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ISSUE 58 EDITION 2 2019 Conversion growth strategy Poolwerx leads the way Emerging stronger from a crisis 7-Eleven’s remediation and reform journey Getting your lease right The shifting retail landscape AUS $6.95 | NZ $7.95 9 772652 123000 ISSN 2652-1237 02 OFFICIAL JOURNAL OF THE FRANCHISE COUNCIL OF AUSTRALIA thefranchisereview | i
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Contents 2 A message from the CEO 4 Using a conversion growth strategy to realise potential 9 Confronting the challenge and emerging stronger 13 Tough time for small business means big challenges for the economy 16 Franchisees provide input through new Advisory Committee 4 18 Returning to the fold in franchising 20 Redcat’s IT platform is helping food retail franchises adapt for success 22 Why the world’s biggest franchise brand gets ideas from Down Under 24 Getting your retail lease right 26 A human approach to the evolving landscape 28 Turn the page: How millennials are influencing your marketing 9 31 What’s next for franchising? 34 Good franchising is simply good business for all 38 Inspiring customer loyalty 40 Winning in 2020: A business planning method for generating success 45 Upcoming FCA Events 46 WA shines at State Conference 48 Getting the right culture back 50 Evolution of a franchise 24 52 NFC19: Evolving in a new landscape PUBLISHER EDITORIAL CONTENT ENQUIRIES DISCLAIMER The Franchise Council of Australia Editor, Franchise Council of Australia The views expressed in this journal do not necessarily ABN 17 002 789 988 T 1300 669 030 reflect the views or policies of the FCA. Publication PO Box 2195, Malvern East VIC 3145 E editor@franchise.org.au of advertisements for products or services does not indicate endorsement by the FCA. The responsibility T 1300 669 030 ADVERTISING ENQUIRIES for accuracy of information is that of the individual F + 61 (0) 3 9508 0899 contributors, and neither the publisher or editors can E info@franchise.org.au Peter White, Franchise Council of Australia accept responsibility for the accuracy of information W www.franchise.org.au T 1300 669 030 that is supplied by others. Readers should make their E peter.white@franchise.org.au own inquiries in making any decisions, and, where DESIGN AND LAYOUT necessary, seek professional advice. PerryCallan GENERAL INFORMATION 387 Tooronga Road, All material is published at the discretion of COPYRIGHT East Hawthorn VIC 3123 the FCA. Editorial contributions, advertising © 2019 Franchise Council of Australia. All rights T 03 9822 9629 bookings and artwork deadline information reserved. Reproduction in whole or in part without W perrycallan.com.au is available by contacting the FCA on written permission is strictly prohibited. 1300 669 030. thefranchisereview | 1
A MESSAGE FROM THE CEO Regions respond enthusiastically to franchise opportunity By Mary Aldred, CEO, Franchise Council of Australia Fostering a strong To help address this, the FCA began Franchises offer the brand a campaign in 2019 to support regional recognition, efficiency and economies and diverse small revitalisation by highlighting franchises of scale advantages of a chain store business sector is a as an efficient, innovative tool to while retaining the local economy address service and small business and entrepreneurial benefits that significant component ownership gaps. are hallmarks of independent small of a sustainable local The FCA sent letters of invitation businesses which help local economies to nearly 80 regional economic strengthen and expand their base. economic development development officers across Australia The franchise business model provides strategy. For many and is now in discussion with a number an organisational system and corporate of councils interested in attracting new support that lowers barriers to entry. regional centres, slowing franchised businesses. Reducing these traditional obstacles may commercial investment At the same time, the FCA sent an greatly enhance opportunities for many email to members to ask if they were first-time entrepreneurs who traditionally has resulted in a shortfall interested in setting up in specific lack adequate resources, access to capital, in the range of retail and regions and looking to identify potential and extensive industry experience. small business services franchisees and business operators. As CEO, I’m leading a small but The result was outstanding and the focused FCA delegation in July meeting and entrepreneurial FCA is now organising introductions with regional economic development opportunities. between franchise members and local officers, councillors, local chambers of governments in several regions, on the commerce and key regional landlords path to become Australia’s foremost between the WA coast and northern small business and franchise system NSW to discuss and introduce franchises matchmaker. which could breathe life back into their The regional councils have economies and communities through approached the FCA mindful that matching local business people with selective franchises which address some of the nation’s most successful identified service and small business franchise systems. gaps in their area will help create In doing so, we clearly acknowledge a more diverse business mix, new the model for the program developed employment opportunities and core with Greater Hamilton Council in south- activity in the community. western Victoria. 2 | thefranchisereview
“The benefit of introducing franchised businesses is not just economic, but also has a positive social and community impact.” The Greater Hamilton region promoted Through my own regional background, its business opportunities to franchisors I know how much franchised businesses and franchisees at the Franchise Council contribute to rural and regional Australia of Australia’s National Convention and the FCA has been delighted to assist in Melbourne in October 2018 and Greater Hamilton, as well as discuss the produced a detailed information kit to opportunity with several more councils assist franchise systems to evaluate the across Australia. opportunities in the region. The benefit of introducing franchised The Greater Hamilton regional businesses is not just economic, but also presence at NFC2018 was a fantastic has a positive social and community introduction to the industry and a impact. Often you will find franchisees surprise to many attendees, with passing on the knowledge they have Hamilton receiving positive feedback for gained through their training and support their proactive approach to generating to other local businesses. Healthy business growth for the region. businesses create healthy communities. The central geographical location for By helping to meet the needs and a franchise territory, projected population maximise the opportunities for interested growth of the region and the stable franchisors and franchisees, as well as regional spend that is demonstrating providing a crucial link between local an upward trend, were significant government and business, the FCA can considerations for franchisors. further enhance the success of the local Since then, the Council team and a economy, maintain population growth number of franchise systems have been in and diversify the service offering for the discussions aligning potential franchisees community. with franchisors. Other franchisors are We would be pleased to discuss redesigning their geographical territories further how the FCA can assist both our or examining their business model to members and local regions in utilising adjust to a smaller catchment. this program to participate in the nation- Franchisors noted that when you see wide strategy to leverage the benefits a local council investing in infrastructure of franchising to rebuild and strengthen for its CBD, then this is a sure sign of Australia’s local economies and growth throughout the region. communities. n thefranchisereview | 3
As Poolwerx continues its expansion in the United States of America, the pool and spa care franchise has turned its attention to finding ‘ma and pa’ pool businesses and converting them to franchised operations. Using a conversion growth strategy to realise potential 4 | thefranchisereview
It’s a recruitment strategy that is pool businesses, with 500 ‘ma and pa’ not ready to retire yet but want a solid paying dividends for franchisor and operators. As we strive for the goal of exit strategy. This makes them willing franchisees alike. 300 stores new stores domestically as to convert to the brand because of the For franchisees, it’s a welcome move well, we expect over 50 per cent of our higher future sales price it will drive. from being an unsupported independent new Australian franchise partners will 4. COO – Convert, own, operate. business in a tough market to gaining originate from a conversion.” These independents are usually around the resources that come from joining 45 years of age, with about a decade a franchise framework to secure their Identifying a of experience in the industry. They are livelihood. conversion prospect ready to take their business to the next As franchisor, Poolwerx gains a ready- “Our approach is based on a fair bit level but unsure how to achieve it solely. made customer base and the expertise of science to ensure we are targeting the They realise the benefits of joining a of franchisees who have already been right businesses,” O’Brien says. franchise to make this goal come to operating their own business in the “We map all independent stores fruition. market. in Australia, United States, and New “Conversion as a franchise Zealand and crosscheck those against Promoting the development strategy is an opportunity our current franchise territories and advantages of franchising we have embraced over the past few pool ownership to see what options are to potential converts years after realising the immense available for expansion. We then rank the According to O’Brien, in the United potential it held for our business,” says stores according to the opportunity level States currently about 30 per cent of CEO and Founder of Poolwerx, John and utilise data from our suppliers to conversion prospects contact Poolwerx, O’Brien (left). combine all this intelligence to populate with the remaining 70 per cent targeted “Since adopting the strategy (in the our recruitment database and formulate through a direct approach. USA), we have learnt so much about a plan of approach to introduce the Experience has taught O’Brien and the process and honed our approach Poolwerx brand.” his team that there are several influential to great success, leading to a record 40 According to O’Brien, prospects factors that a potential conversion retail store conversions in 40 months,” usually fall into four categories. business considers before joining the he says. 1. Immediate acquisition. Usually network. Now, 70 percent of Poolwerx’s there is a serious personal issue or illness “The number one question people USA network has been derived from that is driving the need for an immediate want to know is: how do I increase my conversion franchising and O’Brien sale and they are grateful of the revenue? Marketing is the answer, but says the strategy will also form a major approach. If the business and location the reality is it can be hard for a sole element of the franchise’s recruitment is right, Poolwerx will find a franchise operator to turn their minds to investing program in Australia, where he believes partner to buy it as soon as possible or in in marketing and sales,” O’Brien says. it will eventually account for half of the some cases buy it corporately and find a “The fact we can go to them and say network’s new franchise partners. franchisee buyer later. we utilise the combined resources of a “There are so many benefits to 2. Matchmaker. Some owners are still national marketing fund to promote the conversion for both the convert and keen to sell but do not want to convert brand regularly is an attractive benefit the franchisor and it is an underutilised and are happy to wait for the right price. for a new prospect.” strategy in my opinion. The opportunity They realise it would be easier to sell as Drilling down further into the finances, is vast. In the US, research shows that part of a franchise, so they become part potential conversion franchisees are also 85 per cent of independent pools are of Poolwerx’s match maker program interested to know how being part of the ‘ma and pa’ operators. With our current to find a buyer. The buyer is aware the network can increase gross profits and trajectory of 300 new Poolwerx stores business will be converted to a Poolwerx reduce costs. This is where group buying in the US over the next few years, and this is part of the purchase appeal. power comes into its own. we anticipate that 70 per cent of the 3. COOT – Convert, own, operate “The fact we negotiate pool product new business joining the brand will be and transfer. These people are typically purchasing programs on behalf of through conversion,” O’Brien says. 65 years of age, have been in business our franchise partners means we can “Comparatively, in Australia there a long time and don’t have any family invariably negotiate better deals and are about 800 independent retail interested in taking ownership. They are leverage buying power. This leads to thefranchisereview | 5
reducing costs of goods and improving “...a conversion growth strategy has led to rapid market share and gross profit margins,” O’Brien says. revenue growth and is now a cornerstone of our recruitment success.” For a non-franchised small business owner, the training and support offered when they join a franchise network is another big drawcard. Delivering a a recruitment method that has delivered “Being in business for yourself can conversion strategy for Poolwerx. be lonely but in franchising there are “There is a perception that conversion “I am constantly surprised more strong support teams to guide you. franchise recruitment comes with some businesses don’t look at conversion as an From the professional development baggage, and that is true given you can option, especially those in less saturated offered by our field management team, be working with businesses owners who markets where there are fewer players,” to the comradery established between have been doing things their way for 30 O’Brien says. franchise partners through regular years, but the bumps are worth it,” says “To deliver on a conversion strategy meetings and conventions, there is no is very different to core franchising. We O’Brien. reason to feel alone,” says O’Brien. had to target a new market and it wasn’t “You get instant market share and Finally, O’Brien lists access to the one where franchising was top of mind. inevitably learn things from these latest technology, including a state-of- They were not looking in the typical experienced business owners that can the-art global website, a world class places we had advertised before. We help shape and grow your brand too. ERP system and “the quickest most had to make sure Poolwerx established Ultimately though, if an independent has accurate water testing” as influential to a presence in pool trade magazines. We selected to join a franchise brand, they potential conversion franchisee’s joining exhibited at expos and used our industry are amenable because they have chosen his network. supply network for recruitment referrals. to benefit from being part of a larger “Everything we offer has a clear It worked to introduce the brand and get franchise system. purpose, to ensure our franchise people thinking about a new way to do “For Poolwerx, a conversion growth partners can manage their business business. strategy has led to rapid market share more efficiently, effectively, remotely and And while conversion franchising can and revenue growth and is now a profitably,” he says. come with its own set of challenges, it’s cornerstone of our recruitment success.” 6 | thefranchisereview
Conversion franchisees enjoy the benefits of franchising As non-franchised small CB: The main benefits are: potentially a better supply chain and pricing; business owners, Frank better employee training opportunities; Disher, Seon Jaramillo, potentially better brand recognition and marketing; having other eyes looking at and Cal Boothby all faced our company objectively and offering the challenges of flying advice as to where and how we can improve; and a network of other franchise solo as owner-operators partners who support each other and without the frameworks share ideas. of franchising to support TFR: What stood out about the way that Poolwerx managed the process of you them. Here, these three joining the franchise network? Poolwerx converts share FD: I felt like Poolwerx worked hard their stories. to help me preserve the good aspects from my existing business and bring me The Franchise Review (TFR): What are around to the Poolwerx way without the reasons you decided that it would be completely disrupting everything. They beneficial for your business to join the understand that I have customers that Poolwerx franchise network? have been with me for several years and it is important that I maintain those Frank Disher, Poolwerx franchise partner, relationships. They are also very patient Keller, Texas (FD): I would describe Cal Boothby, Poolwerx franchise partner, and encouraging with my lack of proper myself as a hardworking, ethical person. Redlands, California (CB): We had many business skills. I would never describe myself as a good reasons but the main ones are: businessperson. I retired last year as a SJ: What stood out to us after meeting 1. We wanted our company to remain with them over a two-year year time span Federal Aviation Administration (FAA) air in business long term and that meant was trust. We had to trust the people that traffic controller after 27 years. I have had finding ways to stay competitive in retail we would be joining forces with. We met my business for 22 years and it has been by having better buying power, better John O’Brien, CEO along with his wife, relatively the same size; around $2 million marketing and better brand recognition. and felt he truly has a connection with in gross revenue, about 12 employees and a few hundred service accounts 2. We wanted more extensive training building relationships, people, and their this entire time. I have been blessed to opportunities for our employees that businesses. Ben was the most influential bring in enough work and make enough would help them have not only jobs but person in our transition. As I told him, I money to cover expenses most of that rewarding careers in the pool industry. have to believe in what I am hearing from time, however there were many months 3. We wanted our company to remain him because it truly affects the lives of where my FAA job was my only take- intact and our employees to keep their our families and my employees’ families. home income, and I had to contribute my jobs when we decide to retire. If I did not feel that trust, regardless of the savings to pay company expenses. I was business model they offered, we would 4. We knew that when the time comes, a working a total of 70 to 100 hours a week. not have joined forces. franchise will be easier to sell and will have I knew nothing about business and I knew CB: The Poolwerx core values are very greater value than our small independent that was my weakness. I felt Poolwerx’s much in line with our own and that was business. A new buyer will be able to expertise in business was the missing very important to us when we considered obtain bank financing and will receive component allowing me to achieve great making this leap. There has been an comprehensive training through Poolwerx. success. open line of communication throughout TFR: What would you list as the main Seon Jaramillo, Poolwerx franchise the process and that is critical in a major benefits of operating a franchise as partner, Austin, Texas (SJ): We decided change such as this. Because we are a opposed to operating as an independent to join Poolwerx as a franchise for several larger company that has been in business small business? reasons. The first reason is that online sales for 35 years and we are a conversion to are killing small business retail and we hope FD: For me the main benefit is guidance Poolwerx rather than a new start, there that joining a franchise with better buying and structure. The path to success is a have been some bumps in the road, but power, better processes, larger foundation paved road that is well maintained. I was we have always believed that everyone at and better education at our fingertips in a maze that occasionally crossed that Poolwerx genuinely wants us to succeed can help us sustain the wave of online path but I had no particular direction to in this venture. We have learnt a great sales. We also like immediately having an follow. I now understand what numbers deal about franchising from them and expanded family that I can call upon at any I need, how to track those numbers, and they have been open to learning from us time for help with pool issues. As a mum how to achieve those numbers. Having a (and other franchise partners) about the and pop business, creating processes and plan that is structured for my needs and US market and customs, which can be implementing them is not fun. Poolwerx capabilities is a huge blessing for me. different from those in Australia. They are stepped in and helped me with processes SJ: The main benefit of operating a committed to ‘finding a better way’, which that have already been built so I do not franchise rather than a small business is we have appreciated. We have made have to reinvent the wheel. brand strength. many new friends! n thefranchisereview | 7
FRANCHISE COUNCIL OF AUSTRALIA 2019 MULTI UNIT SUMMIT Friday 9th August 2019 | Fenix Events | 680 Victoria Street Richmond VIC Looking to create successful growth in franchising? If you want to grow either • Learn innovative ways to fund expansion of your business and secure the best deals from lenders in number of locations • Learn cutting edge strategies to boost the engagement or quality of operations, and performance of your people the FCA 2019 Multi-Unit • Discover the characteristics of successful multi-unit Franchising Summit is a franchisees and how to develop these must-attend event. • Collaborate with other high performing franchisees and experienced executives from top brands Top business speakers • Hear how successful multi unit franchisees have will be sharing their achieved greater financial success and lifestyle flexibility experiences and franchising The program provides a choice of franchisee panels along success stories in a with a franchisor concurrent, run by highly knowledgeable comprehensive, exciting and experienced franchise specialists with many brands and informative day. represented by multi unit owners and brand area managers. Round table topics also give delegates the opportunity to participate in the discussion and personally contribute their experience as well as networking drinks at end of day. This is the event for multi-unit and multi-brand franchisees and franchisors looking to build their businesses to achieve their growth goals. For more information or to register, visit FCAmultiunitsummit.com.au or call us on 1300 669 030.
Mid 2015 revelations of widespread underpayment within 7-Eleven’s franchisee network came to light. Over the past four years, 7-Eleven has embarked on a comprehensive remediation and reform journey. 7-Eleven CEO Angus McKay explains how the business set about remedying those impacted and reforming operations to be an exemplar of how to address these issues and better position the business for growth. Confronting the challenge and emerging stronger thefranchisereview | 9
Accountability and New leadership • centralising payroll to ensure non- repaid wages compliance is more easily identifiable; Providing restitution to affected • investing in a significant increase in The plight of underpaid workers employees was only one part of the field-level investigation and compliance was the business’ primary focus. journey. The business needed to change, activity; Our owners promptly committed to and our reform appropriately started • creating a sophisticated data repaying any underpaid individual, from the top. analytics, monitoring and reporting without any legal obligation to do so. A new Chairman of the Board platform to further help identify The business took accountability for was appointed, along with three new unusual patterns of behaviour; not only the issue but also the solution. Non-Executive Directors. These new • establishing a hotline to ensure There was a great deal of debate Directors brought diverse and highly that any employee (including those and media coverage regarding the relevant skillsets, across corporate within the franchisee network) can process and people involved in governance, finance, strategy and cross- make an enquiry or lodge a complaint making restitution to those directly cultural engagement. about non-compliance with workplace affected. What was lost in that The senior leadership team was also laws; debate and coverage was the focus overhauled, including the departure of the • investigating and, where required, on getting people paid quickly in former CEO and Operations Manager, and acting upon any allegations of unlawful what is Australia’s largest ever wage the appointment of a new CEO. More than store activity, including termination of repayment program. The process was two-thirds of the senior leadership team the Franchise Agreement; and entirely voluntary. More than $160 are new to roles or to the business since • increasing Franchisees’ profit share million in wages and superannuation the underpayment issue was revealed. and minimum profit guarantees under had been repaid. our Franchise Agreement, positioning We communicated directly Business reform 7-Eleven’s model as among the most and regularly to more than 15,000 With franchisee employees now competitive and attractive in the current and former employees, and being repaid, a new look Board and franchise industry. via public calls in a range of national Management team, 7-Eleven also took 7-Eleven also voluntarily entered and international media over 18 a number of substantial steps to tackle into an industry-leading Proactive months. Wage claims were handled and stamp out wage fraud at the Compliance Deed with the Fair confidentially by the Independent franchised store network level, including: Work Ombudsman (FWO) in Secretariat with its focus on making it • a multi-million dollar investment which we committed to a range of as simple as possible for the claimant. in innovative store level technology to further reforms. Natalie James, the We said we would remediate centrally record and capture time and former FWO said “The measures in underpaid workers as comprehensively attendance records for all Employees this deed are the most robust and and efficiently as possible, and that is through biometric (thumbprint) sign-on comprehensive that any franchise exactly what we did. and sign-off; brand has in place in Australia.” 10 | thefranchisereview
“We have made mistakes but have sought to address these from the front and not retire from the debate we sparked. While there’s more to be done, much more, we are proud of the progress we have made.” International education is a booming sector for the Australian economy, but we must be vigilant to the increasing number of vulnerable students now present in our country, working to pay for their education, but at the mercy of potentially unscrupulous employers. In this regard, 7-Eleven cautiously welcomed the Government’s Migrant Workers’ Taskforce report released in March this year. However, we were disappointed the report and recommendations fail to address many of the key deep-seated cultural issues and visa enforcement and restrictions that unfortunately contribute to the vulnerability of migrant workers which we shared with the Taskforce based on our experience. We have consistently argued that any Raising the bar of 7-Eleven to pursue through the courts, let alone the two-thirds of Australian comprehensive approach needs to include Through these measures and more, we looking at the ‘supply-side’ of the issue, franchisors that are small-medium have worked hard to ensure the highest including a mature discussion about the businesses. levels of performance and compliance visa restrictions for international students. 7-Eleven was disappointed the Joint amongst our network. Where those Parliamentary Inquiry into Franchising standards are not being met, we will failed to recommend that the two relevant Business growth continue to take action. industry codes – the Franchising Code of Throughout our remediation and Since October 2015, we have Conduct and the Oil Code - be amended reform journey, the business has continued successfully terminated more than to give franchisors the right to terminate a to perform strongly, beating our financial 20 Franchise Agreements for wage franchise agreement in the case of serious targets and grown to be Australia’s second fraud. However, terminating a Franchise largest private company. We still open over non-compliance with Commonwealth Agreement is not a decision we take Workplace Laws or Fair Work Instruments. 30 stores each year and have expanded lightly, nor is it as straightforward as A further area for reform – both from our Corporate Stores to about 15% of the commonly believed. It relies on having our experience and as is now apparent in network enabling us to better understand franchisee employees willingly provide many sectors of the economy - is a mature the store environment, trial initiatives, and evidence to 7-Eleven to support discussion of student visa rules and policy ultimately be better retailers. terminating the offending Franchisee – settings. It is broadly accepted that current The business has won a number of evidence that can stand up to the scrutiny visa rules do not allow students to legally industry awards in the last year, including of the Australian courts and legal system. work enough hours to cover their tuition the NACS Asian Convenience Retail This requires bravery from those most and living costs, which creates a pool of Technology Award for our 7-Eleven deeply affected by wage underpayment. vulnerable workers at risk of exploitation Fuel App, a world-first which has been We should not underestimate the due to economic needs or fear of downloaded by 1.6 million customers and I difficulty associated with calling out such deportation for breaching their visa. saved nearly $11.5 million off their petrol behaviour, especially when it requires the n A recent 4 Corners story on bills. individual to step outside strong cultural international students showed universities Most recently, 7-Eleven won the c and ethnic groups. allegedly lowering the language Canstar Most Satisfied Customers – Petrol m Termination is only available to a requirements to admit more students. In and Service Stations Award for second franchisor if it can be demonstrated that addition, a former Immigration official also year running. the underpayment has occurred in a way mentioned that their financial capability We have made mistakes but have that involves fraudulent conduct. to support themselves – as required under sought to address these from the front Our experience demonstrates that the visa - is also rarely checked. However, and not retire from the debate we sparked. the barriers to terminating a franchise the story did not link these factors with the While there’s more to be done, much agreement in cases of underpayment are increasing exploitation of foreign students more, we are proud of the progress we difficult enough for a company the size being revealed across the economy. have made. n thefranchisereview | 11
Forget the pundits, there are two types of talk that matter most – taxi talk and pub talk. You can bet that if the word ‘recession’ is bobbing up in the front bar of the Railway Hotel or from a cabbie on the way to the airport, it’s front of mind for many people. Tough time for small business means big challenges for the economy By Mary Aldred, CEO, Franchise Council of Australia thefranchisereview | 13
“The footprint of small business on the rest of the economy is too big to ignore and it’s not just a lack of financing that’s currently casting a looming shadow over growth.” Small business is the canary in the picked this up, saying it wants to see stop lending to small business, and cage for the rest of the economy. Over unemployment fall. That means seeing warned that it was a serious issue for the nine out of ten Australian businesses are more people with a job, being able to economy. small businesses, they pay 12 per cent afford to spend more in the retail sector. As the Fidelity report on retail of total company tax revenue and with Right now, giving someone a job is the real estate found late last year, online over 40 per cent of Australia’s workforce best boost you can give the economy. shopping is transforming retail at a time employed in a small business, are one of There are many legitimate grievances when consumption is struggling and the our biggest job creators. that have been aired through the role of consumption in growth is waning. There are a lot of reasons why it’s banking inquiry. But taking a deep, And the speed of change is accelerating. tough to run a small business right now. narrow dive into the banking sector The level of rents and floor space are Access to finance is near the top of the without acknowledging the broader becoming uneconomic for more and list, and the fallout from the banking consequences was always going to more bricks and mortar retailers. Many inquiry has tightened the tap. The punish small business and penalise small businesses have their business Reserve Bank of Australia’s annual small Australian jobs. We’re now seeing some finance equity tied up in a real asset, like business survey reports that one fifth of of that impact come to fruition. their home. small businesses are now struggling to Announced late last year, the federal The footprint of small business on the secure finance. government’s investment of $2 billion rest of the economy is too big to ignore Consider that more than 90 per to facilitate small business lending was and it’s not just a lack of financing that’s cent of Australian businesses are small aimed at countering this fallout. currently casting a looming shadow over businesses, and over 40 per cent of Under the initiative, a loan to a growth. Australian jobs are in those businesses. franchisee or small business is secured Retail leasing, energy prices, industrial This is particularly significant in only over the business, and not real relations, and the regulatory costs of franchising, because over 90 per cent estate security or personal guarantees. doing business are all becoming bigger of the approximately 80,000 franchise This is important, because many small hurdles for small business to clear. With outlets in Australia are small businesses. business owners use their home to secure new technology and digital disruption, Of concern, ASIC reported that last a business loan. With a slow down in the the way we do business is changing too, year the number of companies entering housing market already biting, this will and it’s tough for small businesses to external administration increased by have a big impact on small businesses keep on top of this let alone ahead of it. 11.2 per cent. This year, there’s an added and their ability to secure finance. The sector needs an emboldened gauntlet of traps small businesses are Ahmed Fahour, CEO of the non- focus and encouragement to grow jobs running. bank lender Latitude Financial, has said and invest. If small business takes its foot In retail, discretionary consumer that small lenders just don’t have the off the peddle, the rest of the economy spending is dropping. The RBA has capacity to take up the slack if the banks will stall. n 14 | thefranchisereview
The FCA’s new Franchisee Advisory Committee (FAC) has now had two meetings to discuss the challenges facing small to medium businesses and the type of on-the- ground support and services that can assist franchisees in the current tough consumer environment. Franchisees provide input through new Advisory Committee The committee was established to give franchisees a formal avenue to provide The Franchisee input directly to FCA CEO Mary Aldred Advisory Committee on relevant policy issues. Mary recently briefed the committee on the status of Crystal Petzer the franchising taskforce and its proposed The Alternative Board approach to stakeholder engagement in Jane Lombard coming months. “I regularly benchmark Hire A Hubby Committee members were asked against leading franchisees, their views on the parliamentary inquiry’s not just in Australia, but the Beverley Taylor key recommendations and the resulting USA and UK.” discussion focused on Franchising Code InXpress of Conduct enforcement activity, the Beverley Taylor Rob Bruhl Australian Competition and Consumer Commission (ACCC) complaints Drug-Safe Workplaces process and the merits of mandatory Shannon Hickey legal and financial advice, as well as the The Lott specific difficulties that franchisees (and franchisors) face in negotiating retail leases. Peter Goulis The FCA will provide the Taskforce lead La Porchetta organisation, the Department of Jobs and Small Business, with contact details of the Damian Colefax members of the committee, to facilitate Just Cuts Franchising franchisee consultation with the taskforce. Following a discussion about other Tony Megalli services and information that might be JAX Tyres of value for franchisees, Mary said FCA franchisor members would be urged to Soon Khoo encourage their franchisees to register Chatime for access to FCA information events, Mike Downey webinars and the eDM mailing list. “Every business requires Franchisors will also be reminded that consistency and effort to Gutter-Vac individual franchisees can apply for direct keep it on track.” membership of the FCA if they wish to have more direct involvement in the FCA. Crystal Petzer 16 | thefranchisereview
Staying ahead The views of FAC Members Beverley Taylor as I love to help other businesses succeed, JAX franchise meetings and have a say. I InXpress I need to succeed in my business too. suggest that any new franchisee should Listening skills and good communication speak with other franchisees already I am always learning, and will never stop, are key in this business. I am constantly within the franchise to learn how to and I don’t waste ‘dead’ time. Whether looking for a way to help our clients achieve the best outcome for their own I am driving in the car, or at the gym on achieve their goals. We have this amazing business. the cross trainer, I am always listening to online Business Builders Blueprint training CDs and making the most of the software to help our business owners Shannon Hickey time. I continuously undertake internal navigate their strategy, plans, goals and Nextra (representing The Lott) and external training courses, on both visions all in one place. This also helps me Newsagencies around the country running a business/finance and sales/ keep my clients accountable. To keep my are unique in some respects to the motivation. I continuously read business discipline I set goals and check in every traditional franchise model as we are books. Always be learning. And take week and month. I also measure my KPIs ‘hosts’ for the franchisor, The Lott, inside advantage of the education offerings in our system to ensure that I am on our own businesses. Being the first ever via the FCA. In addition, I regularly track. Having a diary with block out times concept store for the Lott, I feel that as a benchmark against leading franchisees, really helps too. Every business requires franchisee, we have a need to ‘raise the not just in Australia, but the USA and consistency and effort to keep it on track. bar’. We have always had the ideology UK. I analyse marketplace ‘consensus’ Doing lots of small things consistently of ‘look professional, act professional, on pricing and securing more service works in the long term. be professional.’ Being part of the FCA offerings, which in turn help diversify our has always given me an opportunity offering. This is in addition to spreading Tony Megalli to see what other franchises are doing, my net turnover across a high number JAX Tyres particularly the ones involved in this of customers, rather than leaving ‘all my As a franchisee the essence of my ever-changing retail landscape. We put eggs in one basket’ and relying on the business is to provide a quality service a high expectation on staff and suppliers revenue of a few key customers. to my customers while maintaining the as well as ourselves in competing for JAX business model. We run the business the consumer’s dollar over the ease of Crystal Petzer as a team, and every employee plays the online sale. I have always been a The Alternative Board a key role in the day to day running big believer in the franchise model with I have been in franchising for more than of the business. I treat my staff well success coming only from the same 25 years in three different franchises and and maintain a safe, clean working level of uniformity across the board from like to help the franchisor keep on top of environment and conditions. We follow major capital cities to small rural towns. I the trends in business and generally ask the franchising guidelines and staff are do believe however, every now and then for the new things that are out there to trained to meet the high expectations the franchisor should step outside the help the franchise achieve. Franchisees of the customer’s experience, as well ‘cookie cutter’ model and show the world have to remember that it’s up to them as keeping up to date with technology its vision for the future. This is something with the franchisor to make their business and what our competitors are doing. I that in partnership with the Lott we successful. It is a two-way street. As much also make sure that we are involved in achieved at Chermside. n thefranchisereview | 17
Returning to the fold in franchising Stories about people’s reasons for becoming franchisees are prolific. However, it’s not often that you hear about people leaving a franchise to go independent … and then, coming back to the fold! That’s exactly what happened in the case of Sean Kinchington (above) and Jason Heshusius who have recently returned to the EFM Health Clubs brand. The Franchise Review asked to hear more about their reasons. 18 | thefranchisereview
Sean Kinchington EFM Victoria Park, SA I first bought into an EFM franchise in 2006, when I was 21. I had only been in the industry for about 18 months and the club was one of the most successful in the nation, so it was too good an opportunity to pass up. I ran the club for four years. The second time around it was 2017 and I was 32. I felt that with a growing family it was also time to grow as a personal trainer. I was working for a Jason Heshusius systems and processes in place that make life easier for me to just focus on the day personal training company for the EFM Mawson Lakes, SA to day, month to month operation of the entire seven-and-a-half years between I bought my first EFM in May 2001 club. It mitigated the risk significantly. the two EFMs. at age 21 because the fitness industry The EFM Franchise Support Centre I knew it would be hard to do offered very few opportunities for full provides a model to follow and many that at the job I was working in since time employment. Buying an EFM things were already in place, for example leaving EFM, so when there was an franchise meant I got to train people, who insurance is with and how its opportunity to start up a new club in while having the potential to earn a full- structured, where our equipment comes an a part of Adelaide that I knew well, time income. The added benefit was that from and who maintains it, the lease with a company I had been familiar I could do so without having to do it all agreement details, the behind the scenes with, I felt it was the right time. The and learn it all on my own, and I’d have paperwork and member records and notion of building something from the an asset to sell at the end. EFM provided tracking systems. All the things that many ground up also was also a major pull. support so I could follow a plan – the EFM new business owners or self-employed When it came to starting up the new way – which made the decision so much individuals don’t realise they need until club, I had then been in the industry easier. I had the franchise effectively for they are in their business and too far for 12 years and so I was pretty clear nine years. committed to change course. Plus, there on the type of message I wanted to I bought again in July 2016. The is a great network of franchisees who also give people in regards to health and reasons were varied: I had worked a job own clubs under the same banner. They training. EFM messaging across the that required long hours for an average provide a network of people I can reach entire nation was similar to mine, so it wage, and it was very stressful. I was tired out to if I need, and also an opportunity felt right to go back to EFM. The model of working for and answering to someone for me to give back by sharing what I itself meant that I had constant support else. I wanted to be back in control and know. and the ability to bounce ideas off not missed the training and camaraderie that As a second time around franchisee, only the head office team but other came with EFM from years gone by. I I’m impressed by the way the EFM franchisees. briefly considered going out on my own, franchise network has progressed What stands out to me is that even but when an opportunity came up to buy significantly. The changes I noticed when though each club is run by a different an EFM franchise that was just missing I returned were huge. They genuinely trainer who can carry different traits a little TLC, it was a no-brainer to come want to make a difference to the health and ways of implementing programs back. and wellbeing of our community, to make to their members, the EFM network I figured that if I went out on my own, the biggest impact they can. To do so, shares a common goal of wanting I’d only be replicating what EFM already EFM knows that the franchisees need to changing people’s lives in regards to has established, except I’d have to do all be given the direction and support they their health and fitness, which can in the little things that consume so much need to be successful. So that’s what they turn change other aspects of their lives. of your time and resources. EFM has set out to do – set us up for success. n When The Lott* offers Australia’s official lottery games which Australians trust and love! Australia Each year Australia’s Official Lotteries make dreams come true. With the help of our retailers, Australia’s Official government-regulated dreams, Lotteries play an important role in helping to support Australian communities with over $1.1 billion^ available for hospitals, schools and sporting groups. ^State Lottery Taxes FY18 Australia-Wide (ex.WA). we all win! We are Australia’s largest franchise network with almost 4,000 franchisees, operating across all of Australia, except for WA. For more information please email franchiseenquires@thelott.com Why join us at the Lott? *The Lott represents Australia’s Official Lotteries which are sold by licensed entities: Tattersall’s Sweeps Pty Ltd, Tatts NT Lotteries Pty Ltd, New South Wales Lotteries Corporation Pty Ltd, Golden Casket Lotteries Corporation Ltd, and Tatts Lotteries SA Pty Ltd. thefranchisereview | 19
The world of retail food franchising is changing more rapidly than ever. Go back just a few short years and the idea of a taxi service delivering your food seemed far-fetched. Now it’s used by millions as part of everyday life. Keeping up with the evolving landscape, and staying ahead of the wave of change is perhaps one of the biggest challenges faced by any food franchise. What are these changes, and how can food retailers adapt and change with the market, to ensure that no matter what lies ahead, they continue to survive and thrive? Redcat’s IT platform Customers driving change is helping Let’s look at the way in which customers are driving change in the landscape. They are more powerful food retail than ever – with increasing competition for their dollar, they are in the driving seat, knowing that retailers are wooing them hard for a share of their wallet. franchises This means they can be ever more demanding, insisting on the highest standards of food, service, convenience and information. They want to feel adapt for valued by and connected with the retailers where they do choose to spend. Technology is driving changes in the success way they interact with food providers too – there’s a smartphone in every pocket and consumers want to harness its power and convenience. Just about the only thing they don’t do via their phone is actually eat the food! 20 | thefranchisereview
Businesses responding Redcat helps deliver the loyalty Uber Eats has generated enormous to change programs that customers really want, revenue opportunity for franchise food use and value. Customers want to use retailers. But without integration, it can What do the changes in consumer apps to do a whole host of things – cause a logistical headache. Nando’s, behaviour mean for food franchise find restaurants and opening times, home of peri-peri chicken, has been an businesses? How are they having to view menus, place orders, pay, collect early adopter of Redcat’s integrated change and adapt? and store points, check points, spend Uber Eats option. ‘We’re delighted They understand that the only way points, update their preferences, by what we have helped Nando’s to they can meet increasing customer play games and receive offers and achieve’, says Jeff Lamb, Redcat CEO. demands and still run a profitable incentives. Redcat helps its retail ‘Integration is the key in hospitality business is through information and franchise customers to do any or all of systems – the more parts of the connection delivered by technology. this, in a tailored, branded app. business you can connect, the more Technology that gives them insights Using Redcat loyalty, clients have business benefit you can deliver. It’s into their customers, and their business. seen sales from members increase by the principle behind Redcat’s constant Technology that pulls together every 12 per cent, return visits increase by 20 drive towards seamless integration element of their operation, front of house per cent and overall sales jump by 4 throughout the supply chain.’ and back. Technology that goes outside per cent. And because it’s part of that their four walls to connect them to fully integrated system, key information customers and suppliers. is shared so that, for example, there Tailored systems What are some of the ways food is a single version of the menu, with There is little that is more frustrating retail franchises can address this rapidly any changes visible in the app in real for a business of any kind than being changing world, and use technology to time; customer data is available to told that if they want to implement support new ways of doing business? the reporting system; customer online technology, they’ll have to adapt their The Franchise Review spoke to leading orders go straight into the POS, the business processes to fit the system. It specialist hospitality IT platform provider accounting and inventory systems, just goes completely against the grain of Redcat, about how they are helping as if they’d been placed in store. Which innovation, and differentiation, which franchise food retailers to keep up to makes life simpler and responding to are the lifeblood of competitive edge. speed and succeed. market changes faster. Imagine instead an organisation knows its IT platform provider will work with Delivery services Integration them to adapt the system to do exactly The biggest change in the retail food what they want it to do. That’s what To move fast and adapt to customer franchise market over the last three years Redcat customers can do – Redcat demands with functionality like the has been the rapid growth of aggregation helps them build systems that fit delivery service integration and and delivery services. In Australia, Uber their ideas, not have to contort their loyalty described above, food retailers Eats, Deliveroo and Menulog are the business to processes to someone else’s need be able to exchange and share primary players, offering an incredibly parameters. Redcat’s approach plays a information between all parts of their wide range of food and beverage options big part in helping some of the country’s business. Duplication, re-entry and delivered to the door. For the food leading franchise organisations to manual handling are ‘brakes’, slowing retailers, the extra business this generates rapidly adapt their business. down the rate of change. Food retail is a boon, but until now, it has also been a businesses that adapt to rapid change big effort and cost to process the orders. can only do so because their systems And the rest … The issue is that orders from Uber Eats, seamlessly work together – point of While loyalty and delivery are Deliveroo or Menulog came in on their sale, accounting, payroll, inventory, two of the biggest, most visible and own separate, dedicated terminal, and loyalty, kitchen management and ‘sexiest’ features that Redcat offers, then a staff member has to re-key them every other piece in the puzzle. It’s they’re by no means that only way into the POS. Meaning loss of counter not as simple as it might sound – that its approach of integration and space, staff with less time face to face there are lots of so called ‘integrated’ tailoring helps retail food franchises customers, and the risk of errors creeping systems that are actually a collection win in the market. Online ordering, into the orders. Redcat has changed the of miscellaneous, mismatched parts, payment gateways, paperless kitchen game for its clients, with the industry’s which never quite join up. Redcat management, digital marketing boards, first full integration of Uber Eats, Deliveroo designed its Polygon system from real time reporting dashboards – the and Menulog with a POS. Redcat’s clients scratch to be a single end to end list is extensive and impressive. And the can now receive aggregator orders system, which could be implemented reason that Redcat does it so well? It’s directly into their point of sale, increasing piece by piece. With point of sale at its because they’re focused and they’ve efficiency, and reducing cost and risk. The core, it is extendable by simply adding been in their customers’ shoes. Almost customer demand for delivery services other elements, like loyalty and digital everyone at Redcat has worked in the doesn’t look like diminishing any time apps. By allowing franchise businesses food service industry and Redcat only soon, but Redcat clients stay ahead of to easily implement new functions, does hospitality. They understand their the wave by being able to process them without long and painstaking (not to clients’ business and they are truly rapidly and profitably. mention expensive) integration work, dedicated to helping them evolve, in Redcat helps them adapt rapidly and order to succeed in the industry’s new Loyalty keep up with where their customers landscape. n One of the biggest drivers of customer want them to be. insights, personalised marketing, and increased sales is a loyalty system. A great loyalty system makes it a ‘no- brainer’ for customers to use it and stick with your brand. thefranchisereview | 21
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