July - Aug 18 Feature - Business Supporting Business

VOL 12 ISSUE 05 july/august 2018

#PeoplePossible with MBE

don’t get caught out by the renewal process

the importance of

making a profit Business Franchise Australia and New Zealand 45

Adverts

Stationery

Logos

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Contents

50

On the Cover 48 Cover Story: #PeoplePossible with MBE

Mailboxes Etc (MBE)

56

58 Expert Advice: Don’t Get Caught Out by the Renewal Process

Raynia Theodore | MST Lawyers

66 Expert Advice: The Importance of Making a Profit

Andrew Graham | RSM AUSTRALIA

50 Feature Editorial: Business Supporting Business

58

54 Profile : Simplicity Loans and Advisory 56 Have Your Say: Cashflow It

Considering Alternative Finance Companies with Cashflow It

60 Profile : Harmoniq 62 Expert Advice: Are You Buying a Small Business or a Franchise Business? What’s the real difference?

FC Business Solutions

66

64 Profile : The Interface Financial Group

Finance Your Franchise with Simplicity Loans & Advisory

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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c ov er sto ry: M ail B oxes E tc.

#PeoplePossible with MBE “MBE‘s #PeoplePossible attribute embodies the best way to convey the MBE Global Network’s vocation of continuously finding new tailormade solutions to meet customers’ daily challenges. MBE entrepreneurs are solutions enablers.”

Mail Boxes Etc. is one of the largest third-party logistics, communication services, marketing and printing networks in the world.

With over 2,500 Service Centers globally, Mail Boxes Etc. is constantly finding new, tailor-made solutions for its customers’ daily challenges.

This focus drives Mail Boxes Etc. entrepreneurs across the world towards successful innovation. Mail Boxes Etc. (MBE) is an organisation of solution enablers, and its #PeoplePossible attitude has proven to shift boundaries around the globe.

MBE Worldwide Group Over 2,600 Service Centers Worldwide 44 Countries Worldwide US$940 Million System-wide Sales

Impressive Global Expansion Since its foundation in San Diego, California in 1980, MBE has evolved into one of the world’s largest international networks of franchised entrepreneurs operating retail-based shipping, logistics, printing,

marketing and communications solutions to private customers and businesses big and small. In 1992, the Master License for Italy was acquired. By 2003, the MBE success story was repeated with further expansions in Spain, Germany and Austria. The entire MBE global business (except for North America) was acquired by Milan-based MBE Worldwide in 2009, with continued growth planned for the future. The record of success reached another milestone in 2017 with the strategic acquisition of two U.S. based companies, PostNet and AlphaGraphics.

In 2017, MBE signed Master Franchise Agreements for 13 new countries. This exciting expansion has brought MBE and its services to the Balkans, Eastern Europe and Greece. “We aim to develop the Mail Boxes Etc. brand and network throughout the world. To achieve this, we are continuously engaged to attract successful, motivated and entrepreneurial businessmen and women to own and operate franchise master license agreements” said Giuseppe Bergonzi, General Manager of Worldwide Development. “MBE succeeds internationally because of its ability to adapt the business model and extensive range of services to meet the requirements of both service-oriented businesses and convenienceoriented consumer.”

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Upon signing a master license agreement, each master licensee acquires exclusive rights for their country to use the MBE internationally registered brand and associated trademarks, Franchise business concept, and know-how to develop and support a network of entrepreneurial franchisees in their licensed specific territory.

MBE Australia In August 2018, MBE Australia is celebrating the 25th Anniversary of the first ever Mail Boxes Etc. centre in Australia.

Since then, MBE has been servicing Australians through centres in Brisbane, Gold Coast, Canberra, Perth, Sydney and Melbourne. MBE Australia proudly services businesses big and small, as well as private customers. MBE really is a one-stop-shop, providing services ranging from: • copying and printing • private mailbox services • mail forwarding and redirection • mail and parcel notification • direct mail programs • virtual office services • telephone answering services Backed by the MBE Global brand and its #PeoplePossible campaign, Australian private customers and businesses know that MBE Australia is a trusted, reliable and innovative service provider for a wide range of products, business and mail services.

“MBE‘s #PeoplePossible attribute embodies the best way to convey the MBE Global

MBE are looking for new owner-operators across all states and territories who are open to the possibilities provided by the MBE brand. Requirements include being driven and self-motivated, and no prior business ownership experience is necessary, although an understanding of business and the attitude of a team player are vital. If you have a passion for business, the ability to communicate and work well with others, and a drive to success, you fit perfectly with the Mail Boxes Etc. team.

If you think you’re a match for MBE, enquire about becoming a part of a dynamic franchising community today! Franchisees receive full support from the MBE head office - dedicated to providing guidance, consulting and all the resources you need to make your MBE franchise successful!

Ongoing Support for Franchisees All new franchisees take part in a comprehensive six-week training program, that covers all aspects of running your centre. Ongoing training is provided, utilising MBE’s Online Training Academy and valuable support from the head office team. Administration and accounting training is provided, plus a comprehensive quarterly marketing action plan produced by the head office marketing department. This assists franchisees with local area marketing and seasonal advertising, which is invaluable when engaging with a local territory. Easyto-use templates and artwork are provided in order to achieve successful marketing.

Network’s vocation of continuously finding new tailor-made solutions to meet customers’ daily challenges. MBE entrepreneurs are solutions enablers.”

MBE: A Customised Franchise Offering Mail Boxes Etc. have long been known as the franchise with three businesses in one – freight, printing and mail box services.

This varied service offering makes an MBE franchise ideal for driven, entrepreneurial franchisees. This unique multi-product

franchise has achieved great success over the last 30 years, and MBE are now looking for new franchisees to join them as they enter this exciting new era of growth. The team at MBE recognise that franchisee and customer needs are starting to shift, and their franchise team is leading a format change that will mean significant cost savings to the franchisee.

With over 2,600 affiliated Centres worldwide, MBE is expanding globally.

The MBE footprint in the Australian marketplace has always been consistent, but new outlets can take on a kiosk format rather

MBE’s Franchise Conference is also popular within the network, with an attendance by more than 85 per cent of the franchisees.

Held in the Barossa Valley earlier this year, the focus was innovation, both in the network and the industry in general, to capitalise on market share. Featuring motivational speakers and presentations on a range of topics, this was an opportunity for franchisees to come together and share best practices and support each other.

If you think you are a fit for MBE and are interested in joining the well established global franchise network, contact us now for more information on: 0457 677 986 www.mbe.com.au

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than a traditional retail outlet. This gives the franchisee the option to focus on services other than printing. The kiosk format also means that less floor-space is required, which allows for a lower lease cost, and an even more affordable franchise!

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Business Supporting Business

In order to maintain a successful franchise business, both franchisees and franchisors will need to engage with any number of business services.

For small, medium and large companies, finding the perfect support services to assist in the everyday running of the business is often vital in order to achieve and maintain success.

At Business Franchise Magazine Australia and New Zealand, we appreciate the

efforts, expertise and importance of the many different business services available to business owners in Australia and New Zealand, and around the world!

Business services cover a wide range of requirements, whether it be a thorough and trusted office or shop cleaner, a knowledgeable lawyer or accountant, a reliable printing company, a talented designer or an innovative IT company, business services are the key to success in the world of business and franchising.

Trusted Business Services Business Franchise Magazine has developed invaluable relationships with a vast number of business services over the years, so we

50 Business Franchise Australia and New Zealand

decided to share some of our industry experience with you in this month’s ‘Business Services’ Feature.

Consulting Engaging the services of a consultant can be a fantastic help for many businesses. You can find a consultant for basically every industry and business type, ready to share their expertise and give expert advice. Whether you are looking for help to grow and expand your business, want to introduce new products or services effectively, or are seeking niche industry advice, there is undoubtedly a consultant out there will the knowledge and experience your business requires.

This issue of Business Franchise Magazine

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“Engaging the services of a consultant can be a fantastic help for many businesses.

You can find a consultant for basically every industry and business type.”

Australia and New Zealand includes a number of great consulting companies, ready to assist you with your franchise.

DC Strategy For over 30 years DC Strategy has been providing end-to-end franchise consulting, law, recruitment, brand, marketing and technology services. Their experienced multi-disciplinary teams have built over $2 billion in enterprise value for clients in the last decade alone, developing and supporting many of the most successful national franchise brands here and internationally.

DC Strategy manage the franchise commercial, legal and recruitment needs of a large number of networks providing specialist services including trademark,

employment, migration, mediation and international recruitment assistance.

Franchising Consulting and Advice

FC Business Solutions

We are lucky enough to have Brian Keen, founder of Franchise Simply and Pete Burdon, founder of Franchise Media Training contributing to this issue of Business Franchise Magazine. Brian Keen has been involved in the franchise industry for more than 30 years. His hands on business experience as a multi-unit franchisee, franchisor and consultant at Franchise Simply has helped many of the big names create their own franchise systems and growth over the years. Pete Burdon at Franchise Media Training utilises his years of franchising and journalistic experience to consult franchisees on how to best utilise local media. Franchise Media Training prepares franchisees and franchisors to massively grow their sales and bottom lines.

FC Business Solutions is an integrated consultancy focused exclusively on the franchise community. Their team of professionals has been providing specialised and expert services to franchises for many years. The FC Business Solutions team are actively involved members of the Franchise Council of Australia regularly attending events, participating in committees and assisting in raising the profile of franchising in Australia. FC Business Solutions regularly contribute interesting and knowledgeable ‘Expert Advice’ columns for Business Franchise Magazine, another way they continue to services the franchising industry.

Accountants There are are very few things in business that is more important than the bottom line. This makes effective accountancy vital in order to manage and maintain a business’s finances.

Many small to medium businesses outsource their accountancy, and there are many reliable accountants out there to service a wide range of businesses. Whether it be for payroll, accounts payable or receivable, or more holistic, all round accounting, a good accountant could mean make or break for a business.

RSM Australia RSM Australia is committed to enabling clients through a greater understanding of what matters most to their business. In addition to local knowledge provided by

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their advisers in 30 offices across Australia, RSM Australia draws on their international reach and scale to ensure clients stay at the forefront of the world’s best practices, technology and innovation within a rapidly changing global economy. Providing ready access to expert corporate financial and advisory accounting services, RSM Australia’s one-firm structure underscores a client-focused culture.

M.A.S Accountants As the original accounting office for small business, m.a.s have worked with various clients with varying needs, from accounting basics to tax accounting, to payroll management, accounts payable and accounts receivable assistance, business accounting is our strength. M.a.s know that your time is too valuable to spend on doing your small business accounting.

Lawyers Good legal advice is vital for businesses, and thankfully there are some fantastic lawyers in Australia and New Zealand ready to assist business big and small with their legal requirements.

MST Lawyers In this issue, we have a valuable Expert Advice column written by Raynia Theodore, Principal, in the Corporate Advisory and Franchising Team at MST Lawyers. MST Lawyers has over 25 years’ experience in franchising, representing clients throughout Australia and internationally in a variety of industries. MST are the trusted lawyers and legal adviser for countless business, and are a great example of how beneficial effective legal advice can be.

Marsh and Maher Lawyers Marsh and Maher commenced as a new boutique legal firm in 2008, with a desire to provide practical and efficient legal services to its core of established clients. In March 2017, Marsh and Maher joined with Richmond Bennison, completing their broad range of expertise. As well as providing clients quality legal services, it was also their ambition to ensure each client felt that their needs were given the highest priority. They aim to be our clients’ “Trusted Adviser”.

Marsh and Maher continue to strive to provide pragmatic and sensible advice and ensure each client is properly valued, and

their needs, whether business or personal, are given the highest level of care and attention.

Financial Services Whether it be through dealing with one of the big banks, or engaging the services of a boutique financial services company, every business and franchise will need to be in contact with financial services at some point.

This issue of Business Franchise Magazine has showcased a number of quality financial advisors and brokers, with a wide range of service offerings and expertise to suit every business.

Cashflow It Cashflow It are alternative lenders and specialists funders to the franchise sector.

They offer numerous funding solutions for your franchise business with lending options including rentals, leasing and business loans.

With a simple and transparent application process, Cashflow It can help franchisees fund equipment whilst retaining their hard earned capital. Get in touch with Cashflow It today, the franchise finance experts.

Simplicity Loans & Advisory After seeing a need for improved advice, support and expertise in the brokerage and property advisory industry, the directors of Simplicity Loans decided to combine their 34 years of lending experience to create an organisation that could provide superior knowledge and service to a wide range of customers. Simplicity is a boutique brokerage and property advisory business located in two locations across Sydney; one office space on Castlereagh St in the CBD and an office north of the city in Pymble. The team at Simplicity Loan’s ultimate aim is to help their clients achieve their financial goals, ensuring the delivery of high quality advice and outcomes. Simplicity will always work in the best interests of their clients, supporting the alignment of all parties to a common goal.

Interface Financial Group

“Good legal advice is vital for businesses, and thankfully there are some fantastic lawyers in Australia and New Zealand ready to assist business big and small with their legal requirements.”

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With roots reaching back to 1972, The Interface Financial Group (IFG) has carved out a special place for itself in the commercial finance market. Serving the needs of small and medium-sized businesses, IFG has grown from the ‘one office/one location’ environment into a multinational organization now covering eight countries on four continents. IFG provides a cash flow acceleration service for their clients. In today’s environment clients invariably find that they are at the mercy of their customer when it comes to their cash flow, as it is

their customer who controls the payment cycle and hence their business. The Interface approach allows for invoices to be turned into immediate cash once the goods have been delivered or the services performed.

Vital Business Services Other services vital to the smooth running and success of a business include: • Graphic Design • Cleaners • IT Services • Printing • Marketing • And many more!

one of the largest third-party logistics, communication services, marketing and printing networks in the world. Not only is MBE a business service provider, they are also a global franchise - currently seeking franchise partners across Australia and the world!

In August 2018, MBE Australia is celebrating the 25th Anniversary of the first ever Mail Boxes Etc. centre in Australia.

Since then, MBE has been servicing Australians through centres in Brisbane, Gold Coast, Canberra, Perth, Sydney and Melbourne. MBE Australia proudly services businesses big and small, as well as private customers. MBE really is a one-stop-shop, providing services ranging from: • copying and printing

Mail Boxes Etc.

• private mailbox services

This issue’s Feature Cover showcases the services of Mail Boxes Etc. (MBE),

• mail forwarding and redirection • mail and parcel notification • direct mail programs • virtual office services • telephone answering services Enjoy the Business Services Feature in this issue of Business Franchise Magazine! We hope it helps you find the perfect support services to assist you in the everyday running of your business, in order for you to achieve and maintain success.

Look out for our next special feature:

food & beverage franchises

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“Whether it be through dealing with one of the big banks, or engaging the services of a boutique financial services company, every business and franchise will need to be in contact with financial services at some point.”

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pr o file : s implicity Loans and A dv isory

Finance Your Franchise

with Simplicity Loans & Advisory After seeing a need for improved advice, support and expertise in the brokerage and property advisory industry, the directors of Simplicity Loans & Advisory decided to combine their 34 years of lending experience to create an organisation that could provide superior knowledge and service to a wide range of customers.

Simplicity is a boutique brokerage and property advisory business located in two locations across Sydney; one office space on Castlereagh St in the CBD and an office north of the city in Pymble. The team at Simplicity’s ultimate aim is to help their clients achieve their financial goals, ensuring the delivery of high quality advice and outcomes. Simplicity will always work in the best interests of their clients, supporting the alignment of all parties to a common goal.

Obtaining finance for buying a franchise can often be difficult, as many lenders hesitate to fund new franchises. The lending managers at Simplicity are experienced in securing franchise funding. They have established strong relationships with a large number of reputable lenders, offering tailor-made franchise financing packages that can help your investment succeed.

Simplicity understand what lenders are looking for and can assist in presenting your loan application in order to maximise your chances of getting approval for financing. The team at Simplicity can assist you in obtaining finance for any type of franchise, and this is supported by a wealth of experience with many major franchises, including but not limited to; McDonalds • Oporto’s • Pandora • Jax • Crust • Dominos • Pizza Hut • 7 Eleven • Zeus • BP • Subway Simplicity is heavily invested in providing tailored assistance to commercial and self-employed consumers, maintaining the utmost regard for both their commercial and personal requirements.

Simplicity pride themselves on providing assistance and support from day one of the finance application all the way through the life of the loan. The team at Simplicity can be considered small but mighty, consisting of nine dedicated and enthusiastic members ranging from experienced senior commercial bankers to innovative and progressive university graduates.

The team at Simplicity is seen as a major differentiation point from their competitors. In addition to having increased ability to turn over deals quickly and efficiently, they are able to cover all aspects of finance, from large scale commercial and construction facilities to small business loans to personal and equipment finance. Not only do Simplicity have these capabilities, they have team members

54 Business Franchise Australia and New Zealand

who specialise in each of these areas, providing more knowledgeable and personalised advice and exceptional customer service to their clients.

The extensive knowledge base and support at Simplicity allows the team to cater to any need that arises, whether it be commercial property debt, franchise financing, cash flow lending or property development loans.

Since Simplicity’s inception in August 2017, the company has grown to a level that demonstrates performance scope well beyond its size.

Acknowledging that you can’t be everything to everyone, Simplicity was set up to meet the needs of mid-tier and corporate clients with all aspects of lending and advisory.

Having settled $150 million in the first 10 months of the business, the directors believe they have the right people in the right positions.

Simplicity has provided amazing client outcomes and customer service, which will continue to exceed expectations as deals and revenue continue to grow.

Simplicity’s success until now has been built purely on referrals and word of mouth from their broad network of professionals, a real testament to their level of service.

If you would like to talk to someone about your finance options or obtaining a franchise loan, do not hesitate to get in contact with the knowledgeable and helpful team at Simplicity Loans & Advisory! franchising@simplicity.net.au 1300 022 022

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h av e yo ur say: Cashflow I t

Considering Alternative Finance Companies with Alternative finance companies have been experiencing steady growth in demand in recent years. With the integrity of Australia’s largest banking institutions being called into question, many have been led to ask where the future of the finance industry is heading.

Consumer trust in the big banks has faltered, due to a lack of transparency and seemingly little care for those they service.

As a result, Australia’s growing number of entrepreneurial ventures and small businesses are turning elsewhere to secure their financing, often struggling to meet the ever changing lending requirements of traditional institutions. The outcome of this has seen the Australian alternative finance market rise to be the second largest in the Asia Pacific Region.

Challenges In Gaining Bank Funding The ability of small and medium enterprises (SMEs), including franchises ability to access funding has been a major factor affecting

their growth for many years now. Often they struggle to meet the strict criteria laid out by banks, as these institutions are built to meet the needs of large businesses, failing to accommodate the varied needs of SMEs and the franchise sector.

Other barriers faced by those trying to obtain finance from banks include complex application procedures, slow assessment processes and high collateral requirements.

This is often due to the biased negative perception surrounding the risks of SMEs, and as a result many start-ups and new franchisees can’t even get their foot in the door.

As the challenges associated with traditional lending institutions are placed in the spotlight, the benefits of choosing alternative finance lenders have become clearer. With the concept of alternative finance gaining traction amongst consumers, the industry has seen an 130 per cent increase in demand in the second half of 2017 alone, according to Equifax.

What Is Fuelling The Rise In Alternative Finance Despite still representing only a small cross-section of the lending options available to consumers, businesses are increasingly considering alternative finance as a viable option, with a 69 per cent growth in commercial demand according to Equifax.

Breaking this down into industries we can see that retail trade entities represent

56 Business Franchise Australia and New Zealand

the largest segment of enquiries at 21per cent, with other notable sectors including construction, accommodation & food services and manufacturing.

The shift in the industry is mostly thanks to the high rates of adoption amongst SMEs, with Equifax finding that they accounted for 98.8 per cent of alternative finance in enquiries in 2017. The reason behind why more businesses are making the change comes down to their overall experience with the lender. 90 per cent of those surveyed in the Banjo Small Business Finance Survey stated that they preferred their experience with alternative finance lenders to that of banks.

Studies by Equifax also found that millennials represent 62 per cent of alternative finance enquiries, suggesting that young consumers, likely seeking their first loan, are turning away from traditional lenders. Interesting, research also showed that new businesses (between 1-9 years) are showing higher demand compared to their more established counterparts. With new businesses and millennial consumers showing the highest rates of adoption, these trends suggest that alternative providers could become the norm in coming years.

Benefits Of Choosing Alternative Lenders With numerous barriers standing between many small businesses and access to finance through banks, it is no surprise that they are seeking other options. For many this option is an alternative finance provider, as they are offering something the banks just can’t match.

There are a broad range of benefits associated with using a specialist finance company. For industries such as franchising, a lender that offers a tailored solution to meet the specific needs of a franchise business offers a wealth of advantages.

Such niche lending solutions are praised for their transparency and flexibility, often allowing businesses to access capital faster with more flexibility and at an earlier stage in their growth lifecycle. Alternative finance lenders also boast lower costs and more manageable repayments, doing away with the complex application processes that often rule out banks as an option for franchisees and startup businesses.

What Is Required To Successfully Get Finance The in’s and out’s and what is actually required to successfully gain access to finance can be the downfall of many applications no matter the lender. Not having a comprehensive understanding of exactly what lenders want to see can impact a franchisee’s chances of securing finance.

Gathering the key information that proves the viability of the business is vital in submitting a successful application.

As for exactly what this information is, the requirements can different depending on the lender. As a general rule, most applications will require some of the following: Forms of ID, Business Plan, Personal Asset & Liability Statement, Financial Statements & Projections, Personal or Company Tax Returns, along with the completion of the lenders application form.

Whether applying to a traditional lender such as a bank, or an alternative finance provider, it is important that franchisees ensure the information given is accurate and up to date. The business plan could be considered one of the most important documents within an application. Often brushed off by business owners, this document is an opportunity for them to sell the business idea and outline exactly why the business is going to be successful.

This comprehensive plan should cover topics including the business’s goals, the market position, marketing strategies, the management team and financial information.

To gain a solid understanding of the application process, businesses should consider how lenders assess each application.

A common set of principles used is the ‘5 C’s of Credit’. This model outlines nine areas that lenders will look into when reviewing the application: Character, Capacity, Capital, Collateral and Conditions. All of which contribute to the success of a business owner securing the finance they need.

Gaining access to finance from traditional lenders often means franchisees have to jump through hoops, only to find they don’t meet the strict requirements. Hence it is no surprise that many business owners are turning to alternative finance lenders. The ability of such lenders to provide innovative solutions and embrace what works for the client is driving the industry’s success. If the banks continue to falter in the eyes of consumers, alternative lenders could become the preferred option in future years.

Cashflow It are alternative lenders and specialists funders to the franchise sector.

They offer numerous funding solutions for your franchise business with lending options including rentals, leasing and business loans. With a simple and transparent application process, Cashflow It can help franchisees fund equipment whilst retaining their hard earned capital.

Get in touch with Cashflow It today, the franchise finance experts.

1300 659 676 www.cashflowit.com.au

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“With numerous barriers standing between many small businesses and access to finance through banks, it is no surprise that they are seeking other options.”

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e x pert adv i c e

DON’T GET CAUGHT OUT BY THE RENEWAL PROCESS Most Franchise Agreements are for fixed terms. This fact is often overlooked by excited franchisees going into a new business venture.

“Most franchise agreements specify requirements that the franchisee must meet in order for its franchise agreement to be renewed.”

Franchise agreements “do not run for infinity and beyond” and the renewal or extension of a franchise agreement is not always a given.

franchise to the franchisee the new franchise will be on the franchisor’s then current terms which could be significantly different to the franchisee’s existing terms.

Some franchise agreements only provide for a fixed initial term with no right of renewal.

Others provide for a fixed initial term with one option or a number of options to renew.

That said, even in the case where the franchisee has an option or a number of options to renew, renewal of the franchise agreement is not guaranteed. Most franchise agreements specify requirements that the franchisee must meet in order for its franchise agreement to be renewed.

In the case of fixed term franchise agreements with no options to renew, the franchisee will essentially be at the mercy of the franchisor at the expiry of the initial term. The franchisor will be under no obligation to renew the franchise agreement.

If the franchisor agrees to grant a new

Renewal Requirements The typical conditions or requirements to the renewal of a franchise agreement where the

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Franchisee has an option to renew include: 1. exercising the option within a specific timeframe, for example, not earlier than 12 months before and not later than six months before the expiry date. It is important that franchisees note these dates because failure to meet the timeframes can have fatal consequences – the franchisor may not agree to renew the franchise agreement; 2. payment of a renewal fee. This may be the equivalent of the upfront fee payable by new franchisees coming into the network. Franchisees should budget to pay this fee right from the outset;

Raynia Theodore | Principal, Corporate Advisory & Franchising Team MST Lawyers

3. possible upgrade of the business premises and equipment where the franchise is conducted from static premises. Again, franchisees should budget for this financial outlay from the outset and also review the premises lease to determine the frequency of upgrades that may be required by the landlord; 4. the remedy of any breaches of the franchise agreement; 5. the signing a new franchise agreement.

In many cases the franchisee is required to sign the franchisor’s franchise agreement current at the time of the renewal. The franchisee should request a copy of this agreement before it has to exercise any option to renew. This agreement may contain different terms, including different financial terms. If the financial terms of the new franchise agreement are more onerous, the business may be less profitable and worth less if the franchisee wants to sell.

The above are not an exhaustive list of the requirements for the renewal of a franchise agreement but they represent the most common requirements. If they are not met the Franchisor will not be obliged to renew the franchise agreement.

Code Requirements: In the case of franchise agreements that are for longer than a six month term, franchisors are required, under the Franchising Code of Conduct (“the Code”), to inform Franchisees whether or not they will extend the franchise agreement or enter into a new franchise agreement. The term extend is defined in the Code and, in the context of an extension of the term of a franchise agreement, occurs when the period of the franchise agreement is extended other than because of an option exercisable by the franchisee. The notice must be given at least six months before the end of term of the franchise agreement.

If the franchise agreement is for a term of less than six months, the notice period is reduced to one month before the end of the term.

Is a franchisor proposes to renew or extend the term or scope of a franchise agreement,

the franchisor must provide the franchisee with its current disclosure document, a copy of the Code and the franchise agreement in the form in which it is to be executed at least 14 days prior to the renewal or extension of the franchise agreement.

This will be too late to enable a franchisee to conduct due diligence in order to make a reasonably informed decision on whether or not to accept a renewal or extension of the franchise agreement. Where the franchisee has an option to renew the franchise agreement this time period will be well outside the time period within which the franchisee must exercise its option to renew.

Under the Code franchisees have the right to request a copy of the franchisor’s current disclosure document once in a 12 month period and franchisors are obliged to provide a copy of their current disclosure document within 14 days of a request being made by a Franchisee. We recommend franchisees request a copy of the franchisor’s current disclosure document and franchise agreement at the time the franchisee is considering a renewal or extension of the franchise agreement.

Once the disclosure document and franchise agreement are received the franchisee should examine them carefully, in particular, the terms of the franchise agreement to ascertain whether any of the terms of the franchise agreement have changed.

Franchisees should also seek legal advice in respect of the documents and where a franchisee has an option to renew the legal advice that should be sought should include advice as to whether the franchisor can change any of the terms of the franchise agreement and require the franchisee to enter into a new form of franchise agreement or whether the franchisor must renew the franchise agreement on the same terms.

Ensuring Renewal: What can franchisees do to ensure the renewal or extension of their franchise agreement?

1. attempt to negotiate one or more options to renew the franchise agreement.

2. where the franchise agreement contains an option or options to renew, take a note of the option dates to minimise the risk that the dates may be missed and any right to renew lost.

3. comply with the terms of the franchise agreement.

4. not leave the renewal or extension process to the last minute. Franchisees should start discussions with the franchisor early.

If the discussions start early the decision to renew or extend can be made well before the expiry date of the franchise agreement and avoid the uncertainty and lack of security created for both parties when a franchise agreement expires with no agreement having been reached.

Points to Remember: Franchisees must always remember: • they do not own the brand and the systems - they are only given permission to use the brand and systems for a finite period of time - either an initial term or an initial term with a prospect of renewal for a further term or series of further terms; • were it not for the franchise agreement, they would not be allowed to use the brand and the systems; and • when the franchise agreement comes to an end, they can no longer use the brand and the systems.

Situations can arise where a Franchisee, through hard work, effort and toil, can build up a business worth many times the initial outlay, only to face the possibility of that value evaporating when the franchise agreement comes to an end and is not renewed or extended. At that point, the Franchisee’s only assets are the tangible assets used in the business, such as the plant and equipment.

It is important that Franchisees not only seek appropriate legal advice at the outset but also financial advice to ensure the duration of the franchise agreement gives them sufficient time to make a return on their investment.

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, in the Corporate Advisory and Franchising Team at MST Lawyers, please contact the Corporate Advisory and Franchising Team for assistance or further information. +61 3 8540 0242 +61 3 8540 0202 www.mst.com.au

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“Some franchise agreements only provide for a fixed initial term with no right of renewal.

Others provide for a fixed initial term with one option or a number of options to renew.”

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pr o file : H A R M O N i Q

“Juggling 28 franchise locations, our systems were holding us back.

We were constantly missing out on sales opportunities. And we needed something easier to use, that could adapt as our business grew.”

- Andrew O’Brien, Business Systems Manager, Amber Tiles.

NEW FRANCHISE-TUNING SOFTWARE POSITIONS AMBER TILES FOR ANOTHER 40+ YEARS OF GROWTH A quiet achiever in Australian franchising explains how upgrading their Business Management Platform fuelled their continued success.

Franchisor Snapshot

speed. And even experienced users weren’t taking advantage of many of the existing system’s features – it was just too complex.

don’t have a marketing department. Now we’re giving them the ability to access this capability themselves.”

Plus, if outlet numbers were to keep growing, Amber Tiles knew they’d simply need more robust, efficient infrastructure and better operational support for their stores.

“What really struck me about HARMONiQ was how customisable it was,” O’Brien continues, “we could easily simplify it, include or exclude features, all based on our specific franchisor requirements. And its scalability is also going to be a real asset.”

Why Amber Tiles chose HARMONiQ

• 28 stores in NSW, QLD and ACT

Improving customer communications, franchisee relationships and overall staff productivity across multiple franchising locations is no easy feat.

• Huge, diverse inventory

The new software needed to address:

• Variable pricing by region

• Inbuilt marketing capabilities, allowing regular, segmented, personal communication with customers

• Leading tile & pavers retailer • Founded 1973

• Thousands of trade and consumer buyers 15 years ago, Amber Tiles wrestled control over an expanding franchise operation with the introduction of Micronet Distribution Software. Back then, it made a world of difference to a business with huge inventory and price management demands – and is credited with spurring much of the company’s subsequent growth.

15 years on, however, Amber Tiles saw gaps in their overall systems begin to emerge.

“We were losing out on valuable return business,” Amber Tiles Business Systems Manager Andrew O’Brien says. “Repeat trade buyers are gold for our stores. But we had no platform to stay in touch with them regularly. Many franchisees were relying solely on face-to-face contact to nurture these relationships – and that just wasn’t scalable.”

O’Brien also saw critical gaps in systems useability.

New staff needed significant, costly and time-draining training just to get up to

• An intuitive and user-friendly platform to get staff on board and using it swiftly • Ability to customise, including sophisticated inventory management features built specifically for the unique challenges of a franchise business • Multi-site functionality, communication and visibility • Ability to scale for the growth to come

“HARMONiQ met all of the requirements we set ourselves when we began our search for new software. And it provided a whole lot of additional functionality to boot.”

“In addition to integrating inventory management accounting and business intelligence capabilities,” O’Brien explains, “HARMONiQ also included the ability to stay in touch with our customers in a far easier way. Most of our franchisees

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How’s it going so far?

All Amber Tiles stores are now successfully up and running on HARMONiQ. And the benefits have been significant from even the earliest days.

“Staff immediately found it easier to pick up and run with,” O’Brien reports. “And we’re getting real efficiencies from its multi-site functionality. Now we’re able to communicate, and trade electronically, with all our franchisees. Plus, we’re evolving our communications strategies to take advantage of its marketing automation tools.”

Any last advice?

O’Brien cautions that it takes serious commitment to get the result you want from implementation of a highly developed platform like HARMONiQ. “If you want a product off the shelf, you get what you pay for,” he says. “But if you’re prepared to put in the effort and resources with HARMONiQ, it can make a huge difference for your users – and that’s where we’re getting the most benefit.”

For full details or a no-obligation demonstration of HARMONiQ, call us on 02 9542 2000 or visit www.franchising.software/demo to schedule a demo with one of our franchising experts.

MAKE YOUR BUSINESS MORE STREAMLINED, PERSONAL & POWERFUL HARMONiQ - the breakthrough all-in-one ERP system tailored to your franchise’s unique needs

SEE HARMONIQ IN ACTION GET YOUR FREE DEMO TODAY Simple. Powerful. Easy to use. And unbelievably flexible. HARMONiQ is the first in its category that can be truly personalised to the way you want your franchise business to operate and your people to work together.

(Not to mention offering the fastest customisation times in the industry.)

It offers all the features a franchisor needs to fine tune business performance - in a single, scaleable system that can grow as you grow.

SEE

Business intelligence and reporting Inventory and warehouse management Stock control Workflow automation Retail POS Integrated eMarketing Accounting Customer Relationship Management

IN ACTION

Call 02 9542 2000 to book your free demo, or visit www.franchising.software/demo to learn more about how HARMONiQ helps you do business better.

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Are you buying a small business or a franchise business?

What’s the real difference?

To say Australia is a smallbusiness economy is somewhat underselling the real impact small business has as an employer, exporter, importer and service provider.

In the last financial year, Australian Bureau of Statistics data shows there were well over 2.2 million actively trading businesses in Australia – an increase of 3.1 per cent on the previous year.

With an estimated 95 per cent of these businesses being classified as small

businesses, there is little doubt there is tough competition for just about any new business to find the right customers in a crowded marketplace. This is before consideration of regulatory, legal, financial and logistical issues involved with running a business.

The risk of going it alone Every small business owner takes on a big risk in ‘going it alone’ but the numbers indicate plenty are willing to take on the many challenges posed by small business ownership.

And the risks are considerable, particularly financial.

Small business ownership can be sold as glitz and glamour when in reality, you will

be the first in and the last one to leave. Are you prepared to put in these hours? Are you willing to nourish your asset and evolve with it?

The benefits of the franchising model Franchising is another method many small business owners have used in the hope of minimising some risk.

There is a lot to like about the franchising model. Buying into a franchise enables instant brand recognition, an established framework to draw upon, a head office team to support the franchisee with regulatory issues like industrial relations, and a community of like-minded people to lean on, and learn from.

These are all wins. They can certainly help a new business stand out from the crowd and hit the ground running, but it is vital that buying a franchise system is not seen by franchisees as a ‘mission accomplished.’

Simply purchasing a franchise does not give the franchisee the right to be a business owner. This must be earned. And like anything in life that is earned, it is hard work.

Buying into a franchise system is buying into a world of small business ownership and with that, any franchisee must embrace the entrepreneurial spirit and hustle to go on the journey with the franchisor.

“How are you going to do the ‘little things’ right – how are you going to strip back the business and build it around you and the needs of your customers?”

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How are you going to do the ‘little things’ right – how are you going to strip back the business and build it around you and the needs of your customers?

Franchisees must also embrace the leadership of owning a business – the impact their decision has on others and the opportunity to empower their employees and their local communities.

A new franchisee needs to invest in their employees and build up trust as an employer of excellence to attract and retain skilled and enthusiastic employees who can be trusted with the business.

The co-pilot, not the passenger Unlike catching a bus where the driver does all the driving and navigation, and the passenger can tune out with a book, and find themselves at their destination, buying into a franchise system is like being a co-pilot of a plane. They are an active participant in the journey – helping to steer the business alongside the franchisor in order to achieve mutual success.

While the franchisor will provide a lot of groundwork, for example, some recognition in the market, tools, templates and head office support, the franchisee still needs to do all the same things any small business owner does in order to stand out.

Have you clearly identified your goals and objectives with your team prior to purchasing the franchise?

“Relying upon a head office marketing strategy was also not sufficient to maintain or increase sales, we had to focus on training and self-assessment to ensure that our customer service levels were adequate with the ever changing expectations of our customers.”

- Angus Christian, Helloworld Travel Franchisee

Simply having a well-known restaurant, professional service or consumer product will not automatically endear a new franchisee to the community. Investing in local marketing initiatives is vital to ensure a new franchisee’s venture is known in the area.

Customers must not only trust the franchise brand, but their local franchisee. This means ensuring consistency but also going the ‘extra mile’ and not just cruising on the brand value of the franchise system.

While many new marketing initiatives may be driven by head office, a franchisee needs to be constantly driving their innovation through their own business to ensure they are providing good customer experience.

“Simply having a well-known restaurant, professional service or consumer product will not automatically endear a new franchisee to the community.”

Are you ready to take the next step?

Ultimately, what is the main reason you want to become a business owner? Is it the the prestige the desire for income, or is there a driving passion for entrepreneurship, innovation and leadership?

“Become involved in a business that you are passionate about. You are going to be at work for long periods of time when your business first starts. So, you may as well love what you are doing!”

the ins and outs of their business, but importantly enjoying the journey, both the risks and the rewards.

“I understand buying a proven system in a franchise gives me a head-start to running a profitable business, however there is absolutely no expectation that the doors open and profit enters the front door without super hard work and effort.”

- Ashlee Kelly, Listen To Your Body Franchisee

The desire for leadership and the need for life-long learning

FC Business Solutions is the only integrated consultancy focused exclusively on the franchise community. Our team of professionals has been providing specialised and expert services to franchises for many years.

With more than two million small businesses in Australia, sadly not all will succeed. While buying into a franchise system does mitigate some of the risk, it needs to be acknowledged that owning a business is a privilege.

The FC Business Solutions team are actively involved members of the Franchise Council of Australia regularly attending events, participating in committees and assisting in raising the profile of franchising in Australia.

It is a privilege to build something greater than one’s self – to build a team and empower people and a community.

FC Business Solutions is a business which has proudly been certified in accordance with the internationally recognised ISO 9001: 2008 management system which focuses our business on delivering a consistent level of quality to our clients defined by regularly reviewed processes and procedures.

- Paul Ferraro, Autobarn Franchisee

Are you prepared to educate, motivate and empower everyone that you cross paths with?

As Simon Sinkek says, “leadership is an education and the best leaders think of themselves as the students, not the teachers.”

In holding this true, business owners can become business leaders as they learn and

hello@fcbs.com.au (03) 9533 0028 www.fcbs.com.au

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pr o file : T he I nterface Financial G ro u p

Tried, tested &

ready to go!

With roots reaching back to 1972, The Interface Financial Group (IFG) has carved out a special place for itself in the commercial finance market.

Serving the needs of small and mediumsized businesses, IFG has grown from the ‘one office/one location’ environment into a multi-national organization now covering eight countries on four continents.

The founder of the company, Mr. John Sheehy, had a simple approach to business when he started in 1972 – that approach being, to provide a service that his clients needed and to provide it in as timely a fashion as possible.

Over 45 years later IFG continues to focus on that mentality and approach – servicing clients in a timeframe that was not possible in 1972 but now, with the advent of extensive integrated technology, the service timeframe has been drastically reduced.

IFG provides a cash flow acceleration service for their clients. In today’s environment clients invariably find that they are at the mercy of their customer when it comes to their cash flow, as it is their customer who controls the payment cycle and hence their business. The Interface approach allows for invoices to be turned into immediate cash once the goods have been delivered or the services performed.

Giving clients the option to place a portion of their business on a ‘cash-on-delivery’ basis enables exponential growth for their clients. This form of financing is categorised as invoice discounting and while it may fall under the umbrella of the factoring financial service family, it is a unique and distinctive stand-alone service.

Banks have traditionally been the provider of capital for business growth throughout the country, something that has existed for many

decades. However, there is now a noticeable shift in that role, with banks being less favorably disposed to a lending relationship with their SME customer base.

Obviously, this is not a satisfactory situation for those businesses, however the fact that there are alternatives creates not only an opportunity for Interface but a viable growth pipeline for emerging businesses. Where a company’s needs cannot be met by their conventional funder, then an immediate opportunity is created for the Interface service.

very realistic and viable opportunity. IFG, having been in business for over 45 years, brings extensive expertise and history to the table for all franchisees. The extensive technology component in the franchise also provides an unparalleled opportunity for both franchisees and clients to grow their respective businesses.

Not only is the Interface service distinct in terms of performance time, it is also distinct in terms of delivery methods. Interface is organised on a franchise basis. This approach enables the organisation to have an extensive geographical reach into the marketplace through their franchisees. Working with franchisees also provides a high level of local due diligence in assessing funding opportunities and again reducing the overall time from ‘application to funding’.

The advent of technology in the Interface organization has enabled them to craft a franchise that is now basically paperless.

Franchisees are no longer in the form filling business, and their efforts are very much concentrated on the ‘people’ aspects of running and building their business. For individuals who see themselves as ‘people’ people with a strong business background, then the Interface opportunity may be a ‘must review ‘opportunity. Working only in the business-to-business marketplace and only core business hours without extensive travel, and in a home-based environment with no inventory and employees to invest in, the Interface franchise is very much a work smart and not work hard opportunity.

For individuals looking to own their own business and an opportunity to enter the entrepreneurial marketplace, a white collar professional franchise such as IFG offers a

For more information: ifg@interfacefinancial.com www.interfacefinancial.com.au/franchise

64 Business Franchise Australia and New Zealand

Office Expense.

2IÀFH H[SHQVH Advertising to Purchase. $GYHUWLVLQJ WR 3XUFKDVH Employees.

(PSOR\HHV Stock to Purchase & Warehouse 6WRFN WR 3XUFKDVH :DUHKRXVH 60+ Hour Weeks.

2IÀFH H[SHQVH +RXU :HHNV $GYHUWLVLQJ WR 3XUFKDVH (PSOR\HHV 6WRFN WR 3XUFKDVH :DUHKRXVH +RXU :HHNV

For more information: ifg@interfacefinancial.com www.interfacefinancial.com.au/franchise

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THE IMPORTANCE OF MAKING A PROFIT

Entering into a franchise agreement may be the best business decision you ever make.

Equally important, any business, be it an SME, franchise or large corporation should aim to make an adequate profit return after market value wages to owners and maximise the return on capital investment should it decide to sell the business.

However, it’s important to look at its longterm potential rather than seeing it as a trade-off of hard earned money and/or going into debt in return for a lifestyle with a modestly paying job, warns Andy Graham, Managing Partner – Brisbane and Director, Business Advisory, RSM Australia.

Busy treading water?

Whether it’s against their better judgement or not, one thing many franchise operators don’t do every pay cycle is draw down a ‘market value wage’, along with any staff they employ. But as important as receiving a regular wage is, that’s only one of three imperatives that any successful franchise operator should expect from their business.

While Franchisors are relatively upfront about what it’s going to cost to get you into their systems, you should ensure that they also tell you what a good profit looks like.

Whether you’re new to running a business, or have been doing it for decades, it’s critical to recognise that being frantically busy doesn’t necessarily mean you’re making a profit. Similarly, it’s important to realise that profit isn’t just the money received from customers for the goods you sell.

The profit is simply what’s left after revenue from business activity exceeds the expenses

66 Business Franchise Australia and New Zealand

needed to keep the business going or to put in another way; profit = total revenue – total expenses. This may sound like business 101, and too pedantry to mention. But the sad reality is that too many franchisees struggle with becoming and remaining profitable.

Just as your household can’t go on forever without you pulling a wage, no franchise is sustainable if it doesn’t turn a positive net profit. It’s profit that allows you to continually reinvest in your business, and will go a long way to helping you secure financing from a lender or attract investors to fund future operations or growth and expansion plans.

Understanding your financial position There is a myriad of reasons as to why you might be making a loss and the sooner you can get to the bottom of it, the better.

Andrew Graham | Managing Partner - Brisbane and Director, Business Advisory | RSM Australia

Royal Commission is a gamechanger If you’re a franchisee who’s struggling to either make and/or maintain profitability, then you need to prepare for the net negative fallout from the recent Royal Commission into banking. Like it or not, it may become even harder for franchisees to get credit as banks become more mindful of operating within increasingly tighter rules being imposed by government and other regulatory bodies, notably APRA and ASIC. With the time it takes banks to make judgement calls on loan applications likely to be considerably longer, franchisees that are used to making swift decisions, may find their ability to capitalise on new opportunities is diminished. Thirdly, assuming you are able to acquire bank funding, the cost of accessing the account facilities and payment services you’ve come to expect are likely to be higher, as bank charges rise in an effort to maintain their profit margins.

If there’s any doubt as to the financial position of your business, at any time, but especially at tax time, then bad accounting could be the root cause of your problems.

No franchisee can run their business unless they have a complete financial snapshot of the business in real-time, and cloud-based accounting is an effective way to ensure you achieve this.

If one of the reasons you’ve been attracted to a franchisor is the quality of their systems, then bad accounting and access to the financials is unlikely to be an issue for you.

However, that doesn’t mean future earnings forecast within the franchisor’s disclosure documents haven’t been overly optimistic.

Consequently, franchise fees could be one of your biggest issues if they don’t represent value for money for what you are receiving especially within a down market where the cost of doing business is going up.

like when you’re going through a period of transition or high growth.

But given that non-banks – which are not currently controlled by APRA – typically don’t require SMEs/franchisees to jump through as many hoops, it’s equally important to know when they’re likely to do more harm than good.

Remember, both bank and non-bank lenders have useful tools that are freely available on-line from the comfort of your own office. However, when trawling through the burgeoning number of online lending opportunities aimed at SME operators, make sure you know who you’re really dealing with and their connections to other financial entities.

Five tell-tale signs of an unprofitable franchise 1. The business is not a sound financial proposition.

Then there’s the very real possibility that interest rates may go up, even before the RBA begins a new rate rise cycle, as banks respond to pressures from both the Royal Commission and what’s happening offshore, notably the US.

Understand your options The good news is that there is now a growing plethora of alternative funding sources available to franchisees. Step one is to make sense of all the options available in the SME finance space. These include unsecured finance from non-bank lenders, new Fintechtype organisations, foreign lenders, through to crowdfunding, private equity, factoring, peer-to-peer lending, and governmentbacked mortgage securitisation schemes.

The next step is to understand how each of these different funding options work. Half the battle is knowing what stages of your business’s life-cycle might complement faster and more flexible non-bank lending options,

In other words, you’ve been sold a pup and the money you will need to make to cover overheads such as rent, wages, cost of goods, utilities and loan repayments is simply unrealistic. Admittedly, all franchise owners work hard, but if sacrificing your marriage and family life has become a permanent lifestyle then you need to honestly assess whether this is sustainable long-term.

2. Difficulty in accessing financial data.

Many franchise operations come with financial reporting software that franchise owners must use. Owners should be able to get access to real-time financial information to track their income and expenses.

3. Lack of qualified, dedicated people to handle the books.

Unlike many other areas of the franchise, bookkeepers don’t require certification and its commonplace for businesses to rely on a family member, someone on

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“While Franchisors are relatively upfront about what it’s going to cost to get you into their systems, you should ensure that they also tell you what a good profit looks like.”

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contract or also juggling other duties, to perform this role. Whilst bookkeeping principles are fairly similar, each franchise will have its own quirks and the bookkeeper will need to be across the different financial reporting technologies that would best suit that franchise. It’s important for business owners to work with their accountants and bookkeeper and take an ‘active interest’ in the financial date produced – not just have an eye on the balance in the bank account.

4. Unreasonable franchise costs.

All franchisees have franchise fees payable, which typically cover marketing costs and administration fees. Franchisees need to understand the fees that they are paying, and what they get for those fees.

They need to make sure they get value for money and use the services provided by their franchisor.

5. Poor franchisor purchasing agreements.

It is common in franchise business structures, for franchisors to negotiate deals with suppliers, and then on-sell inventory items to the franchisees.

Franchisees need to regularly review these costs to ensure that the amounts

“The profit is simply what’s left after revenue from business activity exceeds the expenses needed to keep the business going or to put in another way; profit = total revenue – total expenses.” paid for their stock is better than if they source the same items themselves from other suppliers. Notwithstanding most franchise agreements will likely require the franchisee to purchase exclusively from the franchisor.

Andy is a Director of Business Advisory and Managing Partner of the Brisbane Office.

Andy has just completed a six year term as the National Head of Business Advisory.

He is now a member of the firm’s National Executive Board which oversees the firm’s national management structures and strategy.

As a natural communicator with high level problem solving skills, Andrew works closely with his clients to deliver results and outcomes that make a real difference to their business and personal goals.

68 Business Franchise Australia and New Zealand

Andy is an obsessively client focused commercial and tax adviser with a proven record of strategy development and managing growth to deliver substantial improvements to businesses.

Having grown into one of Australia’s leading professional services firms over the last ninety five years, RSM Australia is committed to enabling clients through a greater understanding of what matters most to their business.

In addition to local knowledge provided by their advisers in 30 offices across Australia, RSM Australia draws on their international reach and scale to ensure clients stay at the forefront of the world’s best practices, technology and innovation within a rapidly changing global economy.

(07) 3225 7800 andy.graham@rsm.com.au www.rsm.global/australia