May/June 16 Feature: Food & Beverage

food & beverage

VOL 10 ISSUE 04 may/june 2016

funding

a food and beverage franchise

Business Franchise Australia and New Zealand 31

Resources at your fingertips!

CURRENT TITLES INCLUDE: Business FRANCHISE Australia and New Zealand magazine The Magazine for Franchisees, Bi-monthly publication The Australian and New Zealand Business FRANCHISOR magazine The Magazine for Franchisors, Quarterly publication Australian and New Zealand Business FRANCHISE DIRECTORY Annual publication The FRANCHISE GUIDE Annual publication CGB’s website also provides an additional advertising and information format and complements our publications.

www.businessfranchiseaustralia.com.au

32 Business Franchise Australia and New Zealand

Contents On the Cover: Zambrero – Mexican with a Mission 34 What’s New!

Announcements from the industry 36 Cover story

Zambrero: A Healthy, Humanitarian and Heartfelt Approach

to Mexican Food 38 Feature Editorial Consumers hungry for more!

42 Profile Steve Costi’s Famous Fish 44 The Power of Franchising FC Business Solutions

47 Domino’s 48 Franchisor in Depth

Theobroma Food of the Gods

42

52 Profile Xpresso Mobile Café 54 Lease Considerations for Franchisees

Mark Sherry, Harmans Lawyers New Zealand

57 La Porchetta 58 Have Your Say

Retail Food Group

54

60 Pizza Hut Franchisees Unsuccessful Raynia Theodore, MST Lawyers

62 Funding a Food & Beverage Franchise

Labrina Tsekouras, Westpac

A regular of Business Franchise Magazine, our special supplement in franchising showcases a different industry each issue To share your specific expert industry advice or to feature your franchise in the next issue, please contact: Kathleen Lennox, Sales & Marketing Manager Phone: 03 9787 8077 Email: kathleen@cgbpublishing.com.au

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what’snew!

Soul Origin Franchisees Finalists in FCA Awards

“Healthy fast food” brand Soul Origin is proud to announce it has finalists in three categories of The FCA NSW Regional Awards, which has progressed to the Finalists stage of judging. The finalists are: Sherwin Djamil – Multi-Unit Franchisee of the Year Sherwin Djamil – Franchisee Community Responsibility & Contribution Harry Yiannikas – Field Manager of the Year Organised by the Franchise Council of Australia, which is the peak body representing franchisees, franchisors, and service providers to the sector, the Excellence in Franchising Awards recognise and reward those who are in the top of their field. The awards also provide a platform for companies and individuals to showcase the remarkable work they are doing in the franchising sector.

“This is a great achievement for our young brand,” says Soul Origin General Manager Chris Mavris. “These awards are a terrific opportunity to foster excellence among our franchisees by allowing them to shine on a national stage. We knew we had some of the best franchisees in the business, and it is exciting to have that officially recognised.”

Small format marks big change for Oporto Simply known as Oporto Surry Hills, the brand has launched their first new ‘pequino’ (Portuguese for small) format store this week. This is the first of many to be rolled out in inner city locations across the country, and marks a big step forward in the modernisation of the brand.

Craig Tozer, Oporto CEO “This is an extremely exciting time for Oporto. This design is fresh and modern, and is exactly where we need to be. To bring the kitchen front and centre for customers to view was critical in the design as we want to highlight our use of fresh produce and cooking methods. This new small format paves the way for future restaurants to open in inner city locations where real estate is limited. Exciting times indeed.”

With the use of real and natural, authentic, environmentally friendly materials the impressively modern space was designed by Zone Design and built by ONYX. With only 50 square metres to work with, the Design and Construction team along with Operations have cleverly integrated the fully functioning open kitchen with grill, oven and fryers along with refrigeration, counter space and seating for 10 people.

Anthony Shina, General Manager Design & Construction for Oporto was integral in bringing the project to life “Working with such a

34 Business Franchise Australia and New Zealand

small space had its challenges however with an amazing team we have achieved all we set out to do. Fresh modern design with an open kitchen to showcase freshly prepared food. The result is a distinctive shift from the traditional QSR fast food design to a more modern, warm, premium and urban environment.”

The menu has also been streamlined with a specific focus on what Oporto is most well-known for; delicious, full flavour, flame grilled Portuguese Chickens, as well as the famous Bondi Burgers; Embrulhos; Saladeiras and Jalepeno Poppers to name a few.

AUSTRALIAN RETAILERS AWARDED FOR INNOVATION ON THE GLOBAL STAGE elected Australian member of this prestigious alliance of consultancy companies, and this year nominated over 10 home-grown innovators of which 2 have made it into the publication and won Innovation Awards alongside the likes of Ikea, Whole Foods Brooklyn and Rebecca Minkoff.

Retail Innovations is a world renowned book released annually by Ebeltoft Group, containing the most innovative and exciting retailers from all over the world that year. Hundreds of retailers are nominated by consultancy businesses in more than 25 mature and emerging retail markets across the globe, which then go through a scrutinising judging process before the finalists make the publication.

Retail advisors, Retail Doctor Group are the

Out of hundreds of innovative retail case studies submitted from around the world, Australian retailers Sneakerboy and food franchise SumoSalad have been awarded the title of Australian Innovators of the Year by Ebeltoft Group consultants.

“A massive congratulations to the Sneakerboy and SumoSalad teams” said Brian Walker, CEO of Retail Doctor Group. “The integration of technology and mobility, as well as a unique physical retail experience, redefines what it is to be truly omni-channel.

Sneakerboy is a homegrown Australian retail innovation, showcasing a new generation of

thinking and redefining retail.

“SumoSalad’s Green Label store experience is not only innovative but creates a feeling of trust around the brand. With the fresh produce grown and displayed in-store, consumers are confident of its freshness and quality and, therefore, willing to invest in a healthier alternative to other fastfood chains.

By building these foundations of trust, the retailer is creating sustainable brand loyalty, which can be built upon as the concept spreads across the whole business. Both retailers are well deserving winners of this award” These award winners also sit as front-runners in the three key trend categories, identified by Ebeltoft members that have rocked the retail world in the past 12 months: • Passion for food • Low inventory • Second-hand/no waste

REFFIND launches Educate with Neil Perry’s Burger Project Employee experience technology company, REFFIND Limited (ASX:RFN), recently announced the launch of its Educate solution. REFFIND Educate, part of the REFFIND platform, enables organisations to deliver short-form video information to employees via their smartphones, providing a fast, simple way to educate and communicate with staff and new employees.

Australian celebrity chef Neil Perry’s Burger Project was the first client to roll-out the Educate component of the REFFIND platform, leveraging it to train and communicate with the company’s employees.

REFFIND Educate has provided Burger Project with a replacement for time-consuming and costly traditional forms of training. It lets the organisation send short form videos to train its employees on basic food-handling skills and working up to the higher skills of grilling, customer service, training, and supervising.

Neil Perry AM, Burger Project founder and Rockpool executive chef, said, “Regular training is an important factor in maintaining our high standards and helps the organisation keep its brand pledge of providing house-made food with top-notch ingredients that ensures freshness and genuine quality.

“We were looking for a solution that was modern and new, which would appeal to the demographic of our staff and be readily accessible to them. With REFFIND Educate, we can make sure new employees know how to perform tasks according to the policies, processes, and systems that have been put in place to maintain our high quality

standards. This is an especially valuable tool as Burger Project works on its goal to expand from two to over 50 outlets within the next few years.”

With REFFIND Educate, Burger Project staff can now conduct all initial training on their smartphones. A follow-up survey ensures they understand the content and, if they ever need a refresher, the training content can be quickly resent. At the same time, information about new products or processes can be easily communicated to existing employees across the entire organisation, regardless of working hours.

Business Franchise Australia and New Zealand 35

FEATURE : foo d & b e v er ag e

c ov er sto ry: Z a m b r er o

ZAMBRERO:

A healthy, humanitarian and heartfelt approach to Mexican food Dr Sam Prince opened the first Zambrero restaurant in 2005 with one mission: combine his desire to help the underprivileged and fuel his entrepreneurial vision.

From day one, the Plate 4 Plate initiative was built into the company’s business model.

The concept was simple: for every burrito or bowl purchased at Zambrero, a plate of food is donated to someone less fortunate in the developing world.

Fast forward a decade, to December 2015.

In the outer Perth suburb of Midland, Zambrero is celebrating its 100th restaurant opening. It’s also the 21st restaurant for the state and the 5th Zambrero drive thru in Australia.

Today, Dr Sam Prince is headquartered in Sydney, alongside 40 Support Office staff, and 68 Franchise Partners around Australia, who all have their sights on opening 50 restaurants before the year’s end.

On digital counters in Zambrero restaurants all over Australia, the number of meals donated through Plate 4 Plate has clicked to over 8 million.

Despite the numbers, for Sam Prince and the Zambrero Group, now more than ever quality is still the focus.

Like its fresh and healthy Mexican fare, the team’s recipe to success is made up of a few simple but high quality ingredients that sets the franchise apart from the rest.

“Establishing relationships with Stop Hunger Now and Foodbank Australia, both hunger relief organisations, helps Zambrero achieve their mission while focusing on developing and delivering quality Mexican food.”

36 Business Franchise Australia and New Zealand

Aid organisation? Mexican fast food restaurant?

Zambrero exists at the intersection of fast food franchise and humanitarian organisation. It sells fresh, healthy, flavoursome Mexican for a reason: to help eradicate world hunger.

Plate 4 Plate is Zambrero’s reason for being.

It’s corporate social responsibility taken to a new level.

In 2015, the company extended its humanitarian efforts to combat poverty in our own backyard. To do this, Zambrero created a range of retail products that includes superfood muesli bars and black rice packets with the purpose of alleviating the growing hunger problem in Australia. With every retail product sold, a meal is donated to an Australian in need. Already, 10,000 meals have been served to families around the country.

At the core of Zambrero is Dr Sam Prince’s belief that an aid organisation should be run with the same rigour as business.

He has deeply and carefully formed his philosophies about how to most effectively make his mark in the world.

“Before you even begin to help someone, you firstly need to have a clear vision as to what comprises a basic human right and a basic human responsibility,” says Dr Prince.

To do this the team needed to partner with organisations working in the field who shared their common goal to end world hunger.

fully realise the impact our brand will have in the Sydney market,” says Crowe.

“One of our advantages is the flexibility of our restaurants as we can occupy all kinds of spaces. The fact that our food comes from a central kitchen eliminates the need for us to have things like grease traps, so we can be versatile in the spaces we look to rent,” he said.

Development Agents like Crowe and McCormack take a hands-on role not only running their own franchises but also providing daily support to their Franchise Partners.

Establishing relationships with Stop Hunger Now and Foodbank Australia, both hunger relief organisations, helps Zambrero achieve their mission while focusing on developing and delivering quality Mexican food.

Stop Hunger Now packs and distributes food to countries where many do not have access to adequate nutrition, primarily through school feeding programs.

A model that works For Zambrero, simple processes both structurally and operationally are key to its continued growth.

The decision to employ a Development Agent model into the company’s structure was what facilitated the brand’s restaurant boom.

Last year, the company experienced its highest jump in restaurant numbers, doubling its number from 50 to 100 in under 18 months.

Daryl McCormack, previously the CEO of one of Australia’s largest retail franchises and now Zambrero’s Victorian Development Agent, met Sam Prince at the beginning of this new chapter for the brand.

With McCormack’s strong background in franchising, Prince and his team were keen to consult with him on how to expand Zambrero around Australia.

“I was happy to sit down and give them a couple of hours of my time,” says McCormack of a breakfast meeting he agreed to, now three years ago.

“Six hours later we were still deep in discussion. I’d met with many young entrepreneurs before but what really struck me is how different this brand was to any other. Sure, we are all here to make profits but when that is linked to a wholehearted desire to do good and help people, that really drew me in,” he said.

With Daryl now on side, the Development Agent model was deployed in each state and over the course of the next three years, Zambrero would see promising growth in Victorian metro areas, and rapid growth in the Queensland and Western Australian regional markets.

In the last 12 months, Queensland has opened 10 new restaurants, with 9 confirmed to open in 2016, taking the state’s total to 47.

Breaking new ground Having had a largely regional development focus, Zambrero this year shifts its sights to metro areas, NSW being one of key interest.

Jonathan Crowe is tasked with the job of developing the Zambrero brand in metro NSW. Crowe, a former property and real estate development manager, knows the Sydney market will have its challenges but believes the strength of the brand’s core values, coupled with its high quality food offering and on-trend aesthetic will be received well

by Sydney-siders.

“We’re the largest Mexican restaurant franchise in Australia, but we’re still yet to

On any given day Zambrero’s agents are providing support to their Franchise Partners by negotiating rental contracts, working to reduce their COGS and maximise profitability in their restaurant and even consulting with tradespeople on restaurant fit outs.

“We become the support network between head office and the Franchise Partner and this is crucial to ensuring we open high quality restaurants every time as well as provide the ongoing support they need to improve their ongoing operations,” says McCormack.

Having development agents in the field allows every opportunity to be taken with a people first approach.

“When you streamline and get everything working operationally you have more time to focus on finding the right people who are more than ready to become advocates for our brand,” says Crowe.

He believes Zambreo has got the recipe to success worked out: “We’ve got all the right ingredients: a model that works, fresh and healthy food, outstanding people, and a supportive and inspiring culture that permeates the entire organisation, we can only do great things from here.”

For more information contact: T: 1300-ZAMBRERO (1300-92627376) E: franchise@zambrero.com W: www.zambrero.com

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FEATURE : foo d & b e v er ag e

“We’re the largest Mexican restaurant franchise in Australia, but we’re still yet to fully realise the impact our brand will have in the Sydney market.”

FEATURE : foo d & b e v er ag e

Consumers hungry for more!

Did you know that Australians spend billions of dollars on food and beverages every year? Or that Australians drink over one billion cups of coffee in cafés, restaurants and take away outlets?

Then what are you waiting for? Join the world of food franchising!

The early days Until the early 1970’s, franchising was virtually an unknown concept in Australia.

That quickly changed with the arrival of the ‘golden arches’ along with two all-beef patties, forever changing the suburban landscape. KFC and Pizza Hut joined McDonald’s, and so began the story of franchising in Australia.

Since these early days, franchising has grown in leaps and bounds to include almost every industry and covers almost every product and service imaginable. The food sector of franchising continues to thrive and grow, with food franchises representing a large proportion of the franchising industry.

According to the 2014 Franchising Australia survey completed by Griffith University’s Asia-Pacific Centre for Franchising Excellence, eighteen percent of all franchise systems focus on accommodation and food, which includes fast food and coffee shops, with only retail franchises higher (27 per cent).

38 Business Franchise Australia and New Zealand

Our love of food

Put simply, we love our food, and in terms of franchising the options have never been more prolific. From the early days of burgers and pizzas, we are now being served up more options than ever, and with growing concerns over our increasing waistlines healthy options have become popular in recent times.

In addition, more and more people are raising concerns of gluten intolerance, lactose intolerance, nut allergies, high cholesterol, diabetes… the list goes on! As food retailers, being able to cater for all kinds of food intolerances and preferences is becoming increasingly important. Responding to consumer desires is vital for sustainability in the food industry.

Steve Costi’s Famous Fish have recognised there was a niche available for a quality seafood based franchise. The number one take-away food item sold by independent stores, Australia’s appetite for seafood has increased by 27 per cent per capita since 1997 and is increasingly seen as the appropriate ‘fast food’ by governments, health agencies and consumers alike.

La Porchetta has over 70 restaurants in Australia and New Zealand, and are the market leaders in cooking quality Italian food with fresh ingredients, with no signs of slowing. With the first La Porchetta Restaurant open in Melbourne’s Italian hub in 1985, they have been part of the Australian food landscape for 30 years.

Ethical and humanitarian causes also appeal to the consumer and one of the leaders of the pack is Zambrero. Combined with his desire for healthy Mexican food, Dr Sam Prince wanted to help the underprivileged.

FEATURE : foo d & b e v er ag e The concept was simple: for every burrito or bowl purchased at Zambrero, a plate of food is donated to someone less fortunate in the developing world. Fast forward a decade, and the 100th restaurant opening was recently celebrated in the outer Perth suburb of Midland.

Café culture

“We love our food, and in terms of franchising the options have never been more prolific. From the early days of burgers and pizzas, we are now being served up more options than ever.”

Coffee culture has swept Australia in a big way. For most people, a trip to the shops cannot pass without stopping for a coffee, a long day at work wouldn’t be the same without the familiar take away coffee cup on our desk, and a long drive simply wouldn’t be possible without a mandatory coffee break! The coffee market has grown considerably in Australia in the last few years, and has proved to be a booming market for many franchisors.

The ever expanding list of franchise opportunities for those interested in a coffee franchise provides a wide variety of options for potential franchisees. Xpresso Mobile Café was one of the first companies in Australia to install coffee machines in vans, taking premium Di Bella Coffee to thirsty consumers. Xpresso Mobile Café offers franchisees the opportunity to share in the success of an established brand with a proven track record throughout Australia, growing at a rate of 30 per cent each year.

Alternatively, there are a wide range of coffee shop franchise opportunities where coffee is served in stylish, relaxed and friendly surroundings, most also providing a takeaway option for customers. If you’ve

Business Franchise Australia and New Zealand 39

FEATURE : foo d & b e v er ag e

“Australia and New Zealand have always been proud of their multicultural heritage and our cravings for food from all over the world is reflective of this, including Indian, Thai, Spanish, Italian, Chinese, Middle Eastern and many more.” the FSC (Food Standards Code), TGA (Therapeutic Goods Association) and the Health Authority. Then you need to consider what the ACCC rules are and of course if you get into franchising there is also the Franchising Code of Conduct. These are just a few of the governmental and industry bodies that have specific requirements when it comes to the food industry.

“This can all be very daunting and confusing, particularly when many of these bodies do not give you a clear answer on a question regarding the rules. But business always has its challenges. You need to just keep going, becoming a sponge and soaking up all the information you can possibly absorb. Information is key, because making a mistake in regards to any of the above Codes and Associations can not only cause massive fines, but can be terrible for the public relations of your business.”

Choices, Choices!

Given the growing and changing food industry, the customer demand and availability of so many systems to choose from, which one do you go with? always wanted to run your own café, then perhaps these options could be suited to you.

Global cravings Australia and New Zealand have always been proud of their multi-cultural heritage and our cravings for food from all over the world is reflective of this, including Indian, Thai, Spanish, Italian, Chinese, Middle Eastern and many more.

Potential franchisees can choose from a variety of retail food options covering all kinds of cuisines. And whilst premium quality international food offerings often come at a higher price point, successful franchise owners will tell you that people are happy to pay a premium for a top quality product that is made exactly how they want it.

Of course, if we go back to where franchising first began in Australia, the fast food sector

of franchising remains as strong as ever.

With fast food outlets providing tasty, quick, and cheap food in all locations, from highways to malls and on the high street, the appeal for consumers remains high, and with many now providing healthy alternatives these businesses remain highly competitive in the industry.

Rules and regulations As with any industry it’s important to understand the rules and regulations associated with the business, and this is extremely important when working in food retail. Janine Allis, Founder of Boost Juice and Managing Director of Retail Zoo, gave this advice for Business Franchise readers thinking of getting into the food industry: “First of all you need to fully understand what it means to be in food, particularly healthy food. You need to be aware of

40 Business Franchise Australia and New Zealand

First decide that you are interested in the food retail business. Then get together with your family and make sure they are interested in the food business – this is important not to overlook – as you will be spending a great deal of time in your new business.

You must then get with your franchise banker and put together a realistic sum of money you can afford to put into this new venture. This will most likely weed out some systems quite quickly – as the larger, more well-known food names come with a hefty price tag. They are strong, tried and tested and have proven success stories – but you must truly be able to afford to buy into this.

Once you have an amount in mind, you can begin to shop around. Are you looking for a particular location? Are you looking for a particular type of food or drink? Are you looking for a premised based business, or a mobile unit?

FEATURE : foo d & b e v er ag e “As food retailers, being able to cater for all kinds of food intolerances and preferences is becoming increasingly important. Responding to consumer desires is vital for sustainability in the food industry.”

You will be able to narrow down your search, but don’t rush. If you get to your short list, it is time to take the focus away from the product and direct all your attention to the franchise system and the franchisor.

Get to know your franchisor The franchisor holds the key. The management system, the operational procedures, the leasing agreements, the contracts, and the fees have been generated by the franchisor. Check the franchisors background – is it solid? Meet with him or her. Do they seem to be a person of integrity?

Do they answer all of your questions openly and honestly? Do they invite you to do your own investigations into the company?

Are they eager for you to talk to existing franchisees? If at any point you feel pushed, rushed, bullied or even ignored by the franchisor – it is time to consider walking away. Hopefully though, the franchisor will be professional, honest and open.

location to another? Do the employees seem happy? Do the customers seem happy? By doing as much research as you can you can gain the knowledge to know if you are making the right choice at the right time.

So if making coffees, flipping burgers, or if carefully crafting international cuisine whets your appetite for the exciting world of food franchising, you will most likely find that you have started on a fantastic path to success.

Bon Appetite!

The next step is to meet with several existing franchisees. While it’s fine to have all the manuals in place and have the franchisor tell you how great and successful the business may be, it’s the franchisees that have the real story. Visit them in their place of business, ask questions, and ask their employees if they enjoy working there.

One of the great things about researching food franchises is that you can simply drop in and eat. Be a random customer, visit several locations. Is the food good? Is the service good? Is it consistent from one

Business Franchise Australia and New Zealand 41

FEATURE : foo d & b e v er ag e

pr o fi l e : St e v e C ost i ’s Fa m o us F i s h

SET SAIL FOR A NEW BEGINNING Steve Costi’s Famous Fish mission is to always supply phenomenal seafood, give customers an amazing experience, and create strong exciting seafood diners while giving generously to others.

for seafood has increased by 27 per cent per capita since 1997 and is increasingly seen as the appropriate ‘fast food’ by governments, health agencies and consumers alike. Steve Costi’s Famous Fish have recognised that of the 30,000+ take-away outlets generating in excess of $7 billion in retail sales, there are no multi-unit, integrated seafood operations and there was a niche available for a quality seafood based dine-in and take-away franchise.

Committed to this mission, Steve Costi along with business partners Jon Sully and Vaughn McGuiness are looking for community minded, entrepreneurial and fun business owners to join the growing team.

Committed to attracting an exceptional calibre of franchisees, Famous Fish want everybody involved in the business to have fun, enjoy what they do and look for opportunities to give back to their local community. Living and breathing these principles within the organisation, Famous Fish are looking for franchise partners that embody these values.

AN AUSTRALIAN FAVOURITE Continuing a family tradition tracing back to 1958 and inspired by his father’s passion and success in the seafood industry, Steve Costi got into business for himself and soon the Costi family fish shops started to open throughout the NSW region.

While still in his early twenties, Steve began to build what would become a recognisable retail brand and forerunner to the Steve Costi’s Famous Fish franchise. Opening up his second store at David Jones, Market Street Food Hall in Sydney, Steve discovered an entrepreneurial flair and passion for offering the freshest, most affordable seafood available.

THE FUTURE OF SEAFOOD The number one take-away food item sold by independent stores, Australia’s appetite

BECOMING A FRANCHISEE

After an application is submitted and reviewed, it’s time to meet face to face with the team. With support from Famous Fish during every step of the application process, potential franchisees are asked to complete extensive due diligence and work with an accountant or financial adviser to help with the development of their business plan.

SUPPORT & ASSISTANCE WITH EVERY STEP Once the Franchise Agreement is signed, a Store Operations Specialist is assigned whose mission it is to help grow the franchise store.

In addition to Famous Fish offering site selection, lease and store layout assistance, the Store Operations Specialist will walk

42 Business Franchise Australia and New Zealand

“Committed to attracting an exceptional calibre of franchisees, Famous Fish want everybody involved in the business to have fun and enjoy what they do.” you through the details of getting your store open, as well as spending the first full week of opening in-store. Alongside a five week training program incorporating classroom and practical training, assistance is also given with hiring and training staff, preopening marketing and ongoing operational support.

A LOCAL BUSINESS The Famous Fish promise is to always maintain the spirit and heart of a locallyowned small business, valuing the people within the communities by being good neighbours, treating people well and doing business with integrity. Supporting local community causes such as charities, sporting clubs and disadvantaged people, Famous Fish want to give back to the communities that support them.

If you want to be your own boss, have more control of your time and love quality seafood, contact Steve Costi’s Famous Fish now for more information.

T: 03 5975 8614 E: franchising@famousfish.com.au W: www.famousfish.com.au

Steve Costi and his family have been in the seafood business since 1958, and after years of success have decided to franchise the Famous Fish business.

Coupled with the strength of the Costi Brand, our franchisees will benefit from our comprehensive training, business, marketing and head office support. Set sail in one of Australia’s most successful retail sectors!

SEAFOOD REMAINS THE #1 TAKE-AWAY food item sold by independent take-aways in Australia.

Serving authentic, original and accessible seafood, and delivering an efficient, manageable franchise business.

Join our franchise family!

We take an instant liking to committed, hardworking individuals who have a dream of working for themselves and strong ideals about quality, because people that hang onto those ideals always make it!

For more information regarding the Famous Fish Franchise opportunity, please contact Sal El-Houli:

P: 0425 786584 E: franchising@famousfish.com.au W: www.famousfish.com.au Business Franchise Australia and New Zealand 43

FEATURE : foo d & b e v er ag e

e x per t a dv i c e

The power of franchising

So you have bought a coffee shop franchise, the first few months were amazing. Plenty of customers, hitting all of your KPIs, living the dream! But a café just opened up across the street and all of your customers are disappearing.

Their coffee isn’t better than yours, and they don’t even sell cakes!

Where did you go wrong? What can you do to get them back? You need help!

That’s the exact reason why you purchased a franchise – you didn’t want to do it alone.

You have bought into a franchise system that has set up a business model that actually works. They have a team of trained support professionals who understand your business and why things sometimes go wrong. These trained professionals have worked diligently to prepare franchisees for situations like this.

Some franchise systems differ as to the chain of command but let’s start at the beginning.

The franchisee always has a constant point of contact, the Area Manager – let’s call her Sally. You need to call Sally right now and tell her about the situation that you are in.

Sally should have access to detailed store performance figures because of the

44 Business Franchise Australia and New Zealand

transparency in the POS System. This transparency will assist Sally to diagnose your pain point – whether it’s a lack of sales in morning trade, not up-selling or maybe your staff don’t know the popular alternatives to coffee. Sally will be able to generate reports that will most likely confirm your earlier suspicions. But that’s not all Sally does, she has also set a meeting with you at 10am on Tuesday to further investigate the situation.

But how did you let your business get in this position in the first place?

During your franchise induction, the franchisor trained you and your staff on all of the tools and resources that you could leverage to operate a successful business. One month down the track and the training was still fresh in your mind and being utilised in

FEATURE : foo d & b e v er ag e the business – but six months later, you had forgotten about those tools that made life easy. Now sales have dropped dramatically, and you are crying for help!

The power of franchising is in the tools and resources. This is not the first time that a business’s top or bottom line has been impacted by a competitor – and most definitely not the last time either. Thankfully the franchise support is once again there for this occasion; and just quietly between the two of us – they are here to help and want to see you succeed.

It’s 10am, Sally arrives. She immediately notices that you are not taking advantage of the local area marketing campaign all of the other franchisees are currently promoting.

She also notices that the sign on the door

“A franchise system offers much more than a couple of logos and brand recognition, it’s an entire system that works seamlessly for many others.” says closed – but the shop has been open since 6am!

Of course the café across the road is buzzing, there’s a line of people waiting for their mediocre coffee and here we are without a single customer waiting because our customers can’t see our amazing offers…

Sally calls Brian, the support office marketing genius to come down to the café with the latest marketing material to help with promotion. Brian’s job is to get you to engage with the local area - you may have heard the terms LAE or LAM before, specifically in your induction training. As a local business, it’s vital that the community actually know that:

• you are open and ready for business; • what you do; and • the special offers you have that customers can’t get anywhere else.

Brian takes out the marketing posters, publishes a couple of tech savvy Facebook and Instagram posts and the customers start rolling in. Now of course, customers won’t immediately start flowing in – but you get the idea. By using the marketing material that the franchisor has already created you give yourself the greatest chance of success.

There’s a reason why the campaigns are created, and it’s because they tend to work.

Brian’s work is done here, so he goes back

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FEATURE : foo d & b e v er ag e

e x per t a dv i c e

to the office to work on your next exciting campaign. Sally has been observing your staff for the past half hour and notices an alarming trend. Your staff don’t know what they’re selling.

Haley, a young university student who has an exam this afternoon wants something strong – but she doesn’t know what to order, she’s not a coffee drinker. The staff member should be able to recommend two or three options for strong beverages; perhaps a double shot of espresso, or maybe even an iced drink. But instead, your staff member goes back into his shell and waits as confused Haley starts to walk away. The sale has been lost.

This customer engagement, especially in a café is a critical part of the sales process.

Having a clear understanding of each of the products that are on offer makes sure that John with his skim milk iced caramel macchiato is able to order exactly what he wants without having to go across the road to your arch rival.

Information about your offerings are not only two feet above everyone’s heads on the menu, but they are also a major part of your operations manual. Product knowledge, keeping up to date with all of the latest promotions, and having a clear understanding of the pricing structure is something that each employee needs to have.

Sally sends you an email with a link (or PDF if your franchisor is old school) to the relevant sections of the operations manual that you need to look over. She also guides you through how you could educate your staff about the product offers.

You are already paying for the support services of Sally, Brian and anyone else in the support office, so you need to make sure that you are utilising them as much as you need to.

If you’re not yet part of a franchise system, and it’s something that you are considering, think about this - you may know someone who can design a logo, develop a website or even train staff if you’re lucky, but do you have someone that will do all of these things on call for you? Do you have someone who will prepare a 600 page operations manual that outlines every tiny aspect of your business? The simple answer is no! A franchise system offers much more than a couple of logos and brand recognition, it’s an entire system that works seamlessly for many others.

Sally and the team back at head office know what they are doing, they’ve seen it all before. Make sure to ask for help, and trust what they have to say.

FC Business Solutions is an integrated consultancy firm specialising in developing, growing and marketing franchise systems. A professional team

46 Business Franchise Australia and New Zealand

provides expert service exclusively to the franchise community, in system development, marketing and communications, business health checks, and business operations. They also offer solutions in documentation, training, and human resources.

Contact: P: 03 9533 0028 E: contact@fcbs.com.au W: www.fcbs.com.au Here are a few of things that a field coach should be doing to help you and your business: • conducting regular meetings with a clear agenda, resulting in action items; • conducting regular audits to identify areas for improvement; • utilising the franchisor’s benchmarks to review your key financial indicators against other franchises within the group; • providing guidance on training for you and your team; • keeping you up to date with all of the latest marketing campaigns; • encouraging you to engage with other members of the franchise system; • sharing with you the success others have seen with new initiatives.

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.

FEATURE : food & b e v erage

fr a n c h i s o r i n d ep t h : theo b ro m a F ood of the gods

JOIN THE CHOCOLATE REVOLUTION From the moment a customer walks into a Theobroma Food of the Gods (Theobroma) store, they are immersed into a world of boutique products and experience the heavenly atmosphere of the warm and calming ambience.

Known for their boutique products, store designs and innovative menus, Theobroma have taken that to the next level with the recent launch of their new design concept.

Franchise and Operations Manager Benjamin Fernandes says, “The first rebranded store at Northland Shopping Centre in Victoria has pushed the boundaries. Part of our re-branding has been to focus back on the core values of the business - to go back and tell the story of what our brand

stands for and what we believe in. We’re doing a lot of work this year to really educate our customers on our brand; and to get the customer to buy into Theobroma and understand who we are.”

Cocoa or chocolate is derived from the tropical Cacao tree (Theobroma Cacao) and following its Mayan and Aztec heritage, Swedish naturalist Carolus Linnaeus (1707 – 1778) gave cacao the Latin name of Theobroma – food of the gods, a fitting name for a food that is adored by millions of people around the world, in its various forms.

Reviving the ‘Food of the Gods’ tagline Theobroma is committed to their mission statement: To pamper the world in chocolates, food and beverages fit for the gods.

HOW IT STARTED Opening a boutique store in Hawthorn, Victoria in 2004, founders Theo Racovalis an award winning craftsman and chocolate connoisseur and George Roiniotis - an architect and designer by trade wanted to fill

48 Business Franchise Australia and New Zealand

a void in the marketplace with a high quality Australian alternative. Once the decision was made to commercialise and franchise the concept, a showcase store was opened at the now Spencer Outlet Centre, Southern Cross Station, Melbourne in December 2006 and received a phenomenal response.

In response to the spiralling demand for high quality chocolates and chocolate beverages as an alternative to coffee, Theobroma provides the perfect respite from a bustling day, with each boutique store housing a chocolate display cabinet that ranges from one to three metres long, with a wide-range of hand crafted couverture chocolates, with eye-catching colours and flavours you won’t find anywhere else.

The concept originally revolved around artisan hand crafted couverture chocolate jewels, signature coffee and Belgian hot chocolates and a purely dessert based offering – Chocolate fondues, Belgian waffles, French Croissants, and chocolate themed drinks ice creams and sundaes but it has evolved over the years and now offers consumers a wide variety of chocolates and chocolate beverages;

FEATURE : foo d & b e v er ag e hot and cold beverages including licensed drinks; chocolate desserts; melted chocolate dips; other chocolate related products with some stores now offering a food café breakfast and allday menu.

Benjamin says, “There has been a real growth in specialty chocolate cafes over the last 5-7 years. There is a growth move towards premium products what we’re finding is that people are willing to pay for quality, whether it is food, coffee or chocolate. Last year’s IBIS world report into Specialty Chocolate acknowledge the moving trend and estimate the industry revenue to hit over $300milliom this year. We are positioning ourselves to be an integral part of that.

“Introducing the full-food menu two years ago and incorporating a semi-commercial kitchen has proven to be very successful.

This allows us to have a café style store with high quality food and drinks, that’s fit for the gods. What we found historically was that people were coming to us after eating

their lunch or dinner elsewhere to relax and enjoy our products and we weren’t maximising the opportunity that was available to us. Our customers love what we have done and it’s proven to be a hit with our guests. We have created a unique environment; a casual style café within a pleasant relaxed environment – a perfect place to catch up with family, friends and colleagues.”

“Reviving the ‘Food of the Gods’ tagline Theobroma is committed to their mission statement: To pamper the world in chocolates, food and beverages fit for the gods.”

Business Franchise Australia and New Zealand 49

FEATURE : foo d & b e v er ag e

fr a n c h i s o r i n d ep t h : t h e o b r o m a F o o d o f t h e g o ds

“There is a growth move towards premium products; what we’re finding is that people are willing to pay for quality, whether it is food, coffee or chocolate.”

ONE SIZE DOES NOT FIT ALL! All Theobroma stores are designed to drive sales by attracting customers, presenting product in their most attractive manner and to provide efficient workflow. The colours, counter concept and displays provide an attractive and efficient retail layout with both internal and external product display counters to enhance sales and capture the outside audience.

“Franchisees choose to buy into a franchise model for differing reasons and we work closely with each of them to understand their individual drive and tailor our model setup to suit. Some wish to leave a mundane job behind them and buy themselves a rewarding job, others want to buy a business to be actively involved and work within it while some may decide it’s more about return on their investment and don’t want to be actively involved with the day-to-day running of the business,” says Benjamin.

By believing that one size does not fit all, Theobroma have a range of concepts - all of which are flexible - to suit all franchisees.

Appreciating that different areas, people and demographics have different needs, various business models are available to suit the franchisee, as well as the customer.

There are two main concepts to choose from: Lounges and Lounge Bars: created as an environment where the consumption of food and beverages is an experience in itself and offer customers

a selection of seating to suit their mood.

Comfortable sofas and tub chairs offer those who wish for a chance to pause and take a break, while the coffee bar and café seating with a selection of timber furniture provide a quick grab and go option. Suitable for large format areas and high traffic zones - predominantly for local shopping strips and entertainment/shopping and café/bar precincts. Our Lounge Bars are licenced and offer a variety of chocolate themed cocktails along with boutique beer and wine.

Pavilions/Pavilion Bars: offers its patrons the finest hot and cold beverages, specialising in indulgent chocolate beverages, coffees, blended teas, and other custom drinks. In addition, Pavilion sites offer soft drinks, fresh-baked pastries and other confections, as well as a range of the Theobroma chocolate retail products. Suited to shopping centre environments where a kiosk is favourable over an inline store, it also works strongly in high commuter areas with a captive audience. Our Pavilion Bars are an expanded offering on the Pavilion concept but with the added addition of a chocolate cocktail menu and a limited beer and wine menu. This is suited to either airport terminals or entertainment precincts.

DRIVE AND PASSION All franchisees must share similar business values to Theobroma to succeed, which are Excellence – to strive to be the best in all that is done and Customer Service – to strive for 100 per cent customer satisfaction.

Looking for people that have drive and

50 Business 50 Business Franchise Franchise AustraliaAustralia and Newand Zealand New Zealand

passion, Theobroma believe that people are the most important ingredient in making any business a success. Desirable attributes include an ability to make people smile; a friendly disposition; a positive and enthusiastic approach to business ownership and a determination to succeed and grow.

As most franchisees wish to stay within their local community, Theobroma work closely with them to find a suitable site, if one is not already available. Franchisees are involved in every step of the process, from design and fit-out right through to opening.

A training program which can be tailored to the franchisee’s existing skillset has been developed to aid these values and includes everything there is to know about chocolate, selling skills, inventory control, local area marketing, and all areas of the store operations including POS systems and opening/closing procedures.

A professional team with extensive experience in franchising, retail and marketing also provide assistance with site selection; store design and fit-out; property leasing; marketing of the brand and providing marketing support.

Theobroma are confident that once you get to know their business model, you’ll become just as hooked as they are. To find out more contact Franchise and Operations Manager Benjamin Fernandes on: T: + 61 3 9480 1030 E: ben@theobroma.com.au W: www.theobroma.com.au

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FEATURE : foo d & b e v er ag e

pr o fi l e : Xpr esso M o b i l e Caf é

BUILD YOUR OWN EMPIRE Do you want to join a franchise system that also focuses on existing franchisees and not just recruiting new ones?

How about a 100 per cent Australian owned and operated mobile café system that uses the best coffee and best vans? If the answer is yes, Xpresso Mobile Café set the benchmark when it comes to Aussie mobile cafes!

Xpresso was one of the first companies in Australia to install coffee machines in vans, taking premium Di Bella Coffee to thirsty consumers. Xpresso Mobile Café offers franchisees the opportunity to share in the success of an established brand with a proven track record throughout Australia, growing at a rate of 30 per cent each year.

Every Xpresso Mobile Café is equipped to supply a full range of hot and cold beverages, along with good quality, local fresh lunches, usually only found in fixed address cafes.

INCOME BOOST Explaining how Xpresso Mobile Café franchisees are an integral part of their local business community, Franchise Development Manager Jonathan Payne says, “There is enormous flexibility in our franchise system with regard to food. Unlike our competitors we’re not a middle man.

We encourage our franchisees to connect with bakeries and good quality local food wholesalers and specialist food companies in their area that can enable them to be a full lunch solution to their customers.

“We don’t want our franchisees to just be a morning coffee and muffin franchise. There are terrific wholesalers out there that sell food items such as wraps, rolls, cold pastas and salads, with great profit margins. This is evident with some of our operators earning $750/800 per day, of which half of that is food. As long as the food is individually wrapped and doesn’t require heating, then franchisees are free to offer any food type and help support their local businesses and community.”

unit business owners - purchasing a second vehicle at cost with no upfront fee - and reach break-even for the equivalent cost of just 20 cups of coffee a day,” says Jonathan.

FUTURE GROWTH

BECOMING A FRANCHISEE

With franchisees spread throughout Australia, Xpresso Mobile Café operates in areas where businesses have limited access to quality espresso coffee and products.

Franchisees work their own hours Monday to Friday within their own large territory, typically working less than 40 hours a week.

In fact, Xpresso is the 2015 Top Franchise winner in the areas of Lifestyle and Passion.*

Owning an Xpresso Mobile Café suits enthusiastic and motivated operators, looking for an excellent work-life balance while working flexible hours and within your local community.

With the security of operating within the larger framework and support structure of a franchise system, Xpresso Mobile Café is enabling existing franchisees to launch their second mobile café within their existing territory for the equivalent of 20 cups of coffee a day.

“Our franchisees are always given a very generous territory that has the potential for growth and would very easily support 2 or 3 vans. We have found that after 12 - 18 months on the road, some of our franchisees consider and purchase a second van; which is essentially a passive income once it’s all set up. Utilising Xpresso’s in-house finance arrangement, franchisees can become multi-

52 Business Franchise Australia and New Zealand

“Typically working less than 40 hours a week, Xpresso is the 2015 Top Franchise winner in the areas of Lifestyle and Passion.”

Franchisees pay a flat weekly service fee, stepped for the first six months. Offering a great return on investment with no hidden costs, from just $119,500 plus GST – which includes an upfront franchise fee franchisees are provided a turnkey operation, brand new fitted out van, all equipment and stock, sundries, training AND customers with an initial income guarantee.

If you are looking to build your own business empire within Australia’s billion dollar espresso coffee industry but with the support of an award winning franchisor, contact Xpresso Mobile Café for a new franchisee pack.

T: 1300 655 559 E: joinus@xpresso.com.au W: www.xpresso.com.au *TopFranchise.com.au

FEATURE : foo d & b e v er ag e

e x per t a dv i c e

LEASE CONSIDERATIONS FOR FRANCHISEES “Many people don’t think of their exit strategies when entering into a franchise. They are too focused on the new operation. However, sound exit strategies are a very important part of business.”

Mark Sherry | Partner | Harmans Lawyers New Zealand

At the time a buyer acquires a franchise they have a lot of different things to focus on.

In many instances, the main focus is on the franchise itself and other issues are only given peripheral attention.

However, when a franchise is being purchased that requires premises to operate from, it is important to give due consideration to the following issues:

54 Business Franchise Australia and New Zealand

Many people purchasing a franchise do not give consideration to the length of their franchise term and how that compares with the term of the lease they are signing up to.

Where possible, it is highly preferable to try and match these terms so that they align. If someone signs up a franchise for an initial period of five years, but the landlord of the premises will only agree to an initial lease term of eight years, then upon the expiry of the initial franchise term, the franchisee will potentially face serious issues if any of the following scenarios arise: a) If the business has been struggling and the franchisee did not wish to continue in business, or if they have their franchise terminated for some other reason at the end of the first term, they would still have three years of obligations to meet under the lease and no operating business to cover those costs. The only way to be able to get rid of these obligations would be to convince someone else to take over the lease by taking an assignment of it. b) A similar problem could arise if the franchise business is booming and it needs more room to expand. On the renewal of the franchise, the franchisee will either need to try and find someone else to take over the lease or they will need to resign themself to the fact that they’ll have to stay in unsuitable premises for another three years. c) A franchisor will often require their franchisee to have security of premises for the whole of each franchise term.

Therefore, a franchisee would face a problem in renewing the franchise for a further five years in circumstances where the landlord wants the premises back at the end of the eight year lease term.

In this case both the franchisee and franchisor would need to be confident that replacement premises could be found when the expiry date of the lease approaches. Even if such premises were available, the franchisee would need to relocate and fit them out for the final two year period before his franchise is due for renewal again. That can be a significant cost.

If the terms of the franchise and the lease match, then a franchisee is able to make a decision on both the franchise and the premises at the same time. Both are able to be terminated if that is what is wanted without having continuing obligations under one or the other. Similarly, if the business had been growing, the franchisee would be able to exit the premises and take on a new lease while continuing with the franchise.

The franchisor also gets a level of comfort when lease and franchise terms match.

They know that if the lease is renewed on a term that matches the franchise, then the franchise will have premises to operate from for the whole of the next franchise term.

Ongoing Liability Many people are unaware that liability often continues under business leases in New Zealand even when a business is sold and the lease is assigned to the new business owner. If a tenant wishes to remove the potential for ongoing liability after they have assigned the lease, they must negotiate this at the outset of the lease. It is during this negotiation period that a prospective tenant can often convince a landlord to be more accommodating on such issues, as they are looking for a tenant to start paying them rental.

Many people don’t think of their exit strategies when entering into a franchise.

They are too focused on the new operation.

However, sound exit strategies are a very important part of business. If a franchisee builds a successful franchise and then decides to sell it, the lease needs to be assigned to the buyer. If the buyer turns out to be a bad operator and the business folds then there is a chance that the landlord could seek lost rental from the previous tenant unless liability was limited at the start of the lease. If this is not possible, then wise business owners should take advice on restructuring their affairs so that in a worst case scenario, if the landlord calls up a guarantee, there may be some protection available for valuable assets.

Reducing Competition When a franchisee is leasing premises in a block of shops or a shopping mall, it is easy to overlook the fact that during the initial negotiation it may be possible to get the landlord to agree to terms that may enhance their franchise’s chances of success. An example of this could be getting the landlord to agree not to lease any of their other premises to competitors of the franchise, so that they can have some exclusivity for their business type from that site. Obviously this does not work for all types of businesses unless carefully drafted. Fast food businesses often are more successful when there is a critical mass of competitors around them, as the mere existence of different food options creates an inviting destination for customers.

Therefore, it might be best, to negotiate exclusivity on being the only burger outlet in the premises, rather than just the only fast food outlet.

Clauses Required by a Franchisor Many franchise agreements have specific clauses in them that relate to premises.

Some franchise agreements allow for the franchisor to take a head lease of premises and then sublease them to the franchisee. The purpose of this is to allow the franchisor to have direct control over what they consider to be a strategic site.

However, more often than not, a franchise agreement will simply provide that a lease should contain certain clauses that give the franchisor an element of control over the leased premises. Essentially the franchisor wants the option to be able to take over a lease if the franchisee’s business fails by having the landlord agree to not take any action for defaults under the lease without first giving notice to the franchisor and giving them the ability to rectify matters and become the tenant.

Getting a landlord to agree to such clauses can sometimes be a delicate negotiation.

It is not uncommon for an Agreement to Lease to be signed up for premises without consideration even being given to the specific terms in a franchise agreement that relate to premises. If a franchisee fails to obtain a landlord’s consent to the clauses that the franchisor requires it to, then technically this can put a franchisee into default right at the outset of its franchise.

However, it is not uncommon for a franchisee to have their franchisor involved in the premises selection and the franchisor can often assist in the negotiations with the landlord to obtain their consent to the required clauses.

Zoning Issues Most urban centres have city plans and those plans will create different zones for different potential uses. When signing up a lease of premises for a franchise it is important to make sure that the zoning allows for the type of business being operated. In some cases it will be blindingly obvious that a zone is appropriate, say if a franchisee wants to operate a retail outlet and the site is surrounded by other retail operations. However in other instances the zone that premises are in may not clear. In such cases it is important to check that the rules do not prohibit proposed operations.

Many councils have their city plans online and these will show the boundaries for various zones. In addition most lawyers and commercial real estate agents will be able to assist with zoning queries too.

Business Franchise Australia and New Zealand 55

FEATURE : foo d & b e v er ag e

The Term of the Lease

FEATURE : foo d & b e v er ag e

e x per t a dv i c e

It is very important to check that where premises have had a prior use that differs from that of the new franchise operation, that the change of use will not trigger unexpected upgrades to things such as fire systems, provisioning of toilets or building strength. Examples that the writer is aware of include when former retail premises are suddenly to be used as a food outlet and the council required upgrades to fire systems as well as engineering modifications to the building. Most modern leases will preclude a landlord from taking responsibility for such costs when a tenant seeks to assign an existing lease, so the change of use itself can lead to significant costs.

Building Soundness Leading on from the prior topic, it is critical to make sure that proper due diligence is carried out on the buildings that businesses are to operate from. They must not only be safe, but they must meet a certain level of the building code. Some business owners think they don’t have to do this as a tenant and that it is more of a building owner’s issue. However, after the Christchurch earthquakes, councils around New Zealand have issued notices to building owners to stop certain premises from being occupied where they are deemed to be an earthquake risk. This has meant that the businesses that occupy those premises have been shut

O

“Most urban centres have city plans and those plans will create different zones for different potential uses. When signing up a lease of premises for a franchise it is important to make sure that the zoning allows for the type of business being operated.” out of them. In some cases, businesses have been closed where their premises happen to be located next door to buildings that are deemed to be dangerous, even though their own premises are sound.

Historically tenants did not necessarily look at such issues as they were merely leasing the premises and not buying the building.

However, recent events have brought about a re-think in this regard. From a tenant’s perspective it is advisable to try and negotiate a clause allowing for a right to terminate a lease if the premises are closed and unable to be occupied by them for a period of time. This would help an affected business relocate and reestablish itself whilst avoiding significant disputes between the landlord and tenant.

Although many leases are signed up on relatively standard form documents, the specific terms of them are able to be negotiated. The level of negotiation that is able to be achieved will depend not only on the attitude of the specific landlord and tenant but also on the market environment and whether it currently favours landlords or tenants. Further, the more money a landlord is contributing to assist the tenant in fitting out premises, the less likely they will be

56 Business Franchise Australia and New Zealand

willing to negotiate on things like the term of the lease and other potential issues that might make a lease more tenant friendly.

However, offsetting that can be the influence that strong and reputable franchise systems can bring as they are perceived as good quality tenants. It is therefore important to take expert legal advice prior to entering into both lease and franchise obligations so that the best possible outcome can be achieved and mismatches can be avoided.

Mark Sherry, LLB (Hons), BCom, is a Partner with Harmans Lawyers New Zealand. He leads the commercial and property team, specialising in franchising, hospitality, rural law, property matters and asset protection.

Harmans is a full service legal firm providing excellent service and advice, allowing Harmans to develop long-term, solid relationships with their clients.

For more information please contact Mark Sherry at: P: +64 3 352 2293 M: +64 21 524 890 E: mark.sherry@harmans.co.nz W: www.harmans.co.nz

Own a Slice of La Porchetta!

“

La Porchetta is like a family. They are there for support when we need it and they work with us to improve our business.

“

Vicky and Michael Vincent Franchisee

Join the largest Italian restaurant chain in Australia and New Zealand. You will love taking part of serving our guests quality Italian food, to order, using fresh ingredients.

We are looking for passionate food lovers with a strong work ethic and drive to join our family.

You bring the drive and commitment and La Porchetta will provide the proven systems, training and support to achieve success.

WHY LA PORCHETTA? • • • • • •

A proven profitable operation.

We are a much loved and recognisable national brand.

We have strong local area marketing support and advice.

Be part our dynamic and engaged family of restaurants that love people.

Join our team of restaurant owners who love getting together and share ideas.

We offer a flat fee structure that allows you to build your business faster.

Minimum Investment: Dependent on Site Conditions $300k+

Opportunities now available Australia-wide in key metropolitan and regional areas.

Visit: http://www.laporchetta.com.au/franchising, email: franchising@laporchetta.com.au OR call (03) 9460 6700.

Follow us on Social Media

/LaPorchetta /LaPorchettaOfficial /LaPorchettaChefsTV

Enquire Now

Download our New iPhone App or Android App

www.laporchetta.com

FEATURE : foo d & b e v er ag e

h av e yo u r s ay: r e ta i l f o o d g r o u p

UP CLOSE & PERSONAL

A Day in the Life of a Trainer Adequate training and support is key when starting up a new franchise, as it helps to reduce any risks by providing a supportive environment where there are plenty of resources available and an encouraging community.

Having been in the industry for over 12 years, Kristy has seen hundreds of franchisees come through the doors of the Retail Food Group academy and walk out feeling empowered to take their franchise to new heights.

Kristy Thornton

Donut King Product Specialist, Kristy Thornton, has a vision for franchisees to take their success to the next level, offering top quality training and development.

We recently sat down with Kristy to ask her all about what is involved in her day as a trainer, and some important facts for those wanting to get into franchising.

Q

HOW AND WHY DID YOU GET INTO YOUR ROLE AS A TRAINER? A. Training has been a passion of mine for many years and I always knew that it was something I wanted to pursue.

I have always loved seeing the potential in new learners and passing on my knowledge and experience to them for their benefit.

58 Business Franchise Australia and New Zealand

Each new franchisee has their own unique strengths and skills, and I have always found it so rewarding to see them flourish in their current skills, and also develop new ones.

After realising my love for all of this, I began to look into the necessary steps to make training a possibility, and before too long I was well on the way to following my dream.

I began my journey as an Assistant Manager in 1994 at McDonald’s and worked my way up to a Restaurant Manager in 1999.

From there I gained valuable experience at multiple large food chains, learning new skills and knowledge.

During this time I learnt how to train and develop new employees, helping them to reach their goals and full potential.

This experience opened up the door to become a New Franchisee Trainer at Retail Food Group in 2010, and since then I have never looked back.

Q

TELL US A BIT ABOUT WHAT’S INVOLVED IN THE TRAINING SCHEDULE FOR NEW FRANCHISEES.

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“My favourite part of the training schedule is seeing the difference between the first week and the last week and how far they have come.”

A. Every day is different as every franchisee is different, and we take them on a journey.

Our training and development program covers all aspects of franchising and the ins and outs of owning a business.

It is both a theoretical and practical experience where new franchisees can learn about business skills, customer service, product, maintenance and much more.

Throughout the training schedule I go through the ins and outs of Donut King products with new franchisees.

The aim of this is for new franchisees to learn the skills and techniques of creating the all-important Donut King products that are well-known throughout the country.

My favourite part of the training schedule is seeing the difference between the first week and the last week and how far they have come.

Our new franchisees receive thorough training and extensive support so that they feel as empowered as they possibly can.

It’s important that the environment is comfortable for learners and I always make sure that I am assessing their progress daily so that they are getting the most out of their training.

New franchisees should feel confident and competent with their newly acquired skills so we maintain an ‘open door policy’ with everyone.

Q

WHY IS TRAINING IMPORTANT FOR NEW FRANCHISEES? A. Training is very important for new franchisees as it ensures quality and consistency not only for their individual store, but also for all stores across the brand.

Not only this but it ensures that franchisees have the confidence to pass along the right skills to their team and develop them also.

Ultimately, training is important for both franchisor and franchisee in producing a successful business.

Q

WHAT HAS BEEN THE BIGGEST LESSON THAT YOU HAVE LEARNT SINCE BECOMING A TRAINER? A. Being a trainer has helped me to understand individual learning styles and facilitate these individual learning styles with the right communication.

Each franchisee is different and I’ve found that it’s important to realise that and harness the potential in each individual person.

Q

HOW DO YOU MAINTAIN A GREAT CULTURE IN YOUR TRAINING ACADEMY? A. A great culture among trainers comes from being passionate about what you’re doing as it is infectious to those around you.

We also love to focus on having a humble and approachable personality in the academy, making sure that any new learners can feel comfortable when asking questions.

I encourage all of our trainers to lead by example and most of all, have fun in whatever they’re doing.

Q

WHAT IS A KEY PIECE OF ADVICE YOU WOULD GIVE TO SOMEONE LOOKING TO BUY A FRANCHISE? A. Buying a franchise is a big decision and there is always a lot to consider. A key piece of advice for new franchisees would be to be prepared to work hard and to be involved in all operational aspects of the business.

New franchisees need to know that they will

“A key piece of advice for new franchisees would be to be prepared to work hard and to be involved in all operational aspects of the business.” need to be quite involved in their business, including the set-up, training team members themselves and making sure it all runs smoothly, but the hard work and long hours will all pay off in the end.

Although owning a franchise is a big investment of both money and time, new franchisees need to remember that there is always support and an encouraging community behind them – that’s the great benefit of the franchising system.

Q

WHAT IS A KEY PIECE OF ADVICE YOU WOULD GIVE TO ANOTHER TRAINER WHEN IT COMES TO TRAINING A NEW FRANCHISEE? A. A key piece of advice that I would give to another trainer would be to ensure that you are being adaptable to all learners.

It’s also important to create a good working relationship with your learners and spend time understanding their experience.

Understanding their experience will ensure that you are able to facilitate the best training to suit their specific learning style and ultimately help develop them to be the best that they can. www.rfg.com.au

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PIZZA HUT FRANCHISEES UNSUCCESSFUL The long awaited decision in what has come to be known as the ‘Pizza Hut Class Action’ was published publicly on 26 February 2016. 190 Pizza Hut franchisees sued their franchisor in relation to a decision to reduce pizza prices in 2014.

Facts The basic facts were that the Franchisor of the Pizza Hut Network, Yum Restaurants Australia Pty Ltd (Yum) decided in early 2014 to implement a new model whereby it would:

1. reduce the range of pizzas offered for sale from four to two (reducing the total number of pizzas for sale from 27 to 17); and 2. drop prices on the two remaining ranges from $9.95 to $4.95 and from $11.95 to $8.50 respectively.

This was known as the ‘Value Model’.

“Decisions that adversely affect franchisees, do not necessarily mean a franchisor has not acted in good faith or unconscionably.”

The Value Model The Value Model included reductions in certain price points and was scheduled to commence on 1 July 2014. The Value Model relied on New Zealand data (in particular, the adoption of New Zealand benchmarks and labour hours) and the results of the Australian Capital Territory trial (discussed below) The objective of the Value Model was to increase sales by 34.5 per cent.

The Value Model had been trialled in eight

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Pizza Hut franchises in the Australian Capital Territory between February and April 2014. All eight franchises were owned by the one franchisee. As part of the trial, Yum agreed to indemnify the franchisee for any losses incurred in the trial. Yum ultimately paid the franchisee almost $200,000. There was a substantial dispute between the parties as to the success of the trial.

After franchisees had been informed of the introduction of the Value Model, 80 of them sought an urgent injunction from the Federal Court of Australia to restrain Pizza Hut’s implementation of the Value Model on 1 July 2014. The application, made on 19 June 2014 was heard and determined by the Court on 24 June 2014. The Court dismissed the franchisees’ application, clearing the path for the Value Model to be implemented on 1 July 2014.

“Typically (and expressly in this case), franchise agreements do not contain any promises that franchisees will make a profit.”

Raynia Theodore | Principal | MST Lawyers

the meaning of the Competition and Consumer Act 2010 (Cth).

New proceedings

Judgment

A fresh court action was issued on 12 August 2014 which eventually proceeded to final hearing over 18 days in mid to late 2015. This second proceeding involved 190 franchisees (out of a possible 200), led by one franchisee (Diab Pty Limited and its director and majority shareholder Danny Diab) who owned and operated six franchises in the Greater Macarthur region of New South Wales and had been involved in Pizza Hut businesses since 1989.

The Court found:

Much of the debate turned on clauses C1 and 6.2 of the Franchise Agreement which stated: C1 MAXIMUM RETAIL PRICE Franchisee will not permit any Approved Product to be sold at the Outlet at any price exceeding the maximum retail prices advised by Franchisor to Franchisee from time to time.

6.2 Franchisee will participate in such national and regional advertising, promotions, research and tests as Franchisor from time to time requires and Franchisee will not have any claim or action against Franchisor in connection with the level of success of any such advertising, promotion, research or test.

The franchisees made three core allegations, namely: 1. pursuant to clause C1, Yum was obliged to set profitable prices – in other words, Yum was obliged to fix prices that would enable franchisees to make or increase its profits; 2. Yum was subject to the following implied duties owed by Yum under the Franchise Agreement to each Franchisee: a. an implied duty to co-operate with the Franchisees to achieve the objects of the Franchise Agreement and b. an implied duty to comply with reasonable standards of conduct, taking account of the interests of both parties to the Franchise Agreement and 3. Yum’s conduct was unconscionable within

1. Yum was not obliged to fix prices for each product line so each product line was profitable. The object of the Franchise Agreement was each franchise business, not each pizza; 2. Although Yum owed a duty to co-operate with franchisees, the duty was not breached; and 3. Yum had not engaged in unconscionable conduct.

In effect, the Court found, as a whole, Yum’s decision to implement the Value Model was based on reasonable grounds and made in good faith on the belief that it would increase franchise profitability. Simply because the plan did not maintain profits or realise increased or a maintenance of profits (which were otherwise declining) did not make Yum liable for franchisees’ losses.

The evidence showed that, for the most part, Yum had carefully considered the strategy in fixing the maximum prices. No dishonesty, negligence, bad faith or recklessness had been demonstrated nor had any decisions been made capriciously or arbitrarily, although one Yum staff member involved in the analysis of the ACT trial was found to have demonstrated poor business judgment through his naivety.

The Court agreed with Yum’s submission that the Value Model included more than just price reductions. The Value Model initially included increased marketing budgets, “first to market” advantage and a consequential uplift in transactions and sales.

The Court further held that clauses C1 and 6.2 expressly made clear that: 1. Yum had complete control over promotions and fixing maximum prices; and 2. Yum’s liability for unsuccessful promotions was excluded.

In this case, the benefit of hindsight

illustrated that the results of the Value Model were not as bad as predicted.

However, hindsight, although beneficial, could not be used to demonstrate that a decision made in good faith, which led to what was ultimately an unsuccessful strategy, created any liability on the part of Yum franchisees.

Ultimately, the question was not whether the decision (or, in fact, the modelling underlying the decision) was right or wrong, but whether the decision was reasonable.

Critical points to take away Some of the key points to remember, as a result of this decision, are: 1. typically (and expressly in this case), franchise agreements do not contain any promises that franchisees will make a profit.

2. there is a common law duty on parties to commercial contracts to exercise their discretionary powers (i.e. the power the set maximum prices) in good faith, honestly and with reasonable cause. In other words, clauses in franchise agreements that expressly empower one party (typically a franchisor) to make discretionary decisions must be exercised in good faith, honestly and with reasonable cause.

3. decisions that adversely affect franchisees (including, for example decisions that adversely affect sales and profitability) do not necessarily mean a franchisor has not acted in good faith or unconscionably.

MST Lawyers has over 25 years’ experience in franchising, representing clients throughout Australia and internationally in a variety of industries.

Written by Raynia Theodore, Principal and Jack Newton, Lawyer, in the Corporate Advisory and Franchising Team at MST Lawyers, please contact the Corporate Advisory and Franchising Team for assistance or further information.

T: 03 8540 0200 E: franchise@mst.com.au W: www.mst.com.au

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Funding a food and beverage franchise The purchase of a food and beverage franchise business is a significant investment decision which can be both an exciting and anxious time for a potential franchisee.

The food and beverage sector has always offered many appealing opportunities in franchising with a large variety of options available to potential buyers. Funding a food and beverage franchise business is a very unique experience as both the franchisee and the bank need to consider additional benchmarking information.

Benchmarks are a guide which assists a franchise business to compare itself against similar businesses within the same franchise system or within the same industry. From

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a bank’s perspective benchmarks are vital as they demonstrate the business’s ability to service its debts.

Key benchmarks which help assess the profitability of a food and beverage franchise business includes sales performance; gross profit (GP); food and beverage costs; wages and rent. Business profitability in turn determines the ability of the business to obtain funding and rewards its owners for the investment risk.

Sales are influenced by such aspects as the drawing power of the particular brand, its location, price, availability of parking, service proposition and atmosphere etc. Even if sales are strong that does not necessarily lead to increased profitability unless a business can also sustain or improve the gross profit margin and minimise other operating costs including expenses such as wages.

“Understanding food and beverage costs and how to control these costs can be the key to success in the food and beverage industry.�

Labrina Tsekouras | Senior Business Development Manager VIC & TAS, Westpac

FOOD AND BEVERAGE COSTS Understanding food and beverage costs and how to control these costs can be the key to success in the food and beverage industry. The fact that franchisees can compare their cost of food with others in the same franchise system (benchmarking) is a really important advantage when it comes to getting the balance right. Lowering food and beverage costs increases the gross profit margin, which influences the bottom line and hence improves the business’s ability to service their debt.

Many franchise food and beverage brands have very sophisticated measurement tools and management information systems to assist with controlling food and beverage costs. These tools break sales down into categories or even specific items so that franchisees are aware of what contribution each category or item makes to their gross profit. Gross profit is also influenced by factors like wastage and shrinkage (theft) which need to be carefully monitored by a business.

Larger volume of food and beverage purchases from the bigger franchises enables better negotiated prices than individual businesses, lowering their food and beverage costs and increasing their competitiveness and profitability.

WAGES Preparing and serving food and beverages is a fairly labour intensive activity and the profitability of any business is damaged if the business is over-staffed. Getting the staffing levels right compared to other similar businesses is very important and a key benchmark measurement. Wages is one key aspect which franchisees have control over. By simply rectifying overstaffing and/ or working in the business as an owner/ operator, it is sometimes possible to increase the profitability of the business significantly.

RENT For many food and beverage businesses a location which offers superior foot traffic, vehicle traffic and good parking becomes an important factor to drive and influence sales.

These location advantages in turn are often also a direct influence and will usually result in much higher rent costs/overheads.

Shopping Centre locations also present specific challenges because the rents are generally higher. The rent payable has to be carefully considered before the purchase of a business because it creates a large fixed cost component which can have a direct impact on profitability and the ability of the business to survive a period of downturns in sales.

FUNDING With some preparation and planning franchisees can save time and money in the funding process. After identifying the food and beverage franchise opportunity, the next step is to determine ways to fund the purchase. It is therefore important to work with the franchisor, an accountant and lawyer to find out what is achievable, what is

realistic and to put together a comprehensive business plan to achieve the right funding available to you.

A business plan will assist franchisees to understand the majority of their financial requirements such as purchase price and setup costs, stock requirements, debtor levels and ingoing costs (for example, legal fees, accounting fees, stamp duty, government charges, insurance prepayments, landlord bonds etc.)

Franchisees should choose a bank which has expertise in the franchise sector and which provides a range of financial products and services that the franchise business will need.

In all probability this will not just be one simple loan but will involve a combination of two or more of the following options:

Business Term Loans Bank business term loans are repayable over a specified term and are therefore a well suited finance for the initial purchase, or the set-up of a business. This can include funding for the franchise fee, initial stock, fit-out and equipment costs. Care should be taken to match the term of the loan with

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“Many franchise food and beverage brands have very sophisticated measurement tools and management information systems to assist with controlling food and beverage costs.”

the remaining term of lease and franchise agreements to ensure that business debt is fully paid at the expiry of these agreements.

Generally business term loans can be secured against equity in the borrower’s residential property or, in some situations, the borrower may be able to use the assets of the franchise as part of the security mix. This will depend on the arrangements between the bank and the franchisor and if an accreditation is in place. In practice if an accreditation is in place this means that a potential franchisee needs less of their own money to get into a franchise business as they can secure part of the investment against the assets and future cash flow of the business.

Short term funding - overdraft This type of finance is suited to cover cash flow fluctuations. Overdrafts may be suitable for seasonal business and franchises with a high level of debtors or stock. This facility is generally secured by the borrower’s residential property.

Equipment finance and leasing Many food and beverage businesses require specialised equipment such as pizza ovens, coffee machines, cool rooms, display cabinets and vehicles. Equipment finance is normally managed using the equipment as security and over a term within the useful working life of the item being funded. Equipment

finance has the advantage of lowering the equity/investment required, as funding could be up to 80 - 100 per cent of value (if new).

This is a facility for a specified term secured by equipment and may be provided by a bank or finance company.

Secured funding This is used extensively, particularly where long-term funding is required. It may require an owner’s contribution for example, free equity in a property or the total funding can be secured against the property. Other forms of security or third party guarantees can also be considered. Secured lending would usually be the cheapest option and the part of the loan secured against property can often be done over a longer term, which can lower monthly repayments and ease cash flow pressures.

Landlord contribution

business then buying a franchise may enable you to afford a much larger food business than if setting up an independent outlet.

Westpac has supported the franchise sector in Australia for over 20 years. The growth of a specific franchise system is supported by providing streamlined processes for lending, as well as access to other lending transactional solutions.

The bank also has a national network of franchise specialist business bankers who are able to deal with specific day to day needs of the franchise customer.

Labrina Tsekouras is the Westpac Senior Business Development Manager for Victoria and Tasmania and specialises in the franchising sector.

Contact Labrina at: Phone: 0418 246 903 Email: ltsekouras@westpac.com.au Web: www.westpac.com.au

In some instances another possible source of funding could come via the landlord in the form of fit out contributions and set up costs.

A bank with a specialist franchise team like Westpac is often prepared to lend against new (greenfield) and existing franchise businesses which are accredited. If you are looking at getting into a food and beverage

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The information contained in this article is intended as a guide only and is not intended as an exhaustive list of matters to be considered. Persons entering into franchise agreements should seek their own independent legal, accounting and other advice.

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next feature investing in your future A regular of Business Franchise Magazine, our special supplement in franchising showcases a different industry each issue To share your specific expert industry advice or to feature your franchise in the next issue, please contact: Kathleen Lennox, Sales & Marketing Manager Phone: 03 9787 8077 Email: kathleen@cgbpublishing.com.au