year that retailers were increasing their casual dining floor space from 50sq m to 1000 sq m. Kym Thrift, associate director of retail leasing at Colliers International, said “The casual dining precincts tend to be located within major regional shopping centres creating a dining experience that retains the customers within the precinct for a lot longer than a takeaway option would.” Hospitality magazine reports the opening of a $20m dining and retail precinct in June this year in Perth, a retail hub combining modern architecture, heritage buildings, art and space. And in early 2014 Westfield completed its $45m redevelopment of its Eastgardens centre with the unveiling JAN/FEB 2016 | 59 | WWW.FRANCHISEBUSINESS.COM.AU

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The casual dining precincts tend to be located within major regional shopping centres creating a dining experience that retains the customers within the precinct for a lot longer than a takeaway option would

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of a new casual dining area. The precinct has a 1,3000 sq m with indoor and outoor dining for six hospitality businesses including the franchised dessert chain San Churro.

pancake), nuong (grills) and introducing a shared plate that includes a selection of cuon (rice paper rolls), spring rolls, goi (Viet salad), crispy chicken ribs and crispy school prawns.

So why are brands opting to expand into the casual dining arena?

Customers will be seated with menus and table service will add extra convenience.

One franchise chain to step into this space is the Melbourne based Vietnamese fast-food business, Rolld.

William Street, Perth will house the first Rolld Kitchen outlet.

“The Rolld Kitchen brand is to address a huge demand from our loyal customers about casual dining, especially for families. We want customers to have the Rolld family experience whether with your family or friends,” says marketing director at Rolld, Christina Murrell. The brand new Rolld Kitchen will offer an extension of the menu, with a new range of sup mi (Viet noodle soup), com tam (broken rice), banh xeo (Viet-

“Expect a space that is significantly larger than regular Rolld stores (up to twice as big), with seating capacity for 60+ happy diners. It was a chance for us to re-think strategically”, says founder and CEO, Bao Hoang.

priate for the fringe precinct.” Lunch accounts for 70 percent of the business, and this new model is a chance to take the business from the food court, he says. Cantina is all about tacos, beers, and a sit-down restaurant experience. It is, says Young, very financially viable. And a little bit fancy. “Papa Rich and Grill’d have taken fast casual to casual dining through décor and the presentation of food,” he says. It seems this is what the customers are looking for.

Just launched is the latest development in Mexican dining. Clovis Young, the founder of Mad Mex, explains the new Cantina model.

“This is more of a taco, beachy vibe, a 3sqm cantina - fresh juices, big jugs, margaritas, flagship coconut mojitos.”

“Mad Mex is a reduced service model. Five to seven years ago it was a step up in food courts, now with Cantina we’re appro-

Customers open a tab at the bar, order chips and salsa, order a meal. It is still a quick eating option, just five to 10 minutes

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from ordering to food delivered on enamel plates to the table. Young describes the environment as more contemporary, “a bit less 22 years old testosterone male, but still wanting to dial up a fair amount of fun”. Translate that as colourful handwritten signs, surf boards, less mariachi on the airwaves and more 80s and 90s and current rock music. The cantina will be tailored to each precinct. Young emphasises that these are two separate brands with different value propositions. “We can see both are great businesses, very different territories,” he says. A larger footprint and a pricier menu set the tone for the cantina option. Franchisees will need to invest an extra $150,000 than they would on a typical Mad Mex outlet to get it up and running. “It’s a more complicated business model, and a higher level of hospitality experience is required – managing a bar, plating food, wait service. We are conscious of a different skill set – but our first franchisee (in Tuggerah, on the

New South Wales Central Coast) is a top performing existing franchisee,” says Young. It’s about moving from a manufacturing mindset (we build your meal) to a front of house focus, he highlights. “It’s a really positive step to deliver the Mexican family food experience around a table.”

buddy support from one of the operations support managers. Q. IS THE FRANCHISE TERM ALIGNED TO THE LEASE? A. As best as is possible. Q. WHAT HELP DO YOU OFFER FRANCHISEES IN LOCATING SITES? A. We assist via our leasing industry experts, we also have a specific site criteria we use.

Summing up the development of the Mexican food concept, Young reflects on how the Mexican restaurant of the 1970s and 1980s was overtaken by the taste for Thai in the 1990s. That was the start of fast casual.

Q. DO YOU NEGOTIATE RENTS WITH THE LANDLORD? A. Absolutely but we also have our industry leasing experts assist us here as well.

“The cantina takes the old favourite of the 1980s and makes it modern and relevant and cool.”

Q. WHO HOLDS THE HEAD LEASE? A. In a franchised store the prospective franchisee would hold the head lease.

There is plenty of action across the franchise casual dining sector.

Q. WHAT’S THE TYPICAL SIZE OF AN OUTLET? A. The brand can operate in a space from 110sqm to 400sqm.

COCO CUBANO Q. WHAT ARE THE COSTS OF INVESTING IN YOUR FRANCHISE? A. Costs can be anywhere between $500,000 and $1m depending on size of the venue and the level of landlord contribution. Q. WHAT DEPOSIT IS REQUIRED? $4,000. Q. HOW LONG IS TRAINING? A. Training is six to eight weeks. Q. WHERE IS TRAINING CONDUCTED? A. In one of our corporate stores with JAN/FEB 2016 | 61 | WWW.FRANCHISEBUSINESS.COM.AU

Q. HOW MANY STAFF ARE TYPICALLY REQUIRED IN EACH UNIT? A. We generally have a staff level of about 25 to 45; this is dependant on store location and volumes and staff rosters that suit their own schedules and work commitments. Q. HOW MANY NEW OUTLETS DO YOU EXPECT TO OPEN IN 2016? Between two and six stores if we find the right locations – and the most important asset – the right partner franchisee being selected. CONTINUED ON PAGE 64

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INDIAN BROTHERS Q. WHAT IS THE BEST REASON TO INVEST IN A CASUAL DINING FRANCHISE? A. Our business is easy to operate – it is adaptable to various size locations. As we are a fast casual concept the table and chairs area are minimal. Q. WHAT ARE THE COSTS OF INVESTING IN YOUR FRANCHISE A. The franchise fee is $30,000+ GST. We anticipate a turnkey cost of about $170,000to $190,000. Ongoing fees are six percent royalty and three percent marketing fee. The typical costs surrounding documents are $3,500 + GST . Q. WHAT DEPOSIT IS REQUIRED? A. We require $3,500 + GST for the deposit. Q. HOW LONG IS TRAINING? A. Training is two weeks Q. WHERE IS TRAINING CONDUCTED? A. Brisbane

MAD MEX

Q. IS THE FRANCHISE TERM ALIGNED TO THE LEASE? A. The franchise term is five years with two options to renew. Q. WHAT HELP DO YOU OFFER FRANCHISEES IN LOCATING SITES? A. We are constantly researching available sites. Q. DO YOU NEGOTIATE RENTS WITH THE LANDLORD? A. Yes we do. Q. WHO HOLDS THE HEAD LEASE? A. It depends on the location. Q. WHAT’S THE TYPICAL SIZE OF AN OUTLET? A. 75sqm Q. HOW MANY STAFF ARE TYPICALLY REQUIRED IN EACH UNIT? A. Franchisees need to employ between three and six staff for each outlet. Q. HOW MANY NEW OUTLETS DO YOU EXPECT TO OPEN IN 2016? A. Between five and 10.

Q. WHAT IS THE BEST REASON TO INVEST IN A CASUAL DINING FRANCHISE? A. The dining experience has evolved in recent times and we are finding the average consumer expects quality service and fresh ingredients in an environment which is fun , colourful and exciting. More and more shopping centres are creating casual dining precincts to cater for this explosion which needs to be both affordable and vibrant. Q. WHAT ARE THE COSTS OF INVESTING IN YOUR FRANCHISE? A. Typically a Mad Mex investment varies between $450,000 and $600,000. Ongoing fees include a six percent franchise fee and a marketing levy of three percent. We invest more time and resources during the application process to ensure all planets are aligned before the partnership begins. Q. WHAT DEPOSIT IS REQUIRED? A. An initial deposit of $2,000 gets you started which is then followed by a further $15,000 to start preparing franchise documents. Q. HOW LONG IS TRAINING? A. A six week intensive training program comprises both practical and theory. Q. WHERE IS TRAINING CONDUCTED? A. Across our network of training stores in Sydney and Victoria. Q. IS THE FRANCHISE TERM ALIGNED TO THE LEASE? In most cases where possible we try and align both agreements , however in some cases this is not the case. Q. WHAT HELP DO YOU OFFER FRANCHISEES IN LOCATING SITES? A. We have an in-house property team which works

JAN/FEB 2016 | 64 | WWW.FRANCHISEBUSINESS.COM.AU

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For more information on joining the InXpress Franchising Team call David 0412 692 052 or visit inxpress.com.au

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hard to find the right locations and more importantly the right lease terms. Q. DO YOU NEGOTIATE RENTS WITH THE LANDLORD? A. Most definitely. We have worked hard over the years to establish good solid relationships with all landlords. Q. WHO HOLDS THE HEAD LEASE? A. Mad Mex always holds the head lease which ensures favourable lease terms with the landlord. Q. WHAT’S THE TYPICAL SIZE OF AN OUTLET? A. An outlet is 120sqm to 200sqm. Q. HOW MANY STAFF ARE TYPICALLY REQUIRED IN EACH UNIT? A. Depending on the operation anywhere between 10 and 30 staff. Q. HOW MANY NEW OUTLETS DO YOU EXPECT TO OPEN IN 2016? A. We are on track to open 20 new locations each year in Australia with similar numbers internationally.

ROZZI’S CANTEEN Q. WHAT IS THE BEST REASON TO INVEST IN A CASUAL DINING FRANCHISE? A. The casual dining scene is experiencing significant growth as consumers embrace high quality food without the necessary restaurant prices and our franchise operators have an ability to control their labour costs more effectively than restaurant operators Q. WHAT ARE THE COSTS OF INVESTING IN YOUR FRANCHISE? A. The turnkey cost ranges from $450,000 to $650,000 (dependent on the site) and this includes a franchise fee of $40,000. Ongoing fees include the franchise royalty which is six percent of gross weekly sales and the marketing fee of two percent of gross weekly sales. Documentation costs are approximately $1500 for greenfield locations JAN/FEB 2016 | 66 | WWW.FRANCHISEBUSINESS.COM.AU

(included in the turnkey costs for greenfield sites) to $2500 for existing sites. Q. WHAT DEPOSIT IS REQUIRED? A. The deposit required is the $40,000 franchise fee. Q. HOW LONG IS TRAINING? A. Four weeks Q. WHERE IS TRAINING CONDUCTED? A. Training is held at a both Rozzi’s corporate stores and franchise outlets. Q. IS THE FRANCHISE TERM ALIGNED TO THE LEASE? A. Absolutely it is. Q. WHAT HELP DO YOU OFFER FRANCHISEES IN LOCATING SITES? A. Rozzi’s does all the work and research in locating sites

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Q. DO YOU NEGOTIATE RENTS WITH THE LANDLORD? A. Yes, Rozziâ&#x20AC;&#x2122;s does all the negotiation in regards to all aspects of the commercial terms of the lease. Q. WHO HOLDS THE HEAD LEASE? A. Rozziâ&#x20AC;&#x2122;s holds the head lease. Q. WHATâ&#x20AC;&#x2122;S THE TYPICAL SIZE OF AN OUTLET? A. It can range from 130sqm to 300sqm. Q. HOW MANY STAFF ARE TYPICALLY REQUIRED IN EACH UNIT? A. Between 15 and 25, depending on size of the premises. Q. WHAT SAME YEAR SALES GROWTH HAVE YOU SEEN LAST FINANCIAL YEAR? A. About 15 percent. Q. HOW MANY NEW OUTLETS DO YOU EXPECT TO OPEN IN 2016? A. We are aiming for five new stores in 2016 â&#x20AC;&#x201C; three in Victoria and two in Queensland.

A BROADER PERSPECTIVE While in the US, the home of fast-food, the casual dining concept right now is struggling, in the UK the hospitality industry is embracing the category â&#x20AC;&#x201C; thereâ&#x20AC;&#x2122;s even a dedicated trade show, entitled Casual Dining, catering for this specific segment and with its own awards program. Back here, Wagamama, the noodle chain that has spread from the UK across Europe, the Middle East and into the US, has closed its Australian outlets and is searching for a new master franchisee. WHY EATING OUT? A report from the UK highlights that food quality, price and cleanliness are the top three considerations for consumers choosing where to eat out. Why do consumers eat out: â&#x153;ą 25% donâ&#x20AC;&#x2122;t want to cook â&#x153;ą 20% hungry while out â&#x153;ą 17% good value for money meals One third of visits use promotional discounts. The average spend has fallen but families eat out more.

In the UK: global tastes include Asian, Middle Eastern and South American cuisines. And of course American food is on the menu. Expansion includes healthy takeaways, Italian, Mexican fast casual. Specialists that are growing are juice bars, coffee, Mexican street food, bakeries.

SOURCE: LYNX PURCHASING CASUAL DINING REPORT 2015

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JAN/FEB 2016 | 67 | WWW.FRANCHISEBUSINESS.COM.AU

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AGEING GRACEFULLY T

he business of providing at-home care and support for the community is on the rise as Australians follow the global trend of a population living longer, and wanting a better quality of life at home. The Australian Government is funding a $73.7m initiative which allows consumers to directly access home care packages. The first stage launched on 1 July 2015 gives consumers who receive a government funded home care package the ability to choose their provider and the services. And on 1 February 2017, the initiative will put the power fully in the hands of the family or individual seeking home care by providing the funds directly to the seniors themselves. The message is increased competition and improved flexibility for customers. The measure is also intended to reduce admin processes for the providers. JAN/FEB 2016 | 68 | WWW.FRANCHISEBUSINESS.COM.AU

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In 2020, 36 percent of the Australian population will be past retirement age

The various regulatory changes follow recommendations from the Productivity Commission that Australians should be able to choose their home care provider. Martin Warner, founder and owner of Home Instead Senior Care says “We truly feel that this is a win for seniors and their families and we’re thrilled to see how the landscape is going to change. We’re moving away from a provider-led system to a consumer driven system which is driven by value and the quality of care provided to Australian seniors.” And with aged care predicted to be a big industry as our raft of baby boomers matures and lives longer, this has a great deal of potential for the astute investor. In 2020, 36 percent of the Australian population will be past retirement age. And according to the Australian Bureau of Statistics, the rate of growth of the senior population will not fall below 30 percent for another decade. Home Instead Senior Care highlights the growth in our ageing population: the population of 3.1m seniors aged 65 and older will become 8.1m ageing baby boomers within the next four decades. With this comes extended life expectancy so those aged over 85 will number 1.8m. As Senior Helpers points out, the age group 85 and older is now the fastest growing segment of the Australian population. Investing in a franchise in the aged care sector makes sense for anyone wanting to make a difference to others, and build a viable business. So who are the branded franchised companies operating in the home-care marketplace? Here we look at three franchise options.

HOME INSTEAD SENIOR CARE Services include 24 hour care, care management, Alzheimer’s and dementia care, companionship, home help, palliative care, respite care, transition care and transport. Care givers are providing all manner of support to ensure a senior citizen can stay at home, even if they suffer from life-limiting diseases or chronic illness. Home Instead Senior Care has been providing services since 1994, and that means the franchise business has JAN/FEB 2016 | 69 | WWW.FRANCHISEBUSINESS.COM.AU

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The population of 3.1m seniors aged 65 and older will become 8.1m ageing baby boomers within the next four decades

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The estimated investment costs including GST and a franchise fee of $54,000, are between $75,000 and $85,000, depending on location and whether the business is new or existing. This figure does not include working capital. Once signed up to the franchise, new franchisees undergo extensive training – not just in a classroom setting but through on-site visits and digital learning programs. There will be business and technical support on hand, and of course marketing, advertising and pr guidance. developed extensive training programs to ensure the highest quality of care. And because the business is an internationally established business with more than 900 independently owned and operated franchises around the globe, there is support at all levels for franchisees. Each franchise is a protected, exclusive territory based on the demographics of the area and will require about 50sqm of office space from which to operate the business.

JUST BETTER CARE At Just Better Care the focus is also on supporting people in the community live the life the way they want, and this includes in-home support services for the elderly, people with a disability, anyone at home recovering from illness or a medical procedure and new mothers. Nearly 280,000 Australians live with some form of dementia – and they are not always

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the elderly; dementia can affect people in their 30s, 40s or 50s. What is core to the Just Better Care business is social inclusion. The business began in Australia and started franchising in 2007 and is now owned by Caring Brands/Interim Healthcare so it’s part of a global network. There are more than 30 Just Better Care franchises around the country, in total providing about 19,000 hours of support on a weekly basis. The menu of services extends from domestic care and meal preparation to in-home nursing. Each office works to best practice and is ISO 9001 accredited. There is a defined marketing territory for each franchise, start-up training

and ongoing support, national marketing, access to online marketing tools and a sevenpart quality management system that incorporates corporate governance, quality management, service management, human resource management, operational management, marketing and research and development. To buy a Just Better Care franchise will require a $60,000 franchise fee, $10,000 for opening promotional expenses and approximately $100,000 of working capital is required to establish the business.

helps clients age with dignity.

SENIOR HELPERS

There is expertise in providing short–term and long-term geriatric care.

This business has an awardwinning program for Alzheimer’s and dementia care, its Senior Gems program developed by occupational therapist Teepa Snow that

And on its menu of services it has a special Wellness Watch service on offer too, for customers requiring a less intensive care program – less

regular visits and phone calls to monitor the safety and health of the client. Franchisees receive system training, pre-opening training, and ongoing multi-channel training that can be accessed through webinars, conference calls, written modules and other media.

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Asia boosts

tourist sector

ustralia’s tourism industry is expected to exceed $129bn by 2020-21, thanks in part to a weaker Australian dollar and increased inbound tourism from Asia.

The lucrative tourism industry right now is worth approximately $118bn in revenue and employs more than 543,000 people across the country. According to business information analysts at IBISWorld this sector is set to grow strongly over the next five years. Tourism is becoming one of the nation’s fundamental export industries. China has surpassed the previously fruitful Japanese market in visitor numbers, nights stayed and dollars spent, and is now one of JAN/FEB 2016 | 72 | WWW.FRANCHISEBUSINESS.COM.AU

the industry’s most valuable markets. Chinese visitors have outspent visitors from the UK by 50 percent. Over the next five years, India is expected to follow suit, driven by a growing middle class and an increase in the number of Indian students choosing to study in Australia. Australia’s top five most valuable tourism markets in 2014-15 however include many traditional markets such as the UK, US and New Zealand, as economic recovery continued in these countries.

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GREAT

EXPECTATIONS H

ow are Australian franchises facing up to the challenges of the retail revolution? We put Battery World and Beaumont Tiles in the spotlight.

“Australian retailing is in a very exciting transformative stage at present. The underlying fundamentals of the Australian economy are incredibly robust. The emergence of e-commerce highlights opportunities to engage and interact with customers as never before.”

Bob Beaumont, founder and franchisor at Beaumont Tiles, reports a mixed trading landscape in retail. “It’s a bit patchy from state to state but generally the business is there for the good operators,” he says. “The strength of the building industry has helped but equally so has increasing willingness of the market to be adventurous in their decoration of their new home or renovation. “As Beaumont Tiles is an aspirational brand specialising in innovative decorating ideas this has made our brand more appealing in the market,” Beaumont says.

That is the view of Battery World general manager Rowan Hodge.

Technology naturally drives the battery industry. But Hodge attributes the real power elsewhere.

“Increasingly empowered customers are also brutal to retailers who fail to meet their expectations,” he says.

“The real engine room for our business is our franchise community. Only through providing truly reliable and

JAN/FEB 2016 | 74 | WWW.FRANCHISEBUSINESS.COM.AU

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There is no magical method to suddenly become a succesful retailer

trustworthy advice, products and services for many years has Battery World achieved its highly enviable position in the Australian retail landscape.” Battery World franchisees face similar challenges to most retailers with rising utilities. In recent years, software costs have also risen sharply, Hodge reports. But these costs have been offset by a $1m investment from the franchisor in the NetSuite retail management system (RMS). “The greater cost challenge is to remain undistracted by costs in our mission to invest in training. The Battery World unique selling proposition vests in our extraordinary product knowledge. In 2015, the franchisor has created four extra full

time resources to support the training of the franchise network.” Cost of goods is of course the “Pachyderm in the room” suggests Bob Beaumont. “This is being driven by the dramatic decline in the value of the Australian dollar resulting in a huge cost of goods increase which is very difficult to fully pass onto the market used to lower prices. This puts pressure on margins.” So what have franchisees needed to do differently to boost their businesses? The answer is simple – and yet not so simple. “There is no magical method to suddenly

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more than $200m a year. Now we’re on the edge of a technological revolution he says. “Retail is in a huge state of change. We are only seeing the beginning of the internet revolution. We have already seen some types of retail become virtually extinct overnight due to online purchasing. Fortunately some products are more resistant than others to inroads of web sales, tiles and bathroomware being among them. “Technology also enables us to be innovative in-store, enhancing the experience and ideas we offer to our customers.

Successful retailers survive in the long run because they respond to their customer needs

“Retail has been cyclical, experiencing ups and downs, since the beginning of time. Successful retailers thrive in the long run because they respond to their customer needs,” he says.

become a successful retailer that we are aware of. What we have done is to truly provide expert advice,” says Hodge. Any business can price match a product. The right business can instead get you the right solution at the right price. Quality is so important when dealing with batteries and power solutions.

Battery World’s retail strength lies in responding to a changing world where people need to be continually charged.

the innovative public attitude driven by such programs as The Block and House Rules.”

But again, according to Rowan Hodge, the successful retailer has a role to play beyond the simple supply of relevant products.

WHAT DO YOU THINK IS THE FUTURE FOR RETAIL? Bob Beaumont has been in the tile business for more than 40 years, working in the family business that now brings in

“The highest volume Battery World stores attract some new customers through their marketing and strive to never lose a customer, ever.” In the Beaumont Tiles business the focus has been on meeting the more demanding and sophisticated expectations of today’s décor-savvy consumer. Beaumont says “Our shops have embarked on a big commitment to upgrade shops to appeal to the higher expectation of the market place. "We have also needed to upgrade the range to cater for JAN/FEB 2016 | 76 | WWW.FRANCHISEBUSINESS.COM.AU

ROWAN HODGE

“Future trends in e-commerce, payment methods, marketing or salesmanship will always be relevant, but they will

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PostNet Area Representative (Western Australia) Tjandra Setiawan: 0405 458 188 tjandras@postnet.com.au

Established and Proven Franchise System Over 750 Franchises Worldwide In Industry Since 1983 Franchising Since 1992 Multi Products/Services Franchise Five Days Week Business - No Weekend Work No Experience Necessary Minimal Employee Base Low Inventory Business World Class Comprehensive Training & Ongoing Support

PostNet Area Representative (Queensland) Gary Khoo: 0449 997 893 garyk@postnet.com.au

PostNet Australia Pty. Ltd. Robin Lau: 0490 338 427 / 0415 189 593 robinlau@postnet.com.au

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

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IT’S A TOUGH GIG Retailing high flyer Solomon Lew, who heads up Premier Investments (it includes the Just Group portfolio with Smiggle, Peter Alexander and Just Jeans), believes retail hasn’t been this tough for 50 years. never replace the desire of Battery World customers to rely upon the expert advice they receive; to be treated with respect; to enjoy high levels of customer service; and to trust the handshake (and warranty) of the local owner in a bricks and mortar business.

BOB BEAUMONT

ever brought to market in our business if it erodes in any way our unique selling proposition (USP). That USP is the delivery of extraordinary product knowledge to solve customers’ problems.”

“Retail will continue to be strong with consumers who want and expect this service.”

Battery World is so confident in its bricks and mortar retail model the franchisor signs the head leases for new and existing sites for 12 years.

HOW ARE BUSINESSES ADJUSTING TO SUIT THIS FUTURE?

“As a customer e-commerce doesn’t provide expert advice and the right solution for your specific needs.”

Like any retailer, Battery World is not immune from new customer preferences. One of these is e-commerce and the chain is embracing in this in 2016. “Our greatest care will be taken to make sure that no new customer touchpoint is

Bob Beaumont insists the tiles business n early adopter of tech been for years an techtinue to be on the front nology. “We continue foot, adopting thee best from the computer o developing our own industry but also -house,” he says. specialist tools in-house,”

Lew cited the high cost of living, unemployment, personal debt, public policy decisions and a poorly managed transition from the mining boom as factors contributing to the challenges. Inside Retail reports that Lew said at the company’s annual general meeting tax reform and weekend penalty rates remain issues which need to be addressed.

KEEPING THE DIGITAL DOLLAR AT HOME Overseas websites are tempting Australian shoppers away from home-grown retailers. The latest research shows that 74 percent of Aussies have spent their dollars outside the country. The survey of 1000 consumers found the shoppers were motivated by better prices and product choice. Andrew Clarke, founder and CEO of Cashrewards which commissioned the survey, says “We are in the midst of an evolution in the shopping industry, driven by the consumer search for better prices and greater incentives and

rewards on demand. The search for ularly when lower-priced items, particularly hing against the Aussie dollar is languishing rongly motiother global currencies, is strongly me smarter vating consumers to become ning. In the shoppers and more discerning. cal retailers next couple of years, local will need to incentivise and engage consumers in better ways.” rs spending So what will keep shoppers their dollar locally? Clarke says “While our local retailers can’t always compete on price or product range, our survey revealed an area of

customer service that local retailers could innovate to win Aussies back, and which overseas retailers would struggle to offer. It is delivery: this was identified as likely the least favourite aspect of online shopping for many Australians.”

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Working with

NUMBERS JAN/FEB 2016 | 80 | WWW.FRANCHISEBUSINESS.COM.AU

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hat does it take to be successful in the financial services sector? Whether the focus is on home loans, financial advice or providing back office support, there is potential to develop a solid business in financial services.

But is this a business arena where prior knowledge and skills set are a prerequisite? “Lending experience is not mandatory but it is an advantage,” says Matt Fitzpatrick, Smartline national recruitment manager, “Being good with detail and having a head for numbers is certainly useful when finding clients the right loan and delivering the high level of service expected from Smartline.”

MORTGAGE BROKING Established in 1999 Smartline Personal Mortgage Advisers is an award winning franchised mortgage broking group. Its network of more than 300 advisers has helped at least 250,000 Australians to arrange a mortgage. The business writes at least $5 billion in loans annually. Many of the Smartline’s franchisees have joined the business after a career in financial services – it’s a perfect segue into business ownership. Smartline counts former bankers, lending specialists, branch managers, home finance and business development professionals among its franchisee team. They are attracted by the opportunity to combine their knowledge with the flexibility of running their own business, a better work life balance and the strong potential for income growth. An understanding of finance and lending can be beneficial for incoming franchisees who need to undertake industry certification, complete training and gain lender accreditation. Personal recommendations account for 85 percent of the business so the ability to build and nurture strong relationships with clients and the capacity to find business through networking are also important factors in building a successful franchise. “The mortgage broking business can be a challenge so it’s important to us that our franchisees are driven to build their client base. JAN/FEB 2016 | 81 | WWW.FRANCHISEBUSINESS.COM.AU

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experienced, successful franchisees,” says Fitzpatrick. The combination of upfront and trail commissions can help grow income faster for franchisees.

The focus is on delivering the best possible customer experience and marketing the franchisee’s business

Michael Saliba, a Smartline adviser says “Everyone asks if it was ‘scary’ going out on my own and leaving a secure bank job after so many years. I’ve never once felt worried about the choice. The scariest thing was realising I should have done it sooner.” We recruit people who are committed to delivering great service to clients,” said Matt Fitzpatrick. “Ninety eight percent of our clients say they would use us again, so it’s really important to us that our people are passionate about the business,” he adds. The focus is on delivering the best possible customer experience and marketing the franchisee’s business. “We actively work with new franchisees to maximise their potential for success with regular progress meetings and business coaching from

Smartline was recently named as Australia’s number one franchise by Topfranchise. com.au, a position it has held since 2009.

ACCOUNTING Victoria Wilson has been a First Class Accounts franchisee for 11 years. She believes it is advantageous to have prior experience in bookkeeping or finance but not essential as full training is provided at First Class Accounts.

BUILDING, EQUIPPING AND MAINTAINING YOUR BUSINESS

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As a strongly regulated industry, there is a minimum formal education requirement to be a bookkeeper. Anyone wishing to be part of this arm of the financial services industry must complete a Certificate IV in Bookkeeping. “First Class Accounts assists all franchisees to achieve this accreditation but without prior experience a new franchisee must complete a set number of hours under the guidance of a registered BAS agent before operating on their own. “In general though, you certainly have to enjoy working with people and numbers as you deal with both in some way every day.” The bookkeeping industry is growing, with the demand for qualified practitioners on the rise. First Class Accounts has grown 25 percent over the past year, and has maintained this level of growth for the past three years. There are currently about 180 active franchisees working with thousands of businesses across Australia. “From a franchisee’s perspective the potential for growth is relative to what you want to achieve. Essentially, you can make your business as small or large as you want depending on the type of lifestyle and work life balance you want to achieve. It’s an amazing advantage this business model provides.” There are definite advantages to being part of a franchise, says Wilson.

The bookkeeping industry is growing with the demand for qualified practitioners on the rise

“Without question the major benefit is the support available to the

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FRANCHISING

NOW For more information contact Duncan Powell on 0407 059 603 Email: duncan@cocolat.com.au http://www.cocolat.com.au/franchise-opportunities

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FINANCIAL ADVICE

ACCOUNTING AND BOOKKEEPING

Key external drivers include: high income earners, the All Ordinaries index, real household disposable income and a population aged 50 or older. The IbisWorld report Financial planning and Investment Advice in Australia, August 2015 reads “Over the next five years, an ageing population, compulsory superannuation contributions and rising disposable incomes will continue to support growing demand for financial advice. Additionally, industry players are anticipated to benefit from greater transparency, professionalism and investor confidence in the long-term, as a result of the regulatory changes.”

✱ Bookkeeping accounts for just 3 percent of the products and services. ✱ Tax requirements and stricter reporting obligations are driving the outsourcing of accounting and bookkeeping among small businesses. ✱ The big four accounting firms have 16 percent market share. The remainder is highly fragmented. ✱ More than half of the operators in this sector are sole traders and 45 percent employ fewer than 20 staff; they tend to service individuals or small businesses. ✱ What drives success? The ability to effectively manage risk (professional indemnity insurance), brand name, industry organisation membership, high level of chargeable time, good customer relations.

franchisees. Covering all aspects, from technical, to marketing and business management support, you really have access to everything you need to be a successful business owner. It’s great to have autonomy in managing your own business, all the while knowing you are backed by the security and experience of a well-established business and brand.” Wilson says the low overheads and the prospect of generating a return on investment in good time make the franchise an appealing option. “In the bookkeeping industry we must also complete ongoing professional development to stay relevant and up–to-date and being part of a franchise enables that to happen more easily.”

FINANCIAL ADVICE In 2015-16 Revenue $4.8bn Profit $1.7bn Wages $1.5bn Annual growth 2011-16 3.1% Annual growth 2016-21 2.1% SOURCE: FINANCIAL PLANNING AND INVESTMENT ADVICE IN AUSTRALIA, AUGUST 2015

SOURCE: ACCOUNTING SERVICES IN AUSTRALIA, SEPTEMBER 2015

with the ATO on behalf of my clients to discuss payment plans, as well as troubleshooting phone calls about software or accounting issues. “Each quarter BAS time is a very busy period in our business. I choose to work exceptionally hard during these times so I can ease off a little more in the downtime.” A varied workload and diverse tasks are part of the job and can be an attraction in themselves. But there are other reasons why Wilson finds her role as a franchisee very satisfying. “Owning my own First Class Accounts franchise is very rewarding on a number of levels. I have been able to reach many of my lifestyle and financial goals, and I’m also proud to know that I am helping other small business to be smarter and more efficient about managing their finances.”

A franchise is also a great choice for people trying to find better balance between family life and work. There is the flexibility to structure the day to suit the franchisee and clients. “No day is the same but the first thing I usually do is turn on the computer and check emails, probably like most small business owners really. Then I will often go out on site to clients, pick up any work or receipts I need, do any banking and visit the post box. In the afternoon I generally work from my home office doing the offsite work and responding to any phone calls or emails I missed while on site. “There is also a lot of time spent speaking JAN/FEB 2016 | 84 | WWW.FRANCHISEBUSINESS.COM.AU

THE MORTGAGE SECTOR In 2015-16 Revenue $76.1bn Profit $6.9bn Wages $12.1bn Annual growth 2011-16 -3.5% Annual growth 2016-21 10.7% SOURCE: MORTGAGES IN AUSTRALIA, JULY 2015

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It’s all in

THE BEANS T

here’s more to a successful mobile coffee chain than a catchy name and a well-equipped van.

JOHN STANTON

“Roasting in one go is seen as more time efficient but we have never been about taking the easy way out.” Attention to detail across the business is paramount.

Maroubra based Harrison Kaissis has been running a Cafe2U franchise within Sydney’s Waterloo area for the past couple of years.

Baristas undergo extensive faceto-face training which covers everything from the picking process of the beans to texturing milk for different coffee options.

The move from managing a local restaurant to owning his own mobile coffee business has given Kaissis a flexible work environment that he enjoys.

“Many new customers are surprised and delighted with the calibre of barista and quality coffee that Cafe2U delivers,” Stanton says.

“There is the option to go out by yourself but if you want someone with you, then that is ok too. “Either way, there is a strong support network behind you. If you ever need anything, there is always someone close by you can call on. It feels good to be a part of that.” For general manager John Stanton, the key

is becoming less common within the industry,” he says.

to success lies within the takeaway cup. “Our blend contains Arabica beans from five different countries and we use a complex two phase roasting process, which JAN/FEB 2016 | 86 | WWW.FRANCHISEBUSINESS.COM.AU

“It’s no surprise to us. Beyond our intense training, these baristas also own the business, so their dedication and care are of the highest standard. These guys know their coffee and stand by their reputation.”

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I DID IT. â&#x20AC;&#x153;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!â&#x20AC;? - 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.

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

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Tips from a

TROPHY WINNER B

ecoming a successful retailer can be a challenge, but franchisee Russell Cooper of Snooze Capalaba has it figured out.

With a strong retail background spanning over three decades, Cooper worked in store management for a number of furniture retailers before moving to Snooze as a regional manager in January 2006 and progressing to national operations manager in 2008. In 2010, Cooper decided to become his own boss and purchased Snooze Capalaba – quite a risk in the tough retail climate. Four years later, he and his partner Belinda have been awarded the highest accolade at the annual Snooze Annual Conference, Retailer of the Year. This isn’t the first time the pair has held this trophy; it’s the second – a true testament to their success across profit performance, store operations, staff development and customer satisfaction. With such a successful story to tell and second store in Helensvale on the way, we caught up with Cooper to get some tips on what it takes to be an award-winning retailer.

RECOGNISE THE BIG CHANGES YOU NEED TO MAKE TO REACH YOUR CONSUMERS I walked into the toughest retail climate in the last 25 years, and knew I needed to do something with the store’s presentation in order to gain an advantage over competitors. It wasn’t rocket science, but it’s the little things that go a long way in retail – especially when it comes to a store’s look and feel, which makes the crucial first impression.

CHANGE YOUR SALES STRATEGY AND OPERATIONS TO SUIT YOUR FOOT TRAFFIC There was a period when foot traffic into store declined quite significantly. Rather than pushing our sale items, we decided to speak with our customers to try and understand the reasons why they weren’t visiting as

frequently, and implemented solutions accordingly. One of the key issues identified was the wait for furniture to be delivered to their home. As a result we took a number of steps to keep customers in the loop when expecting a Snooze delivery – particularly, alerting them to their delivery a day and an hour before it’s due. It’s by no means been easy, but listening and responding to our patrons has really set our customer experience apart from the pack. It has given us the opportunity to turn negative experiences into positive ones and celebrate exceptional employee customer service along the way.

INVEST IN THE RIGHT PEOPLE TO TAKE CARE OF THE FINANCIALS It’s okay not to be great at all operations. Subsequently, it is vital to recognise the strengths and weaknesses of yourself and your team. I, for example, have always known that bookkeeping isn’t my strong suit. Acknowledging that I wasn’t as competent

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as I could be in ledger management, I employed a skilled bookkeeper to work with us three days per week. It was one of the best investments I’ve ever made.

BE PREPARED AND TRUST THE BUSINESS In this fast-moving economy you can’t afford to take your eye off the ball and constantly need to be seeking opportunities to improve in all aspects of business operation. From engaging in conversations with customers to investigating complaints, we have managed to safeguard the success of our franchise by never becoming complacent and continuing to learn from mistakes. You also need to trust your support network and the business you have invested in. We have always had faith in the leadership, passion and direction of Simon Beaty (managing director for Snooze). This was especially pertinent during the early days of becoming a franchise partner, but has continued to guide the business through the later stages as well.

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CHOCOLATE with a heart S

an Churro has stepped up to the mark in its aim to help build a fairer future for cocoa farmers in developing countries.

cocoa. The iconic couverture chocolate is still imported from Spain, but it now carries the Fairtrade cocoa certification.

on Fairtrade terms, so it’s fantastic to to see San Churro leading the way.

At the moment this offer is eat-in only, it’s not available across the retail merchandise.

“Fairtrade is all about doing business better and fairer. In the case of our Fairtrade Cocoa Program it’s also a good excuse to eat more of what you love and feel good about it.”

San Churro’s commitment to Fairtrade began in 2010 when the brand became the first national café chain to serve it’s certified organic coffee throughout the network. The popular franchise has become the first national chocolate café chain in Australia to purchase cocoa under the new Fairtrade Cocoa program. And this step to a better future for the farmers is going to be good news for the franchisees too, giving them a real point of difference in the marketplace. Approximately 70 percent of the dark, milk and white chocolate menu items served at San Churro are now created using Fairtrade

Giro Maurici, founder of San Churro, says “Our Fairtrade commitment is long term. This is just the beginning for us, we are currently working hard with all our suppliers to extend the use of Fairtrade cocoa to all areas of our chocolate offering.” The CEO of Fairtrade Australia and New Zealand, Molly Harriss Olson, says “Currently 90 percent of the world’s cocoa is grown on small-scale family farms but only 1.2 percent of this is sold JAN/FEB 2016 | 90 | WWW.FRANCHISEBUSINESS.COM.AU

Maurici adds “Our mission is to serve the best chocolate in the most delightful way. For us, this is not only about creating happiness for our customers but also assisting the farmers who grow our cocoa in breaking the poverty cycle and improving the living conditions within their communities. As such, we are proud and excited to now offer a Fairtrade option to our customers.”

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The bread

WINNERS Y

oung couple Britt and Ben Diggins have achieved so much in a few years of being franchisees – and that includes a national franchise award.

The process proved invaluable, giving them insight into the workings of a bakery business, and ensuring a smooth transition into ownership. “It was no different from leasing. We did everything ourselves anyway,” says Britt.

Ben had years of baking and training, and a passion for the brand and the product. “I came back to purchase the shop,” explains Ben. “It was a bit run down and I saw an opportunity to build it up.” The plan has worked.

Ben Diggins had notched up a few years as an apprentice baker at Bakers Delight and he knew the business. So it made sense when he and Britt were looking for a chance to get into a franchise they took the first step with the national bakery chain. Britt and Ben started working together at Bakers Delight in 2007 when they leased a bakery outlet. They were just 19 and 24. It gave them the opportunity to get a handle on the business operations and for the franchisor to evaluate their suitability as franchisees, and to ensure their skills sets were up to scratch.

And that’s because a lot was learned during the lease period, says Ben.

“We’re still growing,” he says.

Instead of outsourcing the bookkeeping and back of house admin as the previous franchisee had done, the pair was able through the leasing period to understand how all the accounting worked and what was required, and then to manage it themselves when they signed up to the franchise.

The business has improved about 16 percent since they took over the reins.

“After six months all went smoothly and we purchased the business. We had been working for a while so we had funds and family help to buy it,” says Britt.

“I run front of house,” says Britt, a hairdresser by trade. “I run the sales.”

So by 2008 the young couple were heading up their own business. JAN/FEB 2016 | 92 | WWW.FRANCHISEBUSINESS.COM.AU

And they have extended the bakery team to six full timers, with four bakers working every day. A mix of casual, part time and full time employees make up the 24 sales staff.

While the pair are busy managing the existing business they have plans to open a second store in July this year in the same area, all while caring for their two young

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children under the age of four. Britt works three days a week. “Our idea is not to just work in the business but help develop opportunities,” says Ben. Learning the ropes while working in the stores has allowed them the flexibility to manage this. While the couple separate their roles, they have had to adapt to working together with very different personalities. “Ben is calm and I’m a bit full on, I’m energetic. But we’re both perfectionists. I’m learning to adapt, I’m quite controlling.” Now the pair is quite experienced at running their business. “There’s a huge difference now from when we started. When we look back we realise we didn’t know much. In eight years we have established good financials, built a new house, had a wedding and kids,” says Britt. The long term plan is to keep growing and developing, and running a successful business. Bakers Delight encourages local community involvement, and that sits well with the Diggins’ attitude to business. Ben says “It’s a small town, Wagga Wagga. You have to get in to the community, it’s very important.” The population numbers just 80,000 and the pair have built a profile for themselves, supplying baked goods for sporting events, sponsoring local football clubs, providing awards certificates, participating in school fetes. They also love the structure of the business, and the relationship franchisees have with the franchisor.

business owner she can now step in and help other people achieve their dreams through employment and franchising. “We’ll be able to help younger people and one of them might purchase a business.” The network of fellow franchisees has helped them achieve in business, and to become high performers. “There are no real secrets [in the network of franchisees]. Everyone knows what everyone else is doing. It drives you a bit more.” In 2014 the couple were nominated in the Franchise Council of Australia Excellence in Franchising awards and reached the finals. Last year they were more determined and put in a stronger submission, says Britt. It paid off, and the pair walked away from the annual gala awards night named Franchisee of the Year [with two or more staff]. “We are honoured. It’s such a huge achievement,” says Britt.

In eight years we have established good financials, built a new house, had a wedding and kids

It means a lot to Britt that as a JAN/FEB 2016 | 93 | WWW.FRANCHISEBUSINESS.COM.AU

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AT THE

cutting edge H

airhouse Warehouse Forest Hill franchisee Deb Doran couldn’t wait to bring the hair and beauty retail brand to The Glen Shopping Centre.

Doran took over an existing franchise at Melbourne's Forest Hill last year, with plans to open further outlets in the future. And within just three months, she had grown the Forest Hill store’s profitability by an impressive 50 percent over the previous year. “I love the business, I love working with people, and Hairhouse Warehouse is a proven, profitable brand,” Doran says.

“The Glen had never had a Hairhouse Warehouse store before, and I knew if I didn’t open one, someone else would.” So it made sense for her to snap up the opportunity to open her second outlet. Doran opened the doors to the latest Hairhouse Warehouse outlet late 2015. With only a short commute between Forest Hill and The Glen, Doran says it will be convenient for her and her staff to move between stores. “The ongoing training and support that Hairhouse Warehouse head office provides is reassuring,” Deb JAN/FEB 2016 | 95 | WWW.FRANCHISEBUSINESS.COM.AU

says. “The success of the store will be driven by me and my team.” Doran’s 12-year career in various roles with Hairhouse Warehouse gave her the ideal foundation to take the leap into franchising. “Knowing the business model and systems, I felt confident in succeeding,” she says. “It was a natural progression into the next chapter of my life at Hairhouse Warehouse.” The Hairhouse Warehouse chain is continuing to expand - and hair industry experience is not a prerequisite for success, according to franchise development manager Peter Fiasco. “We look for people with business acumen, a commitment to excellence and a love of working with people,” he says.

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things I wish I knew before I bought a franchise

erry Roelofsz has been the Snap-on Tools franchisee for South Auckland for two years. Before that, he ran a Snap-on company store, so he’s seen both sides of a franchised business.

1. HOW MUCH TIME IT TAKES TO RUN THE BUSINESS One of the big factors for Roelofsz was the time commitment required. When you’re a franchisee it can seem like you’re always at work. “This is a 24-hours-a-day, seven-days-a-week job in many ways,” he says. “I knew what I was getting into, but it was surprising how busy it is.” There are long days on the truck selling tools, but the business still needs attention after hours, with such things as administration, training, stock control and, of course, paperwork.

2. THERE WILL BE PAPERWORK “I didn’t think there would be so much office work to do,” Roelofsz admits. “But you’ve got to keep on top of it. I worked out how to do it and I have a system now that works well for me.” This includes business records, accounting, reporting and other bookwork, which can be a headache if you’re not ready for it. The Snap-on system helps franchisees keep on top of the office work, but they still need to be able to organise themselves.

3. HOW TO MANAGE CASHFLOW This is another key area for franchisees, and it requires a good system and good organisation to stay in control. “I have moments when the GST gives me a kick in the head, and there are bottlenecks with cashflow,” he says. “But I learnt how to take a step back and assess the problem and I found ways to make things work better.”

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GERRY ROELOFSZ Snap-on Tools franchisee, South Auckland

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Every business owner knows the pressures of matching the money going out with the money coming in. But there are ways to even out the cashflow. Roelofsz explains “I have regular competitions among my customers, and that helps to get cash back on to the truck.”

4. YOU NEED PATIENCE No matter how good the product, it will take time to build a customer base – no one strikes it rich on day one. Roelofsz had experience with a company store before he took over the franchise, so he was well-supplied with customers, but some newcomers can find it a struggle in the early days. “Because we have a high-quality product, it is easy to sell the tools. At the start, you think you might run out of customers, but you never do!”

5. THE IMPORTANCE OF COMPANY SUPPORT A lot of people become franchisees because they like being in charge of their own

destiny. This is true, but franchise systems also offer plenty of support to their people out in the field. Once he was in his truck as a franchisee, Roelofsz was pleasantly surprised about the back-up he gets from head office. “Snap-on is great at keeping me informed,” he says. “The sales meetings are detailed and very helpful. “Also, when I won a monthly award, I was surprised to get a phone call from Ajit (Ponnambalam, the managing director). It’s great to get that recognition.”

Xpresso Mobile Cafés operate in areas nationally where there are little to no fixed location café options for the workforce in commercial and light industrial precincts. We supply premium Di Bella Coffee products – both hot and cold. Frappés, energy drinks, cold brew coffee products, bottles of water and food options such as gourmet cookies that are designed to compliment the enjoyment of an awesome espresso coffee. An Xpresso Mobile Café is perfect for corporate and school/ community events. Ask us about our unique school fundraising programs! We also stock Di Bella Coffee specialty capsules that fit the ‘Nespresso’ pod machine. Both of these services are unique to Australia!

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No matter how good the product, it will take time to build a customer base

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Spicing up

A TRUE ORIGINAL

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hen you are custodian of an icon that still holds sway but has lost a little of its gilt over the years , it’s time to dust it down, remember why it is so legendary, and bring it back into the light. And that’s just what the team at Oporto has been doing.

The Bondi Burger with its Original Chilli Sauce is famous in New South Wales, and increasingly around the country, as the go-to option in chicken burgers. It has formed the backbone of the Oporto business which was founded as Bondi Charcoal Chicken 30 years ago by Portuguese immigrant Antonio Cerqueira. When Cerqueira’s success reached the point where he needed an injection of cash to take the chain further than its 13 stores, the Oporto franchise was born – back in 1999. Just eight years later the business which had added another 88 stores was sold to Quick Service Restaurants, now owned by private equity firm Archer Capital. In a move to maintain consistency across the chain, the Original Chilli Sauce which depended on fresh ginger, lemon and chilli was changed, and became a processed product. It turned out to be not such a good move. Today’s new management team, headed up

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by Craig Tozer, CEO, is now bringing back the Original Chilli Sauce, in consultation with founder Cerqueira. It’s just one step in the re-focusing of the brand back to its core, back to basics, back to what the customers want. For a brand founded on the principles of fresh food, grilled not fried, and a unique spicy flavouring, the return to its roots couldn’t have come at a better time. There is a consumer mood for authenticity, and an appreciation of genuine ingredients, and a brand with a real story, a real figure behind it. There’s a greater awareness of eating well at fast food outlets and other brands in the sector have taken strides to update their menus and refurbish stores, and to put premium product at the centre of a casual dining setting. So it’s refreshing that Oporto has adopted a slick new look to take the business into the next stage of expansion. Gone is the garish, takeaway colour scheme and décor; now the emphasis on wooden tables,

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ANTONIO CERQUEIRA, FOUNDER

CRAIG TOZER, CEO “We weren’t upgrading our stores consistently and we were not understanding what the customers want. Our menu had got bigger and bigger and not simpler. Operations became more complex and service slowed. " Today there are five pillars driving the Oporto business, says Tozer. 1. People: There’s been a lot of staff retraining and we’ve brought in people from McDonald’s and KFC. We’ve organised the structure to help business partners.

“I arrived in the 1970s and struggled to find Portuguse style chicken. I saw the opportunity to offer something different in Sydney. I had the idea of a hot chicken shop and was in business with a partner for 18 months. We sold chicken and salads and the burgers attracted people from out of Sydney. “We opened our second shop after three years. We were Bondi Charcoal Chicken, then Portuguese Style Bondi Charcoal Chicken.” When Cerqueira turned to franchising the chain of stores was named Oporto after the Portuguese town and football team. Then Cerqueira parted ways with the brand he had built from scratch. “I sold the business in 2007 because the offer was too good to refuse. “Then the company changed the chilli sauce. If it’s working why change? Now the owners asked me to come back and bring it back. “So I’m bringing back the original sauce and the culture. People need to have a leader, someone that they can believe in, someone behind the company. “I want it to grow to the number one Australian franchise. “We started a bit cheeky and lost it. We need to be ourselves and not change just because the business is growing.”

3. Stores: We are upgrading stores to be very modern and relevant to the Millennial customer base. We will have 25 stores by 30 June 2016. There will be smaller stores too, a little bigger than kiosks. That’s about accessibility to customers and great returns for franchisees. Expect about 16 new stores, we’re expanding in NSW, Queenland and Victoria.

2. Customer focus: For us it’s about delighting the customer every time. We are providing more relevant information through digital channels.

4. Fabulous food: Leverage the taste and taste adventure. We’re known for spice. Oporto holds the 7th position in the larger quick service restaurant business in Australia.

We’ve spent a lot of time on why people like and don’t like the brand, using a net promoter score.

5. Financial returns: How do we innovate to increase returns to franchisees?

TRICIA SOUTHWELL, CHIEF MARKETING OFFICER “We’re a restaurant and people come to eat great food. The service and environment is important but it is the food they come back for. “This is a unique Portuguese spicy chicken and there’s a high recognition with the chilli sauce but people don’t always want a burger so wSe’ll be more focused on chicken options. “A lot of quick service restaurant brands are a bit restricted [in marketing] but we can go harder on flavour, we can carry a niche, be a bit cheeky.” The brand is increasingly digitally focused and Southwell has

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developed a loyalty program that delivers not just food-related rewards but offers items like concert tickets that Millennial customers will want to snap up. This year will see celebrations of the 30 year old business that has expanded into drive-through outlets, something that Southwell sees as a differential. That, and the fact that although the brand is owned by private equity, it has roots in family. “Authenticity is critical. Antonio sold the business and it lost its focus. We are bringing the connections back and will talk about how the brand started.”

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FRANCHISEES Adrian Pinazza and Mus Khalife are franchisees of Wetherill Park and soon will open the Hoxton Park outlet. “I love the brand, it’s a bit edgy, a bit different,” says Pinazza. “We morphed into fast food for a while, now it’s getting back. Transforming now to what made us famous, what made people love us. “It’s re-energised franchisees.”

Khalife says customers have trust in the service and the product. “We have a unique flavour. I learned a long time ago that any business that doesn’t go up and down isn’t a good business. Now we’re going up again. “What’s good is the passion of the team, a lot of people with a lot of knowledge, all working to the same goal.” Former chef Cally Martin runs the Prairiewood franchise. “What I love about Oporto is that everything is fresh with a nice flavour. It’s a healthy option. And when I spoke to the team, there was a real family feel.” Akanksha Taneja has grown up in Oporto. Now the former staff member and manager is a franchisee in Penrith. “I love the product and customers are happy. I understand it’s a bit pricier but people are getting what they pay for. I’m really excited about the return of the chilli sauce, it will definitely drive more business.”

deep black walls and stylish seating resonates with today’s consumer.

campaigns particularly in the highly relevant digital and social media channels.

That customer is predominantly the Millennial – and it is the Millennials who are most likely to be sporting the new staff uniform too; its t-shirt with slogans and screen prints is designed with them in mind.

Former McDonald’s recruit Tricia Southwell heads up marketing. “We’ve been talking to a lot of our customers and gained some great insights about what they love and where we sit in the market.

“Would they be proud to wear this on their way home?” is the question Craig Tozer asked when commissioning the designs. “Our uniform was bright orange, just not fit for purpose for a brand that’s high quality.” While the staff and target customers might be young, there are some customers who have loved the brand from way-back who are particularly happy to see the new menu and are thrilled that the Original Chilli Sauce is back where it belongs.

“They love our food, they love the Bondi Burger. But love has waned in the experience, in what we’re not giving them, not putting them at the centre. Bringing back the Original Chilli Sauce is a big statement, we are giving back to the customer.” Putting the customer back in the centre of the equation is paramount for the business, and it demands a passion for customer service, and for great food, both of which Antonio Cerqueira has in abundance. So what does Cerqueira think of it all? “The customer owns the business, not us. So don’t walk away from the original product.

“I had one customer dancing for joy – and he’s coming back to buy tubs of it,” says manager-turned Oporto franchisee Akanksha Taneja who owns the Penrith outlet.

“When I started as a franchisor, my ambition was to be big out there. I always believed. And I still love Oporto. I want the business to succeed. I would still like it to be next to the big guys.

With such a great story to tell it’s no wonder there are plans for marketing

“No-one can stop us as long as we do the right thing.”

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FRANCHISING, LICENSING, AND DISTRIBUTION SPECIALISTS Australia is open for business and the 2016 forecast is for further growth. The new Franchising Code of Conduct commenced 1 January 2015 and the ACCC has indicated they are actively monitoring compliance in the industry! Minimise your risk and ensure your compliance to avoid fines and penalties. We act for local Australian and International franchisors and master franchisees, as well as acting for overseas companies looking to establish business in Australia. We provided advice to companies and individuals in: • International franchising and assisting overseas companies to establish business in Australia. • Master franchise rights. • Dispute resolution – solution and strategies. • Franchise advice – fixed fee reports. • Sale or purchase of franchise systems. • Trademark and intellectual property (IP) advice. • Company structures. • Business modelling – franchising, branchising, licensing, distribution and agency. • Employment law. • Consumer law and ACCC advice. We have a network of franchise consultants to assist our clients to establish their brand and franchise systems. Member: International Franchise Lawyers Association (IFLA), US Commercial Service and Franchise Council of Australia (FCA). We offer fixed fees based on the scope of work so our clients can budget for their legal costs with certainty.

Contact: Robert Toth p: +61 03 9604 9410 m: +61 412 673 757 e: rxt@marshmaher.com.au

Marianne Marchesi p: +61 03 9604 9416 m: +61 402 212 954 e: mim@marshmaher.com.au

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10 reasons why you should

INVEST IN A FRANCHISE

ou’ve read our advice articles, checked up what’s new in food trends, discovered what’s happening in the franchise sector. Now it’s time to reflect on just why you should invest in a franchise.

performed well and has a strong reputation, you stand a better chance of funding your business.

7. ACCESS TO BUYING POWER

1. IT’S A BOOMING SECTOR

4. COMPETITIVE ADVANTAGE

This billion dollar industry keeps growing and there are new systems embracing a franchising formula every month.

The franchisor and other franchisees in the network are a valuable source of information and inspiration. Everyone wins if they share best practice.

2. RISK IS MINIMISED There’s no guarantee of success with a franchise, but operating a tried and tested system makes it a little easier to get up and running.

3. BRAND POWER It takes years to develop brand loyalty - but in franchising, someone has already done that for you!

5. FOCUS ON BUILDING YOUR BUSINESS With a lot of the systems and processes already in place you don’t have to reinvent. That leaves you time to concentrate on your own business.

6. ACCESS TO FINANCE Banks are naturally cautious, so if you’re starting out with a brand that has already JAN/FEB 2016 | 103 | WWW.FRANCHISEBUSINESS.COM.AU

It’s all about volume - and in a franchise network that’s what you’ve got on your side. The buying power can be invaluable.

8. ACCESS TO INNOVATION Franchisees benefit from the franchisor’s investment in research and innovation.

9. OPPORTUNITY TO EXPAND Many franchise systems see value in embracing multi-unit operations for their successful franchisees.

10. RULES AND REGULATIONS. Sure, we don’t all love rules, but a regulatory code that governs the franchise sector has real benefits for a franchisee.

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Search. Discover. Succeed. Our Franchise Business new look website is now live. Visit the home of Franchising magazine online at FranchiseBusiness.com.au • Access information and resources through a more intuitive interface • Franchise opportunities can be researched through a more optimised display, combining trending news with directory listings • Shortlist your preferred franchises for sale • Get mobile! Our mobile compatible site makes it easy to enquire wherever you are The new release website is packed with more than 1600 brands; in excess of 6600 actual franchises for sale; and expert advice and information including more than 6600 articles.

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LEGALESE

Franchise and employment

LAW UPDATE

BRENTON ALLEN is a lawyer in the workplace relations team at MST Lawyers

he last year has seen numerous Australian franchisees and franchisors face widespread media scrutiny for alleged non-compliance with Australian workplace laws. 7-Eleven, United Petroleum and Pizza Hut have been at the forefront of the mediaâ&#x20AC;&#x2122;s coverage with allegations spanning from the underpayment of wages and doctoring of payroll records to sham contracting arrangements.

With the media on the lookout for its next workplace scandal, franchisees need to remain more cognisant of their employment law obligations than ever before. The risks faced with unwanted media attention and significant court imposed penalties are far too heavy to ignore. A response at a parliamentary level has come in the form of the Australian Greens party proposing The Fair Work Amendment (Recovery of Unpaid Amounts for Franchisee Employees) Bill 2015 on 12 October 2015. The Bill aims to make franchisors more accountable for the industrial relations breaches of its franchisees by enabling underpaid workers in a franchise arrangement to claim unpaid wages against the franchisor, with the franchisor retaining a right to recover the amount of the underpayment from the franchisee. But as the law currently stands, franchisors and franchisees remain autonomous and responsible for the legal ramifications of their own industrial relations breaches. Whilst both franchisors and franchisees may feel the impact of brand damage, the consequences for underpayment rests solely with the perpetrator.

breaches can result in significant penalties under the Fair Work Act 2009. 2. PAYING CASH Franchisees that remunerate staff by way of cash must ensure that they adhere to their obligations regarding, amongst other things, PAYG withholding and minimum superannuation contributions. 3. RECORD KEEPING Franchisees must provide a payslip (with the information required by the Act) to all employees no later than one day after they receive their wages. In addition, employee records (including overtime, leave and superannuation records) are required to be made and kept for a period of seven years and made available for inspection to an employee upon request. Whilst adhering to these obligations is often seen as laborious or unnecessary, franchisees are liable to substantial penalties for non-compliance. 4. FAIR WORK OMBUDSMAN INVESTIGATION

DANGER AREAS Some common workplace obligations that franchisees tend to neglect are provided below. 1. MINIMUM WAGE AND COMPLIANCE WITH INDUSTRIAL INSTRUMENTS

In circumstances where a franchisee is subject to an employee complaint and subsequent Fair Work Ombudsman investigation, it is critical that the franchisee co-operate. Australian Courts view a lack of co-operation in this regard as an aggravating factor when considering the appropriate sanction for non-compliance.

Minimum wage obligations are often found in a modern award or registered workplace agreement. Awards and agreements can be tricky to navigate and often contain many hidden employee entitlements (overtime, penalty rates and allowances to name a few). It is essential that franchisees understand the terms of the award or agreement applying to their business as

CONCLUSION Franchisees must be proactive in ensuring compliance with Australian workplace laws and instruments that apply to their industry. If not, franchisees are likely to find that underpaying staff and skirting on employment law obligations is a counter-productive strategy.

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TRENDS

The magic INGREDIENT

ANDREW TERRY Professor of Business Regulation, The University of Sydney Business School

he magic ingredient! If we could nail that we’d be set up for life. Wouldn’t we? If only it were that simple. But, we’ll give it a go.

In relation to franchising we have to do this in two parts – firstly the magic ingredient which makes franchising a more successful distribution strategy than operating through a company owned network of managed outlets, and secondly the magic ingredient which makes some franchise systems more successful than other franchise systems.

THE MAGIC INGREDIENT IN FRANCHISED VERSUS NON FRANCHISED OPERATIONS Unlike certain magic ingredients – the recipe for Coca Cola or KFC’s 11 herbs and spices which remain trade secrets entrusted, apparently, to only two senior executives who are not allowed to travel on the same plane – the magic ingredient for franchising is not a secret ingredient. All efficient enterprises whether operating though a network of managed branches or a franchised network harness the power of brands, of systems, of management, of technology, of communication, of economies of scale, of information sharing. The X factor in franchising – the magic ingre-

dient – is not a state secret. It’s the proprietorship of the franchisee – the financial and psychological commitment, driven to a large extent by self interest, which results in franchisees outperforming managers irrespective of various incentive strategies that may be available to the latter.

The factors that influence successful franchising are a matter of record: a viable and successful business concept, a viable and proven business system, a committed and competent franchisor, a committed and capable franchisee, and a financial equation that makes sense for both franchisor and franchisee.

The value-add that flows from franchisees having a stake in the business that a manager doesn’t provides the edge. The franchisor of course must provide the formula to enable the franchisee to succeed and the franchisee must have the appropriate temperament and skill set but if these are in place the hands-on commitment of the franchisee drives the business forward.

But these ingredients of successful franchising are easier to state than to apply. The reality for the prospective franchisee looking for the magic ingredient which explains why one franchise model is more successful than another is that, unfortunately, there isn’t one. It’s not the individual ingredients which determine success but the manner in which they are combined and applied and developed.

THE MAGIC INGREDIENT IN INDIVIDUAL FRANCHISE SYSTEMS This is the magic ingredient we’d like to bottle but it’s much more difficult. Why are some systems more successful than others given, as suggested above, that the magic ingredient is not a tightlyheld secret? If the recipe for Coca Cola or KFC’s 11 herbs and spices were in the public domain – and a Google search suggests that they may be – would it make much of a difference? Unlikely. The secretiveness of the recipe adds a mystique but cannot explain the success of these enterprises. So too with franchising. We know the magic ingredient but it is the total package and how it is implemented which makes the difference.

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SO WHAT TO DO? This column will have given little comfort to the prospective franchisee looking for the easy answer to the question I must have been asked a thousand times –“what franchise should I buy?” But in franchising, as in life, it’s not that simple. The good news for prospective franchisees is that you are, in my opinion, the magic ingredient in the franchising success story. The bad news is that, at the level of particular franchise systems, this is not enough to ensure your personal success. Your best friend here is your mature understanding of the factors that characterise successful franchise systems and your informed, rigorous and objective assessment of them in relation to the particular opportunity.

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START YOUR JOURNEY Thinking about buying a franchise? Leverage our countless years of knowledge and industry expertise to help ﬁnd the right franchise for you!

Download our FREE 6 step “Buying a Franchise” education journey at FranchiseBusiness.com.au/subscribe

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LEADERSHIP

CRUMBS IN THE

keyboard

KARLI FURMAGE is a trainer, coach and writer. Contact karli@goglobal. consulting

hey have been there for weeks, taunting me. Crumbs stuck in between the keys in my keyboard. Every now and then I’ve turned my keyboard upside down and given it a good shake. A few have fallen out, but I can still see little bits of food scrap in between the keys. Gross.

It may be making the appointment with their lawyer to review the franchise agreement or wading through the financials or filling out the paperwork or photocopying their ID. There is so much to investigate and analyse and do before purchasing a franchise it’s no wonder some things get relegated to the ‘I’ll do that later’ pile. Why do we procrastinate?

They got there in an uncharacteristic event of eating a sandwich at my desk. I was chasing deadlines, multitasking and continued to work, type and dribble crumbs. It was a big sandwich, I am a messy eater and now I have this situation. To fix it requires the vacuum, possibly even a screwdriver. Reading this you are no doubt thinking – why haven’t I done something about it?

The reason is usually the same – taking action requires a degree of pain. Fear of making a decision, not wanting to look stupid because we don’t understand some of the documents, the difficult process of reading pages and pages of legal documents… all cause pain. So we avoid them. The start of the year is a perfect time to face what we’ve been avoiding. Take positive steps to bring your dream of owning a franchise to reality.

Good question. I’m normally a person of focus and action. Not this time. It’s annoyed me every day for weeks, but I have done nothing to fix it. Last night things came to a head. Returning to my office late, I flicked the light on and there was a cockroach on my keyboard. So at midnight I dragged the vacuum out and in five minutes I had fixed the situation. No more crumbs. Sparkling clean keyboard. I then spent an hour berating myself for why on earth hadn’t I done this sooner? It took five minutes! I had spent at least five minutes every day for the last few weeks being annoyed about it. Now you may be a productivity machine and stopped reading when the cockroach appeared… or you may be like me and every now and then put things off: sometimes little things, sometimes big things. Most potential franchisees I speak to have a point in their search for a business where they hit a ‘keyboard crumb’.

TAKE THESE STEPS Write down the actions to take. We all know this one and the research to support the likelihood of action being taken when it’s written down is overwhelming. So make that list. Chop big tasks into smaller ones. Prioritise. You might not get everything done right now, so prioritise the actions that will make the biggest difference to achieving your business ownership dream. Set a deadline and accountability. Today, tomorrow, 3pm on the 30th… what ever it is, commit in writing to the deadline. Then tell people! Having an accountability to complete a task is a great motivator. Lock it in your diary. Make the time for the activity to happen, that avoids the ‘oops I didn’t get around to it’ excuses. Keep the big picture in mind. The more difficult, annoying, vague or seemingly meaningless a task is, the more likely we are to procrastinate with it. So where possible put the task in context of how it will help you achieve your dream.

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