Business Franchise Guide Aus & NZ

YOUR KEY TO BUYING, MANAGING AND PROFITING FROM YOUR OWN FRANCHISE

The Franchise Guide 2016 is published by CGB Publishing Pty Ltd PO Box 968 Mt Eliza VIC 3930 Australia Phone: 03 9787 8077 Fax: 03 9787 8499 *** The information and contents in this publication are believed by the publisher to be true, correct and accurate but no independent investigation has been undertaken. Accordingly, the publisher does not represent or warrant that the information and contents are true, correct or accurate and recommends that each reader seek appropriate professional advice, guidance and direction before acting or relying on all information contained herein. Opinions expressed in the articles contained in this publication are not necessarily those of the publisher.

PUBLISHER’S SUGGESTED RETAIL PRICE $19.95 Š 2015 CGB Publishing Pty Ltd all rights reserved.

ISBN 978-0-9803923-8-8

Contents Preface ................................................................................................................................................................................................ 1 Chapter 1 What is franchising?............................................................................................................. 3

Professor Lorelle Frazer, Asia-Pacific Centre for Franchising Excellence, Griffith University

Chapter 2 Who you gonna call? Yourself‌....................................................................13

Janine Allis, Retail Zoo

Chapter 3 What Does Due Diligence Really Mean?. ...................................................21

Suzanne Jarzobkowska, DC Strategy

Chapter 4 Funding your franchise.................................................................................................33

Darryn McAuliffe, FRANdata

Chapter 5 Understanding the Legal Documents........................................................43

Robert Toth & Marianne Marchesi, Marsh & Maher

Chapter 6 Financial tips for prospective franchisees. ....................................55

Jamie Bishop, McLean Delmo Bentleys

Chapter 7 What makes a successful franchisee?...................................................65

Kathy Smith, Fastway Couriers

Chapter 8 Define your target market........................................................................................73

Stefan Kazakis, Business Benchmark Group

Chapter 9 Investing in an international franchise..............................................79

Rod Young, DC Strategy Group

Chapter 10 Employing staff in Australia: Know your obligations. ...91

Michelle Dawson, Madgwicks Lawyers

Chapter 11 Employing staff in NZ – The legal landscape.............................. 107

Graeme Riach, Harmans Lawyers New Zealand

Chapter 12 The Franchise Council of Australia......................................................... 117

Chapter 13 Franchising in New Zealand................................................................................ 123

Graham Billings, Franchise Association of New Zealand

Chapter 14 Territory – Do you really know what you

are getting?................................................................................................................................. 131

Stewart Germann, Stewart Germann Law Office

Chapter 15 Growing your franchise........................................................................................... 137

Jason Gehrke, Franchise Advisory Centre Chapter 16 How to franchise your business simply............................................ 147

Brian Keen, How to Franchise Simply Franchise Listings.................................................................................................................................................... 156 Professional Services Listings.............................................................................................................. 180 Publications...................................................................................................................................................................... 191 Helpful Organisations....................................................................................................................................... 192 Index. ............................................................................................................................................................................................ 193

Preface

By Joanne Tuffy Editor CGB Publishing Pty Ltd

H

ave you always wanted to be in business for yourself, but weren’t confident you had all the necessary experience to be successful? You are not alone.

This is the reason franchising has flourished over the last three decades; it enables dedicated and driven individuals, who may lack the business knowhow to build a stand-alone enterprise, to achieve their dreams of owning their own business by joining forces with a strong, stable, established business network.

The fact that you have picked up this book means that you are seriously contemplating buying a franchise. You are on the right path. The more information you read, especially by franchise sector experts, the more you will discover that franchising is a fantastic opportunity for you to become your own boss and start a new life.

The aim of this publication is to give you a sound starting point to begin your franchising journey. We have included a wealth of information from leaders in the franchising industry – giving you professional insight on how to research, select, buy and successfully run your own franchise. We have asked franchise lawyers, accountants and consultants to share with us their tips and tricks to achieving personal and financial stability and success.

Don’t miss the chapters from Janine Allis, Founder of Boost Juice and Kathy Smith, Regional Franchisee for Fastway Couriers. Both chapters focus on you, the franchisee and how to become successful within your chosen field. Also, don’t miss the chapters from the Franchise Council of Australia (FCA) and Franchise Association of New Zealand (FANZ). Both give detailed information on the services provided to both franchisees and franchisors.

As an added bonus, we have also included a chapter on how to franchise your business. So if you have an excellent existing model that could possibly be expanded into a franchise, be sure to take a look at this chapter as well.

Franchising opportunities today extend to nearly every business sector; from food to financial services, fitness to furniture, building to bedding, printing to -1-

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pet care‌.the list goes on and on. You can find nearly any kind of profession, in a wide price range, suited to your family and financial circumstances.

Regardless of the franchise you choose, you will have access to the support, structure and sound business model of a proven system.

Once you are convinced that a franchise system is the right move for you – we have a selection of leading franchise systems listed in the back of the book.

Browse through the categories and see which systems interest you most.

Changing direction in life can be daunting. However, gaining as much knowledge as possible and utilising all the available tools and resources to guide you on the right path will ensure you have the best possible chance for success.

Best of luck on your exciting journey.

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Chapter 1

WHAT IS FRANCHISING?

By Professor Lorelle Frazer Director, Asia-Pacific Centre for Franchising Excellence Griffith University

About the Author The Asia-Pacific Centre for Franchising Excellence was launched by Griffith University in March 2008, formalising the University’s commitment to franchising research and education, developed over more than a decade.

Its aim is to help advance franchise industry best practice through independent research, education and the dissemination of information via the Centre’s website.

Since its launch, the Centre has been led by one of the world’s leading and most highly respected franchise researchers Professor Lorelle Frazer.

Based at Griffith University in Brisbane, the Centre works to transform research findings into practical outcomes for business, such as the Centre’s free, online Pre-Entry Franchise Education Program, sponsored by the Australian sector regulator, the Australian Competition & Consumer Commission, which was developed following research into franchise conflict uncovered a greater need for prospective franchisees to conduct better due diligence before buying a franchise.

Its research helps inform policy and Centre members actively engage with key government bodies and franchise associations across the Asia-Pacific, as well as with other franchise academics across the globe.

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How Do I Find Out If franchising Is Right For Me? We interviewed Professor Lorelle Frazer, Director of the Asia-Pacific Centre for Franchising Excellence at Griffith University to find out.

The Centre is an invaluable resource for anyone looking to begin their journey in franchising.

It is completely independent and impartial, there are no vested interests or selling of franchise systems. The focus is solely on education and professional development in franchising, including the foundation stones of knowledge for new entrants to the sector.

Knowledge is power and nowhere more so than in the franchising sector, where new franchisees are making the ultimate leap of faith into their own business.

Here is Professor Frazer’s overview and insights into franchising in Australia as well as some valuable tips and resources for those interested in the opportunities that franchising presents.

How Big Is Franchising In Australia?

The franchise sector is a big contributor to the Australian economy, contributing an estimated $144 billion.

It is dynamic and diverse and has matured well beyond its origins in fast food retailing to now encompass all aspects of consumer and business-to-business products and services.

Virtually anything can be franchised, is already franchised, and the future possibilities for the sector are endless.

The Franchise Council of Australia (FCA) describes franchising as not a business in itself, but rather a way of doing business or a system. “Franchising is a business relationship in which the franchisor (the owner of the business providing the product or service) assigns to independent people (the franchisees) the right to market and distribute the franchisor’s goods or service, and to use the business name for a fixed period of time.”

Franchising has proved very popular and successful in Australia and is now one of the biggest and most important contributors to the country’s small business sector, which is increasingly being recognised by all levels of government as key driver of future economic growth.

Indeed, the franchise sector has outperformed many other areas of the Australian economy in recent years. Against a background of declining mining investment, the weak state of the labour market, and financial conservatism, Australia’s general economic growth has been sluggish over the past few years.

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What is franchising?

However, the franchise sector has experienced net growth in franchise units and sales turnover, reflecting its diverse base and reach, the power of franchise brands and their strong acceptance by Australian consumers.

There are currently a total 1,160 franchise systems in Australia, according to the latest Franchising Australia Report released in 2014. This biennial survey, carried out by the Asia-Pacific Centre for Franchising Excellence and supported by the FCA, is the definitive guide to Australia’s franchise sector.

The Franchising Australia Report was launched in 1998 and its comprehensive database of franchisors has been updated every two years since. The next edition in 2016 will mark its 10th biennial instalment.

Franchise systems operating in Australia include some of the biggest consumer brands in the world, local success stories, and up-and-coming entrepreneurs who have chosen the franchising concept to expand their operations. Within these systems, there are 79,000 franchise units in Australia, which are local and usually individually owned and operated businesses. A total of more than 460,000 people are employed directly across the franchising sector in Australia, as well as the many more companies and individuals involved in the supporting supply chain. The overall turnover of the sector is huge, with an estimated contribution of approximately $144 billion to the Australian economy.

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Source: Franchising Australia Report 2014

Australia is often described as the ‘franchise capital of the world’ due to our large amount of franchising activity and franchise systems, relative to our population. Many of these are home grown successes alongside most of the world’s biggest franchise brands.

Franchising is growing steadily all around the world, and has a lot of major growth to come in the fast-developing and huge population markets of Asia and the sub-continent, in particular China and India.

In Australia, the total number of franchise systems has grown consistently over the past decade, although there has been a 1.7 per cent decline from 2012 to 2014. This is actually a good sign for the sector. Australia had held one of the highest levels of franchisors per capita in the world for several years, but many franchise systems have been too small to remain viable. As the franchise sector continues to mature in Australia, we can expect to see the total number of franchisors decline whilst individual franchise systems grow their number of franchise units.

WHO IS SUITED TO FRANCHISING? Franchising now encompasses almost every aspect of society, so there really is a franchise system out there with the product and service offering suited to the interests of anyone looking to run their own business.

There are always new trends emerging that become popular with franchisors, franchisees, and consumers. Health and fitness has been one big area of growth for franchising in recent years, and aged care and associated support services is now rapidly emerging as another strategic area for franchise growth, given Australia’s ageing population.

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What is franchising?

The provision of specialist services to meet specific market needs is also fertile ground for new franchise systems, as evidenced by the growth in areas such as dog walking and washing, and tutoring to name just a few.

There are also new trends that are always emerging in the way that the franchise sector operates. This includes more people now operating several franchise units instead of just one, so they become multi-unit operators within the system.

Some franchise systems are also expanding by acquiring other franchise systems, so we are seeing mergers, acquisitions and alliances occurring.

Regardless of the franchise and the product or service it provides, it is important for people who are considering entering the sector to undertake pre-entry education and also ask themselves critical questions about what they want to achieve by becoming a franchisee. Is return on investment the key motivator, or is it predominantly a lifestyle choice?

TIP: Define what you want early on. What is your priority? To create a high yielding investment or to achieve a highly flexible lifestyle?

The first steps are the most important in ensuring a successful and sustainable journey in the world of franchising. This does not just start with buying a franchise. Pre-entry education is crucial in plotting the right path for your future as a franchisee.

Many people often have this idea in their head that they would love to own a ‘such and such’ franchise, but they don’t really know what it’s like to operate one. So take a reality check and, if possible, check out the franchise. Try it out (if you are allowed to do that) because it might seem like a good idea owning a pizza franchise, but the reality is; ‘in start-up mode’ you are the key worker in the business. That means you will probably be the one cooking and serving pizzas every night of the week and the weekends. Your social and family life will be impacted. A lot of people find out too late that this is not the lifestyle they envisaged when they first started their journey into franchising and business ownership.

Similarly, you might like dogs, but do you really want to wash 70 dogs a week?

That may get a little bit tedious. So just think about what it is really like, how it will affect your lifestyle; how it will affect your relationships with your family? Will you have social time? The pressure’s on you and whether you are the right personality for that business.

TIP: Imagine your day-to-day existence in that franchise? Does it feel like a good fit? Will you be engaged and excited to go to work for the next six months, two years or 10 years? How does this fit with your earlier decision about what you want: a high yield on your investment or greater lifestyle flexibility?

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HOW DO YOU BECOME A FRANCHISEE? The typical investment to buy into a franchise obviously depends on the type of franchise and its size and so on. Typically, for a retail franchise you’d be looking at an average of about $250,000 plus to enter, and for a service franchise maybe $50,000 - $60,000 plus, but there are also extreme variations as well.

The franchise fee is separate to other costs and doesn’t typically include fit out, stock etc. That is usually disclosed separately. The franchise fee is like your rental of the brand and the franchise system for a set amount of years. On top of the franchise fee you usually have your gearing up items like site costs, fit out, signage, stock, hardware, vehicles, tools of trade etc. That is why disclosure documents are so important, as all these expenses should be itemised in the disclosure document.

TIP: Be diligent in asking for ALL costs involved in your franchise business. This should be in your disclosure document so make sure you scrutinise this using, at the minimum, business law and financial professionals; ask plenty of questions before you buy.

Buying a franchise is definitely not a guarantee of business success. You have a degree of risk as with any small business, whether it is a franchise business or an independent small business.

However, franchises are at an advantage because they have been out there operating already, and usually have a well-known brand that most customers know. They are often larger systems so it may minimise risks. You still need to be careful that you are entering the right franchise though and recognise that there is a lot of hard work ahead. Just like any other business, there is no guarantee of success.

TIP: Research the brand and competitors via the internet, your friends and potential customers. Ask them if they’ve heard of your potential brand and what do they think of it? Have they shopped there or would they?

WHAT IS THE FRANCHISEE-FRANCHISOR RELATIONSHIP? It can often be described as a mentoring relationship, as many people who enter franchising may not have been in business before and do not understand what is involved.

So the franchisor can help to guide them through the process. If it is not the franchisor personally then it may be someone else in the franchise organisation such as field support staff.

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What is franchising?

There is also the network of franchisees around them so they can share experiences and provide advice. For some franchisees it can be an isolating experience; they feel like they are there on their own. So it does really depend what franchise system you are in, how big it is, how many layers of management there are and how much support is given. Finding the answers to these questions are part of good due dilegence when buying a franchise business.

TIP: Start your relationships early. Develop a good trusted group of support people e.g. franchisees, franchisors and professional services people. Don’t be afraid to ask existing franchisees about the level of support they get and who they turn to for solutions.

Communication is probably one of the most important aspects in the franchiseefranchisor relationship, and an area where franchisees can get dissatisfied. If you are in a small franchise it is a lot easier to stay in direct contact with the franchisor. Once you enter a large franchise system you may not actually have contact with the franchisor as many mature franchise systems are now listed companies. In most cases it will be the field support staff that you are dealing with. That lack of direct contact with the franchisor (or the CEO) can sometimes be worrying for franchisees as they did not realise it would be like that.

This makes effective communication vital to the franchisee-franchisor relationship.

TIP: Ask about the communication systems in terms of product information, pricing, marketing and financial reporting etc. How is it received to you and what is expected from you? Is there a representative group of franchisees such as a Franchise Advisory Council? How often do they meet? How do you access and meet with other franchisees?

GETTING STARTED So just how do new potential franchisees navigate their way through the myriad of information they are presented with, and which will dictate their future prospects in franchising? There is help available to assist in making informed decisions on your future in franchising.

The Asia-Pacific Centre for Franchising Excellence provides a range of convenient, easy-to-access and in many cases FREE online franchise preentry, business survival and management essentials education programs. These industry-based educational resources should be the first port of call for anyone looking to buy a franchise.

Potential franchisees need to rely on much more than just ‘gut feel’ when making such an important decision as a franchise investment, and the Centre is committed to providing the early education required for future business success.

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Its educational programs are designed to not only aid improved decision making through enhanced knowledge levels, but to also improve understanding of the franchising sector, compliance with the Franchising Code, and practical issues that could be faced.

The authentic and ethical nature of these resources is what sets the Centre apart in the franchising sector. There is no hidden agenda or selling of franchise systems or products. In fact, these educational tools may even lead you to a decision that franchising is not for you.

The focus of the Centre’s educational activities is to get potential franchisees thinking, asking questions, finding answers and making well-informed decisions about their future. This in turn, raises knowledge levels; understanding of franchising and compliance; and best practice standards across the sector. The end result of better education is more successful and sustainable franchisees and franchise systems throughout the sector.

TIP: Anyone new to the franchising sector or thinking of buying a franchise should consider the following programs offered by Griffith University’s Asia-Pacific Centre for Franchising Excellence.

‘Buying a Franchise’ Pre-entry Franchise Education – FREE Online Short Course If you are thinking of buying a franchise, this FREE online short course is available to help you assess franchise business opportunities before deciding which one is right for you.

It is important to know how to correctly assess franchise business opportunities to ensure you make the correct choice.

The ‘Buying a Franchise’ Pre-Entry Franchise Education Program sets the solid foundations for business success, before you actually buy a franchise business.

It is designed to assist franchisees to better understand the due diligence process and create more realistic expectations when entering franchising.

Research into the effectiveness of this program reveals franchisees that complete the program will not only have more realistic expectations, they are also more likely to become franchisees.

This program is kindly funded by the Australian Competition & Consumer Commission (ACCC) and it is strongly recommended to incorporate the program into franchisee recruitment processes.

Even if you’ve already started looking for a franchise to buy, you will still benefit from the ‘Buying a Franchise’ Pre-Entry Franchise Education Program.

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What is franchising?

Its five short online course modules cover: what is franchising? understanding franchise disclosure, franchise support services, franchising intellectual property, and questions to ask franchisors.

Franchise and Small Business Survival eClass – FREE Online Education This FREE Franchise and Small Business Survival eClass is specifically designed for people looking to buy a franchise, recent franchisees and small business owners.

Recent franchise sector research by the Centre showed that many franchisees and small businesses overlooked critical issues in their management that could lead to business failure.

The Franchise and Small Business Survival eClass investigates key areas in business management, including contractual understanding, partnerships, expectations and debt levels.

While these have all been identified as being critical areas, it has been shown that most failed business owners were lacking in knowledge in one, or more, of these areas. They are all issues which, without proper understanding and management, directly place the future prospects of business success at great risk.

This valuable online educational resource comprises four animated eClasses to improve business management knowledge in these critical areas. Knowing what these issues are before buying a franchise or small business is the best insurance for any business.

Franchise Business Management Essentials eClass – Online Short Course The Franchise Business Management Essentials eClass is for people looking to buy a franchise or who have recently become a franchisee.

It is focussed on building strong business fundamentals for franchisees and is designed to supplement franchisor training by addressing key areas which often lie outside of this, such as core business management skills.

Whether you are looking to buy a franchise, or have recently become a franchisee, you will need to gain an understanding of how to manage a small business effectively. Most franchisors do not address business management in their training for franchisees, instead focusing more on the operational aspects of running the business. That’s where this short online course can help as it is specifically designed to fill this skills gap.

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The eClasses cover all the fundamental business skills you will need to run a successful business, including preparing budgets and cash flow forecasts, managing staff and supply chains, introduction to small business and franchise marketing, managing growth and identifying opportunities, franchise conflict causes and resolutions, and profiting when exiting your business.

This resource incorporates the latest franchise research and best practice examples to accelerate success and is ideal for people with no or limited previous business experience.

For more information on these invaluable franchising sector educational resources, visit www.franchise.edu.au or contact the Asia-Pacific Centre for Franchising Excellence on Tel: (07) 3382 1401.

As well as setting franchisees on the right path to franchise business success, the Centre offers a wide range of ongoing, sector events, resources, and educational programs for both franchisees and franchisors, as part of its commitment to lifelong learning and professional development for all in the franchising sector.

The Centre offers a wide range of franchise courses, both online and face-toface, professional development events, online seminars, research reports and more. You can sign up to receive the Centre’s fortnightly newsletter and other information on events free on the website.

Professor Lorelle Frazer Director, Asia-Pacific Centre for Franchising Excellence Griffith University 07 3382 1401 www.franchise.edu.au

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Chapter 2

Who you gonna call?

Yourself…

By Janine Allis Founder of Boost Juice Retail Zoo

About the Author Janine Allis is not your everyday self-made businesswoman. She grew her juice and smoothie empire from her kitchen bench to an international success story (Boost Juice Bars are now in 13 countries with over 400 stores).

For most people, the formula for achieving success in life is to study hard, get good grades, get into a good business school or university and work your way up the ladder… Janine’s way was to work three jobs so she could fulfill her dream of travelling the world and letting life take her on a journey; from nannying in a little French village to working for rock gods and movie stars on a yacht in the South of France and the Caribbean.

As a young mum and looking for a new adventure back in Australia, Janine decided to invest in her passion for healthy snacks on the run.

That passion has translated into over $2 billion in global sales since inception and the business has squeezed and blended its way through thousands of tonnes of fresh fruit and veg every year, including over 2000 tonnes of watermelons, 49 million blueberries and 3 million bananas a year in Australia alone.

Janine is now sharing her knowledge with others, including through her a role as a “shark” and mentor on Channel Ten’s Shark Tank, and says if she can do it, anyone can.

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Who you gonna call? Yourself…

If you’re looking for a magic bullet to help you succeed in business; try looking in the mirror.

According to Janine Allis – one of Australia’s most successful self-made businesswomen – there is no secret shortcut to the top but the biggest asset you’ve got is yourself.

“One thing I get asked a lot is, ‘What is the trick to succeeding in business?’” she said.

“Everyone wants to know – what’s the secret sauce? What’s the magic bullet?

What’s that elusive thing that if I can just switch it on, it’ll take me to my first million?

“The truth is; there’s no such thing because there are so many factors that go into making a business succeed that you can’t possibly narrow it down to one thing.

“But one of the things that makes a huge difference to whether you succeed or fail – regardless of all those other factors – is what kind of person you are.”

HAVE YOU GOT “IT”?

Janine said over the years, she has gotten quite good at spotting when a person has “it” and when they don’t.

“One of the criticisms I faced in Season One of Shark Tank was how quick I was to judge the applicants – both positively and negatively,” she said.

“But when you’ve been in business as long as I have, you get to know the signs that tell you whether a person has that fire in their belly or whether they’re going to be what I call a ‘VERB’ – which is an acronym I heard many years ago that perfectly describes the kind of mentality that I think goes hand-inhand with failure.”

VERB stands for victim, entitlement, rescue and blame.

“A victim thinks ‘poor me’ instead of finding a solution,” Janine explains.

“They feel entitled to receive instead of driven to achieve and when things go wrong, they wait to be rescued, instead of finding a solution. Lastly, they blame others instead of taking responsibility.”

She said the most destructive thing about a VERB mentality was that it placed a person in a state of total powerlessness.

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solve any problem because it’s up to someone else to rescue you,” she said.

“If you take this attitude in business; you will fail. Somebody in that head space will have it written all over their body language and you can see them coming.”

By contrast, she said it was easy to spot a person who was hungry, driven, positive, engaged and determined.

“They ask questions, they are switched onto the answers and you can just tell that the minute they leave the room, they’ll be putting all your advice into action,” she said.

“There’s enormous power in choosing to be accountable for your own actions and outcomes. In the words of the great philosopher, Vanilla Ice, ‘If there was a problem, yo, I’ll solve it!’ That’s the kind of proactive attitude that will take you places in business!”

A HEART FOR BUSINESS Janine has often said she takes a maternal view of business.

“When you have a business, you can’t be half-hearted about it; you have to go all the way,” she said.

“It’s like being pregnant – you can’t be just a little bit pregnant! A business can be very consuming and it will sometimes take all your time and what feels like your entire soul. Sometimes the main thing that stands between the winners and losers is simply the ability to keep going.

“If you are serious about achieving success in your field, you can’t just shove your business on the back-burner every time you want to take an overseas holiday or when you’ve just had a big weekend and want to sleep in the next day. You’ve got to put your business first. It’s your new baby and it needs you.”

She said many people were simply not willing to make the necessary sacrifices to allow their business to succeed.

“People are often attracted to the Branson and Zuckerberg success stories and keen to reach dizzying heights of success as fast as possible – along with all the trappings,” she said.

“I have seen people who start a business with a flashy office, pay themselves a top wage and simply burn money. We’re living in an era of ‘NOW’. Everybody wants to have everything immediately and nobody wants to wait but these businesses are often in the four out of five businesses that fail in the first five years.

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“The reason is, this kind of thinking translates into how they manage their finances and how they want to run their businesses too. They want the sports car and the corner office but they’re not willing to invest in fundamentals like careful product development and good marketing.

“That’s like having a baby and getting the fancy jogger pram and upgrading to a bigger car but not feeding your child or changing its nappy.”

REDUCING THE RISK For many people, the biggest fear around business is the need to rely entirely on themselves, Janine said.

“A lot of people fear going it alone because they don’t have the back-up of being able to pop over to the finance department and ask a question or check something with the lawyers and so on,” she said.

“Being at the top of the tree comes with a lot of responsibility. Suddenly you’re the one responsible for making all the big decisions and if you get it wrong; the risk is all yours.”

She said this was one reason that franchises were so appealing to many people wanting to own their own businesses.

“Franchises offer people many of the advantages and freedoms of running their own businesses but without the isolation and exposure that you have when you go it alone.” Janine said.

“Our franchisees come from diverse backgrounds and industries and many of them have had previous experience in retail and have owned or operated successful businesses before – so they know what they’re doing.

“For many of them, the reason they’ve opted for a franchise rather than starting a business from scratch is because they’ve made the decision to enter into a supported business model that offers all the resources, advice and back-up that a central support office can provide. This lowers their risk and provides more security up-front.”

But even with that reassurance, Janine said being in business requires a very special sort of person to make it work.

WHAT DOES IT TAKE TO WIN? Not everyone can succeed in business, according to Janine.

“But every now and again, a firecracker will walk through the door and you just know – this person has it in spades – whatever ‘it’ is!” she said.

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Who you gonna call? Yourself…

“It doesn’t take a big personality and the winning characteristics don’t necessarily shout across the room but there’s just that combination of ingredients that come together to create that magic and when you see it, you can’t miss it.”

Janine says over the years she has refined those characteristics into a list of must-have attributes that the Retail Zoo team use when looking for potential franchise partners.

“If you’re wondering whether you’d be a strong franchise leader, this is a great checklist that will help you identify your strengths and weaknesses,” she said.

“Anyone who’s thinking about opening a franchise should take the time to assess their own skills and personal characteristics because when the poo hits the fan, you’ll have to be your own superhero. You need to know what kind of person is looking out for you in a crisis.

“This is a great way to think about how you can make the leader of your business – you – a stronger, better more reliable leader that can take you through the tough times and make sure you end up on top.”

TEN THINGS THAT MAKE A GREAT BUSINESS OWNER 1. Reliable:

Good franchisees tend to be reliable and solid individuals who are careful but not necessarily risk averse. In other words, they have the necessary skills to be consistent and manage a franchise operation effectively but they have enough spirit and sense of adventure to seize an opportunity when it arises.

2. Hard working:

Anything worth having in life is probably going to require some hard work and nothing could be truer of your business. All franchisees must be capable of hard work to make the franchise a success from the start. If you put in the work at the beginning, success is likely to follow, as it will ensure your store is running well and staff and customers are happy with the business.

3. Leadership skills:

Like it or not, when you run a business, you set the tone, culture and morale of your team so your leadership is a critical success factor. At Boost, we look for franchisees who have developed well-rounded life and business skills through activities that expose them to dealing with people, leading a team and communicating with others. This is not about specific industry experience, because we will pass on our knowledge and expertise in the juice and smoothie space and provide the necessary training and support - 17 -

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needed to make the franchise a success at a technical and operational level.

This is about more human skills, such as the ability to engage and motivate a team.

4. Great people skills:

Running a Boost store is all about people. We are completely focused on our customers and the kind of experience we offer them. This means it’s really important for us to work with franchisees who love people and have great communication and networking skills.

Great communication starts in the home, so we look for people who involve their whole family in their decision-making and talk through the process with their loved ones. After all, these are the people who will be most affected by the demands of running the business! Once in the business, the franchisee will be juggling the demands of family, business, suppliers, customers and other business contacts so strong communication skills will be really important.

Successful franchisees always have excellent interpersonal skills and can effectively interact with their employees and customers. They use these skills to create loyalty, value and trust.

This also makes our franchisees really effective networkers. The ability to network and to manage customer and business relationships effectively is part of the role of the franchisee. Loyalty and trust are important characteristics when managing staff and customers particularly at Boost.

These need to be strong in order for the franchise business to succeed.

5. Financial awareness:

You don’t need to be an accountant to run a business but you do need to know where your dollars and cents are coming from and going to. This starts with having the necessary finances to set up a franchise in the first place! After the franchise agreement has been signed and the franchise is set up, a franchisee must keep an eye on financial income and expenditure as the company progresses. Nobody should know better than you what’s in your own wallet and the same should be true of your business. When you have a really good handle on the detail, you’ll be able to make small tweaks that could have a huge impact on your profitability over time. That’s just good business sense!

6. Risk aversion:

Successful franchisees are risk averse. That doesn’t mean they have no sense of adventure, it just means that when they do take risks they are calculated risks that are as small and controlled as possible. Any business - 18 -

Who you gonna call? Yourself…

start-up involves some risk of failure. Successful franchisees do their homework, so they know what they’re getting into and this is a great way of minimising risk. A strong franchise like Boost with a proven track record of success can help to reduce risk and eliminate possible threats by guiding you on your way to success.

7. System orientation:

Entrepreneurs have an urge to reinvent the wheel based on their incredible confidence in their ability to figure out how things should be done to get the best results! This is great but it can be a huge time-waster. Successful franchisees, on the other hand, want proven systems. They don’t want to have to figure out the best way to do something. They want a system of operation that tells them the best way to do anything associated with the business. They are willing to learn from others who have been there before to avoid making mistakes, so they can be more successful more quickly.

8. Coachable:

When you stop learning, you stop growing so it’s critical to always be open to new information. The motto of franchising is ‘In business for yourself, not by yourself’. Successful franchisees look for opportunities to learn from others in the Boost system who have experienced what they are going through before. Their philosophy should be: When in doubt, ask. They should constantly ask for advice from the franchisor support staff and other successful franchisees and follow the advice they get. They understand that they don’t know all the answers and are willing to ask for help when they need it.

9. Willing to delegate work:

A good leader knows how to conserve themselves for the really important tasks. That doesn’t mean you don’t get your hands dirty when the need arises but hanging onto every task – no matter how big or small – is a poor use of you as a leadership resource. The ability to delegate work to staff is key to the success of the franchise and can help foster effective relationships between staff and franchise owner. Delegating work will also help to take some of the pressure off the franchisee and enable the franchisee to concentrate on other important elements of the Boost business.

10. Willingness to ask for help:

Running a business is a challenging, exciting and rewarding rollercoaster ride but it’s never an easy one. A good franchisee is never afraid to ask for help from the franchisor, staff and family. Sometimes simply asking for help or advice in solving a difficult issue can take a bit of the pressure - 19 -

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off. Being willing to ask for help is central to maintaining, successful and healthy business.

Janine said that above all things, what truly impresses her in a businessperson is a sincere passion for their business.

“I’ve met a few people over the years and I’ve just known immediately, I have to be in business with these guys!” she said.

“There’s just something about them straight away. They radiate passion and excitement for their work and they are genuinely excited about what they are doing. They take the attitude that this business is their baby and you can tell they are going to stick by it through thick and thin – no matter what difficulties arise.

“When I see that kind of dedication, I know they’re worth taking a risk on and that’s one of the key differences between the businesses that make it and the ones that don’t – the care factor.

“Ultimately, if you’re serious about making your business a success, you have to love it. I mean really LOVE it because there are going to be days when it feels like everything is going wrong and you want to burn it down yourself. On days like that, the only thing that gets you through it is a genuine passion for what you’re doing.

“That’s what I’m looking for in a franchise partner. You can train for skill but you can’t teach passion. They’ve either got it, or they don’t.”

Janine Allis Founder of Boost Juice Retail Zoo +61 3 9508 4409 boostinfo@retailzoo.com.au salsasinfo@retailzoo.com.au ciboinfo@retailzoo.com.au

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Chapter 3

What Does Due Diligence Really Mean?

Suzanne Jarzobkowska CEO DC Strategy

About the Author Suzanne heads up the multi-disciplinary team of commercial consultants, lawyers and franchise recruiters and brokers. She specialises in organisational behaviour, change management, culture and performance enhancement, business growth, transformation and conflict resolution in the franchise sector. A dynamic speaker who presents widely in the media, commercial and educational communities she writes extensively about franchising in regular columns in print and online business publications.

DC Strategy is the only end-to-end franchise consulting, legal, recruitment, franchise brokerage and brand, marketing and technology firm. For over 30 years their experienced specialist teams have developed franchise programs for many of the most successful national franchises, many of which they’ve taken to the world. In the last decade alone they have built over $1.8 billion in enterprise value for their clients. They have also brought many well known international franchise brands to Australia and assisted many franchise networks to exit. DCS’s expert franchise lawyers offer fixed fee franchisee legal reviews.

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his chapter offers specialist franchise commercial and legal advice to guide you through the process of assessing the franchise you are considering buying and diminishing the risk of going into business.

Due diligence is one of those phrases accountants and lawyers often use when advising clients about their responsibilities in purchasing a business. It literally means the investigation or appraisal of a business undertaken by a prospective buyer to evaluate its commercial potential. Let’s examine why this is important and what you need to do.

Risk mitigation Most people buy a franchise business rather than establish their own business because they want to reduce the risk of going into business for themselves.

Four out of five independent small businesses fail in the first five years. But about one out of five franchise businesses fail in that period and although that represents a significant decrease in risk – it is still a 20 per cent chance of failure. So you need to gather as much information as you can to assess the opportunity, thereby ensuring you reduce and manage the risk to the very best of your ability.

Obviously each type of business – retail, quick service restaurants (QSR), financial services, trades, professional, hospitality, IT, mobile or bricks and mortar, will have specific characteristics and concerns, but the following advice addresses first the key commercial and then the key legal issues to assist you in this complex process. That’s really what due diligence is about - how you will evaluate the quality and value of the franchise you are considering, what processes you should follow and whom you should turn to for professional advice to protect yourself when buying a franchise business.

Commercial Advice on Due Diligence Buying a franchise is a big decision. Franchisees invest around seven years and a significant sum of money – much of it often borrowed - in a particular franchise system. With 1200 - 1400 different franchise offerings to choose from in Australia, how will you choose the right one for you? There are a range of commercial considerations in deciding first what kind of business you should buy and then, whether the business you are looking to purchase meets the criteria.

How much can you invest?

This involves your time as well as your money. Some franchise businesses operate 12 or more hours a day, seven days a week. The success of your franchise business depends on your time and effort so be aware of how much - 22 -

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time it will take to operate the business properly and whether this fits in with your other commitments - family and other obligations.

Work out the total investment required and how much you can genuinely afford.

This includes operating capital for rent, staff and operational costs until the business is profitable, interest on loans, your wage as an owner operator and the period it will take to recover your capital costs. You also need to consider whether you can service your existing loans (home loans, car loans, credit cards) and maintain your lifestyle if you buy into a franchise business, given that it may take several months to build up enough turn over to make a profit or match your current income.

How do the financials stack up?

The most important consideration is whether the business is a sound financial proposition - does the financial data you’ve been given make sense? You will want some kind of business plan that includes a financial model, preferably a Profit and Loss statement (P&L) and ask the franchisor what the numbers are based on – preferably other franchisees’ and/or corporate store performance.

Break the numbers down so that you know how many products or services you need to sell and how many clients you need to service per day and what would they have to spend on average to break even, after meeting all your overheads.

If you don’t have the information, ask the franchisor for the average ticket price (ATP) or the number of clients they service a day. And ask for the average unit volume (AUV) or turnover of a range of businesses. This will allow you to see if the financial assumptions being put forward add up, and also whether the franchisor has a good understanding of their own business.

It will also assist you to determine whether a site will generate enough revenue.

If you are considering locating your franchise business in a retail shopping strip or mall, you should visit at various times during the week as Thursday night’s activity would be very different to Sunday morning’s. Even the best franchise business concept won’t work if there is not enough passing foot traffic to make sufficient sales. This may mean sitting in a shopping centre and literally counting the number of people that walk past your intended site at different times of the day and on different days of the week.

You will want to get a good understanding about the operating costs of the company as well. As a rule of thumb, rent should not be more than 10 per cent of sales. A current franchise system in the QSR sector that has recently experienced some major financial problems was rumoured to be paying in excess of $300k a year in rent for some of their sites. This would have been fine except their expected sales were about $1.5milion (and there were additional issues). In this case the franchisor’s financials did not stack up and it would - 23 -

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seem prospective franchisees - many of whom have now closed down - did not do their due diligence.

Operating capital When calculating the capital you need to invest in a franchise, you should also determine the amount of money you will need to cover your overheads such as rent, wages, utilities, cost of goods, loan repayments, franchise fees etc. until such time as the business starts to be profitable. This will vary from business to business. Some such as a food business in a busy mall may only take a month or two, but in the financial services sector where revenue is derived from commissions – it may take 9 - 12 months. Have realistic expectations of what the business can return, factoring in all the outgoings for as long as it will take to return a profit, ensuring you can survive that period. Don’t forget to adequately forecast your salary during that time so you can meet your personal and living expenses such as rent/mortgage, school fees, etc. and maintain an adequate standard of living. Ask other franchisees in the network how long it took them to be profitable and estimate how long you could survive if the business didn’t turn a profit as quickly as you may have anticipated.

Your return on investment (ROI) Another important part of your financial consideration should be the ROI. In simple terms, working on the numbers you have obtained and verified as closely as possible, how long will it take you to get back all the money you have invested? This includes any interest you may be paying on the loans you have taken to fund the investment in your franchise and the operational capital you put up. And remember the business will need to pay you a reasonable/fair salary during this period. Generally the larger the investment, the longer the period to realise the return will be. As a very rough guide businesses under $100K should return the investment in 12 - 24 months. Businesses from about $180-400K should see the return in 2.5 to 3.5 years. Businesses from $500 - $850 or so may take over four years and investment over the $1M mark may take five or more years. But the higher the investment, the higher you would generally expect your reward to be on an annual basis. An investment under $100K may return $50-70K annually whereas a $1.2M business may see annual returns of $250-400K. However, be realistic - if you get to the end of the first year having serviced the debt, paid your interest and earned a reasonable wage, you have the foundation of a good business. Your business typically should grow most rapidly over the next 3 - 4 years and your ROI will maximise as your business becomes fully established. Your aim is to pay down residual debt more quickly from this point and to be debt free in five years. The important thing is to understand - 24 -

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the period and to ensure the term of your franchise agreement (and your lease) are sufficient not only to give you time to get your initial investment back, but hopefully to build some capital as well as the eventual goodwill you will achieve when you sell.

Typically franchisees average about seven years in any system and this is aligned with the average across the board of about 3.5 years to see the return on the capital investment. You should get the initial investment (plus your annual salary) back in your first average five year term and be a couple of years into your second term when you exit and crystallise the capital gain that is the reward for your hard work.

Your commitment It is important to determine how much time you have to invest as a successful franchise requires an owner/operator to be truly profitable. So your due diligence should factor the amount of time that will be required in the business. Is this a seven day a week business, such as a quick service food business, requiring you to work public holidays and nights? Will you need to employ staff; will members of your family work in the business or be giving up a job to work with you? This will impact not only your lifestyle but also the lives of your family and may not be ideal if you have a young family. Or are you looking for a part time opportunity to fit with children at school or a semi-retirement plan?

There are many franchises, such as work from home and mobile opportunities that allow greater flexibility as do many B2B businesses that only require a Monday to Friday commitment.

However, if you are looking at a part-time opportunity, be sure that the numbers you are working on to assess your returns correlate to the amount of time you intend to work. For example, operators in a mobile food concept might be earning good revenue because they work on weekends at sporting events and markets, but if you only intend to work on weekdays, part of your due diligence will require that you break down the potential earnings from numbers you are given to what was earned in the hours you intend to work and what proportion in the period you don’t, and still see if that is enough income for you.

Trading cycles and seasonality Think about what the trading cycle of the business looks like. Is the business seasonal; do sales vary significantly throughout the week/year? Are sales consistent throughout the day or are they focused on specific times? These considerations will impact how you staff the business, the hours that you should work and also whether the franchisor has considered a product or service offering for all parts of the day/month/year. Frozen dessert concepts are a case in point. In warm climates, revenue will not fluctuate as much from - 25 -

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summer to winter as in a cold climate where there can be a significant drop off in winter sales. But provided the summer trading is profitable enough to cover the lower income months then the numbers should average out for the year to create a profitable business. Or in some cases, the business may offer a hot beverage range which may form 25 per cent or more of revenue in the winter months. So break the numbers down to each of the revenue streams and understand whether the fluctuations in trading still create an overall profitable business model.

Location The location of your franchise business will obviously affect the profitability and there can be significant variation between sales in units in the same network.

This includes mobile as well as bricks and mortar businesses. Go to the site or suburb where you want to operate. Are potential customers in the area? Do you have an exclusive territory in your franchise agreement? Who are your competitors? Look carefully at the factors that have made the most successful operators profitable and what factors you may attribute to those who are less so. Is being in a mall or the high street, or near another high volume business or a seasonally based tourist attraction part of any business’ success?

If it is a shop or premises, how far will you have to travel from your home? A couple of hours’ travel a day on top of your labour commitment could be a deal breaker after a few years. See if you can get an outlet in your district which also has advantages of being part of the community and market you know.

Assess the documentation A critical part of your due diligence is to examine every piece of information the franchisor provides as this should outline what you are purchasing and the terms. This is outlined in detail in the legal advice section following.

Operations Manuals The Operations Procedures and Training Manuals should tell you exactly how to run your business with all the systems and procedures clearly explained.

How will training be delivered; will there be an additional cost; what about training your staff and what ongoing support is offered? What marketing will the franchisor do; what marketing collateral is provided and how will you be able to use that to market your business locally? What are your responsibilities to the franchisor: financial reporting, attendance at conferences, minimum performance criteria? Assess and consider whether all the tasks required match your skills and whether you can outsource the tasks that you are not good at, or don’t want to do. Read every line as your ability to comply with the Operations - 26 -

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Manual is part of your compliance with the Franchise Agreement outlined in more detail in the legal section following.

Brand and cultural fit Does the franchise match your experience and skills; are you passionate about the industry, service and products? You need to be as you are investing significant money and as a franchisee you will dedicate on average seven years in this network. Your due diligence should consider whether the brand and cultural fit is right for you. While this may seem less important than a sound financial proposition you need to believe in what you are doing to be really successful. Cultural allegiance drives performance, so it’s important that you support and believe in the company’s values and are aligned with the founder’s vision. Your genuine commitment to the brand will drive your employees’ commitment, your customers’ loyalty and ultimately your profitability. This applies to the franchisor and to the other franchisees - you don’t want to work with people you might not respect or whom you deem incompetent or who are not dedicated to the brand’s success.

Your compliance A franchise is not a democracy. Yes, you have an opportunity to run your own business, but the reason you are buying into a franchise is to reduce the risk of establishing your own business. You are buying access to franchisor’s intellectual property – their operational systems and procedures; brand and marketing; proven products, services and supply; and training and support.

Your success is dependent upon your willingness and ability to comply fully with every aspect of the franchise business as outlined in the operations manuals and the franchise agreement. So understanding what that requires entirely and being prepared to comply operationally, legally and personally is fundamental to your success.

Get verification The core of your due diligence is to ask questions (and get answers!). You should speak with the franchisor (or recruiter) with any concerns and see what independent verification you can get for everything they tell you. Research the business on the internet, look up old press releases and stories, go into several outlets and watch how the staff and customers interact. Most importantly however, speak with other franchisees, former franchisees (and even competitors of the franchise you are considering), to gain as much information as possible. Other franchisees can tell you how training was provided when they joined and if it was sufficient, whether it was available for their employees, at whose cost the training was provided and what support and access they have - 27 -

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to that ongoing. They may verify financial performance: how long it took to become profitable, how much operating capital they needed, about seasonality, rents and staffing. And about the franchisor: what they are like to deal with for support and how responsive they are to individual franchisees. Speaking to a range of franchisees is useful in assessing how you think you might fit as franchisees’ experiences can differ greatly and you want to get a balanced view of the franchise network.

Legal Advice on Due Diligence Let’s look at what due diligence means from a legal perspective by breaking down what may be a stack of documents 10 - 12cm thick and examine them one by one. It’s imperative that you (and your business partner/s) read every line in every document. Don’t be intimidated by the language or by anything you don’t understand. Get a highlighter and highlight anything you do not understand or agree with. Make notes on the margins with questions to ask your accountant or lawyer as you’ll get the best response from your advisors by being as proactive as you can in your due diligence.

The Disclosure Document (DD) The DD is legally required under the Franchising Code of Conduct and will give you important information about the franchise you are thinking about buying.

Franchisees The DD has a list of current and previous franchisees as well as their contact details. You should contact at least three current franchisees and a number of franchisees who have left the network and ask the questions outlined in the ‘Get Verification’ section previously.

Litigation The DD will also let you know about any litigation or disputes past or present so you will know if there are any serious issues or if there have been between franchisees and the franchisor.

Experience of directors Look at the experience of the directors and officers of the franchise. A franchise system whose operators have management skills and years of experience in their chosen or a related business is more likely to be secure than a business that has been operating for a short period of time or where the directors do not have much experience in management or business. But you need to exercise your judgement as every system starts out small and sometimes even wellestablished networks can experience difficulties, retraction or in some cases, collapse.

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What Does Due Diligence Really Mean?

Trade Marks The intellectual property (IP) of a franchise business is fundamental to your due diligence as you are essentially ‘renting’ access to it for the term of your franchise agreement. The trademark is a key piece of the IP and you need to be certain the franchisor owns the trade marks, especially if the franchise is not yet well established. So check that registered trademarks appear in the DD and if they have only been applied for but are not yet registered, this could mean that third parties are using similar trademarks. Take legal advice if this is the case, as you want to be sure that the system you invest in has exclusive ownership of the trade marks and can grow the brand and the value of your (and their) investment.

Operations Manual Ask for access to the Operations Manual as it often includes the minimum performance criteria and other legal obligations you are required to comply with. A breach of the Operations Manual is also a breach of the Franchise Agreement and could lead to the termination of your franchise, so it’s really important that you read the Operations Manual carefully. Franchisors are often reluctant to provide you with a copy of the Operations Manual before you sign the Franchise Agreement because it contains confidential information.

However, you should be able to look at the Operations Manual at head office and note the sections relating to performance criteria and legal obligations.

Lease If you are purchasing an existing franchise, check the details of any lease or licence agreement to make sure there is enough time left on the lease to get a reasonable return on your investment. A number of franchisees have purchased existing franchises without realising there may be only 1-2 years left on the lease. Ideally the term of the lease should line up with the term of the franchise agreement which in retail or QSR will be 5 or 6 years. If the franchise is an existing mobile business with a vehicle lease, check the terms of the vehicle lease and any renewal options for the same reason.

It is also important that you make sure there is no plan for demolition or redevelopment by the landlord as relocating your premises for redevelopment even temporarily would be highly disruptive and possibly even permanently damaging to your business. It may reduce access to your customers and therefore your sales; it may incur large unexpected fit-out costs and ongoing operational costs such as re-printing brochures, modifying your website etc. for your new location. The person selling an existing franchise should also give you a Disclosure Statement which should have information about - 29 -

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demolition and redevelopment. But to be certain, contact centre management personally and confirm there are no plans for redevelopment that will impact your business for the duration of the lease.

Fit Out Costs Fit out costs are often overlooked in the due diligence phase and can lead to major fall-out between the franchisor and franchisee before the business is even launched. Check with the franchisor whether the fit out costs are fixed or just rough estimates that could change at any time during the fit out period. If the costs are only estimates (as they often are), contact the fit out contractors directly to either pin them down to a contractual arrangement for the fit out or manage how the costs could change and ensure you have enough money to deal with any possible increase. Some franchisees have been left with very large unexpected invoices during the fit out period which has seriously impacted their financial capacity to launch and operate the business as they did not have access to more funds.

Franchisor Interview Your interview with the franchisor (or recruiters) should not just be one where you answer questions about your background and ability to run the franchise.

It is also a chance for you to ask the franchisor questions about their business plans, the level of support they give franchisees and the details of training including where it will take place and what expenses may be involved. It is also an opportunity to understand their vision for the brand and the culture of the network to see if your values are aligned.

Protection under the Franchising Code The Franchising Code of Conduct requires franchisors to recommend that you seek legal and financial/business advice. This underscores the serious nature of the relationship protecting both you and the franchisor. This way both parties can be certain that the franchisee has taken independent professional commercial and legal advice to fully assess the representations made by the franchisor. There is a section underneath this recommendation where – if you decide not to take such advice – you must sign to show you have declined to do so.

Professional advice You wouldn’t buy a house without professional input such as a building and pest report or without engaging a professional conveyancer/lawyer to handle the contracts. Buying a franchise is no different – it is simply common sense to pay the relatively small amount to engage professionals to assist and protect - 30 -

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you. Be certain to get the commercial and legal advice in writing and try to negotiate a fixed fee for the services.

Your advisors can also help you set up the right trading entity – should you operate your franchise business as a sole trader, a partnership, a company or a family trust? There are different set up costs for each option and varying annual costs and reporting responsibilities. Each has different advantages in terms of tax minimisation, income splitting, personal liabilities etc and you need to know what will work best for you and your particular circumstances.

It is important to get it right from the beginning as there could be tax and other implications if you change the structure later on.

Understanding and Managing Risk The commercial and legal processes outlined above give you systematic guidelines about how to conduct your due diligence from the consideration of buying a franchise to the execution of the legal documentation. It is quite simply gathering and evaluating as much information as you can to assess the risk of going into that business and deciding if it is acceptable or not. Although buying a franchise is less risky than starting up a business on your own, there is no guarantee that your franchise business will be a success based solely on the fact that it is a franchise.

The Franchising Code of Conduct is there to protect you so the final piece of the due diligence process is to follow the recommendation and speak to a lawyer and an accountant/business advisor who specialises in franchising. Not only could it save you thousands of dollars in potential litigation later, it will assist you through the negotiation of the Franchise Agreement and give you the peace of mind that you’re making an informed commercial and legally sound decision.

Suzanne Jarzabkowska CEO DC Strategy 02 8220 8700 growth@dcstrategy.com www.dcstrategy.com

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Chapter 4

FUNDING YOUR FRANCHISE

By Darryn McAuliffe CEO Australia FRANdata

About the Author Darryn McAuliffe is the CEO of FRANdata Australia and has over thirty years’ experience in the banking and finance sector.

He is a CPA and experienced former bank executive across business banking, risk management and industry specialisation.

For four years prior to joining FRANdata he ran the NAB’s franchising strategy which included the accreditation and portfolio management of major Australian franchise brands.

FRANdata has been supplying independent and credible information to support key franchise decisions for more than twenty five years. Positioning brands for improved finance access is a core specialty. FRANdata operates the Australian Franchise Registry™.

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ranchises, like all business enterprises, need a sufficient level of initial and ongoing capital to survive and prosper.

Unless you are one of the fortunate minority with cash reserves from sale proceeds of a previous business, severance payments or even cash from personal assets, your funding will generally need to come from borrowing.

SOURCES OF FRANCHISE FUNDING This funding (borrowing) generally comes from one of several sources: Friends and family: This relatively minor provider of finance tends to be more active with lower entry cost brands and is often aligned with younger franchisees yet to accumulate a sufficient amount of their own equity to complete the transaction.

It can be a fast, cheap and simple type of funding; backed by those that know, trust and have a very personal desire to see the franchisee succeed. This can be a terrific form of finance but should also be taken on with some clear ground rules around when and how it will be repaid.

The franchisor: This is a growing trend where franchisors, sometimes frustrated with traditional lenders or desperate to convert less capitalised (but otherwise apparently strong potential business partners) into franchisees are either directly or indirectly financing those new franchisees into their systems.

From a franchisee perspective the upside is they commence trading earlier in the system and often on favorable financial terms, but a significant downside can become quickly apparent with the franchisor also now having significant additional power over their franchisee Banks: For most prospective franchisees it will come as little surprise that the banks are still the most common and reliable source of franchise finance. The good news for prospective franchisees is that the franchise model can provide significant appeal to lenders assessing small business lending opportunities.

This can be seen in two key areas: Firstly, the franchise model can help lenders better understand the ‘risk profile’ of a particular transaction. In everyday terms, this means the banks can look at the past performance of the existing units (outlets, branches, territories) to better predict the likely performance of future units. For lenders, and indeed prospective franchisees, a stronger risk profile also means a much higher probability of avoiding loan problems and potential loss. Secondly, once a bank has comfort around the business model franchising can offer a significant business development opportunity from the sheer number of units and staff involved.

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FUNDING YOUR FRANCHISE

Franchise lending transactions with banks typically fall into one of two categories; ‘accredited’ or ‘non-accredited’ lending.

‘Accredited’ status is generally granted to brands that meet certain minimum requirements and have been through a comprehensive review process (see fig.

1 Franchise Brand Bank Accreditation Criteria).

Accredited brands are allocated dedicated bank contacts and their franchisees enjoy more consistent and predictable treatment. Subject to regular review, accreditations do get withdrawn when loan quality falls below an acceptable level or an insufficient number of transactions are achieved to cover the cost of maintaining the accreditation status.

The majority of franchise brands find accreditation elusive with most major banks having less than 50 brands accredited. This represents less than five per cent of the reportedly 1100 active brands operating in Australia.

‘Non-accredited’ lending is considered on a case-by-case basis. This approach can be inconsistent across different lenders but also through outlets within the same lender. Most ‘non-accredited’ lending is treated as generic small business lending due to the lack of reliable information available on the brand giving little credence to the underlying support or improved risk profile a well-managed franchise brand can bring. Lenders will often only proceed if transactions are supported by significant cash contributions or collateral property security.

Fig. 1: Franchise Brand Bank

Accreditation Criteria.

Brand and Industry Loan Performance

Franchisor Strength

Performance matters Training and Support

Franchise Selection Unit Performance

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When lenders look at transactions for ‘non-accredited’ brands, which accounts for the majority franchise lending transactions, they will generally consider each of these criteria on a case-by-case basis.

As part of a prospective franchisee’s own research and loan preparation, they may also like to better understand some of these lender criteria: Brand and Industry: The history of the brand;

The look of their current and future competition; Trends in their industry.

Franchisor strength: The length of time franchising; The size of their operation;

The ability to grow the brand across state and even international borders; Their financial and operational ability to support franchisees in need.

Franchisee selection: How they recruit franchisees;

The satisfaction levels of existing franchisees; The turnover of franchisees.

Unit performance: The average return on the initial investment of a franchisee (by dollars and percentage); The time it takes on average to ‘break-even’;

The time it takes to achieve average sales and average profitability.

Training and support: The initial training provided to new franchisees to position them for a successful start to their franchised business; The ongoing training provided to help them maximise their success;

The early warning signs they identify and actions they take to fix the problem or improve performance.

Loan performance: What history, if any, there has been of franchisees experiencing ‘loan stress’ and the actions the franchisor has taken to support both the borrower and the lender during that situation.

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Other lenders: Apart from the major banks franchise lending capability is also evidenced in several second tier or regional lenders and a number of specialist equipment financiers. Alternative franchise lending sources are also currently under construction. A central theme for existing and emerging franchise lenders is the ability to understand both the franchise sector and individual brands under consideration.

Ultimately, the lender and the new franchisee are looking for the same understanding and comfort of past performance as a guide to future performance.

Quite simply ‘Performance Matters’.

WHAT DO LENDERS LIKE ABOUT FRANCHISING? When assessing a lending application more information equals less (or better understood) risk. It therefore follows that less information equals more risk and where there is no information, a lender will generally take no risk.

The greatest appeal of franchising is its regular ability to close that information gap and provide comfort around the two basic principles of lending money.

Those two principles or tests are can it be repaid; and what happens if it can’t?

Lenders need to be able to answer those questions and a growing number of franchise brands can help them do this through the following key areas: Proven models: Brands that have been operating (and franchising) for a period of time can generally point to a number of outlets across a number of geographies, and a level of performance that supports the business model.

Loan experience: With major banks continuing to dominate small business lending in Australia, the reality is they will have direct experience of franchisee loan performance in many brands. It follows they will use this experience to decide who they wish to do more business with and who they wish to avoid. Other lenders also use their historical loan book in the same ways.

Franchisor support: One of the great incentives to lend to a franchisee is the support that a franchisor can provide if expectations are not being met or unexpected difficulties arise.

There are many examples where franchisors have acted quickly and strongly to support the franchisee which has in turn helped the lender minimise or completely avoid financial loss. Again, and as expected, lenders will be more willing to provide finance to franchisors that directly support franchisees and avoid those brands they feel provide insufficient support of the franchisee and the brand.

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Secondary market: Lenders are generally able to provide more lending and on more favourable terms in cases where franchisors can demonstrate there is a clear and predictable re-sale (secondary) market for the franchise brand.

GETTING TO YES! Less well known, and often hard to identify, is who the active lenders and strongest supporters of the franchise sector are.

Banks continue to be driven by a desire to lend money to borrowers with an acceptable risk profile and on the whole maintain a healthy appetite for franchise lending.

Regardless of the lender, there are three key things that new or refinancing franchisees can do to simplify their search and increase their chances of accessing franchise finance.

1. Find a ‘franchise friendly’ bank Look deeper than a bank’s broader small business messaging. While franchising is a big part of this group it is best looked at independently.

Most banks claim to be actively involved in franchising but in reality there is some variance in how active their appetite is for the broader franchise sector. There are a few tricks for identifying ‘franchise friendly’ lenders.

Firstly, identify individual bankers with direct contact numbers for franchising (rather than a central number). These bankers are responsible for servicing the sector, will have generally had specialist training, be actively involved in the sector and better equipped to service your needs.

Secondly, look for banks that are actively expanding their offering; employing more franchise lending staff, providing more franchise sponsorship and approving more franchise brand accreditations. These are all good signs of their support for the sector.

Thirdly, ask the franchisor to connect you with recent franchisees into the system and ask them to share their recent franchise lending experience.

If your first interaction with the bank does not leave you with confidence that the banker is familiar with your brand and has a clear understanding of required timelines then it is wise to immediately engage an alternate provider.

Sometimes a reputable finance broker can be invaluable in this process. An added benefit, of course, is the potential to compare two or more offerings and select the most appropriate deal for you. A little competitive tension between lenders can be a good ingredient for securing the best deal.

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2. Find a ‘lender friendly’ franchise brand Ask your franchise brand who to talk to at each bank. (This will provide an immediate test of the strength of their banking relationships and an indication of the effort they have put into becoming ‘lender friendly’).

Lenders provide finance with more favorable terms to brands deemed to be ‘lender friendly’ and franchisors can position themselves this way if they embody lender friendly traits.

Traits of ‘lender friendly’ brands include: • a desire to be identified as a genuine and quality franchise brand -

- Franchise Council of Australia membership and registration with the Australian Franchise Registry™ are two excellent indicators that brands are serious about their reputation and that of the franchise sector; recognising the importance of a unified, representative voice and the role improved information plays in supporting that representation.

• an ability to provide lender information in a timely and transparent manner - Lending applications can be declined due to the lender’s inability to access the most basic level of brand information. Brands need to either provide lenders with independent reliable and relevant information or utilise information gateways like the Australian Franchise Registry™ to optimise lending decisions.

• sound financial position (franchisor) -

- a willingness to share financial information to provide insights into the strength of the franchise model, its capacity to endure fluctuations in trading cycles and to support its franchisees.

• disciplined and successful approach to recruiting, training and supporting franchisees -

- the ability to demonstrate a structured and proven approach for single unit or multi-unit franchisee success.

• ability to provide insights into unit performance (franchisees) -

- these help lenders with loan structuring considerations and provides effective and early warning signs for potential problem loans.

• ability to provide insights into the secondary market (unit resale values) - the provision of real and complete comparative market data significantly enhances a lenders ability to recognise the value in a franchise business.

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• ability to work constructively with lenders if expectations are not being met - strong working relationships between banks / franchisors result in superior outcomes and reduced losses on problem loans. A risk that franchisees may underperform is not the key issue; it is the actions the franchisor will undertake if that situation arises.

Many well managed and strong franchise brands are broadening the number of lenders they deal with to safeguard against any reduced lender appetite from their one or two key existing relationships and restrictions that may arise from any internal wholesale lending limits (sometimes referred to as caps) that lenders may introduce.

Finally, and most importantly: 3. Put your best foot forward No matter which lender you turn to they will be looking for well organised applicants and solid future business operators. After finding a ‘lender friendly’ franchise brand and ‘franchise friendly’ lender, the five most significant things a prospective franchisee can do to improve their chances of having their loan approved are: 1. A good first impression - well organised, well presented and well researched.

2. A fully completed application form with copies of supporting documentation and a simple business plan will go a long way to creating a good first impression.

3. Prepare yourself well with a good understanding of what information is required, how much you need to borrow, how you will pay it back and what your ‘fall back’ position will be if your business expectations are not met.

4. In lender terms the ‘fall back’ position is what they think they can rely on if the repayments cannot be made. Whilst they will take on some risk they will always be looking to minimise this through either an acceptable cash contribution by the borrower, an acceptable level of equity in assets pledged as supporting security, comfort in the resale market for the franchise unit or the willingness of the franchisor to buy the unit back from a struggling franchisee.

5. Engage the help of a professional advisor or trusted family member or friend that has some experience dealing with lenders and have the review and challenge your application.

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Whilst accessing finance can involve some work and a fair amount of preparation, lenders are actively looking for more business in the franchise sector.

Well researched franchisees and ‘lender friendly’ brands remain well positioned to access franchise loans.

Darryn McAuliffe CEO Australia FRANdata 02 8346 6093 dmcauliffe@frandata.com.au www.frandata.com.au www.thefranchiseregistry.com.au

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Chapter 5

Understanding the Legal Documents

By Robert Toth, Partner & Marianne Marchesi, Senior Associate Marsh & Maher

About the Authors Robert and Marianne have combined experience in franchising of over 30 years. Both have extensive experience in commercial and franchising law and have acted for a number of well-known brands across a range of industries - including the food and hospitality, entertainment, pharmaceuticals, professional services and homeware sectors.

Rob and Marianne act for franchisors and franchisees both locally and internationally. Their practice focusses on: • Franchising Code of Conduct compliance • The establishment of franchise systems, including drafting key franchise documentation • Conducting franchise transactions • Advising both franchisors and franchisees in relation to disputes, including drafting dispute notices, negotiations, exit strategy advice and mediations • Corporate and commercial advice Both have authored a large number of publications and are regular presenters of a wide range of workshops and seminars, particularly in relation to franchising. Robert is an Accredited Business Law Specialist and Marianne is a Victorian representative of the FCA Women in Franchising Committee.

Robert and Marianne both joined Marsh & Maher in early 2015.

Marsh & Maher is a specialised law firm providing legal services in a variety of practice areas, including commercial and litigation.

The firm has a wide range of clients - from individuals and private and public companies to government organisations.

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T

he process of selecting the right franchise is daunting. Hopefully you will have compared the selected franchise system with other similar systems in the market and spoken to other franchisees. With some trepidation you sign an application form to be approved by the franchisor and the franchisor congratulates you and confirms you are approved!

Ideally by this point you will have engaged your accountant and franchise lawyer. Your accountant will assist you to objectively assess the financial viability of the franchise and assist you with your corporate structure and tax advice.

Your franchise lawyer will be able to review the documentation and work with you and your accountant as part of your trusted team to identify any issues and limit your risk.

The franchisor will then provide you a mountain of documents with a covering letter giving you 14 days in which to review the documents and seek legal and financial advice.

It is a volume of documents and you need to get expert advice.

Don’t go to your local conveyancer or family lawyer who will charge you very little and deliver very little by way of valuable information.

It’s a big investment - spend some money to get the right advice from an experienced accountant and franchise specialist lawyer. It is insurance, as once you sign up you are committed and there is no clear or easy exit; making the wrong decision for the wrong reasons could be extremely costly.

The Franchising Code of Conduct (“the Code”) changes which came into effect of the 1st January 2015 have imposed greater cost and disclosure obligations on franchisors and addressed a number of issues which benefit franchisees.

Key Documents: The documents supplied by the franchisor will be: • A copy of the Code; • A disclosure document including financial statements or an audit report; • The proposed franchise agreement; • Possibly a lease, sub-lease or licence to occupy the premises; and • Legal, accounting and financial advice certificates.

Have your franchise lawyer review the agreement and highlight any issues that may be of concern or out of the ordinary.

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There is no substitute for you, as a franchisee, reading and becoming familiar with the documents.

A franchise agreement is your contract setting out the rights, roles and responsibilities of the parties. It is one thing to enter into a franchise relationship and not something you can walk away from easily.

Franchise agreements are typically 50 to 100 or more pages and can be difficult to understand. They may appear to be a standard form, however in reality there is no such thing and the devil will always be in the detail.

There may be greater room to negotiate if the franchise is a new system and the franchisor is keen to roll out its system. Your experienced franchise lawyer will be able to help you.

There are numerous tricks and traps, not only in relation to the basic financial obligations but in relation to termination and exit rights, the right to assign and restraint provisions to name a few, all of which need to be carefully reviewed.

Seeking legal advice from a franchise law specialist will assist the process as they will also focus on the key commercial issues, rather than recommending wholesale changes to the agreement which are unlikely to be accepted by a franchisor and which will aggravate the franchisor or their lawyer.

The Disclosure Document: Under the Code franchisors are required to provide a disclosure document to the franchisee prior to entering into a franchise agreement and annually throughout the term.

The Disclosure Document must be in the form prescribed by the Code which has significantly changed from 1 January 2015.

The Disclosure Document sets out material information to assist a franchisee to make an informed decision, such as: a) The background and business experience of the franchisor, its directors and associates.

This is important to note whether the franchisor has the necessary skills and business experience. b) Any legal action taken against the franchisor, its directors or its associates.

If this shows a number of legal actions it can be a warning sign. c) Details of past and existing franchisees.

This will assist to see the number of franchisees that have left or exited the system and help to identify if it’s a stable system.

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d) Details of the master franchise arrangement (if applicable). e) Disclosure of its intellectual property and trade marks used in the system.

This may disclose the franchisor only holds a licence to use the trademarks and does not own the trademarks. f) The territory and sites selection policies.

Are you taking on an A grade or C grade site? g) Use of marketing funds.

An area often contentious and the cause of much dispute which has now been tightened up under the new Code to make Franchisors more accountable. h) Upfront establishment and capital costs and ongoing costs.

These should be carefully analysed with your accountant and you should prepare your own cash flow projections to determine the viability of the model. i) The financial position of the franchisor company, including financial reports for each of the last two completed financial years or an audited solvency statement. The Code now requires additional disclosure by the franchisor in relation to: a. any intellectual property rights licenced to the franchisor; b. a copy of any lease or licence agreement; c. Provision of a new Information Statement as to the risks of franchising; d. Disclosure of online trading activities and impact on stores; and e. Use and management of marketing funds.

Where the franchisor has not existed for two or more financial years, the Code requires the franchisor to provide a director’s statutory declaration of solvency and supporting audit report verifying the franchisor’s solvency as at the date of the declaration.

Statements and Representations: As well as being a formal compliance document, the Disclosure Document can also be used as the means to market and promote the franchise system.

It is important however to ensure that the information disclosed is accurate, gives realistic estimates where specific costs cannot be fixed and that the franchisor does not make any misleading statements or representations in it.

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and conditions and assist a franchisee to make an informed decision before committing to the franchise.

Existing Franchisees: The Disclosure Document will also provide information of existing franchisees and enable you to contact them and obtain feedback, which is vital before committing to the franchise.

Prospective franchisees should use the 14 day disclosure period to contact existing franchisees and gather information and feedback about the franchise system, including the advantages and negatives. Feedback from a number of franchisees is recommended to give a balanced view.

The franchisor is also required to provide details of the number of franchisees that have ceased operating in the past three years. Contact details for these former franchisees should be provided, unless the former franchisee requests that their details be withheld.

Prospective franchisees should also try to contact former franchisees who were terminated, to find out why they exited the system and how they were dealt with by the franchisor.

14 Day Disclosure Period: On receipt of the documents, the franchisee is required to acknowledge receipt of the franchise documents. This commences the 14 day disclosure period.

Under the Code the parties can not contract out of the 14 day disclosure period which provides time for franchisees to seek independent legal and financial advice.

Initial Payments: It may be a requirement to pay a document fee, usually $3,000 or thereabouts, to the franchisor’s solicitor, the franchisor directly or their agent. This is usually a commitment and sign of good faith and will enable the franchisor to instruct its solicitor to prepare the suite of franchise documents.

Under the Code, any money paid by a franchisee within the 14 day disclosure period is fully refundable. Beyond 14 days that sum is non-refundable.

Cooling off: The 14 day disclosure period should not be confused with the 7 day cooling off period, which commences from the date the franchisee enters into the agreement or makes a payment under the franchise agreement (whichever event first occurred).

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The cooling off period only applies in relation to a new agreement, not a renewal, extension or transfer of an existing agreement.

A franchisee can terminate the franchise agreement within the 7 day cooling off period. In that case the franchisor is required to refund all payments made by the franchisee, less any non-refundable payments.

These are the franchisor’s reasonable expenses which may include the initial franchise document fee and any part of the training fee. Any payments that are non-refundable must be reasonable and set out in the Disclosure Document.

Standards, Policies and Procedures and the Operations Manual: The vast majority of Franchise Agreements include provisions requiring franchisees to comply with the franchisor’s operations manual.

These policies and procedures may change throughout the course of the franchise relationship and the franchisee will be required to adopt changes at their cost.

Franchisees should request to see and review the operations manual before entering into the franchise agreement. As the operations manual is a confidential document of the franchisor, they may not agree to provide a copy of their operations manual until the franchisee commits and signs the Franchise Agreement. If that is the case, franchisees should ask to review the operations manual within the cooling off period, or to inspect it in the presence of a representative of the franchisor.

The Franchise Agreement: This is your contract which sets out your rights and obligations. It is generally weighted in favour of the franchisor.

The franchisee must comply with the obligations set out in the Franchise Agreement. A failure to comply may trigger rights to the franchisor to issue breach notices and even terminate the agreement. The obligations on the franchisee are usually expressed in the positive (i.e. the Franchisee must do certain things) or negative (i.e. the franchisee must not do certain things).

However the obligations on the franchisor are generally not expressed in the same way, for example the franchisor may give the franchisee ongoing support and training. An important but subtle difference legally and one which affects the franchisee rights.

Therefore a breach by the franchisor of these obligations if they are not expressed as positive obligations may not give the franchisee similar rights as the franchisor to allege a breach or terminate the franchise.

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It should be borne in mind however that franchisees have some measure of protection under the Code due to the entrenched good faith obligations and under the Australian Consumer Law, if the franchisor has acted unconscionably or has engaged in misleading and deceptive conduct, or for example breach of the third line forcing provisions.

The franchisee can also actively protect its position by the dispute resolution process under the Code and seek a mediation, where there are issues in dispute that can not be resolved directly with the franchisor.

Fees payable to the Franchisor: Initial Fees Franchisees are required to pay fees upon signing the franchise agreement – this is often called the ‘Franchise Fee’, ‘Initial Fee’ or an ‘Establishment Fee’. There may also be other fees payable before the franchisee commences operation for specific services, such as a ‘Training Fee’ or ‘Technology Fee’. These fees will be set out in the disclosure document and franchise agreement.

Royalty Under most franchise agreements, the franchisee pays an ongoing fee during the term of the agreement, usually described as the ‘Franchise Fee’ or ‘Royalty’. The fee is typically paid monthly or weekly, either as a percentage of the franchisee’s gross sales or a specific dollar amount (which may or may not be adjusted by CPI).

Note: Even if the business is not running at a profit for the franchisee, the franchisee is still required to pay their royalty and marketing fund contributions. The franchisor of course gets the benefit of charging its fees based on the franchise’s gross turnover.

This is the very reason why it is critical that franchisees prepare their cash flow projections and conduct a financial analysis with their accountant, before committing to a franchise.

Franchisees need to ensure that after paying the royalties and fees the franchisee can, at the very least, take a reasonable wage from the business for their effort.

If the numbers don’t work don’t go ahead!

Tip: If relying on the franchisor’s financial information, ensure their financials make provision for a wage to the franchisee before showing a profit.

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as attending conferences, upgrade of IT and software – these must be set out in the Disclosure Document and should be taken into account.

The franchisor must provide an estimate of establishment costs in the Disclosure Document, however these estimates are often a very broad range, and actual costs may be greater.

Tip: We often find that the working capital requirements in the Disclosure Document are understated. Franchisees should allow a sensible amount of working capital for the first 12 months of operation, particularly so where it is a greenfield site.

Prospective franchisees should also allow for additional costs which may not be included in the Disclosure Document, such as salary and wages of employees, insurance, utility bills, their own local area marketing and account fees.

Term and Renewal: Franchise agreements generally run for a fixed term such as five or ten years.

Some franchise agreements provide an option to renew the agreement for a further term, provided that the franchisee is not then in default of its obligations under the agreement. There may be other conditions, such as the franchisee undertaking to refurbish the premises, or undergo further training.

Again, factor in the cost of a refit and renewal fees to renew your agreement.

The franchisee will often be required to pay a renewal fee. The new franchise agreement would be the franchisor’s standard agreement at that time, which may have different terms to the original agreement and all franchisors have had to upgrade their franchise agreement to comply with the changes to the Code.

Sites and Territories: Mobile franchises (such as those providing gardening or cleaning services) will generally be granted for a specific territory – which might be listed as a number of postcodes, or marked on a map attached to the agreement. Sometimes the territory will be exclusive, so that neither the franchisor nor other franchisee can operate in the allocated territory, giving the franchisee some protection from competition. This is unusual however it is usually non exclusive. In some cases there may be no actual territory and only an exclusive marketing territory.

Retail franchises will generally be granted rights to a specific site, from which the retail outlet operates.

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Usually, exclusivity will be conditional on the franchisee meeting their obligations under the franchise agreement and minimum performance criteria.

Franchisees should ensure they understand the rights granted in their agreement.

Many retail franchisees in major shopping centres will have no exclusivity and the franchisor can actively compete by establishing a company owned store in the centre and grant other franchise rights. If that is open to them, what impact will that have on your business in the future? Many agreements give the franchisor the right to alter or reduce the territory throughout the term.

It should be noted however that many distribution dealership and licence agreements do not give exclusive rights, and even where there are exclusive rights, there may still be rights reserved to the grantor of those rights to compete.

Marketing: Most franchise systems have a marketing fund established by the franchisor for the marketing of the business on behalf of the franchisees. Franchisees usually contribute to the fund monthly or weekly.

The Disclosure Document should set out information about the marketing fund (if any). Usually, a marketing fund will be used for marketing the franchise system as a whole – the franchisor will not be required to spend any part of the fund marketing on an individual franchisee’s business.

Under the new Code, the franchisor must now contribute to the marketing fund on the same basis as franchisees for any company owned stores it operates.

That is a welcome change!

There are also additional obligations on franchisors as to the use and management of the marketing fund and what may be legitimate expenses that can be paid from the fund.

In addition to contributions to the marketing fund, many franchise agreements require franchisees to actively market their business locally and follow the standards and procedures set out in the operations manual, including franchisors approval for those activities.

Sale of the Franchise Business: Most franchise agreements set out provisions which regulate a franchisee’s ability to sell their business.

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If the franchisee wishes to sell, the franchisor will usually have a first right of refusal to purchase the business. If that option is not taken up, the franchisor will have a right to approve the incoming franchisee.

Under the Code, a franchisor must not unreasonably withhold its consent to a transfer of a franchise. Reasonable circumstances for refusal might include the proposed transferee being unlikely to meet the financial obligations or failing to meet the training requirements.

The franchisor may impose a transfer or assignment fee which can be a fixed fee or a percentage of the sale price. These exit costs should be kept in mind by a franchisee when negotiating the sale of the business with the buyer.

End of Term: Upon expiry or termination of the franchise agreement, the franchisee will usually be required to: • Cease use of the trade marks and IP of the franchisor; • Deliver up the premises; • Return all documents relating to the system to the franchisor; • Transfer the phone numbers to the franchisor; • Not compete with the franchisor’s business; and • Return or provide the client database.

Non Compete Provisions: Most franchise agreements include a non compete or restraint of trade provision which provides that for a certain period after the expiration, termination or transfer of the agreement (usually 6 to 24 months), the franchisee must not in any capacity be involved in any business which competes with the franchisor.

The restraint might apply to the territory (if any) and/or within a certain distance of the premises (for example, within a five kilometre radius).

Although this might be considered anti-competitive, Courts have recognised the right of a franchisor to enforce a reasonable restraint or non compete provision.

If the franchisee is not subject to a restraint of trade, any ‘goodwill’ will usually be required to remain with the franchisor upon termination or expiration – a franchisee is rarely entitled to any payment from the franchisor in respect of goodwill, unless expressly negotiated and written into the agreement unless the new Code requirements come into play.

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The impact of what occurs at the end of the term needs to be carefully considered before entering into the agreement.

The new Code imposes new end of term obligations on the franchisor to either renew the Franchise Agreement or if they fail to do so and certain circumstances exist, the franchisor loses the benefit of any restraint or non compete provision against the franchisee.

The franchisor must also give the franchisee not less than six months’ written notice whether it intends to renew the franchise.

Negotiating Changes to the Franchise Agreement: The franchisor will usually offer the same terms to all franchisees, however some franchisors will accept reasonable requests for amendments or concessions particularly if they are a new franchise system and keen to bring franchisees on board.

The concessions can include reduced establishment or franchise fees, marketing levy and royalty-free periods, reduced minimum performance criteria, further renewal terms, and contribution to the fit out.

Where the franchisor agrees to any concession to their standard agreement, ensure that this is in writing, and signed by both parties to ensure it is enforceable.

Summary: Franchisees should seek franchise specialist legal, accounting and business advice before committing. The advice should be independent - do not rely on the franchisor’s advisors.

Don’t be blinded by the ‘lifestyle’ promise and blue sky promises. Do your homework on the business. Becoming a new franchisee in a new franchise system can be a great opportunity but it can also carry greater risk as opposed to an established franchise brand.

Also remember, after signing the franchise agreement, there is a seven day cooling off period in which a franchisee can terminate the agreement.

You have the benefit of the 14 day disclosure period and a 7 day cooling off period. It may be wise to forfeit a relatively small amount of money in the short term than risk losing significantly greater sums by proceeding with a franchise that is not right for you!

Once you commit there is no easy exit.

If the financial and business case does not stack up then walk away as there are many franchise businesses on the market.

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There are generally no rights for a franchisee to terminate a franchise agreement throughout the term; franchisees can not object if the franchisor sells the system or assigns its rights. Franchisees therefore need to be prepared to operate the business for at least the initial term and be prepared for a change in ownership and management of the franchisor. Change of ownership does occur and franchisors do go into liquidation. These are inherent risks in becoming a franchisee.

So if you find a franchise system that you believe is right for you, make sure you get specialist franchise advice.

Robert Toth Partner Marsh & Maher Phone: (03) 9604 9405 Email: rxt@marshmaher.com.au

Marianne Marchesi Senior Associate Marsh & Maher Phone: (03) 9604 9413 Email: mim@marshmaher.com.au

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Chapter 6

FINANCIAL TIPS FOR PROSPECTIVE FRANCHISEES

By Jamie Bishop Partner, Franchising Division McLean Delmo Bentleys

About the Author McLean Delmo is a leading provider of accounting advice to franchise businesses in Australia. Jamie is the partner in charge of Franchising Division, the specialist division of McLean Delmo Bentleys. He has over 19 years’ experience in public practice and has been with the firm since 1999.

He is a member of CPA Australia.

Jamie has specialist skills in business structuring, franchising, management consulting and business valuation. Jamie’s extensive experience in business services enables him to work closely with his clients to provide practical and commercial advice.

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M

aking the decision to purchase a business (franchised or not) can be a scary prospect. The variety and scope of franchise opportunities available can also be bewildering. The process required to select the appropriate franchise business can be equally as daunting.

In this chapter I will give you some financial tips in relation to the purchase of a franchise. The aim is to provide the knowledge so you can make an informed and confident decision.

UNDERSTAND THE LEGISLATION GOVERNING FRANCHISING Franchising in Australia is governed by a Code of Conduct which is administered by the Australian Competition and Consumer Commission. This Code of Conduct is compulsory and must therefore be followed by all franchisors. It applies to all businesses which fit within the definition of a franchise under the legislation, irrespective of whether or not the business opportunity is called a franchise. Some people will call the businesses they have for sale franchises, some will call them licences, some will simply call them business opportunities – but if that opportunity or licence falls within the definition of a franchise, it is a franchise and the Code must be complied with.

REVIEW THE DISCLOSURE DOCUMENT CAREFULLY The Code provides you, the prospective purchaser, with some protection, and you should be aware of what this protection is. From a financial perspective, there will be useful information available to you in the Disclosure Document.

A Disclosure Document is a document which must be given by franchisors to intending franchisees at least 14 days before you sign the Franchise Agreement.

It contains much useful information about the franchise system and its owners, and you cannot properly evaluate a franchise without reviewing that document.

In relation to financial issues, it will include: • Details of the franchisor’s estimate of the initial costs involved in acquiring the franchise.

• Details of ongoing fees payable to the franchisor.

• Possibly, sales and expenses and likely profit for a model franchisee.

Alternatively, the franchisor can simply state in the Disclosure Document that it does not provide any earnings information.

• The most recent profit and loss and balance sheet for the franchisor (or alternatively, a statement by the directors of the franchisor, and verified by a registered company auditor, that the franchisor is able to meet its debts as and when they fall due).

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EDUCATE YOURSELF Before you get too far into the process of purchasing a franchise, educate yourself about business and about franchising. There are plenty of resources for example; • There are publications available from newsagents and bookshops.

• Go to the website of the Franchise Council of Australia (www.franchise.org. au) and review the material available there.

• A number of professional advisors run seminars on franchising and business.

• A number of Franchise Expo’s are run in Australia and New Zealand.

• An appropriate search of the internet will generate a vast amount of information. Be selective in your research on the internet – the information there is not always reliable.

KNOW YOUR BORROWING CAPACITY All of the major banks have an accreditation system for franchises. If a franchise system is accredited with a lender, they will finance 50 to 60 per cent of the purchase price with the only security being the business itself. Conversely, if the system is not accredited, you will have to put in cash to buy the business, or borrow money from a lender against security of a property but the lender will not usually provide any loan against the business itself.

Your borrowing capacity is therefore significantly greater when you are buying a franchise in a system that is accredited with one of the major lenders. You should be aware that the terms of any loan that is secured against the business itself will be significantly different to the terms of the loan that is secured over a property. In particular, the loan secured against the business will have a higher rate of interest and a shorter repayment period.

The bank will also carefully review your ability to pay (service) the loan.

Typically the loan will be serviced via cashflow from the business. For this reason the bank will require detailed profit and cashflow projections.

CHOOSE THE RIGHT BUSINESS STRUCTURE When you establish a franchise business, you have the choice of a number of business structures through which to run the business. Each structure has its advantages and disadvantages. The most appropriate structure for you will depend entirely on your circumstances and intensions. Therefore there is no universal ‘best structure’.

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Your franchise business structure options include: • Sole Trader • Partnership • Company • Trust.

The different business structures are briefly described below:

SOLE TRADER This is the simplest structure available; an individual carries on a business without setting up a separate legal entity. As the sole trader you run the business in your own right (albeit often using a registered business name).

This structure makes you, as the business proprietor, personally liable for all debts, meaning that people to whom you owe money can recover the business debts from your personal assets (for example, your family home).

For sole traders all business income is declared as part of their individual income tax return.

PARTNERSHIPS A partnership is the relationship that exists between two or more persons (individuals or entities such as companies or trusts) carrying on business in common with a view to a profit. As with the sole trader, each partner in the partnership is personally liable for the debts of the partnership so each partner’s assets are at risk. This means that if it is individuals who are partners, the individuals’ personal assets, for example, once again, the family home are at risk. The profits and losses of the partnership are split in accordance with the profit share agreed by the partners.

COMPANIES A company is a separate legal entity, distinct from its shareholders. Companies are owned by shareholders, and directors are responsible for their management.

Operating and maintaining a company is relatively costly compared with a partnership or sole trader.

A company provides the benefit of limited liability (which sole traders and partnerships do not), meaning that the liability of shareholders is limited to their capital invested.

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(similar to the constitution of a company). By law, a trust is required to appoint a trustee. The trustee can either be an individual (or individuals) or a company.

If the trustee is a company, this structure provides the advantage of limited liability in much the same way a company does. If the trustee is an individual the individual’s personal assets are at risk.

There are a number of different types of trusts. The most common type of trust is a discretionary trust (often referred to as a family trust). This type of trust enables income to be distributed to a range of beneficiaries (usually family members) as set out in the trust deed.

SETTING UP A STRUCTURE The right time to choose and set up your business structure is after you have decided to establish your franchise business but before you enter into any franchise agreements or other contractual arrangements. This is because it can prove expensive to change the structure after you have signed a franchise agreement. If, for example, you decide to operate as a sole trader, and accordingly sign the franchise agreement in your own name, but then decide to set up a company or trust, new franchise documents will have to be drawn up and this could prove expensive.

You should also be aware that some franchisors insist on a particular structure.

Any such restrictions imposed on the business structure will be set out in the franchise agreement.

Within my practice I have franchisees using each of the possible business structures. Each situation must be assessed on the facts of that situation.

Overall, in recommending a business structure the objectives I try to take into account are: • Simplicity and ease of operation • Flexibility • Protection of assets, both business and personal • Minimisation of income tax • Minimisation of capital gains tax.

Unfortunately, these objectives sometimes conflict. For example, the structure that is most simple and easy to operate is not necessarily the structure that will provide the best tax benefits. So let us consider each of the objectives and how likely they are to be achieved using the different business structures.

The most appropriate structure will involve a compromise between competing objectives. The cost and complexity of a structure should always be weighed against the benefits provided.

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It is important an appropriate structure is adopted from the start since restructuring can be a very costly and time consuming process. Professional advice received before you sign on the dotted line, from accountants and solicitors experienced in franchising, will ensure that you set up the structure that best suits your circumstances and objectives

PLAN NOW TO MINIMISE CAPITAL GAINS TAX Capital Gains Tax is something that you pay on the sale of a business. Your choice of business structure now may significantly influence the Capital Gains Tax that you pay on the sale of your business.

For example, most taxpayers who sell an asset that has been held for more than one year, receive a 50 per cent discount – that is, they only have to pay tax on half of the capital gain. However, if a capital gain is made by a company, a company does not get that concession. For this reason, many franchisees will choose not to own their franchise through a company.

For many franchisees a further 50 per cent concession (the Active Asset Concession) is available. In practice, what this means is that for many franchisees, every $1 in capital gain can be reduced to 50 cents (by claiming the 50 per cent discount) and then to 25 cents (by claiming the Active Asset Exemption). You can then choose to pay tax on that 25 cents, or avoid tax by either buying replacement active assets or by rolling the money over into a superannuation fund. So for many people selling businesses it is quite possible to avoid paying any tax on the capital gain on the sale of a business. However, the ability to do this is dependent on choosing the correct business structure at the time you buy the franchise.

This area is too complicated to cover in any detail in this article, but it is crucial that you consult an experienced adviser who will ensure that your structure not only minimises your ongoing Income Tax liabilities, but also the Capital Gains Tax payable on the sale of the business.

UNDERSTAND GST ON THE INITIAL PURCHASE There may or there may not be GST on the initial purchase of a business.

You should clearly understand whether or not there is any GST as this will significantly affect the price that you pay.

If you buy a business for, say, $110,000 and the purchase price includes GST, then in the first Business Activity Statement that you lodge after purchasing the business (which will be within three months of you purchasing the business), you will get back 1/11th of the purchase price, ie $10,000. So your net purchase - 60 -

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cost is $100,000. If, however, the purchase price does not include GST, then you will get nothing back when you lodge your first Business Activity Statement and the net cost of the business is $110,000.

So when will there be GST included in purchase price and when will there not be? The answer is that if the sale is a sale of a going concern as defined in GST legislation, if both buyer and seller are registered for GST, and if the appropriate clauses are written into the contract, then there will be no GST included in the transaction. This means that the purchaser cannot claim any GST on the purchase price and the seller does not have to pay any GST on the selling price.

PREPARE YOUR OWN FINANCIAL PROJECTIONS It is likely that in the purchase of a franchise you will be given some financial projections. They may be included in the disclosure document. They may possibly not be included in the disclosure document but be given separately to you by the franchisor or its agent. You should, if you are buying an existing business from an existing franchisee, obtain copies of that franchisee’s most recent financial statements.

None of this financial information is of itself sufficient for you to make an informed decision as to whether you should purchase the franchise. From a financial point of view, you have two decisions to make – do you want to purchase the franchise and how much do you want to pay? The only way that you can make these decisions is by preparing your own financial projections.

You need to prepare detailed monthly sales and expenses and profit projections for the first twelve months for your business. The information provided to you by others is only a guide – it is historical, not prospective, and it is coming from people who have a vested interest in you buying the business. You need to prepare your own projections using your own assumptions and information that you have gathered. Only then can you make the decision as to whether it is worthwhile to purchase the business, and how much you should pay for it.

One particular word of warning – if there are projections provided in a Disclosure Document for a model franchisee, these will nearly always require amendment by you. The model projections may not include depreciation, they will not normally include interest (because the franchisor does not know how much money you will be borrowing), will often not include an owner’s wage (because the amount of the owner’s wage will be at the discretion of you, the owner), etc. The figures in the disclosure document will therefore usually not provide a realistic basis for you to make a decision about a business.

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UNDERSTAND YOUR WORKING CAPITAL REQUIREMENTS Working capital in its simplest form is cash that is used in a business. It can also take the form of current assets and liabilities such as stock, debtors and creditors. These items are not cash but will be turned into cash during the trading cycle. Working capital is the lifeblood of any business.

Typically a business needs enough working capital to fund one full trading cycle. That is the cash that must be expended to supply the goods or services prior to collecting the revenue from the customer. Once collected some of these receipts will be re-invested as the working capital required to fund the next trading cycle. In this way the working capital continues to circulate through the business. It is important that some additional working capital is set aside to fund various contingencies which occur from time to time.

Working capital is a critical component to all businesses. It must be carefully managed to ensure the business has sufficient funds to trade. A cashflow forecast should be prepared in conjunction with the budget. Successful management of working capital will enable a business to grow and take advantage of opportunities in the future. If you have concerns in respect to managing working capital you should consult your financial advisor.

DON’T PAY TOO MUCH When you are buying an existing business from an existing franchisee, the price is nearly always negotiable. Just as when you are buying a house the price the vendor will accept is usually somewhat less than the initial asking price, so it is with the purchase of a business. Do not simply pay the asking price. Be prepared to put in a much lower offer and find out what the vendor really wants.

When you are buying a new franchise from an existing franchisor, there is often less room to negotiate the price. However, there is usually still some room to negotiate.

Do not assume that because you know of another franchisee in a particular system that has done well, that you will automatically also do well in that system. Within all franchise systems, there will be a vast range of franchisee performances. There will be good and there will be bad and there will be indifferent franchises. To some extent this will depend on the operator but it will also depend on the location, demographics of your catchment area, etc. Do your homework, do your financial projections and pay the right price – if you pay too much, you may never be able to make a success of your franchise no matter how well you run it.

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Whilst it is critical you do your own due diligence, do not be afraid to seek professional advice. The cost of advice may seem expensive, but it will be very cheap compared to cost of selecting the wrong business.

Jamie Bishop Partner, Franchising Division McLean Delmo Bentleys 03 9018 4604 jbishop@mcdb.com.au

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Chapter 7

WHAT MAKES A SUCCESSFUL FRANCHISEE?

By Kathy Smith Regional Franchisee, Perth Fastway Couriers

About the Author Kathy Smith is the Regional Franchisee for Fastway Couriers in Perth. With a career specialising in retail sales, business strategy and senior franchise management, Kathy has gained extensive knowledge and experience owning and operating various businesses including a supermarket franchise, where she managed over 70 staff members.

Established in New Zealand in 1983, Fastway Couriers’ global network includes 63 regional depots and 1,200 Courier Franchisees across Australia, New Zealand, Ireland, Northern Ireland and South Africa. Kathy joined the Fastway team in March 2015, and together with her husband Peter, an experienced operations and strategy manager, the pair made the move to Fastway to take over the Perth franchise as a Regional Franchisee and Operations Manager team.

Kathy focused her initial efforts on restructuring and streamlining the operations and logistics of the Perth franchise, in order to enhance efficiency, expand the franchises’ customer base and grow the Fastway brand in the Perth region. Since taking over the Fastway Perth franchise, Kathy has proved that her wealth of knowledge and professional sales experience, combined with her management skills, can add significant value to Fastway’s overall brand.

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WHAT MAKES A SUCCESSFUL FRANCHISEE? It’s the million dollar question for any new franchisee, or anyone looking to buy into a franchise group: “How can I be successful?”

With the appeal of a flexible and dynamic work environment and a smaller degree of financial risk than starting a business from scratch, many are drawn to franchising as a way to explore their entrepreneurial spirit. Franchising is not a ‘get rich quick’ scheme and you aren’t handed a guarantee of success with the keys. While franchisors certainly provide you with the fundamental tools, it’s ultimately up to you, the franchisee, to drive your business towards success with a structured plan, goals and continuous hard-work. There is no single road to success, but there are practices you can implement to help ensure you put your best foot forward to becoming a successful franchisee.

PLAN TO SUCCEED The saying goes that ‘if you fail to plan, then plan to fail’, and this is absolutely true for franchisees. The planning process is a large part of any business and should begin long before you sign on the dotted line. Completing your due diligence analysis is just the beginning of your research and planning needs as a franchisee, and is much more than just a legal requirement. Rather, it’s an opportunity for you to delve into the business and understand how it operates.

It also gives you a taste of the business, so you can decide whether it’s right for you – this is possibly one of the most important questions to answer.

Further to this, franchisees need to develop a business plan. Before you take that first step into the competitive arena, you need to understand your business and its external environment. A business plan answers those fundamental questions such as: Who are my target customers? Who are my competitors?

What is the degree of saturation in the market? Are there any gaps in the market? And, what is the rate of market growth? Based on this information, franchisees can then develop a plan of action, decide how to take advantage of business opportunities, determine how to deal with challenges, and consider what they can bring to the business to drive its success into the future.

So, while franchisors offer you all the basic tools, there is so much more that you can do to ensure you truly hit the ground running once you take ownership of your very own franchise. It’s crucial to remember that your planning doesn’t end once you begin your franchise operations, it’s an ongoing process. Whether you’re planning your weekly schedule or your sales targets for the year ahead, it’s important to set a benchmark for your business so that you can measure and monitor your progress over time.

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THERE’S NO NEED TO REINVENT THE WHEEL Whether you’re part of an industry-leading global network like Fastway Couriers, or a smaller collective of businesses, all franchisees will operate with the exact same business model as the rest of the network. While you need to make your franchise your own, establish your own best practices and plan for its future, it’s important to keep in mind that you’re a small piece of a larger, well-established business puzzle that already has its own mission and vision, policies and procedures instilled into its brand. These have been tried, tested and proved as a recipe for success. With everything laid out for you and a business strategy ready to be implemented, a franchisees job is to bring it to life by putting it all into action, rather than trying to create an entirely new business model.

Before you enter into a franchise business, it’s of utmost importance to be 100 per cent on board with how that particular brand operates and be willing to run your franchise in the same fashion. A successful franchise requires your full commitment, therefore, it’s important to find the best business for you, before you enter into the contract. Of course, any good franchise system is open to innovative ideas and suggestions on how it can improve its entire network, but ultimately you don’t have the freedom of shaping the entire brand to fit your needs.

USE YOUR SUPPORT NETWORK One of the many advantages of owning and operating a franchise is that every business is supported by an established network of professionals that exist to provide you with the guidance you need to succeed. From marketing campaigns to research and development, much of this is managed by your franchisor, relieving you of such responsibilities and offering you the time to really focus on your customers. It’s important to keep in mind that your franchisor wants you to do well and will help you to do so. If your business does well, it’s a positive reflection on the brand as a whole. Therefore, a successful franchisee will utilise their support system, ask for assistance where needed, and take on board their franchisors’ guidance. Your franchisor knows their business and it’s in their interest to provide you with as much assistance as possible – so, take advantage of it.

Teamwork is also an integral part of operating a franchise. Whether you’re a one-person Courier Franchisee or operate a supermarket franchise with over 100 staff members, you’re part of a broader team. For example, every Fastway deport is made up of Regional Franchisees, Courier Franchisees and support staff with a team of managers and directors overseeing the entire network.

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Each person has a part to play in bringing the brand to life and ensuring the customers’ needs are met and exceeded, each and every time. By working together to solve problems, encouraging new ideas and attracting and retaining people that approach their work with heart and enthusiasm, together you can grow your business and drive it towards success. At Fastway, we’re encouraged to build a team culture and spirit, as, although our staff are rarely in the same place at the same time, they’re your immediate support network and they also want to see the franchise succeed.

GOALS KEEP YOU ON TRACK TO SUCCESS Being goal-driven is a necessity for any business owner. Goals give you and your entire team a sense of purpose and direction. While your franchisor will have an overarching vision for the company as a whole, you, as a franchisee, also need to have your own objectives in order to propel your franchise into the near and distant future.

When you’re in business it’s important to recognise that there are several types of goals - financial, operational, social and so on - and each requires action and consistent monitoring. It’s also important to know that there is a difference between goals and objectives and that you need both in order to drive a business towards its overall mission. Goals are the purpose of your ambition or the result which you wish to create from your actions. Objectives, on the other hand, are the actions implemented to attain your overall goals.

It’s also essential that your goals are SMART – specific, measurable, assignable, realistic and timely. Using this criteria for each goal will ensure you have a benchmark in order to measure your progress and ultimately, your success.

Remember, goals should always start small, but grow as your franchise develops. Don’t take on too much too fast - success isn’t a race, it’s a process.

LIVE AND BREATHE THE BRAND A strong brand is one of the most valuable assets an organisation owns. To make it powerful, the brand needs to be applied consistently, so that anyone dealing with it knows exactly who you are and what you stand for. Keep in mind that, to your customers, you’re the face of your brand, so ensuring you always represent your brand’s identity and culture is important.

As a small part of a larger franchise network, you’re an advocate for the brand and so, it’s your responsibility to uphold the brands values in order to support your wider team of franchisees and of course, your franchisor. If you’re to succeed, each member of the franchise needs to take ownership of the franchises’ approach, and have a clear understanding of the impact that performance and attitude can have on the business as a whole.

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WHAT MAKES A SUCCESSFUL FRANCHISEE?

SEEK OPPORTUNITIES FOR GROWTH Lasting success is only achieved by adapting to the market, responding to changes and capitalising on opportunities. Aligning yourself with a franchise that has an ingrained thirst for the latest technology and invests heavily in innovation is the first step to securing your competitiveness in the months and years ahead. This is hugely important to the success of your franchise.

At Fastway, franchisees benefit from the continuous roll-out of new technology and innovations across the network. As a result, our customers have access to the best levels of service and products. In the last 12 months, Fastway has developed innovations that seek to grow the business network, such as Parcel Connect, a new delivery service, which offers customers a more convenient way to send, collect and return parcels, through an expanding network of local retail outlets.

Through these investments, Fastway continues to work towards being recognised as the courier services provider of choice to the Australian online retail industry. As a franchisee it’s important to embrace the technology that’s available to you and seek new opportunities to improve your operations, efficiency and profitability.

In addition, there are always opportunities for business growth within your own regional market. It’s your responsibility to go out and find these opportunities.

Being able to sell yourself and your business, develop strategic and ongoing relationships with customers and solve problems quickly will ensure your business thrives, now and in the future.

PASSION, DRIVE AND A LOT OF HARD WORK Successful franchisees strive for excellence in all they do – they’re motivated, driven and are willing to put in the hard yards to achieve success. While many franchisees have a wide support network available, and the basic building blocks for success, like any business, it needs to be nurtured. This is why it’s of utmost importance to select a franchise system that fits you.

Being passionate about your product or service goes a long way. It allows you to do more than you think - passion drives you to push the limits, achieve your goals and inspires you to seek new opportunities. Boldness and curiosity are two elements that are driven by passion and are a necessity for franchise owners. Almost all businesses will go through periods of adversity, and it will only be your constant drive to succeed that will enable you to overcome the obstacles that fall in your path.

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Success doesn’t just fall in your lap, there are no shortcuts, nor is there a substitute for hard work. Franchisees have to be committed, dedicated and have the right attitude to reach their fullest potential. In addition, your team should reflect your enthusiasm and drive so that you’re supported on your road to success.

CUSTOMER SERVICE IS KEY Your customers are the key to your success - they form the foundation of your franchise and allow you to generate revenue that ultimately supports the livelihood of you and your staff members. Therefore, it’s important to implement a customer-focused approach throughout your franchise.

Building customer relationship management (CRM) strategies and practices can help to create lasting relationships with your customers. Always remember that it costs less time and money for you to work on satisfying and retaining your existing customers than it does to venture out to attract new ones. Wordof-mouth is a strong tool and can dramatically affect the perception of your business in your local area. By ensuring your customers have a positive experience with your business each and every time, they’ll be encouraged to repeat their purchases and tell their family and friends about the great services you provide.

At Fastway, everything we do is to benefit our customers. We work tirelessly to improve and simplify the parcel delivery process so that our customers experience the best and most efficient service. Fastway is also renowned for ‘delighting our customers at the door’ and being the friendly courier experts this is something the entire network is very proud of.

TRAINING AND DEVELOPMENT IS ALWAYS A KPI Training is essential to achieving anything in business and presents endless opportunities to expand the knowledge base of you and your employees.

Training is an ongoing process with no definitive end. Many business owners don’t understand the benefits of training to their business. While franchisees incur an expense to put themselves and their employees through training programs, the benefits far outweigh the costs. Training can address weaknesses, improve performance and consistency, provide overall work satisfaction, and enhance your franchises operations and efficiency.

Today’s market has a high turnover of skills and is rapidly evolving, thus, keeping up-to-date with the latest market trends, technology and skills will ensure you remain proactive in your business approach and always one step ahead of your competitors.

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WHAT MAKES A SUCCESSFUL FRANCHISEE?

GENERATING A PROFIT Like any business, the main goal for your franchise is to generate a profit. While profit isn’t what will make you a successful franchisee, it does determine the survival and growth of your business. Remember your profits are your revenue minus any expenses that you incur, so, it’s important to strive for high sales, as well as reduce costs where possible, without compromising quality.

Keep in mind that your franchise is susceptible to changes in the market and thus, your profit margins will change from week to week and month to month. While it can be difficult for most business owners to manage their daily cash flow, it’s important to understand your business and the market, anticipate changes and respond to crises in order to reduce your risks. Therefore, monitoring costs, creating a flexible structure and adapting to change is essential to ensuring your lasting success.

My final, and most important, piece of advice is – love what you do. If you genuinely enjoy your job, you’ll succeed. It’s a simple recipe for success.

Kathy Smith Regional Franchisee - Perth Fastway Couriers 1300 FASTWAY www.fastway.com.au

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Chapter 8

DEFINE YOUR TARGET MARKET Stefan Kazakis Founder Business Benchmark Group

About the Author Stefan Kazakis is a renowned business strategist, soughtafter presenter and founder of Business Benchmark Group, which helps clients from a variety of crossroads and industries seize opportunities to achieve ongoing business success and substantial profit growth.

Stefan is also the author of From Deadwood to Diamonds (Major Street Publishing, $29.95) and has over 20 years’ experience running successful small to medium sized businesses – including a family business which he took from near bankruptcy to be a multimillion dollar business.

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B

efore you invest in a franchise you need to be absolutely clear about who will buy your product and why. You need to be able to identify them with great clarity. If you are considering a franchised book store it’s no good just to say, ‘I expect booklovers and students to buy my books. I know there are plenty of them out there so I’ll be fine.’

There’s no room for vagueness, guessing, crossing fingers or hopeful estimations when it comes to this stuff. The skills and tools required to create an idea are very different to the skills and tools required to grow market share.

It’s the same for someone who is considering a coffee shop franchise in the city centre. If the extent of your strategic planning is that lots of people come into the city, lots of people like coffee, so if I open a nice coffee shop in the city I should be fine, then that’s not great market research. In fact, that isn’t market research, but you’d be surprised how often franchises get started like this. You won’t be surprised to know they don’t last long if they don’t wake up real fast.

Having made the decision that you are going to invest in a franchise, you know this will provide you with a product or service that you think other people or organisations want to buy. However, thinking this and knowing how and why it will happen are two very different things. At some point in their busy lives, with all sorts of other options available to them, you want people to look at your product and say, ‘Yes, this is what I need’. These people or organisations are referred to as your target market, and you need to know exactly who they are, how you are going to grow and service them.

Why is this so important? Because if you are investing in a franchise, you have to be focusing on how you can serve your target market, you cannot be everything to everyone or you will actually be no good to anybody. It’s important to know who your target market are and how you are going to attract and farm for new opportunities.

SO, WHO ARE THEY? So now that you know why it’s so important to find out who your target market is, let’s have a look at how you go about doing it.

There are six questions you must be able to answer about your target market.

If you can’t answer all of these questions you won’t be able to meet the needs of your target market.

These six questions are: Who is the person or organisation you wish to serve? You need to be able to define them in detail. For example, ‘parents’ is not a well-defined target - 74 -

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market. What age are they? How many kids do they have? Where do they live?

How much money do they earn? Are they married? Are they single? Defining ‘parents’ as a target market is just the beginning.

Where do they congregate in their greatest concentration? Where are they being influenced? What is their desired number one big outcome? What is the problem you solve for them?

When is their highest level of frustration? When will they say, ‘I need to buy this’? One in 10 of your future clients is not ready to buy right now but is thinking about doing so. When do they say ‘now is the time’?

Why will they choose you? Why will they discriminate in your favour and open their wallets for you? This is one of the hardest questions to answer.

Whatever your product or service, your potential ‘A’ clients have other options available to them. Your challenge is to ensure you make it easy for them to buy from you.

How do you expect them to do business with you? How do you expect them to communicate with you, contact you, and correspond with you? How can they let you know they are interested in your services? Will this be online, face to face, over the phone, or a combination? In our modern, highly connected world it’s more important than ever to make it easy for people to interact with you and buy from you. There are always other businesses they can buy from if you make life hard. How can you let them know about you and your service or product?

The more you understand the who, where, what, when, why and how of your target market the better you’ll be able to shape your franchise. Remember, you need to create your own uniqueness within the guidelines of the franchise, customer delight is of paramount importance.

HOW MANY OF THEM ARE THERE? The answers to the above questions will tell you the type of people you are aiming at but they won’t tell you how many of them there are. To establish the size of your target market you now need to define what area you are going to target. This can range from local to global and anything in between. For example, a fruit shop franchise can be highly successful just focusing on people in the target market in surrounding suburbs, but this is not likely to work for a carpet cleaning franchise. People buy fruit weekly but only have their carpets cleaned occasionally, so the carpet cleaner would need to focus on an entire city to have a large enough target market. It’s about focusing on a market that is appropriate to the scale of your business – there’s no right or wrong - 75 -

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answer. For some it’s the eastern suburbs, for some it’s Melbourne or Perth or Adelaide, or a particular rural region. For some it’s the whole of Australia and for some it’s global. It might change over time as you grow; this is fine as long as it’s part of your strategic growth plan and not random, disorganised expansion just for the sake of it.

It is up to you, before you start to grow, to understand three crucial things about your target market: ◆ How big is it? ◆ What market share do you currently have? ◆ What market share would you like to have and in what timeframe?

Most business plans fail because business owners miss this step. They simply have a ‘gut feeling’ or experience in the industry or just wild dreams that tell them willing customers are out there for their chosen franchise but to succeed and grow you need to be proactive, certain and precise. You need to get the numbers to make good decisions in your business. Let me make something clear for you right here: whatever your type of business, this information is available. Whilst the franchisor will have this information for you it is important that you also carry out some research for yourself. You might be able to buy existing market research and you can certainly do some yourself or pay to have it done. There’s no excuse for not being able to answer these questions. If you can’t, it is not because the information isn’t available; it is because you haven’t done the work required. This is crucial, factual information that you need to be fully aware of, otherwise you are building your business on the random hope that someone out there at some time might buy from you because you have an awesome product.

Once you have the answers to these questions it’s time to further break down your target market into niches that will provide you with even more clarity about your customers. Now what? It’s time to do it again! That’s right, your target market can be further broken down into niches that will help give you even more clarity about your customers and how you can curb their frustration.

LET’S BREAK THIS DOWN EVEN FURTHER Once you have answered the above questions with confidence and clarity, have a look at the market you have defined and see how you can break it down even further. For example, my broader target market is business owners ranging from $1 million to $5 million businesses. Within this there are all sorts of niches that I can target separately, such as trades, professional services, manufacturing, retail, hospitality, entertainment and arts, franchisors or franchisees. As a broad - 76 -

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category they all fall into my target market, but have a think about each niche and the questions we posed above. By refining and identifying these niches I can improve my focus even further.

CONSIDER THE VERTICAL MARKETS ALSO Even within these niches there are further vertical markets you can target; for example, within trades you have plumbers, electricians, carpenters, plasterers, tilers, roofers, and on and on it goes. Within professional services we have doctors, lawyers, accountants, architects and much more. You can even break doctors down into chiropractors, physios, GPs, oncologists, podiatrists, surgeons and cardiologists. The high-level categories are very useful, but once you break it down even further you’ll really be able to identify with clarity and confidence who your target market is, why they buy from you and how you can reach them. In my business, when I really want to focus what I’m doing I might spend a whole quarter just focusing on, for example, plumbers.

The Drain Man is a great example of finding a niche. They are registered plumbers, but they just clear and reline drains. That’s it. They don’t do taps or hot water service or showers. It’s just like a brain surgeon compared to a GP – they are plumbers with specialist solutions. The industry is plumbing but the niche is drain-clearing.

DEFINE YOUR MARKETING STRATEGIES While the overall number one big outcome might be the same for an architect and a physio – say, to increase business by 100 per cent in 12 months – how they each go about it will be different, so this allows me to tailor offers even more specifically to meet these clients’ needs. Will the architect and the physio read the same industry magazines, attend the same events and have the same colleagues? Not likely. So my marketing has to be different. What is the investment vs ROI for each? What are their frustrations and their freedoms?

When will they buy from me? While their goals may be broadly similar, everything my business does can be refined to better meet the needs of these two different businesses, thereby increasing the chances that they will purchase from me and not my competitors.

Each one of the niches you identify needs to be defined and dissected, just like your overall target market. You need to ask the who, where, what, when, why and how questions again, then identify its size, how much of it you currently have and how much of it you would like to have in what timeframe.

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business for? What is the underlying foundation? If you don’t know who these people are and what they want, the only way you can solve their problems is by getting lucky, and luck is not a solid business fundamental or a strategy for success.

Your target market can be broken down further into niches that will help give you even more clarity about your customers. Each one of the niches you identify needs to be defined and dissected, just like your overall target market.

If you don’t know who your target market are and what they want, how you are going to service and grow them, the only way you can solve their problems is by getting lucky, and luck is not a strategy for success.

When you decide to go into a franchised business you need to be absolutely clear about who will buy your product and why. There are six questions you must be able to answer about your target market; who, where, what, when, why and how. The answers to the above questions will tell you the type of people you are aiming at but they won’t tell you how many of them there are.

Stefan Kazakis Founder Business Benchmark Group info@businessbenchmarkgroup.com.au www.businessbenchmarkgroup.com.au

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Chapter 9

Investing In an International Franchise

By Rod Young Chairman DC Strategy Group

About the Author Rod has over 30 years’ experience in franchising, licensing and business development in Australia, Europe, China, South East Asia, India and the United States and is considered one of the world’s leading franchise consultants.

He has been a key advisor to many of Australasia’s leading franchise groups. His business interests have also included roles as both a franchisee and franchisor. As well as his role as Chairman of the DC Strategy Group, he is the Chairman of Poolwerx, the pool and spa retail and service giant which has recently expanded into the US; is a Senior Board Advisor to Cartridge World Global Holdings, the Hong Kong-based parent of Cartridge World, having been the Executive Chairman and Global CEO of the $250 million 1000 store/40 country Cartridge World group and taking it to a sale of the network to Chinese manufacturing group SGT earlier this year. Rod also serves on the Board of several national and international companies as well as on the Board of Governors of the ASEAN Franchise Association and the Indian Franchise Association.

DC Strategy, the firm Rod founded, is the region’s premier end-to-end franchise consulting, legal, franchise recruitment and brand and marketing firm, providing strategic advice and services to the franchise community. The specialist teams at DCS have been involved in developing many of the region’s most successful franchise networks.

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How do you become the next market leader?

By leveraging the know-how, systems, branding and marketing, buying power and intellectual property of a proven business in another country, you may just get the boost you need to become a major player in Australia and New Zealand, or in other regions and countries across the world.

Australia has only 1.2 per cent of the global economy but has 2.2 million businesses operating in a population of just 24 million people. Only about 80,000 of these businesses are franchised.

There are almost 10,000 franchised brands across the globe and franchising is growing across almost every market. Master Franchising is a powerful management and financial strategy for global expansion even into politically troubled regions where many businesses would not consider opening as a direct entry funded and managed by the brand owner. For example the Australian-founded Hong Kong-based Cartridge World has recently granted Master Franchises in Afghanistan as well as China, Tanzania and Kenya. With about 1,400 franchise systems in Australia there is always room for one more, either by creating a new category (think chocolate desserts, juice bars, Tex Mex or frozen yogurt), or taking market share from established categories such as Cafés, Burger Bars and Pizza stores have done.

International Franchising is big business Some of the world’s most valuable brands have used franchising to grow into international giants.

Coca Cola, General Motors, Pepsi, Ford, Shell, McDonald’s, BP and KFC are all franchised business models that created global scale.

And it is not just US-based businesses that are using franchising to grow internationally. More franchise networks from other countries are expanding outside their home market and across the globe.

While Australia and New Zealand are a relatively small market, they punch well above their weight in terms of profit per unit and have proven attractive to all the above brands plus many more. They include US-based Burger King, Carl’s Jr., Subway, Ben & Jerry’s, Jani King, It’s Just Lunch, Taiwan-based EasyWay, French-based hairdresser Franck Provost and more recently a raft of frozen yogurt brands led by Yogurtland.

Many other international franchises are about to establish themselves in Australia via Master or Area Development franchising including the dynamic Carl’s Jr. burger chain with its risqué advertising and a focus on ‘young, hungry guys’. It is a huge success in New Zealand and about to launch in - 80 -

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Australia. While other jurisdictions will lag in franchise growth until certainty of IP rights and franchise contracts and other matters of a commercial nature can be backed by transparent and enforceable legal rights, many countries including Australia and New Zealand are well positioned to attract even more international franchises.

The world is awash with capital and there are many groups or individuals with substantial net worth who are searching for the next big idea in their country or region. Many franchise systems have pioneered internationalisation of their brand and demonstrated that master franchising can help a company grow on a global scale. International franchising will become a bigger part of the revenue stream of more successful franchise systems.

Governments and financial institutions have recognised that franchising creates economic activity, opportunity, jobs and profits. Delegations of government and semi-government officials from emerging economies are actively encouraging overseas franchise systems to establish franchise networks in their jurisdictions. Countries such as the US, France, Singapore and Malaysia have proactively supported franchise development for many years and today, politicians in most countries understand the link between franchising, SME’s and economic prosperity.

The emerging retail, food, service and online businesses of the future are focussed on the needs of a changing consumer attitude shaped by eCommerce and social media. The alignment of the physical offer with an eCommerce and social media strategy designed to capture more walk-in and internet sales must be a feature of the international franchise of the future.

However, local representation will always be a critical part of any business model (even Google has over 60 offices across the world to sell its services) and international franchising will flourish as a result.

These new-age businesses are reaping the benefit of this changing consumer and economic momentum and franchising is surfing this wave as the need for motivated owner-operators continues to grow.

An intending Master Franchisee needs to understand that the franchising model can also compliment other growth strategies.

A Master or single unit franchise structure does not eliminate the establishment of joint-ventures or fully company-operated businesses by way of direct ownership in a region or country. Successful franchise networks do also choose to establish new markets where locations are owned and operated by the parent company or enter with acquisition and conversion of a local business. Similarly, complete takeover of former master franchised territories are not uncommon and can substantially increase cash flow and profits for the brand owner.

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The investment Investing in an international franchise offers the potential to either expand an Australian, New Zealand or international franchise business to new countries and markets or import a foreign-based franchise into Australasia. Many Australian companies are doing so now and more Australians are part of that migration of a local brand to an international market by securing Master Franchise rights in foreign countries.

The investment usually involves the payment of an initial upfront fee for a defined territory which may or may not include the right to sub-franchise.

Further investment will be required to open at least one and sometimes several company owned outlets to prove the franchise model in the market before a franchise can be granted in the territory. An investment in localising the operations manual, sourcing suppliers and developing a localised marketing and advertising campaign will also be needed. Good franchisors will also require a Master Franchise candidate and its management team to attend training in the home market at their cost before the first location is established in a territory.

A good example of this is the Bounce Trampoline Universe. This Melbourne, Australia founded business has become a global phenomenon with Bounce Stadiums now established in Asia, the Middle East, Africa and soon Europe.

The Bounce Universe training and openings are strictly controlled and teams from new countries come to Australia to be trained for weeks in the Bounce operations, marketing and culture at both local stadiums and at the Global Support Office.

While you may think this is a costly way to train new Masters, it is a small fraction of the multi-million dollar investment that Bounce requires Masters to have available to invest in this brand.

Ongoing commitments to the franchisor typically involve a share of the local revenue from both initial local franchise fees (if sub-franchising is permitted) and continuing product or service sales by way of a monthly or quarterly royalty payment.

Experienced franchisors look for active investors who will be hands on and operate the business on a day to day basis and have some prior experience in business, people management and real estate and development if it is a bricks and mortar based business. Good franchisors are selective about who they will grant their rights to, so expect to prove you are financially and operationally capable.

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How do you choose the right international franchise?

In developing national and international franchise systems, the DC Strategy team found that the features of many businesses which stood out for their growth trajectory and market share had common elements that were not confined to industry groups or country of origin. These features were present across businesses as diverse as food, retail, service and online networks that built substantial enterprise value for their proprietors and shareholders and offer similar potential to an active investor looking to secure an international franchise.

It goes without saying that the product or service offering must have consumer demand in the market but if you are seeking to invest in an international franchise it should also rank highly in the following: 1. Consistent execution of the fundamentals At the heart of any business is the value proposition. While this may seem so basic that you may say that every business has one, the best-practice franchisors have a focus on the customer proposition which develops loyalty and keeps them coming back.

There is an understanding that each customer is more than just one transaction and they understand that the ‘lifetime value’ of their customers is many multiples of the first transaction with a new customer. This lifetime value is being calculated and benchmarked across the network.

The point of sale experience either in store or online is a key focus to capture new customers and is supported by recognition and acknowledgement that is backed by email and text communication as well as direct mail to build true customer loyalty to the brand.

Included in the fundamentals are the staff / store / uniform / vehicle / website and online presentation that create and reinforce good impressions and a commitment to keeping the customer’s experience fresh.

2. Well defined KPI’s, benchmarking and financial reporting Alfred P. Sloan, the Head of General Motors in the 1950’s, said “the purpose of an enterprise is to make a profit”. We are always fascinated to hear the excuses used as to why a franchise organisation does not require, collect and analyse the monthly profit and loss statements of all franchised outlets. How can any senior executive build, run and maximise the performance of an enterprise if he or she does not have access to the key metrics and especially the net profit of the franchise outlets?

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sale systems and dashboards linked to management reporting processes that measure and benchmark KPI’s across the network. The better franchisors publish the entire networks’ store by store financials and educate their franchisees on how to analyse this data and their performance relative to others in the group.

3. Comprehensive compliance management A complaint of many better franchisees in some networks is that the franchisor is soft on compliance and is letting other franchisees operate a poor standard of business which reflects badly on their franchise and ultimately its value.

These better franchisees soon sell up and migrate to networks with more professional compliance standards. The great franchise systems understand that the customer promise conveyed by advertising and marketing and via the website must be faithfully reflected at the customer-end of the business.

They define what the standard of the network is during the recruitment, screening and selection of franchisees with a view to weeding out people who do not value standards or are unwilling or unable to comply. Induction and training programs highlight what the standards are and how they are measured, managed and achieved.

Field staff provide a fresh set of eyes to prevent ‘store blindness’. Compliance in reporting is also ingrained into the culture of great franchise systems to measure performance and compliance to defined standards.

4. Field staff as coaches, not auditors and policemen The best franchise systems are focused on developing their franchisees and Masters to become better business people by education rather than policing.

We all know that every light globe should be working but if field staff spend too much time on trivia, or develop a culture of blame, they miss the opportunity to earn the confidence of a franchisee or Master and become a mentor. This confidence is critical before coaching commences and quality field staff can develop far better franchisees and businesses when they have invested the time to listen and understand the goals and motivation of a franchise owner and his or her family.

5. A focus on the value of intellectual property (IP) Real champions are brand champions. They understand that the brand is one of the few ways to add a premium price to an otherwise commoditised product or service. We see the best franchisors don’t just focus on the trademark and colour scheme which is of course vital to the brand, but understand their IP also embraces their systems, processes, documentation and culture.

In a world where any tangible item can be easily copied, the true value of IP is often enshrined in the way things are done in the organisation. A respect - 84 -

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for these processes and an understanding of how they create value for the business has become part of the culture and is trained into new recruits in the leading franchise systems. Intellectual Capital, which is the collective knowledge in the heads and hearts of the franchisors network of staff and franchise owners, also falls under the IP category of an enterprise.

DC Strategy also sees Trade Mark Diversification as an emerging feature of leveraging IP. Guylian, the Belgian-based chocolatier best known for its boxed chocolate seashells has granted the Master rights to a Guylian Chocolate CafĂŠ concept pioneered in Sydney, Australia and now expanded into global markets.

6. Real marketing and advertising muscle Nothing builds a business like a commitment to advertising. We use the word commitment advisedly because a feature of all leading franchise systems is a focus on advertising and marketing from the very beginning of establishing the network.

While many competitors decide to wait until they are bigger before spending big on advertising and as a result fail to grow, the best franchisors typically allocate a more substantial percentage of turnover to advertising than their competitors and then supplement these funds with additional investment in advertising to help establish new markets.

Another feature we see is highly developed local area marketing activities by franchisees. This does not just happen. The market leaders understand that marketing can drive community engagement and look for, train and expect franchisees to go beyond the store front or vehicle into their local community. The advertising and marketing is integrated and multi-faceted with traditional leaflet and direct mail, local newspapers, radio, TV, billboards, public relations and a growing online commitment to internet advertising, YouTube, Facebook and other social media.

Innovative cross-promotional activities with non-competing business serving the same consumer pool are often evident. These innovations are almost always developed first by the better emerging franchisors who are looking for cost effective ways to create a larger than life image.

7. Continual innovation Innovation is where the best franchises keep ahead of the pack. They realise that competitors will eventually copy the market leaders and understand that differentiation is important. This differentiation is not just in product but in every aspect of the business.

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of the business. The example of McDonald’s push into coffee via the McCafe concept is a good example. It may be seen by the customers and competitors in new products, services or advertising but the invisible innovation that defends and extends market share is often related to staff training, direct customer communication via email, text, social media, direct mail and online and web communication with new technology to track the nature of the business and customer trends.

This leads to better decisions being made earlier that edge the leading franchisors even further ahead of competitors and re-engage customers who may become jaded without change.

8. Supply chain management When franchisors start to treat their suppliers as strategic partners they begin to approach best practice not only in franchising but in business generally.

By harnessing the know-how and experience of their suppliers, good franchisors find a willing partner in new product research and development because suppliers understand that assisting customers to grow will result in increasing sales volumes for those suppliers.

There are also substantial benefits being created or costs saved by working with suppliers who understand the strategic plans of their franchisor customers. Many of the better franchisors are deriving substantial income by actively managing the supply chain relationships for the benefit of their franchisees as well as for themselves. The key to supply chain management is firstly ensuring that standards are specified for quality, service and delivery and are not compromised, and secondly, the prices paid by franchised owner/ operators across the full range of approved products result in a higher gross profit than if that franchise owner purchased independently.

Many good franchisors have a strong representation of franchisees in supply chain issues with some international brands having the franchisee body control the buying process with the benefits being shared between franchisor and franchisee and/or applied to the advertising fund to boost brand exposure.

EyeQ, the Sydney, Australia-based optometry chain may not be the biggest on the planet but their supply chain strategy stretches into Asia and the US to source the best range, quality, design and prices for the benefit of the EyeQ network.

Their intimate understanding of the nexus between product and sales has focussed them on securing supply chain benefits that are paying dividends for both the company-operated optometry practices they own and those operated by their franchised network members.

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This supply chain strategy underpinned by both sourcing and buying power is the cornerstone of their first steps into international markets.

9. Sound two-way communication Many franchisors do not appreciate that franchising is more of a human resource strategy than a capital raising strategy. As networks grow, so does the experience of the franchisee body. The very best franchise systems appreciate that ignoring or isolating the franchisees leads not only to a stifling of innovation but the loss of quality franchisees to other more open networks.

The franchisor/franchisee relationship is the cornerstone of a successful franchise network and the higher the degree of franchisee satisfaction the better execution of growth strategies. Growth often entails change. Strong communication between franchisee and franchisor, including consultation to gain both ideas and support for change, builds the trust needed to make difficult change management programs successful across the network.

The communication process starts with an open mind by the franchisor and especially the field support team and a willingness to listen and respond to franchisee concerns. The process of monitoring and responding to these concerns is where great franchise networks excel. Franchise Advisory Councils, franchisee product development input, regional advertising committees and annual conferences are all hallmarks of the better franchisors.

10. Induction and ongoing training When a franchisee applies for a franchise it is obvious he or she is doing so because they do not have the expertise to operate a business similar to that of the franchisor. If the recruitment screening and selection process is professionally developed and executed, the franchisee will understand the standards expected by the franchisor and the process by which the franchisee will be trained in every aspect of the franchisor business.

Good franchisors understand that the initial induction and training prior to a franchisee taking over his or her business is merely an orientation process.

The real training starts once the first few months of trading are under the franchisee’s belt and the franchisee starts to settle into a rhythm which will allow them to absorb the subtleties of what makes the franchise really tick.

For the best franchise systems, training is an ongoing activity which is directed not just at the franchisee but his or her staff to ensure that execution of the customer service strategies and the customer experience is being applied faithfully.

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Training programs at each level of the business are evident, from the most junior new recruit that may be trained by the franchisee via ‘train the trainer’ programs, to franchisee and manager training supported by suppliers as well as the franchisor both off site and in conjunction with regular field support coaching and guidance at the franchisee’s location.

Online learning via intranet and webinar is also emerging as a feature of more progressive and committed franchisors, as the best of the best understand that training is a commitment that pays dividends by building franchisee and staff satisfaction, sales and profits, and the costs for this training are incorporated into the annual budgeting and planning process.

For example, the Poolwerx Group have established the world’s most substantial pool retail and service training facility at its Support Office in Brisbane, Australia.

This facility houses the Poolwerx ‘pool school’ which comprises a computer equipped training classroom, a pool store, a totally equipped mobile Poolwerx service van, and fully functioning swimming pools and spas on a suspended platform so that all the hydraulics, electronic and electrical equipment, pumps, filters and other chemical, solar and remote monitoring pool management and control equipment are exposed for installation and operational training purposes.

Franchise owners and their staff from around the world are trained at these facilities to ensure the best possible preparation to provide the standards of service Poolwerx are famous for.

Poolwerx have now leveraged their expertise into the US markets with Poolwerx networks now operating in Arizona, Los Angeles and Florida and expansion plans in more regions of North and South America.

The commitment to training its owner-operators has served Poolwerx well.

Trends Over the next five years, DC Strategy forecast that the international franchise sector will grow at an annualised rate well exceeding inflation.

Substantial growth will occur in the Asian, Indian and Middle East markets and the US recovery will see franchising continue to grow in both North and South America.

There will be an increase in the number of franchised owner operators, many of them being multi-unit owners, regional or master franchisees or area developers. They will emerge as a powerful lobby group enjoying higher profitability levels than their independent counterparts, and will require sophisticated management by franchisors.

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eCommerce and social media will need to be a core part of brand and sales development to keep up with the demands of the new consumer. As desktop and laptop computers give way to mobile phones and tablets, websites must be oriented to these devices.

Many governments have introduced franchising legislation that will lead to better conduct in the franchising sector and there are only a few countries without a national franchise association. Access to information via the web is creating better decision making. There are more accountants and lawyers who understand domestic and international franchising and are better able to advise prospective franchisees. This franchising education is diluting risk.

In summary, it is clear that the very best international franchise investments also have the very best franchise and business practices. They are constantly monitoring the outcomes that result from the ongoing application of the ten key features of best practice franchisors.

For any franchise to develop into an international brand, that organisation’s position in the competitive pack will be determined by how well these features are developed and executed in the local market. The value prize is market leadership and the rewards it brings is the Enterprise Value each stakeholder in the business, be they brand owner, franchise owner, master franchisee or area developer, will achieve upon exit.

If you want to invest in an international franchise the first step is determining if the business model has these features of success and that you have the capital, commitment and experience to faithfully apply them in your market.

Rod Young Chairman DC Strategy Group +61 2 8220 8711 rod.young@dcstrategy.com www.dcstrategy.com

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Chapter 10

EMPLOYING STAFF IN AUSTRALIA:

KNOW YOUR OBLIGATIONS Michelle Dawson Partner, Accredited Workplace Relations Specialist Madgwicks Lawyers

About the Author Michelle Dawson is a Partner at Madgwicks Lawyers. She has worked almost exclusively in the area of workplace relations for 12 years and is a Law Institute of Victoria Accredited Workplace Relations Specialist.

She advises employer clients in a diverse range of industries and sectors including franchising, professional services, tourism, hospitality, transport and resources, and works with employee clients from all walks of life.

Michelle has an in-depth understanding and thorough working knowledge of all employment, workplace and anti-discrimination legislation and law in Australia and is a well-practiced advocate in these areas.

In addition to advising on disputes, she regularly works with clients to assist them with employment strategy, as well as establishing and implementing employment systems, policies and procedures to ensure best practice, compliance with Australian and State laws, as well as effective management of their risks as an employer.

Michelle is highly regarded by clients and colleagues alike and has achieved favourable outcomes in a number of very significant and high profile cases throughout her career.

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INTRODUCTION In Australia, employees have many rights and entitlements. Employers have legal obligations to ensure that these rights are afforded and entitlements met.

The ramifications for employers who do not comply with their obligations to their employees can be significant.

The complexity and extent of the laws that underpin employment and workplace relations in Australia can make it difficult for even the largest of organisations to properly understand and comply with their obligations. It is hardly surprising, therefore, that smaller business operators - including operators of franchisee businesses – can find the concept of becoming an employer particularly daunting.

For franchisees, having a proper understanding of the relevant requirements is essential. Given the high profile nature of many franchise systems in Australia, the consequences of an employment dispute or non-compliance prosecution can be disastrous - not only for the franchisee, but also the franchisor and the whole franchise system - especially where media coverage occurs.

In this chapter, a general summary of the rights, entitlements and obligations in the area of employment will be provided. It is hoped that the content of this chapter will assist to: • make franchisees aware of some of the many rights and entitlements of employees; • provide franchisees with a general understanding of many of the obligations which employers have; • put franchisees in a position to identify key areas of risk, and/or where there is a need for compliance, so as to aid risk management.

The chapter has been divided into sections capturing the various stages of employment as follows: Section 1: Overview - Understanding the Fundamentals Section 2: Getting Started Section 3: Engaging Employees Section 4: During the Employment Section 5: Termination of Employment

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SECTION 1: OVERVIEW - UNDERSTANDING THE FUNDAMENTALS Sources of Employment Law There are various sources of employment law in Australia, including common law (laws made by judges), laws of contract and legislation.

The most significant source of employment law in Australia is the Fair Work Act 2009 (Cth) (“FW Act”). The FW Act is Federal legislation which has general application in all States and Territories of Australia. Important legislation as to other employment and workplace matters also exists from State to State.

Long service leave, workers compensation and payroll tax are governed by legislation in place in each State. Workplace health and safety legislation also generally varies from State to State, although some of the States share health and safety legislation.

Types of Employment There are various different types of employment. The most common are: • full time; • part time; and • casual.

There are also other types of employment including maximum, specified or fixed term employment.

Contractors (persons/entities often running their own businesses, engaged to perform a service or series of services) are not employees. Employers are not permitted to engage as contractors persons who, on the basis of the arrangement as a whole, ought to have been engaged as employees.

Minimum Terms and Conditions The minimum terms and conditions of employment are set by the FW Act and by either Modern Awards (“Award”) or enterprise agreements.

Awards Awards are enforceable documents which employers must (generally, unless an enterprise agreement applies) comply with. Awards are industry or occupationbased and most workplaces not subject to an enterprise agreement will be subject to the provisions of an Award. Some workplaces will have more than one Award to comply with.

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‘enterprise’) level between an employer and its employees (and sometimes their unions) about terms and conditions of employment. Enterprise agreements are made with a group of employees rather than individually. Often (but not always) if an enterprise agreement applies, an Award will not.

Enterprise agreements can also be made by more than one employer, with a group of employees. Some larger franchisors may have an enterprise agreement which franchisees may be required to comply with.

Awards and enterprise agreements set and mandate minimum rates of pay.

Together, the FW Act, Awards and enterprise agreements dictate the minimum employment terms and conditions for employees in Australia.

The National Employment Standards The FW Act set out a series of terms and conditions which employers must comply with. These are known as the National Employment Standards (“NES”) and consist of the following: 1. Maximum weekly hours

Employers must not require a full time employee to work more than 38 hours per week unless any additional hours are reasonable. Employers must not require part time employees to work more than their ordinary hours of work in a week unless any additional hours are reasonable.

Whether additional hours are ‘reasonable’ depends on a range of variables, including the industry, the role and the other terms and conditions of the employment.

2. Requests for flexible working arrangements

Employees who meet certain criteria (including employees who are parents or carers, employees with disabilities and employees aged 55 years and over) can request a change in working arrangements because of their personal circumstances. Employers can only refuse a flexible working arrangements request on reasonable business grounds.

3. Parental leave

Employees (other than most casual employees) who have completed at least 12 months’ continuous service with an employer are entitled to 12 months unpaid parental leave. There are also provisions in other legislation which entitle employees to apply to the Australian Government to be paid during some or all (depending on how much leave is to be taken) of their period of parental leave.

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4. Annual leave

Employees (other than most casual employees) are entitled to 4 weeks of paid annual leave each year (pro-rata for part time employees). Some shift workers are entitled to 5 weeks of paid annual leave each year. Annual leave is cumulative.

Further information in relation to annual leave is available here: http://www.fairwork.gov.au/leave/annual-leave

5. Personal/Carer’s leave

Employees (other than most casual employees) are entitled to 10 days of paid personal/carer’s leave each year (pro rata for part time employees).

Employees may take paid personal/carer’s leave if they are ill or injured, or to provide care or support if a member of their immediate family or household is ill, injured or affected by an unexpected emergency. Personal/ carer’s leave is cumulative.

Further, all employees (including casual employees) are entitled to 2 days of additional unpaid carer’s leave for each occasion when a member of the employee’s immediate family or household requires care or support because of personal illness or injury.

Further information in relation to personal/carer’s leave is available here: http://www.fairwork.gov.au/leave/sick-and-carers-leave

Employees are also entitled to 2 days’ compassionate leave for each occasion when a member of the employee’s immediate family or household is in a certain life-threatening situation, or dies. Compassionate leave is paid leave, other than for casual employees (for whom it is unpaid).

Further information in relation to compassionate leave is available here: http://www.fairwork.gov.au/leave/compassionate-leave

6. Community service leave

Employees who engage in eligible community service activities (including jury service and voluntary emergency management activities) are entitled to be absent from work for certain periods.

Further information in relation to community service leave is available here: http://www.fairwork.gov.au/leave/community-service-leave

7. Long service leave

Employees are entitled to long service leave in accordance with the laws of the State in which they work.

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Further information in relation to long service leave is available here: http://www.fairwork.gov.au/leave/long-service-leave

8. Public holidays

Employees are entitled to be absent from work (with pay) on public holidays, however an employer may request an employee to work on a public holiday if the request is reasonable.

Further information in relation to public holidays is available here: http://www.fairwork.gov.au/leave/public-holidays

9. Notice of termination and redundancy pay

An employer must not terminate an employee’s employment without providing notice to the employee of the termination. The period of notice that will be required will vary by circumstance but will most often be fixed by the NES and/or the appropriate Award.

Further information in relation to notice of termination is included in section 5 following.

Additional information is also available here: http://www.fairwork.gov.au/ending-employment/notice-and-final-pay

If an employer becomes insolvent or bankrupt, or where an employer no longer requires the job done by an employee to be done by anyone, an employee other than a casual employee will usually be entitled to redundancy pay.

The amount of redundancy pay that will apply will vary by reference to things such as the employee’s terms and conditions of employment and their period of service. Where an employee has been employed by an employer for less than 12 months or where an employee is employed by a business with less than 15 employees, there will generally be no obligation to pay redundancy pay.

Further information in relation to redundancy and redundancy pay is included in section 5 following.

Additional information is also available here: http://www.fairwork.gov.au/ending-employment/redundancy

10. Fair Work Information Statement

The Fair Work Ombudsman publishes a ‘Fair Work Information Statement’ which can be found at: http://www.fairwork.gov.au/employee-entitlements/national-employmentstandards/fair-work-information-statement - 96 -

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Employers have to give the Fair Work Information Statement to every employee, as soon as practicable after they commence in their employment.

The interaction between the NES and Awards/Enterprise Agreements The NES operate as a ‘baseline’ set of entitlements. Those baseline standards are replicated in Awards and enterprise agreements. Therefore, they overlap.

Awards and enterprise agreements though, as well as mandating minimum rates of pay (which the NES do not do), contain more detailed and expansive terms.

Penalties for non-compliance It is important for employers to ensure that they at all times comply with the NES and all relevant Awards or enterprise agreements.

Employers who do not comply risk prosecution. Prosecution can lead to orders for back-pay and maximum fines of (at the time of publication) $51,000 for corporations and $10,200 for individuals, per offence.

Ignorance will rarely constitute a sufficient defence for non-compliance.

SECTION 2: GETTING STARTED Franchisees just getting started when it comes to employees should have the following things on their ‘to do’ list: 1. Franchise Agreement and Franchise Manual: Franchisees should check their Franchise Agreement and Franchise Manual to ensure that they are aware of, and can comply with, any provisions pertaining to employment.

2. Payroll and taxation: Franchisees should ensure that they are properly set up and registered for, and that they understand their obligations from the perspectives of, payroll and taxation.

3. Record keeping: Employers have an obligation to keep records as to certain information relating to their employees. Failing to keep appropriate and compliant records can result in an employer being fined or, if the failure is significant or repeated, prosecuted.

Further information as to record keeping obligations can be found here: http://www.fairwork.gov.au/pay/pay-slips-and-record-keeping/recordkeeping

4. Workplace health and safety: Employers in Australia must comply with strict obligations as to workplace health and safety. There can be significant ramifications for any employer who fails to comply.

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Generally, to ensure compliance, employers should provide: • safe premises;

• safe machinery and materials; • safe systems of work;

• a suitable working environment and facilities; and • information, instruction, training and supervision.

The above is indicative only and is by no means a comprehensive list of an employer’s workplace health and safety obligations. An employer’s specific legal obligations will vary by reference to circumstance.

Further information in relation to an employer’s workplace health and safety obligations in each State can be found here: http://www.business.gov.au/business-topics/employing-people/workplacehealth-and-safety/Pages/workplace-health-and-safety-in-your-state-orterritory.aspx

5. Workers compensation insurance: Employers should ensure that they have appropriate and current workers compensation insurance at all times.

Workers compensation regimes vary from State to State.

Further information in relation to workers compensation in each State can be found here: http://www.business.gov.au/business-topics/employing-people/workplacehealth-and-safety/Pages/workers-compensation-requirements.aspx

6. Ascertain whether an Enterprise Agreement applies: As discussed earlier in this chapter, some larger franchisors may have an enterprise agreement which a franchisee may be required to comply with. It will be important for franchisees to ascertain whether or not an enterprise agreement applies and if so, to familiarise themselves with its content and ensure ongoing compliance.

Franchisees should obtain a copy of the enterprise agreement from the franchisor or otherwise by visiting: https://www.fwc.gov.au/awards-and-agreements/agreements/findagreement

It is also possible for employers, including franchisees, to establish their own enterprise agreements. An industry group or lawyer with appropriate workplace relations expertise will be able to assist in this regard.

Where an Enterprise Agreement does not apply, it is likely that an Award will apply.

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7. Identify the relevant Award: There are currently more than 120 Awards applicable to workplaces throughout Australia. It will be important for franchisees to identify, from the outset, the Award that will apply to them and to their employees. A franchisor will often be in a position to assist a franchisee when it comes to identifying the appropriate Award.

There are also some online tools which can assist, found here: http://www.fairwork.gov.au/awards-and-agreements/awards

http://awardfinder.fwo.gov.au/

An industry group or lawyer with appropriate workplace relations expertise will otherwise be able to assist.

Once the relevant Award has been identified, it is important that employers familiarise themselves with the content of the Award and ensure compliance.

8. Employment agreements: Although an Award is likely to apply, it is important that employers also have employment agreements (also called employment contracts) in place with their employees. Where there is an applicable enterprise agreement, employers should also consider having a form of employment agreement in place. Employment agreements need not be overly formal, however it is advisable to have a lawyer with appropriate workplace relations expertise assist.

9. Workplace policies: Workplace policies essentially specify the ‘do’s and don’ts’ within the workplace and, provided that they are prepared and implemented correctly, can be helpful to employers when it comes to taking certain employee disciplinary action and/or defending certain types of employee claims. Often, franchisors may have certain workplace policies that it may require a franchisee to have in place.

Whilst there are many different types of policies that workplace will have (often variable by industry), it is recommended that all business have, in the least, policies in place as to the following: • Workplace health and safety; • Discrimination; • Bullying and harassment; and • Social media.

An industry group, human resources consultant or lawyer with appropriate workplace relations expertise will be able to assist franchisees with policies tailored to the specific needs of the business.

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10. Position descriptions: A position description is a document which sets out the duties and responsibilities and key performance indicators of a role.

Position descriptions should be prepared in relation to each role within a business and are a great tool for: • Devising a role;

• Advertising a role ;

• Classifying a role to a level within the Award (also something which is often best done at the outset, although any classification may later need to be revised by reference to the successful applicant for the role); and • Measuring employee performance.

SECTION 3: ENGAGING EMPLOYEES Recruitment When it comes to finding the right person to fill a role, there are some important things for franchisees to be aware of.

Equal opportunity and anti-discrimination There are a number of laws which deal with equal opportunity and antidiscrimination in the workplace. These laws apply to employees and to prospective employees (including job applicants).

Whilst the laws in relation to equal opportunity and anti-discrimination vary from State to State, generally it is unlawful for an employer to discriminate against an employee or prospective employee because of ‘proscribed attributes’ including the following: • Race

• Colour

• National extraction • Religion

• Political opinion • Sex

• Sexual preference • Age

• Disability (physical or mental) • Marital status

• Family or carer’s responsibilities • Pregnancy

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• Industrial activity • Social origin.

In some States, equal opportunity legislation also prohibits employers from asking certain questions of employees (including prospective employees – so, in job interviews).

Franchisees should obtain specific information in relation to the laws and proscribed attributes applicable to their business.

Franchisees can find relevant further information here: http://www.humanrights.gov.au/our-work/employers

http://www.fairwork.gov.au/website-information/related-sites Misrepresentation If a role is to be advertised it is important that the advertisement does not in any way misrepresent the role or any part of it.

Appointment When an appropriate candidate has been selected for employment, employers should:

• Give an offer of employment in writing (which the prospective employee can consider, accept and sign), ensuring that it complies with any relevant Award provisions.

• Retain the original of any offer or other form of agreement signed by the employee (best practice is to set up a personnel file for each employee where important employment documents can be kept).

Don’t forget that employers have to give the Fair Work Information Statement to every employee, as soon as practicable after they commence. Many employers attach that document to the offer of employment.

There are taxation and superannuation forms for employees to fill in either prior to or upon their commencement. These documents, together with an employee details document template, can be found here: http://www.business.vic.gov.au/hiring-and-managing-staff/employerresponsibilities/employee-record-keeping-staff-information-form

SECTION 4: DURING THE EMPLOYMENT Commencement Employees should be properly inducted so that they receive appropriate information, instruction and training in relation their role. Franchisees should - 101 -

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ensure that during this induction, employees are given an opportunity to read and understand the workplace policies. It is good practice to have an employee sign to acknowledge having done this, and to retain a copy of the signed acknowledgement.

It is also a good idea for employers to at this stage make a diary note for a date around a month prior to the expiration of the employee’s ‘minimum employment period’ (often used interchangeably with the terms ‘probationary period’ or ‘qualifying period’). The minimum employment period for employees of employers with less than 15 employees (“Small Business Employer”) is 12 months. For employees of employers with 15 or more employees, the minimum employment period is 6 months.

The primary significance of the minimum employment period is that where an employee is dismissed within that period, they will not have access to FW Act unfair dismissal remedies. Reviewing an employee’s performance one month prior to the end of the minimum employment period should give sufficient time to for an employer to act appropriately within the minimum employment period.

Employees dismissed outside of the minimum employment period will usually be entitled to seek a remedy for unfair dismissal. It should be noted that casual employees will not usually be entitled to access unfair dismissal remedies.

Review Many employers conduct regular employee performance reviews – usually every 6 or 12 months. Performance reviews are a good opportunity for employers and employees to exchange feedback and, where necessary, for employers to seek to have employees improve in their performance, behaviour and/or conduct going forward. Employers should not, however, ignore any performance, behaviour and/or conduct issues as they arise in favour of awaiting a scheduled review.

Managing employee performance, behaviour and/or conduct Issues with an employee’s performance, behaviour and/or conduct should be addressed both quickly and appropriately. Acting appropriately in this regard requires an understanding of procedural fairness.

If an employer believes, on reasonable grounds, that an employee’s conduct is so serious as to justify immediate dismissal, then it will usually be fair for the employer to dismiss the employee without notice or warning. This is known as summary dismissal. Usually – although not always – things like fraud, violence and serious safety breaches will justify summary dismissal.

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Where an employee’s conduct does not justify summary dismissal, employers should ensure that: • The employee is warned (in writing) that he or she risks being dismissed if the issue does not improve; • The employee is given a reasonable opportunity to improve (sometimes this can involve facilitating further training or clarifying expectations); • Where a discussion about dismissal is to be had, the employee is given the opportunity to have a support person present.

Dismissing an employee for an invalid reason or without affording a fair process will put an employer at risk of the employee making an unfair dismissal claim. Unfair dismissal claims are made by an employee or union to the Fair Work Commission, seeking reinstatement or compensation. Employees can be reinstated with back pay, or awarded up to 26 weeks’ pay as compensation. It is therefore important for franchisees to appropriately manage their risk in this regard.

For Small Business Employers, there is a streamlined process for unfair dismissal which involves the Small Business Fair Dismissal Code (Code).

The Code includes a checklist which employers can use as a part of, and to complete, a dismissal process.

Using the Code can assist all employers to ensure that a dismissal process is appropriate. It will also assist Small Business Employers to defend an unfair dismissal claim. The Code can be found here: https://www.fwc.gov.au/about-us/legislation-regulations/small-business-fairdismissal-code

SECTION 5: TERMINATION OF EMPLOYMENT The reason for termination Employers must have a valid reason to dismiss an employee from their employment. A reason which is unlawful will not be a valid reason. Employers who dismiss, or otherwise adversely treat, an employee for an unlawful reason will be at risk of other types of claims, including discrimination claims and general protections claims (also known as ‘adverse action’ claims).

Unlawful reasons for termination include reasons which are discriminatory (see section 3), or which include that an employee exercised a workplace right (such as to take leave, to complain about wages or conditions or to partake in lawful industrial activity).

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General protections claims are, unlike unfair dismissal claims, uncapped in terms of damages/compensation and employers (and responsibile individuals including Directors and Managers) who are on the wrong end of this type of claim are also potentially susceptible to civil penalties in respect of their conduct.

On dismissal When an employee is dismissed, as well as completing the Code, employers must: 1. Other than where the termination was a summary dismissal: • give employees written notice of the day of termination;

• let the employee work during the notice period, or pay them in lieu.

2. Advise employees of the termination of their employment in writing.

3. Give employees a final payslip with a breakdown of their final pay (and pay it to them). An employee’s final pay should comprise any: • wages earned but, as at the dismissal date, unpaid; • pay for or in lieu of a notice period; • accrued but untaken annual leave;

• accrued but untaken long service leave;

• other sums to which the employee is entitled under the Award or enterprise agreement and/or employment agreement.

4. Issue employees, where necessary, with an Employment Separation Certificate (http://www.humanservices.gov.au/customer/forms/su001).

5. Where required (often by an Award/enterprise agreement), provide a Statement of Service setting out: • the employee’s role;

• a summary of the employee’s duties; • the period of service; and

• the date on which the employment ceased.

Resignation Where an employee resigns, employers should obtain the resignation in writing.

Employees are required to give employers notice. This is generally (although not always) the same as the period of notice which the employer must give to the employee.

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Employers should: • let the employee work during the notice period, or pay them in lieu; and • attend to the matters numbered 3, 4 and 5 in the list set out under the heading ‘On dismissal’ previously.

Redundancy Sometimes, the termination of an employee’s employment will occur due to redundancy. Terminations for redundancy can also put the employer at risk of unfair dismissal claims. In order to manage risk in this regard, employers are generally required to ensure that: • the employer no longer requires the employee’s job to be done by anyone; • they have complied with any obligation Award/enterprise agreement obligation to consult about the redundancy; and • there is no ability for the employer to redeploy the employee to another role within the business.

Once the above has been satisfied, the employer should: • attend to each of the matters in the list set out under the heading ‘On dismissal’ previously; and • ensure that the employee’s final payslip and payment includes any redundancy pay to which the employee is entitled.

Further information as to notice of termination and redundancy pay can be found at: http://www.fairwork.gov.au/about-us/policies-and-guides/fact-sheets/ minimum-workplace-entitlements/notice-of-termination-and-redundancy-pay

IN CONCLUSION Although necessarily general in nature, it is hoped that this chapter has provided franchisees with a basic level of awareness of the rights and entitlements of employees in Australia, as well as an understanding of some of the important employer obligations.

Being aware and having some degree of understanding of the areas where compliance is required and/or where risk exists will assist franchisees to manage their risk – even if just triggering a need to seek further information or advice.

Specialist advice in relation to all workplace relations matters can be obtained through contacting the author.

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Michelle Dawson Partner, Madgwicks Lawyers Accredited Workplace Relations Specialist 03 9242 4733 | 0478 330 087 michelle.dawson@madgwicks.com.au The author wishes to expressly acknowledge the writers and publishers of the additional information and resources to which webpage links have been provided in this chapter.

Disclaimer: Information in this document about the law on any subject is intended only to provide a general outline. It is not intended to be comprehensive nor does it constitute legal advice. You should seek legal or other professional advice before relying on or taking other action based on information contained in this document.

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Chapter 11

EMPLOYING STAFF IN NZ – THE LEGAL LANDSCAPE Graeme Riach Managing Partner Harmans Lawyers New Zealand

About the Author Graeme is a litigation lawyer and the managing partner of Harmans, a Christchurch law firm and member of the NZ Franchise Association with a strong presence and reputation in franchising law.

In a practice spanning some 27 years Graeme has acted as counsel on a myriad of employment related disputes in all jurisdictions – representing both employers and employees in personal grievances and other litigation. Graeme also prepares Individual Employment Agreements for employer clients (including many franchisees) and provides advice on Human Rights issues such as discrimination and harassment.

He has appeared as counsel in several major employment cases including successfully bringing the last reported case on wrongful dismissal in New Zealand (before the law changed the nature of the claim and jurisdiction) and defending employers against large compensation claims arising from redundancy or misconduct dismissals.

As a commercial litigator, Graeme also advises on franchise issues specifically and has acted in several franchisorfranchisee disputes, some of which have culminated in formal arbitration proceedings.A qualified mediator, Graeme has significant experience in alternative dispute resolution and, as the manager of a firm of some 55 personnel, Graeme has firsthand understanding of the many types of issues that can arise in the employment relationship.

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T

his chapter provides an overview of the main legal issues affecting the employment relationship in New Zealand in 2015. Due to the breadth of the area this is necessarily a summary only – to give a detailed and comprehensive outline would take several volumes!

The legal foundation of the employment relationship lies in contract law – there is invariably a contract between the employer and the employee. However, the contract is subject to a legislative overlay with several statutes which have the potential to override the specific terms of the contract. The primary statute is the Employment Relations Act 2000 (‘ERA’). Examples of other legislation that also impact upon the relationship are the Holidays Act 2003 and the Parental Leave and Employment Protection Act 1987. In addition there is the Health and Safety in Employment Act but that also is a topic worthy of a book in itself and will not be addressed in this chapter.

THE RECRUITMENT PROCESS There are of course many different ways in which an employment relationship can come into being. Common recruitment processes in New Zealand include advertisements, both in print and via the internet, and the use of recruitment agents. The main legal issues to be aware of during recruitment include understanding when a contract becomes binding and the need not to contravene anti-discrimination laws. It is unlawful to discriminate against a prospective employee on certain prohibited grounds. These include gender, marital status, religious or ethical belief, colour, race or ethnic origin, disability, age, political opinion, employment status, family status or sexual orientation. In addition the freedom of association rules embodied in the ERA prohibit any preference given to or undue influence on another person because they are (or are not) a member of a union. The anti-discrimination laws make it important not to have statements in advertisements that imply discriminatory practice or intention (such as advertising specifically for a woman). Questions of a potentially discriminatory nature may not be asked of a candidate in the interview.

Assuming that you have successfully run the gauntlet of advertising, interviewing and, if necessary, testing applicants for a job, and settled on the right person, you then need to make an offer of employment. Typically this is done by way of letter which would set out the main terms of the employment such as position title, place of work, hours, remuneration, and (if applicable) other benefits. It is also good practice to include a draft of the employment agreement with the letter of offer and to make the offer conditional on a full written agreement being entered into with the employee.

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agreement before signing it. It is the opportunity to take advice that must be given – not a requirement that such advice be received.

COLLECTIVE EMPLOYMENT AGREEMENTS In New Zealand most employment agreements are of an individual nature.

However, a significant proportion of the work force still operate under collective agreements, typically negotiated by a trade union or professional association on behalf of their members. Collective agreements can be negotiated for a single employer or workforce or multi employers within a particular industry. There are many legislative rules around the negotiation of a collective agreement including the ability for parties to strike (or in the employer’s case) lock out employees during the bargaining process. It is not proposed to deal in any depth with this area. However, employers whose employees may be or later become members of a union should obtain suitable representation and advice when a collective agreement exists or is to be negotiated.

NATURE OF THE EMPLOYMENT Apart from the many legions of different types of jobs there are also different categories of employment. The employment may be full-time or part-time, casual or temporary, fixed term or indefinite. There are rules and issues associated with each category. For instance a true casual employment relationship will only be found (even if described as such in the agreement) where the work is offered to the employee on an infrequent or irregular basis. This may be pursuant to a roster and the employee is free to refuse any particular offer of work. A common trap is to regard employees as casual when they work reasonably regular hours over a considerable period of time and have over time become permanent part-time employees. Fixed Term Agreements (e.g. for 12 months) are legal in New Zealand but must meet certain statutory criteria to qualify. In particular there must be a genuine reason for the fixed term and the reason for the fixed term must be stated in the employment agreement itself. It is not a genuine reason for a fixed term to assess the suitability of the employee for the position. Caution also must be observed if a Fixed Term Agreement carries on beyond the expiry of the fixed term. If challenged it is likely to be held to have converted to an indefinite agreement and therefore not be able to be terminated except in accordance with the law in relation to indefinite employment agreements (discussed below).

THE EMPLOYMENT CONTRACT The employment contract is generally embodied in a written Employment Agreement combined with such terms as are implied by law. It is a legal requirement that there be a written Employment Agreement and penalties may be imposed against employers where no written agreement has been entered into.

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An overriding requirement of the employment relationship is that the employer and employee deal with each other at all times in good faith. This means that the parties should be active and constructive in establishing and maintaining a productive employment relationship in which the parties are, among other things, responsive and communicative. The duty of good faith carries forward into the negotiation of the Employment Agreement. Apart from things that are either contrary to law or inconsistent with the Employment Relations Act there is no limit to what may be included as a term in the Individual Employment Agreement. There are certain minimum requirements, including the names of each party, a description of the work to be performed, the place of work, the hours of work and the wages or salary payable. There must also be a plain language explanation of the services available for resolution of employment relationship problems and a specific reference to the 90 day period within which a personal grievance must be raised (discussed further below).

Typically the agreement will also contain provisions spelling out the leave entitlements of the employee, duties of confidentiality and fidelity, standards of behaviour and appearance and, importantly, the process or processes by which the employment may be terminated. These will include a provision dealing with restructuring and redundancy situations as well as termination for poor performance, misconduct or an inability to carry out the work duties.

TRIAL PERIODS Trial or probationary periods are a particularly vexed area and have resulted in significant litigation over the years. The use of trial or probationary periods is legal in New Zealand and since 2009 the law has allowed employers to dismiss employees during a trial period without fear of that employee bringing a personal grievance. However, some have viewed this change as an erosion of employee rights and the Courts have interpreted the law very narrowly.

Accordingly it is important, if protection is to be gained, for the employer to comply strictly with the legislation. That means that, as the trial period relates only to new employees, the Employment Agreement which contains the trial period must be signed by both parties prior to the employment commencing.

Even an agreement signed on the day of commencement but after the employee has started work, has been held to be ineffective. The wording of the clause must comply strictly with the statutory provision and notice of termination must be given before the end of the trial period although the termination date itself may be after the trial period. The protection is not available if the employee has been subjected to any of the prohibited grounds of discrimination described above.

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are governed by either the Holidays Act 2003 or the Parental Leave and Employment Protection Act 1987. Again, space precludes an in depth review of the area. However the main types include: • Annual leave – the current minimum entitlement is 4 weeks per annum (after 12 months employment) but a greater entitlement can be negotiated.

When the leave is taken is the subject of agreement between the employer and the employee but if agreement is not possible then the employer may direct this.

• Statutory holidays – currently 11 days as listed in the Act – there are many rules around observing these holidays where an employee is required to work on the day itself. These include the requirement to provide a day in lieu and to pay for the work on the day at time and a half.

• Sick leave – a minimum of 5 days per annum which can be carried over if unused in any year (up to a maximum of 20 days current entitlement).

• Parental leave – this is made up of different periods each with certain rights of protection of the employee’s job while absent for this reason. The first 16 weeks are paid leave (up to a level) funded by the Government. An employee may take up to 12 months parental leave and still have the job protected unless they are a key employee or the position is during that time made redundant.

• Bereavement leave – up to three days for close relatives.

Many other types of leave can appear in employment agreements and may be the subject of negotiation.

PROBLEMS IN THE EMPLOYMENT RELATIONSHIP

Employment decisions are always made with the best of intentions but regrettably things can go wrong and problems do arise in the course of the employment relationship. The nature and degree of these problems varies widely but the more serious commonly arise in the context of poor performance or misconduct of the employee. It is in this area that the statutory overlay and decided case law can impact considerably on the strict terms of the written employment agreement. It is vital therefore that employers either understand or, at the time, take advice on the appropriate processes to be adopted for the given situation. Sometimes a written agreement will set out in detail a process for dealing with poor performance or misconduct and, if so, that process must be followed to the letter – unless it is inconsistent with the established law. For poor performance, the process typically requires meetings with the employee at which the areas of concern are discussed (with appropriate specifics) and the employee is given reasonable opportunities to improve. If satisfactory improvements are not made within the time given, then a further meeting or meetings are held and warnings (verbal or written) may be given.

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Before the employee is subjected to any disciplinary measures such as warnings or ultimately dismissal, they should be advised of their right to have a representative present with them at the meeting in question. For performance issues, it is only after appropriate warnings and opportunities to improve have been given, that the employer may consider dismissal.

In cases of misconduct, the process to be adopted depends on the severity or gravity of the conduct in question. For lesser types of misconduct, the procedure involving warnings may be appropriate, again with the allegations being clearly set out and an opportunity to respond given to the employee. For serious misconduct (examples being theft, assault in the workplace, harassment of other staff or other conduct which goes to the heart of the employment relationship) summary or immediate dismissal may be the outcome. Even then however, it is necessary to first meet with the employee having given advance notice of the allegations (and relevant supporting information), allow the employee an opportunity to respond with an explanation (with the right to a legal or other representative) and, if the conduct is found proven, to make submissions on the outcome.

For a dismissal to be upheld as justified, the ERA requires that the employer’s actions were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred. A Court will have regard to the sufficiency of the investigation, the opportunity given to respond to the employer’s concerns and whether the employer genuinely considered the explanation before dismissing. Accordingly it is both substance (was the conduct serious enough to justify dismissal?) and process (did the employer treat the employee fairly throughout?) that are reviewed in the context of personal grievance action.

PERSONAL GRIEVANCES If an employee considers that they have been unfairly or unjustifiably treated in the course of their employment (or in the context or a dismissal) they are entitled to bring a personal grievance against the employer. If the grievance is upheld, the employee may be entitled to several different remedies. These can include either reinstatement to the position (generally only ordered in larger organisations), reimbursement of lost remuneration and compensation for humiliation, loss of dignity and injury to feelings. Employees must raise the grievance by bringing it to the employer’s attention within 90 days after the events upon which it is based arose. In exceptional circumstances, grievances have been allowed to be raised after the 90 day period has elapsed. Grievances that are not resolved by agreement or through mediation are heard initially by the Employment Relations Authority which is an inquisitorial forum - 112 -

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where evidence is given on oath (but not recorded). The Authority has the power to determine the grievance and will do so. A party dissatisfied with the Authority’s determination may challenge that in the Employment Court and there are limited rights of appeal to the higher appeal courts. Most grievances are in fact resolved at the mediation stage with mediators being provided by the Ministry of Business Innovation and Employment. The skills of the mediators and the economics of proceeding to Court are factors resulting in the very high resolution rate.

TERMINATION OF EMPLOYMENT How an employee’s employment may be brought to an end is another fraught area in legal terms and another area where the precise wording of an employment agreement does not completely govern the position. Employment agreements often provide that the employment may be terminated on a period of notice being given by either party - such as one month’s notice. While the notice period certainly does apply, the ability of an employer to terminate the employment depends on the reason for termination and whether the employer has adopted a correct process before getting to that point. As noted above, dismissals for poor performance or misconduct require substantial procedural steps to be gone through before the employer is able to finally give notice.

Redundancy is another situation where the employer may give the required contractual notice but must first have complied with the legal principles applying to dismissal for redundancy. These principles include the need to consult with the employee in a meaningful way before a decision is made to disestablish their position. This involves providing the employee with sufficient information to justify a proposed disestablishment or restructure; where more than one employee is potentially being made redundant, the selection criteria to be used by the employer when making its decision and a reasonable opportunity being given to the employee to have input into the decision including feedback, criticism and alternative suggestions. The good faith obligation referred to earlier is particularly applicable in a redundancy situation. Only after a fair process has been adopted may a justifiable decision be made to dismiss. There is currently no common law right to compensation for being made redundant in New Zealand. An employee being laid off in this situation is entitled only to the notice period set out in their agreement – sometimes paid in lieu.

Some employment agreements do provide for compensation in the event of redundancy, often pursuant to a formula based on the employee’s length of service with the employer. Obviously if such a provision does appear in the employment agreement, whether individual or collective, then this must be paid by the employer in addition to the giving of appropriate notice.

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RESTRUCTURES Situations similar to redundancy can arise where a business has been transferred to a new purchaser. The legislation requires that the employment agreement includes a provision dealing with such an event. A new employer in most circumstances is not required to take on the existing staff of the business being purchased. However there are some categories of employee that the law regards as ‘vulnerable employees’ who must be taken on by an incoming purchaser. These include cleaners and in-house catering staff. In other cases the provisions typically require the outgoing employer to have discussions with and encourage the new purchaser to take on existing staff members and provided that is done, the employer has complied with the agreement even if the purchaser ultimately decides not to take on the staff members concerned.

POST TERMINATION CONSIDERATIONS On an employee’s departure, some contractual duties continue to apply. These include a duty not to misuse confidential information gained during the course of the employment (whether or not this is provided in the written agreement) and, commonly, obligations not to solicit other employees, customers or clients of the business. The latter can be for a specified period of time or indefinitely - depending on the wording in the agreement. Sometimes employers seek to protect their goodwill by including in the agreement a restraint of trade provision. These seek to restrain the employee from either working for or being interested in a competitive business, usually within a geographic radius and for a defined timeframe. These restraint of trade provisions are only enforceable in New Zealand if they are found to be reasonable and protect a valid proprietary interest of the employer such as client relationships. The reasonableness of the clause often relates to the length of time of the restraint bearing in mind the nature of the employment and the geographic coverage. If the Court finds the clause to be unreasonable in either of those respects but nevertheless necessary to protect a valid proprietary interest, then the Court may cut down the clause by reducing the time and/or radius of coverage. A reasonable clause can be enforced by an injunction which prevents the employee from working for the competitor for the duration of the restraint period.

CONCLUSION As noted at the outset, this chapter represents only a very brief overview of the main legal issues affecting employment in New Zealand. It is recommended that prospective purchasers of businesses (including franchises) take appropriate advice and ensure that they have a working knowledge of employer obligations - 114 -

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and an effective employment agreement for the employees of the business.

A little money spent at the outset can avoid much larger sums having to be outlaid later!

Graeme Riach Managing Partner Harmans Lawyers New Zealand DDI (03) 962 2800 (NZ) graeme.riach@harmans.co.nz www.harmans.co.nz

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Chapter 12

THE FRANCHISE COUNCIL OF AUSTRALIA

By Franchise Council of Australia

About the Author The Franchise Council of Australia Limited (FCA) is the peak body for the $144 billion franchise sector in Australia, representing franchisees, franchisors and service providers to the sector.

As the peak body for franchising, the FCA strives to add value to the businesses of its members by providing a range of services relevant to franchising which represent good value.

The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously. The success of franchising depends on successful franchisors, and this in turn, depends on profitable and happy franchisees.

The Franchise Council of Australia works constantly to ensure that all activities and services which benefit franchising also benefit the broader community – including franchisees, franchisors, employees and their local economies and communities.

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he Franchise Council of Australia Limited (FCA) is the peak body for the $144 billion franchise sector in Australia, representing franchisors, franchisees, service providers and advisors to the sector. The FCA is a nationally incorporated not-for-profit association with a national head office based in Melbourne, Victoria.

The FCA’s main aim is to help people get into franchising and ensure the sector they are joining is as good as it can be. This means promoting best practice in the sector and providing the education and other services necessary to ensure a healthy sector constantly striving to lift its own standards.

The FCA assists stakeholders in the Australian franchise sector in a variety of ways, to ensure the sector is a vibrant place to do business.

Membership of the FCA is voluntary, and is open to any individual or organisation involved in the franchising sector, including; franchisees, franchisors, lawyers, accountants, banks, consultants, academics, publishers and many more.

Whether offering advice on best practice franchising, educating government on policies affecting the sector, promoting franchising in the media or providing professional development services to its members, the FCA does its part to make the sector a positive, sustainable place to earn a living.

The FCA is closely affiliated with franchising associations around the world, and is a founding member of the Asia Pacific Franchise Confederation (APFC).

It is also a member of the World Franchise Council (WFC) and for 1999 and 2000 was its secretariat.

MEMBERSHIP BENEFITS • Credibility – maintained through the FCA member standards and the Franchising Code of Conduct; • Professional support – through education programs, networking opportunities and regular events; • Representation – ensuring members’ voices are heard by governments, regulators and other important groups.

Membership also means solidarity. FCA members belong to an association where their peers work together for the betterment of the sector. FCA members share a common method of doing business – not a common business. For this reason, franchisors, franchisees and suppliers can freely exchange ideas without fear of losing their competitive edge.

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MAJOR SERVICES AND INITIATIVES The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously. The success of franchising depends on successful franchisors, and this, in turn, depends on profitable and happy franchisees.

The FCA works constantly to ensure that all activities and services which benefit franchising will benefit the broader community – including franchisees, franchisors, employees and their local economies and communities.

As well as commitment to the highest industry standards, the FCA facilitates a number of services and initiatives to assist in promoting and advancing the role of franchising in Australia, as well as supporting its members.

The FCA Franchise Academy: The FCA Franchise Academy is the premier training provider for the sector committed to providing franchisors, franchisees, franchise consultants and suppliers with the best education programs available.

The FCA Franchise Academy aims to provide both franchise-specific and generic business skills training and education for pre-entry, in-market and succession (exit) to all organisational levels. The establishment of the FCA Franchise Academy coincided with the introduction of nationally recognised qualifications in franchising.

In 2012, the FCA Franchise Academy launched the Certified Franchise Executive program (CFE). The CFE is the only internationally recognised professional accreditation program for franchise executives. It is an educational framework designed to enhance the professionalism of franchising by certifying the highest standards of quality training and education.

The program offers existing and aspiring franchise professionals and entrepreneurs the opportunity to grow professionally and reach a recognised standard of excellence within the local and international franchise community.

FCA Excellence in Franchising Awards: The FCA Excellence in Franchising Awards recognise and reward companies and individuals within the Australian franchise sector and provide a platform for entrants to showcase their achievements on the national stage.

The Awards are open to FCA member companies only and are committed to ensuring that franchisors, franchisees and suppliers to the sector are appropriately represented.

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Success at the Awards can increase brand recognition, customer enquiries and media coverage. It can boost company morale and help attract the best talent to companies.

The Excellence in Franchising Awards ceremony is held in conjunction with the National Franchise Convention and is the pinnacle of the franchising year. Past winners include 2014 Australian Emerging Franchisor of the Year, Shingle Inn, 2014 Franchise Woman of the Year, Sharon Jurd (HydroKleen) and 2014 Multi-unit Franchisee of the Year, Matt and Brad Walker (Grill’d Healthy Burgers) and many more.

Hall of Fame: The Australian Franchise Hall of Fame was established in 2003. During its creation, the selection panel searched back to the origins of franchising in Australia and, by a meticulous process of elimination, identified the groundbreakers, influencers, quiet achievers, selfless contributors and outstanding performers who endured the trials and laid the foundations of the sector’s success.

Now, it is members of the Hall of Fame itself who induct new entrants. The sole criterion is an outstanding contribution to franchising – whether as a franchisor, franchisee, academic, lawyer, consultant, politician, financier – whomever.

The 2014 Hall of Fame inductee is Greg Nathan, founder of The Franchise Relationships Institute.

Women in Franchising Committee: In 2007, the FCA announced the introduction of the Women in Franchising Committee (WIF), dedicated to promoting and advancing the achievements of women in franchising and small business.

The aim of the WIF Committee is to increase female participation in franchising.

It aims to be a professional, organised group within the FCA that will provide women inside and outside the sector with information and encouragement, as well as genuine opportunities for contribution, networking and professional development.

The National Franchise Convention: The FCA hosts the annual National Franchise Convention. The Convention brings together the Australian franchise community – including successful business people, CEOs, government officials and industry advisors – to enjoy education, networking and business development opportunities.

Traditionally a three-day event, the National Franchise Convention also includes a trade exhibition where suppliers to the franchise sector can showcase their products and services.

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The convention is open not only to those in franchising circles but also to the small business sector generally and it is not necessary to be an FCA member to attend.

The 2015 Convention (NFC15) will be held on the Gold Coast in October. For more information contact info@franchise.org.au or visit www.franchise.org. au.

FCA Member Standards: Members of the FCA receive many benefits which help businesses keep informed and connected with the franchise sector and facilitate education.

One of the hallmarks of a reputable sector is a commitment to high standards of personal and professional conduct. This enhances public perceptions of franchising, helps safeguard the investments of franchisors and the businesses of franchisees, protects franchise networks from unfair or unethical attack and provides guidance for those seeking to commence their franchising journey.

The FCA encourages its members to maintain standards of conduct worthy of franchise sector professionals. The Member Standards are designed to provide members of the FCA with an authoritative guide on acceptable standards of conduct.

The FCA believes the Australian franchise sector to be well regulated with the Franchising Code of Conduct (the Code) allowing for affordable, efficient dispute resolution procedures and disclosure provisions to assist and guide the sector. It also considers that the relationship between the franchisor and the franchisee can be developed even further with best practice guidelines in the form of FCA Member Standards.

It is the FCA’s view that a member gains significant market benefit in identifying themselves with FCA membership and as such the business practice and activities of members should work towards franchise best practice.

Member obligations: All FCA members are expected to conduct their franchising activities professionally and in accordance with Australian law. They are expected to comply with agreed minimum standards of conduct. The FCA considers the following standards to be relevant to members: • Members of the FCA shall abide by all relevant State and Federal laws including, in particular, the Franchising Code of Conduct and the Competition and Consumer Act. Within 14 days of a written request by the FCA, a member shall furnish to the FCA a copy of its current disclosure document, franchise agreement and any other documentation or advertising - 121 -

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material used in connection with the appointment of a franchise.

• No member shall imitate the trademark, trade name, corporate name, slogan, or other mark of identification of another member of business in any manner or form that would have the tendency or capacity to mislead or deceive.

• Members will become familiar with the content of these Member Standards and draw them to the attention of clients as appropriate from time to time.

• A member, be they a franchisor, vendor, franchisee, franchise broker, or representative of a franchise system should not sell a franchise if at the time the franchisor or vendor franchisee knew or ought to know that a reasonably competent franchisee would be unlikely to be able to successfully operate the franchise.

• Members are expected to behave professionally and refrain from illegal, unethical or improper dealings or otherwise act contrary to the image of franchising or the FCA. The FCA recognises that its members have different needs, and that different types of members should co-exist harmoniously. The FCA works consistently to ensure all activities directly benefit the membership, while staying true to the main strategic objectives of the Board of Directors – enhancing the public reputation of franchising in the wider business sector, and ensuring Australia remains the most attractive market for both franchisors and franchisees, in which to franchise in the world.

The Franchise Council of Australia 1300 669 030 info@franchise.org.au www.franchise.org.au

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Chapter 13

FRANCHISING IN NEW ZEALAND

By Graham Billings Executive Director Franchise Association of New Zealand

About the Author Graham Billings’ early career led to extensive experience at a senior level in the UK, New Zealand and Australian newspaper and magazine publishing industries and he served on industry bodies in each of these countries.

Moving out of the media industry, he was appointed Managing Director of the Australian arm of a UK multi-national company, where one of his businesses was a product licensee of the Sydney Olympic Games Committee (SOCOG).

Returning to New Zealand in 2001, Graham spent seven years in the health and disability Not-For-Profit sector. In 2008 he was appointed Executive Director of the Franchise Association of New Zealand, the peak body for the franchising sector. Since 2011, he has also fulfilled the function of General Secretariat of the World Franchise Council, the association of 43 National Franchise Associations, whose purpose is to encourage international understanding and cooperation in the protection and promotion of franchising worldwide.

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he Franchise sector of the New Zealand economy is substantially larger than most people realise. The number of units operating with business format franchise systems has increased considerably since 2003 when a major survey was conducted. The Franchising New Zealand 2010 survey conducted

by Massey University, Auckland and Griffith University, Queensland found 423 active franchise systems in New Zealand compared with an estimated 350 in 2003. The survey also estimated a total 23,600 franchisee units, which was a 92 per cent increase over the seven years.

The most recent survey, Franchising New Zealand 2012, however, found that system growth had slowed in the previous two years and that there were now approximately 446 active business format franchise systems. Whilst the number of franchise units had fallen slightly to 22,400, the level of employment in the franchising sector had grown by more than 25 per cent to over 100,000 people.

The franchise model is operated across all sectors of business. In New Zealand, franchising has comparatively fewer businesses in the retail sector compared with many other countries, but is comparatively stronger in home and business-to-business services. Indicative of the entrepreneurial spirit of New Zealanders, approximately 88 per cent of franchises operating here are home-grown and despite the economic situation, there are some franchise systems that are still experiencing growth.

Franchising in New Zealand continues to play an important role in the economy with an estimated contribution of between $19.4 billion and $21.0 billion in turnover.

The Franchise Association of New Zealand If you are looking for a business opportunity or needing advice on franchising, our recommendation is that you don’t sign anything until you have asked the question: “Are you a member of the Franchise Association of New Zealand?”

Members of the Franchise Association are the franchise professionals, committed to uphold ‘Best Practice in Franchising’, and the Association works hard to promote the benefits of dealing with members, both for those looking to purchase a franchise and also those who need to gain professional advice.

The benefit of membership for franchisees was recognised in the New Zealand Prospective Franchisees Survey. *The survey found that 75.7 per cent of prospective franchisees considered membership of The Franchise Association of New Zealand (FANZ) important or very important, when considering a franchise to buy into.

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As the peak body for the franchise community in New Zealand, the Association makes representations to Government on issues of concern to franchisors and franchisees including such issues as proposed legislation; new business support programmes and business taxation. The Association often conducts email surveys of members on key issues to gain valuable feedback prior to making a submission.

Unlike a number of other countries in the world, including Australia, franchising in New Zealand is governed by the same commercial laws as any other business.

In 2008 the Ministry of Economic Development called for submissions on the possibility of introducing franchise specific regulations following a high profile fraud case. In 2009, however, the Minister of Commerce concluded that there was no need at that time for the introduction of franchise-specific regulations and went on to say that that there was little evidence of widespread problems in the sector. He drew attention to the Franchise Association of New Zealand’s Code of Conduct as an area where self regulation was working.

Despite the substantial difference in the regulatory environments between New Zealand and Australia, the two 2012 Surveys show remarkably similar levels of franchising disputes.

Buying your New Zealand franchise Buying the right franchise can have many benefits over the stand-alone business, not least of which is that you can potentially purchase into a franchise system that has a proven track record and one where you will receive all the help you need to become successful.

As a prospective franchisee, an important part of your due diligence should be to establish whether or not the franchise you are considering is a member of FANZ. Don’t be misled by a statement such as, “we are not members but we abide by their Codes.” There have been several reports of this in recent times where something has subsequently gone wrong in the relationship but we have been unable to assist the franchisee, as we have no powers to intervene unless the franchise is actually a member.

Of course, there are franchise systems such as McDonalds who are currently not in membership but who operate ethically and provide valuable business opportunities for the prospective franchisee. In all cases, however, you should ask the franchisor to explain to you why they are not members.

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contain all the elements required under the Association’s Codes and Rules.

Some of the key elements that are required are: • Full and proper disclosure of matters important for a prospective franchisee to know and understand • A seven-day cooling off period before a prospective franchisee is finally committed to the purchase • A requirement that the prospective franchisee produces a certificate from their solicitor to the effect that they have had the agreement explained to them – or a signed statement that they have declined to take independent legal advice • If things go wrong, compulsory mediation by a FANZ appointed experienced franchise mediator as a first step in dealing with the issue.

The Association’s independent Scrutineer carries out compliance checks on a biennial basis to ensure that documentation maintains the standards that are required.

Carrying out your due diligence on every aspect of your intended franchise system is vitally important. The New Zealand Prospective Franchisees* survey found that over 70 per cent of prospective franchisees met with three or more franchisors before making up their minds and nearly 75 per cent talked to three or more franchisees of their intended franchise system as part of their decision making process.

To assist prospective franchisees make informed decisions, FANZ has developed, in conjunction with Massey University, a five segment free online training course that is available through the FANZ web site www.franchiseassociation. org.nz. It also has an online directory of franchise opportunities and franchise advisors www.buyafranchise.co.nz where members of FANZ are clearly marked by the display of the member logo on their entry.

If your franchise system is in membership, you have the ability to make a formal complaint to the Complaints Panel if you believe that your franchisor is in breach of the Association’s Codes or Rules. The Complaints Panel is fully independent of the Board of FANZ and its members are experienced in franchising both from a legal and practical standpoint. If your complaint is upheld, the franchisor can be required to rectify the situation or face a range of penalties that are contained within the Association’s Code of Practice.

If the franchise you are going to purchase is from a member of FANZ, you too will be required to sign up to the Association’s Code of Conduct and - 126 -

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Code of Ethics to ensure that as a franchisee you undertake to maintain ‘Best Practice’.

In addition to standards and compliance, franchisors, franchisees and service provider members gain much from membership to the Association. Apart from the significant marketing advantage of being able to use the Association’s logo as a sign of credibility, membership also opens up a whole range of opportunities to advance their knowledge and learn from the experience of others. This is a unique advantage not available to non-member franchise systems and is clearly demonstrated at Annual Conferences where first time attendees regularly comment that they are amazed by the amount of advice and information that was freely exchanged by members.

As a Member or the franchisee of a Member you have the opportunity to enter the prestigious annual awards, which culminate in a gala awards dinner in November each year. These awards are based on an internationally recognised business excellence system and not only provide you with the opportunity to showcase your business, but also gain valuable insight into the opportunities to improve your business from the feedback reports provided by the evaluators.

There are entry categories for both franchise systems and franchisees and winners regularly use their success in marketing campaigns.

Exporting Your Franchise to New Zealand For an Australian franchisor coming into New Zealand it is a relatively straight forward process from a legal point of view. Most systems that come into New Zealand from Australia set up a local company both to protect intellectual property in New Zealand as well as to ensure a ‘foothold’ in New Zealand.

It is important to get trademarks registered in New Zealand as early as possible.

It is not an expensive process but should be considered well before actually arriving in New Zealand.

If the Australian franchisor is operating directly in New Zealand then the franchise agreement should be reviewed by a New Zealand lawyer and made subject to New Zealand law and to New Zealand jurisdiction for ease of franchise rights enforcement. Reputable Australian systems that come here ensure that they have a disclosure document that is relevant to New Zealand circumstances as well as a cooling off period etc. A number of Australian systems have made, as a key feature of setting up in New Zealand, an early application to join the FANZ especially as the FANZ requirements for disclosure differ in some ways from those required under the Australian regulations.

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Proper disclosure documents, cooling off period and mandatory mediation as a dispute resolution process are all part of the voluntary Code of Practice to which all FANZ members are required to adhere. It certainly enhances the reputation of the system operating in New Zealand. Obviously, if a Master Franchisee is appointed in New Zealand then having that franchisee become a member of the FANZ is likely to be perceived as a system which respects the maintenance of high standards.

In spite of a minority of lawyers and accountants seeing franchising as something akin to the Wild West, the vast majority of lawyers, accountants and business brokers throughout New Zealand have a reasonable understanding of franchising and the benefits it can bring to franchisees. There are a growing number of lawyers, accountants and business brokers who specialise in franchising.

There is still a good deal of education to be undertaken for the public about avoiding doubtful franchise systems, but the trend is for specialised business brokers to promote healthy systems and to steer people away from the moonlight operators.

The majority of the banks in New Zealand now have a strong presence in the franchise industry and bear in mind that all the major banks in New Zealand are Australian owned. There are reputable franchise consultants in New Zealand with well-established track records and for anyone who attends the annual FANZ conference it is manifest to observe that there is a strong and proactive congeniality within the franchise industry in New Zealand.

There are a small number of dedicated and respected franchise consultants in New Zealand who can be invaluable in modifying systems coming into this country. Involving their use can considerably diminish the likelihood of a legal claim being brought against a franchisor coming across from Australia.

Be aware that employment laws in New Zealand are similar to Australia and dismissing staff is not an easy process. Also New Zealand has an Act called the Resource Management Act which, coupled with the Building Act, means that obtaining building consents for shop fit outs can be slow and expensive. It is vital to stress the need to do plenty of homework.

Obtaining sound taxation advice is essential before coming into New Zealand.

There is a withholding tax system for payment of royalties and other fees from New Zealand to Australia but there is plenty of advice available from accountants who understand the taxation laws between the two countries.

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It is important to remember that GST applies to everything in New Zealand (even food items) and the tax structure here is somewhat different from Australia. For a start there is no such thing as stamp duty. The government Kiwi Saver superannuation scheme requires contributions from employers to be made when employees opt in to the scheme.

It is also important to know that we have the Personal Properties Securities Act which is a system of an online registration of all charges (e.g. what used to be debentures for companies) against both individuals and companies as security for moneys lent and where goods and services are supplied on credit.

New Zealand has recently been named as the 6th highest ranking country based on the United Nations Development Programme which has regard to the standard of living of its people, its population’s access to knowledge and its population’s chances of living a long and healthy life.

There are many success stories for Australian systems entering into New Zealand. A point to remember, however, is that the disposable income of New Zealanders is not quite the same as that of Australians. Having said that, the lifestyle differences between Australia and New Zealand are not significant and so long as the homework and planning are done carefully then there are good prospects for Australian systems to enter into New Zealand and becoming successful.

For more information or to find out more about the work of the Association and the Codes of Practice, visit www.franchiseassociation.org.nz *New Zealand Prospective Franchisees – Franchize Consultants Ltd and franchisebusiness.co.nz - April 2011 Additional legal commentary provided by Rory MacDonald – MacDonald Lewis Law

Graham Billings Executive Director Franchise Association of New Zealand (nz) 09 274 2901 contact@franchise.org.nz www.franchiseassociation.org.nz

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Chapter 14

TERRITORY - DO YOU REALLY KNOW WHAT YOU ARE GETTING?

Stewart Germann, Stewart Germann Law Office Auckland NZ

About the Author Stewart Germann who is acknowledged as New Zealand’s leading franchising lawyer with over 35 years experience in this area, is a recognised national and international guest speaker at franchise conferences (New Zealand, Australia, USA).

Stewart Germann Law Office (SGL) is New Zealand’s longest established specialist franchising law firm and Stewart is one of only two New Zealand lawyers included in the International Who’s Who of Franchise Lawyers for 2015.

SGL’s clients include many of New Zealand’s best known national and international franchise brands and he has extensive franchising contacts worldwide and locally.

Stewart is actively involved in international franchising, has published articles in the International Journal of Franchising Law and has attended and participated in many FCA conferences.

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W

hen a potential franchisee has selected a franchise which he or she wishes to pursue, then due diligence must be done. This will involve obtaining a copy of the disclosure document and franchise agreement from the franchisor. A key element in the grant of any franchise is what the territory will be.

By territory I mean a specific area within which the franchisee will be able to conduct the franchised business. If the franchisee is a shop in a shopping mall then will it be just that shopping mall? Will it be a territory covering a reasonable area which will be defined in (say) yellow on a map to be attached to the franchise agreement? Will there be a non-exclusive territory or no territory at all, and, in consequence, ‘a free for all’ within which numerous franchisees will be conducting their own separate business with no demarcation line?

The issue of territory is a very important one for careful consideration. As a franchising lawyer, I am finding clients coming to me with territorial disputes and territorial issues which stem mainly from franchisors trying to allow new franchisees to operate franchises either within what the existing franchisee thought was his own particular territory or offering the right to open a second franchise to the franchisee within the same territory because the existing franchisee is under-utilising the territory.

This article will consider various permutations of territory and will highlight the key areas to watch when a prospective franchisee is considering the franchise agreement and its ramifications.

CONCISE TERRITORY In the majority of cases, a franchisor will have divided up New Zealand or another particular country into concise and separate territories which will be allocated to each new franchisee.

These territories will be carefully defined on separate maps and a typical clause in the franchise agreement may be as follows: “The franchisor grants to the franchisee a franchise to establish and carry on a business within the territory as set out in the Schedule and delineated in red on the map attached and to carry on the business within the territory using the methods and techniques developed by the franchisor…”

This type of clause gives certainty to a franchisee by way of a map being attached to the franchise agreement with the boundaries of the territory clearly defined. There can be no doubt as to the boundaries of the territory which a franchisee is contracting by way of execution of the franchise agreement and - 132 -

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payment of the initial franchise fee. In my opinion, some franchisors make the mistake in the early days of giving franchisees too big a territory which a particular franchisee does not service and exploit to its maximum potential.

There appears to be an incidence of the franchisor using the franchise agreement as a selling ploy/enticement. As I said above, if a map is attached clearly delineating the boundaries of a territory then the franchisor cannot alter that contractual arrangement without agreement by the franchisee.

Some franchisors may then wish to cover their position by reserving in the franchise agreement the right to take back part of the territory in the future (perhaps when the system has become established) by re-demarcation of the boundaries during the term. This may be framed as an absolute right or in the franchisor’s discretion (reasonable or otherwise) that the territory is not being (or has become) and/or may not be capable of being serviced to its maximum potential. A franchisee should be aware of a blanket sole discretionary right which may be drafted as follows: “The franchisor shall have the right at any time during the term to reduce the territory if in the franchisor’s opinion the franchisee is not maximising or is unlikely to be able to maximise business exploitation of the territory.”

A possible way out of the above is for the franchisee’s lawyer to suggest inclusion of an amendment along the following lines: “provided that the franchisor shall not be entitled to reduce the territory to an area within a [insert number] kilometres radius from the premises.”

EXCLUSIVITY OF FRANCHISE What a franchisee requires in entering into a franchise arrangement is certainty.

There must be certainty as to the upfront franchise fee payable, certainty as to the ongoing service fees or royalties payable together with advertising levies and, most importantly, certainty in relation to the territory. A clause which I have come across in one or two franchise agreements which gives certainty and which is clear and unequivocal is along the following lines: “If the franchisor or the franchisee identify the opportunity to establish a further franchise in the territory (‘the proposed franchise’) then the franchisee shall be considered prior to any third party as the proposed operator of the proposed franchise. The existing franchisee, subject to meeting all new franchisee criteria, shall be offered a 14 day first right of refusal.”

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What can be seen from this type of clause is a clear indication that the franchisee has not been given an exclusive territory, but will be considered first and foremost should the franchisor wish to open another outlet in the territory. However, an important caveat for the franchisor is whether the existing franchisee has been operating the business in such a way that gives confidence to the franchisor that the existing franchisee will be able to manage more than one outlet in the territory. Because of this important fact, the clause quoted above usually continues and says the following: “If the franchisor considers the franchisee is capable of operating the proposed franchise in addition to the franchisee’s commitment(s) under its then existing franchise agreement(s), it shall notify the franchisee in writing and the franchisee shall indicate its willingness to accept the proposed franchise. The final decision as to the suitability or otherwise of the franchisee to operate the proposed franchise shall rest solely with the franchisor. If the franchisee declines within 14 days to accept the proposed franchise, then the franchisor shall be free to either itself open a new store within the territory or allow a new franchisee to open a new store within the territory.”

As can be seen above, the clause is explicit, clear and unambiguous but it is essential in all cases for the proposed franchisee to have independent legal advice from a lawyer experienced in franchising.

ALTERNATIVE CLAUSE Another way is to confirm that the franchisee has not been granted an exclusive territory but to combine that provision with a right of first refusal by a franchisee should a franchisor wish to establish another franchise outlet within the territory, and such a clause would read as follows: “The franchisee acknowledges that it has not been granted an exclusive franchise territory but that it has been granted the right to carry on a business at the premises. The franchisor agrees that it shall give the franchisee a first right of refusal (provided the franchisee is in full compliance with all of its obligations pursuant to this agreement) to purchase another franchise it may propose to offer in respect of the establishment of another [insert brand name] outlet at a site which is within the area as specified in the Schedule (“the Territory”) on no less advantageous terms than the proposed franchise offer to any third party.

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it must agree to open the new [insert brand name] outlet within ninety (90) days of acceptance.”

GOOD FAITH It is important that both parties act in good faith towards each other. The subject matter of the territory, regardless of how a clause may be drafted, is always a crucial consideration and it is absolutely essential for a prospective franchisee not to enter the franchise with the wrong idea about the territory and its boundaries. A franchisor must ensure that a franchisee understands what the territory comprises and must represent the position accurately and in good faith.

One franchisor for whom I act retains the right to put a second franchisee in the first franchisee’s territory should there be reasonable grounds for doing so.

However, in such a case the franchisor agrees to share the initial franchise fee payable by the second franchisee on a 50/50 basis with the original franchisee.

The relevant clause has been drafted to read as follows: “The franchisor shall have the right to appoint an additional franchisee in the territory if the franchisor reasonably determines that existing demographic data or actual comparative evidence or other reasonably based financial assertions indicate that there is an opportunity for an additional franchise in the territory without detracting substantially from the business conducted by the franchisee, in which case 50 per cent of any upfront franchise fee received by the franchisor from the sale of such new franchise shall be paid to the franchisee.”

The main principle which should flow through the right of a franchisor to appoint an additional franchisee within the original franchisee’s territory should be one of reasonableness and fairness. It is wrong to punish an existing franchisee who is working extremely hard by merely saying that there is room for another franchisee in the territory.

The franchisee may also be a forward thinker and anticipate the possibility of owning more than one franchise. In this event and depending on the circumstances it may be convenient to have adjacent or neighbouring territories. In that event the franchisor may be amenable to the inclusion in the franchise agreement of an option in favour of the franchisee to take an additional territory (bounding on the original territory) on notice being given to the franchisee by the franchisor of its requirement for a new outlet to be opened in the adjacent territory and failing exercise of the option within a specific period for the franchisor itself then to be able to open the outlet in that territory or for it to offer/grant the territory to a new franchisee.

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NO TERRITORY FRANCHISES Some franchise systems prescribe no territories whatsoever. There is a difficulty here for the initial franchisee who should be concerned about saturation of the area of the franchisee’s proposed operation – ie. how far is the franchisee going to travel to get business? This is especially relevant when in the case of a new system there are no actual (as opposed to hypothetical or anticipated) figures to justify a viable business. The logical reaction would be to request a limit on the number of franchisees to operate in the area although this can also be counterproductive because it may stultify the establishment of and/or the growing of brand awareness to the public.

Is it fair to appoint franchisees within a city area which may be divided into (say) five separate areas, and to say to 20 franchisees “go and conduct your business all over the city as you have no specific boundary except to ensure that any business conducted is within that city?” I consider the answer must be no. However, this would not preclude a franchisee who lives in one part of the city from servicing a customer who lives in another part of that city. Also, relatives and friends of a particular franchisee may want to be looked after by that particular person, regardless of where he might live.

In summary, territories or the lack of specific territories is a fascinating topic in franchising. A franchisor must be fair to each particular franchisee but must also abide by the provisions of the franchise agreement. Too often a franchisor in the early years has granted a franchise to a franchisee and has given too large a territory. It is true that it is easier to give a person a limited area and later to agree to enlarge it if the business is succeeding than to give a person a large area and later take it away or subdivide it if the territory is not being utilised to its maximum potential. The maxim for potential franchisees is – always know what you are getting into in relation to all aspects of the franchise agreement but particularly in relation to the territory.

Stewart Germann Stewart Germann Law Office Auckland, New Zealand stewart@germann.co.nz www.germann.co.nz

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Chapter 15

Growing your franchise

By Jason Gehrke Director Franchise Advisory Centre

About the Author Jason has more than 20 years’ experience in franchising and has worked at franchisee, franchisor and advisor level. His firm, the Franchise Advisory Centre, advises both franchisors and franchisees on pre-entry considerations as well as on sector best practice across a range of franchising issues, and conducts specialised franchise education events around Australia.

He is often quoted in franchise articles in the business media, writes a regular column on franchising, and publishes Franchise News & Events, a free national email news bulletin on franchise trends and issues.

Jason has a Masters of Business Administration (MBA), is a former award-winning CEO of a mobile service franchise system, and teaches undergraduate and postgraduate franchising programs at Griffith University’s Asia-Pacific Centre for Franchise Excellence.

He is a member of the Australian Competition and Consumer Commission’s (ACCC) Franchising Consultative Panel, the Franchise Council of Australia, and has made submissions to state and federal government reviews of the franchise sector.

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F

or many people who buy a franchise, it is usually their first time in business.

They are enthusiastic and willing to learn about the business, but often this enthusiasm is directed only at the technical and operational aspects of the business (ie. the stuff where they work in the business) and rarely at the strategic and tactical level (ie. the stuff where they work on the business).

The technical and operational details of running the business (how to serve customers, make or display the products, perform the services, open and maintain the store etc) are often the primary focus of the franchisor’s training program for new franchisees.

Without doubt this operational excellence is important to both franchisor and franchisee, yet it may not be enough by itself to ensure a franchisee can profit from and grow a successful business.

As a result of prior work or executive experience, plus their due diligence in assessing the business prior to commencement, franchisors may occasionally assume that franchisees will bring a degree of financial acumen to their new franchise.

However this may not always be the case. Where the franchisor’s training may concentrate on the specific technical or operational aspects of the business, a franchisee might not be equipped with the full range of business skills to properly grow their franchise.

For this reason, every potential franchisee should learn general principles of business even before investing in a franchise. In particular, this involves understanding the difference between sales, profit and cash flow.

There is a proverb in business that goes like this: Turnover is vanity; Profit is sanity,

But cash flow is king.

The meaning is simple. Sales turnover can be high and look very impressive.

Indeed it’s one of the first things franchisees might use to benchmark their performance against others in the same group.

However turnover alone is not enough to grow a grow a business unless there is adequate profit, but even this won’t guarantee a successful business unless the cash flow and working capital requirements of the business are kept in balance.

Without the right cash flow, even the most successful business can collapse, just like an elite athlete starved of oxygen.

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So before leaping into a franchise (or any other type of business), budding entrepreneurs should familiarise themselves with the following financial concepts:

CASH FLOW This is quite literally the flow of money into and out of a business. It involves getting paid by people who owe you money (debtors) and paying the people to whom you owe money (creditors). A positive cash flow is where the money is received from debtors before creditors are paid. A negative cash flow is where creditors are paid before money is received from debtors.

Some business models will have positive cash flow, and others may have negative cash flow. Businesses with negative cash flow in particular will need access to working capital.

WORKING CAPITAL Working capital is the money that a business needs to pay its bills until it can do so from retained profits or positive cash flow. Most businesses will need working capital to start with while turnover and profit increases, and may still need working capital (sometimes in the form of an overdraft) if bills need to be paid before income has been received from debtors.

FIXED VERSUS VARIABLE COSTS Fixed costs do not change regardless of the performance of the business.

These include rent or lease repayments, which remain the same irrespective of whether the business serves a million customers, or none.

Variable costs are expenses that are only incurred each time a sale is made (for example, the cost of delivery for an item sold to a customer).

MARGIN The margin is the difference between the cost to the business of the service or item sold, and the price which the customer pays for it.

COST OF GOODS SOLD (COGS) The cost of goods sold, also commonly referred to as COGS, is the cost to the business of the item or service to be sold (but not including the margin).

PROFIT Profit is the surplus left after all expenses have been paid. Once a business is a going concern, the calculation of profit involves taking a financial snapshot at a point in time to see if the income at that point was more than all the expenses.

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but have poor cashflow. This could be more of a risk for a service rather than a retail business, as service businesses may not be paid for the work done until some time after the job is completed. (This then means that the business needs to have enough working capital so it can continue to pay its own expenses in the meantime).

PROFIT & LOSS STATEMENT (P&L) A Profit and Loss statement is the financial report that indicates how much money a business has made or lost over a given period of time.

BALANCE SHEET A balance sheet provides an overall position for the business in terms of what it owns, compared to what it owes. A balance sheet works in tandem with a profit and loss statement to show the wider health of the business. (For example, a business may show a small, one-off loss on its profit and loss statement, but the balance sheet may show it has more than enough assets to cover this loss).

PROVISIONING FOR TAX Even businesses that are not making profits may still have to pay tax, so an allowance should be made for this on an ongoing basis rather than suddenly trying to find a large sum of money when tax is due to be paid. Often this might involve opening a separate bank account and depositing a small amount every week. Even a profitable business can become insolvent if it has not provisioned for tax, and does not have the financial reserves, working capital or cash flow to meet this debt.

While the descriptions above might help explain some financial terms relevant to all types of businesses, the next thing is to put these into perspective. This requires setting some critical benchmarks for both the business and its owners, and monitoring these regularly.

These benchmarks are key performance indicators (KPI’s) that allow an owner to run their business ‘by the numbers’, and in doing so, identify how to grow the business and improve overall performance.

The following are a useful selection of KPI’s for a business and its owners to measure.

THE COST OF LIVING A common problem is that many people going into business for themselves for the first time, (whether franchised or independent), rarely take the time to work out what they need to achieve from the business just to cover their living costs.

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The first thing is to work out what it costs to stay alive – to pay the rent or mortgage, buy groceries, pay bills, put the kids through school, repair the car, save for a rainy day, and so on. This can quickly add up to a surprisingly large amount for many people, and therefore sets an essential business benchmark as it becomes the absolute minimum level of return (in terms of owner’s wage or salary plus profit) that the business should achieve.

As simple as this might sound, a frightening proportion of people in business for themselves don’t know what it costs them to live, and therefore what level of performance their business should be achieving as a minimum.

THE TERM OF THE BUSINESS LOAN When borrowing to buy a franchise, the term of the loan should be the same as the duration of the franchise.

This means that franchise buyers who draw against their 20-year home loan for a five year franchise (for example) are failing to account for the true cost of the interest over the term of the business. While at first the loan repayments for the extra sum borrowed for the business may seem lower, the business owner will be potentially servicing the debt long after they have sold or left the business.

This is the same approach as ensuring that any lease for premises also matches the term of the agreement – usually around five years – but does not lock the franchisee into paying rent for years after the franchise has ended.

BUSINESS COSTS ARE BUSINESS COSTS Business owners may complain about poor profitability in their business, but a closer examination of the accounts commonly reveal a lot of personal expenses that are put through the business and which artificially reduce profits. In many cases, the owners have made a conscious decision to load the business with as many personal expenses as possible to increase deductions and reduce tax on profits.

In reality though, these costs are owner’s drawings in a different form. Once they are added back, the business can usually demonstrate greater profitability in keeping with the business model.

An unfortunate by-product of loading personal expenses into a business to reduce its taxable profits is that it also reduces the ultimate resale value of the business. Businesses are bought and sold on their ability to generate profit, and so a business that shows little or no profit will be worth much less to a potential buyer than the price the seller usually wants.

PAY YOURSELF WHAT THE JOB IS WORTH In some cases, franchisee profitability is under or over-reported because - 141 -

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franchisees either don’t pay themselves enough, or pay themselves more than the business can bear.

For example, a husband and wife couple might show a larger profit for the year, but failed to allocate themselves as a cost to the business. In other words, they didn’t draw a wage or salary, and simply counted the entire surplus at the end of the year as their profit.

This creates a false profit and fools business owners into thinking the business is more profitable than it really is.

In contrast, people who might have had $100,000 per year jobs in the workforce and who continue to pay themselves at that rate when they first start a business could be heading for trouble, especially if the market rate for the job of running that business might be only $50,000 per year.

By paying themselves an unsustainably high amount, these business owners reduce the profits of the business by up to $50,000 a year and may cause it to show a loss. Many owners fail to pay themselves what the job of running that business is otherwise worth on the open market, and this can distort their profit figure.

GET THE MARGINS RIGHT Margins added to the cost of goods or services in some franchise networks can vary greatly, resulting in wildly different profit results for businesses that are outwardly similar, but which buy or sell their products or services at different prices.

A system-wide benchmarking process can allow franchisors and franchisees to identify businesses, products and services with the greatest margins, and learn from these for the benefit of the network. Business owners are often too focused on top line sales (ie. the vanity of turnover), whereas a focus on profit (ie. sanity) is just as important to ensure the long-term viability of the business.

KEEP THE EXPENSES UNDER CONTROL Similar to a large range in margins, the difference between high and lowperforming franchisees in a network can come down to their expenses as a percentage of turnover.

Fixed costs such as rent, leases and base labour can also vary dramatically across a network, and can differ greatly between strong and poor-performing franchisees, whose high expenses rob them of profit.

SELL MORE It’s not rocket science. Some franchisees can do it really well, and others - 142 -

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are not so good at it, but being able to sell is fundamental to the success of any business. A quality benchmarking program will link sales success with promotional activity, and when highly-evolved, can allow franchisees to predict their likely sales increases from a given marketing activity.

WHY IS MONITORING SO IMPORTANT? What gets measured gets done. Benchmarking and financial management is not a burden for business if it can find ways to lift bottom line performance.

Only when business owners are in full control of their business’ KPI’s and monitor them regularly are they in a position to contemplate further growth.

To do this effectively requires commitment and discipline. Most importantly, it requires business-wide implementation and management.

FRANCHISING AS AN ENTREPRENEURIAL ALLIANCE Once a business owner has mastered the basics of financial monitoring and measurement, they are ready to grow and fully benefit from the entrepreneurial alliance that franchising creates.

The term entrepreneurial alliance immediately establishes and recognises the dynamic nature of franchising at franchisor level (ie. the entrepreneurship needed to develop the concept at the outset), plus the self-driven characteristics of successful franchisees who see opportunity to partner with a franchisor for greater success than they could achieve by themselves.

The nature of an alliance is that there are goals common to both parties, as well as obligations. An alliance also suggests a time or situationally-dependent relationship, which is also in keeping with the concept of the limited term of a franchise grant, and the option to renew usually available to both parties at the end of the term.

In many ways this is more illustrative of the nature of the franchise relationship than a ‘commerical marriage’, a favourite term often used by franchise observers and media alike, and which draws obvious parallels with real life marriage. However the difference in franchising is that neither party expects to stay together until ‘death us do part’. Both parties know up front through the disclosure document and franchise agreement what their obligations to each other will be before, during and after the relationship, and in the event of a serious dispute, mediation is a legal requirement.

The entrepreneurial alliance in franchising creates a new term for franchisee: intrapreneur.

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with the concept of entrepreneurial alliance, as franchisee intrapreneurs still require the framework and concept of the franchise system on which to build their own entrepreneurial success.

The inference of both of these terms is that profit underlies the nature of the relationship, and that growth in franchisee profits enhances this relationship.

GROWING INTO ADDITIONAL OUTLETS Many franchise business models lend themselves to multiple-unit ownership.

This provides intrapreneurial growth opportunities for franchisees by acquiring additional outlets (subject to their capacity to effectively manage multiple units). A progression of this nature should be firmly rooted in a solid understanding of the financial concepts explained in this article, and may involve the following stages once the initial outlet has achieved consistently high levels of performance.

Stage 1: Acquisition Seek opportunities to acquire an additional unit, either through opening a new outlet (the most common method for growing retail franchise chains), or by buying an existing (and possibly underperforming) outlet from an established franchisee of the same chain.

Stage 2: Consolidation Build up the second unit, and share some resources (particularly staff and back-of-house facilities) with the initial outlet. The performance of both outlets should also be carefully monitored by the franchisor, who on the one hand is generally pleased to see fewer franchisees operating more outlets, but on the other hand is potentially concerned that a franchisee operating multiple outlets will spread themselves too thinly and their businesses may suffer as a result.

Stage 3: Further acquisition Repeat stages 1 and 2 above, in a nearby location to maximise the operating efficiencies of running several outlets by clustering them together.

Stage 4: Install management Once enough outlets have been established, the franchisee may (if they haven’t already done so) install a management team to operate the group on their behalf, thus reducing their daily operational involvement in the business, and instead spending more time working on the business. At this point, the franchise has become ‘corporatized’ in that the outlets are answerable to a chain of command under a traditional corporate organisational structure (established by the franchisee) within the framework of the franchise system.

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Stage 5: Diversification After having made themselves largely redundant from the day to day operations of their business, the franchisee may seek further challenges or interests elsewhere (eg. new markets, diversification into other businesses, including other franchises, property development, etc). However, any diversification risks taking capital and management expertise away from the core “cash-cow” operations.

FRANCHISOR ENGAGEMENT Throughout these stages of development, franchisees are also likely to play active roles in the development and improvement of the franchise system as a whole by participating in marketing initiatives (including testing new products and marketing campaigns), and contributing to the system’s Franchise Advisory Council.

Franchisees of this nature become role models for their fellow franchisees, and are highly regarded by their peers in the system. By operating their businesses successfully whilst continuing to expand, they are often recognised by their franchisor’s awards programs for their achievements in the system.

MULTIPLE-UNIT OWNERSHIP: ADVANTAGES & DISADVANTAGES Growing into multiple outlets can produce excellent financial outcomes for a franchisee, but if not done correctly, can also result in disappointment. The table below summarises some of the advantages and disadvantages of multipleunit ownership.

Advantages • Opportunity for career growth in business • Sets new challenges and goals

• Potentially greater overall returns

• Greater economies of scale with suppliers • Increased influence with franchisor Disadvantages • Potentially overstretches franchisee’s management competency • Increases franchisee’s overall debt levels

• Poor choice of outlets can eliminate economies of scale

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THE FINAL WORD In conclusion, growing a franchise requires a fundamental understanding of financial basics, the establishment of key performance indicators (KPIs) for elements of the business, constant monitoring and management of these KPIs, and finally, considered growth into additional outlets to maximise the advantages and minimise the disadvantages of multiple unit ownership to become a truly successful franchisee intrapreneur.

Jason Gehrke Director Franchise Advisory Centre 07 3716 0400 Jason@franchiseadvise.com.au www.franchiseadvice.com.au

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Chapter 16

HOW TO FRANCHISE YOUR BUSINESS SIMPLY

By Brian Keen Managing Director How to Franchise Simply

About the Author Brian Keen, Australia’s most sought after advisor for business owners considering franchising, has worked in the franchise sector for over 30 years and truly understands the leverage franchising could provide for the right business.

As a franchisee once himself, opening and operating seven stores in just five years, Brian has first-hand knowledge and experience as to whether a business owner should consider franchising as their core business model for growth and ultimately freedom.

Even though Brian has personally consulted with the biggest names in the franchise industry, his true passion is working with business owners who have reached the critical moment in their business by asking: “Should I Franchise My Business?”

In Brian’s new book Should I Franchise My Business? he breaks down the ten biggest myths that most business owners believe are true about franchising and tells the truth about how to increase your profits while allowing you to retake control of your life by working fewer hours through a no-hype franchising process.

Brian has shown countless business owners how to transform a family-sized firm into a multi-million dollar asset, while saving them tens of thousands of dollars in consultancy fees in the process.

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FRANCHISING – MORE THAN JUST SYSTEMS? A franchise without a system is like a car without wheels – it’s just not going anywhere.

Whether you are just starting up, you currently have 50 franchisees or are somewhere in between, if you are to franchise, you need a clear, simple and well documented system; just as any well run business does.

But I have found during my 30 years dealing with every aspect of franchised business for both myself and others, success involves so much more than just systems and a set of documents. Converting to the franchise model will create change in almost all parts of your business. Here are some examples.

BUILDING TWO BUSINESS STRUCTURES You are in fact building at least two very different but linked business structures, one for you as franchisor and one for your partners in business, your franchisees.

Your franchisees will take responsibility for dealing with your clients or customers and they bring in the money. Your franchisees will be doing much of the technical work your business now concentrates on.

You, as franchisor, and leader of the franchise group, need to make sure everything is working and that you provide support so your franchisees can cover their part of the bargain.

As Tom Potter put it so well when he first franchised Eagle Boys – ‘I have moved from the pizza business to the people business’.

In short, you are going to trade franchisee service for the money they pay and as they will be watching your every move to make sure they get value for money, you had better do your part well.

FRANCHISOR SUPPORT So yes, one of your core roles as franchisor, is to look after your franchisees.

And this will involve different skills with different franchisees as they grow in your partnership.

In the early days, you will be inducting them into the franchise. Teaching most of them exactly how you want them to do business. How to make up the burger to meet your customers’ expectations. How to interact with your customers.

How to make your business look and feel. You will also be teaching many of them the basics of business; all about accounts, advertising, converting leads to sales.

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looking for change and maybe help in growing their franchises. Perhaps by adding more outlets so they, like you, will need to learn how to step out of the business and manage it from the outside.

As Tim Wise, founder of the Tap Doctor explained to me, as his franchise matured, he needed to change the way his staff interacted with franchisees and so he needed to adjust the skill-set of the staff he employed in his Support Office to match franchisee needs.

THE MARKET SAYS YES Marketing is also a central task for any franchisor. Marketing in a franchise, as with any business, involves far more than just advertising.

First, and most important, you really need to understand the market that loves your product. Make absolutely sure you have a product which has a sustainable tribe of raving fans and then work out how big you want the franchise group to be. Marry the two and make sure your product is presented to your tribe in a way which will satisfy their every desire.

Remember, it is the characteristics of this tribe of raving fans which will provide the details for you to work out your franchisee territories which in turn feed into your fee structures. Great fee structures and profit will ultimately determine whether you have happy franchisees or not.

Secondly, looking after the brand, to make sure everything looks the same and works the same, so your franchisees have enough leads to keep them (and you) profitable and happy are central roles.

You cannot afford to let your franchisees make changes to the brand as they wish. This doesn’t mean you cannot make adjustments to meet cultural differences in different localities, but those changes in service, product and the way your business looks and feels need to be carefully considered by you within the context of keeping the heart of the brand consistent. Subway in India, for instance, overcomes local cultural needs by serving from two counters. One a traditional Subway offering and the other with a vegetarian counter to suit religious requirements and cultural tastes. McDonald’s in Australia was the first to introduce the McCafe counter to meet the need we have for expresso coffee on the road but these changes are made in a carefully considered way.

Thirdly, take control of how your franchisees get their customers. In many franchises, responsibility for supplying leads (advertising) to each franchise outlet is also held by the franchisor.

Jim Penman from Jim’s Mowing, for example, decided right at the beginning of his journey in franchising that he wanted people out in the field to be mowing lawns and bringing in the money. That meant they should not be spending time - 149 -

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doing office work they were simply not suited to doing well. So he decided the franchisor office would take every call for a lawn to be cut. The job was costed there and then allocated to the appropriate franchisee to complete.

The balance of how much advertising is undertaken locally will be different with each franchise group.

BUILDING TWO BUSINESS STRUCTURES So yes, big or small, the secret is to realise you are building two completely different business structures from your current business.

In order to tease out how you will organise these two sides of the business so they work together, I have found I need to look at every aspect of your business; not just marketing and support, but also how the money works for both sides of the franchise in the long term, who is going to do what exactly, how product is going to be supplied; the list of questions is endless.

To simplify the process I have an uncomplicated four step system which covers every aspect. At the outset I have to say, I agree, franchising is not necessarily easy. It is hard work, but I know the process can be made simple.

What will I be looking for as we go through these four steps, restructuring your business? I will always be looking to help create the most robust franchised business possible so it can live well into the future.

These are some of the things I will be looking for in your business.

EXPANSION WITH CHOICE How big do you need your franchise group to be? Do you have a simple business method which will suit the largest number of potential franchisees or does the complexity in your business restrict the market? How skilled do you need your franchisees to be?

In the main, I have discovered people who choose to grow their businesses through franchising are entrepreneurs. They are always looking for something new and so most who come to me have businesses with many layers. The trouble is, people who are attracted to buying franchised outlets are very different. They are looking for a clear business idea, one which not only appeals to them but which they can see will work. It is the simplest franchise systems which appeal.

I had a client in the wedding industry who provided both the wedding ceremony (usually on a beach) and the wedding celebration afterwards. She found it was difficult, logistically, to organise clearing up after the ceremony and then running to the celebration venue with sand between her toes in time to greet the bridal party. When she franchised, she found the combined business was - 150 -

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just too complex for one person to manage; so she split her business into two franchise groups – one to deal with the wedding ceremony and the other to deal with the wedding celebration. What she also then found was that the two franchises attracted very different franchisees, with very different profiles and skillsets.

Her story is not unusual. The thing is, these simple franchises appeal to a much wider range of people in the franchisee market, so you get more applicants giving you more choice so you are able to select the best franchisees available and making it easier to expand the group.

MONEY MAKES THE WORLD GO ROUND Absolutely key is understanding the money.

As franchisor, you bring no money into the group. Your franchisees make it and pay you for services you bring to them. This simple fact is often the root cause of disputes and where franchisees are not happy with your service. The bottom line is you want happy franchisees who love you and it is profit – their profit – which will please your franchisees.

So, right at the beginning, as you design your franchised business, you need to work out the money.

• How much does each franchise outlet need to earn to be profitable enough to support you and them?

• How much does your product need to cost and sell for?

• How many items do your franchisees need to sell?

• Who are the people with the money and love of your product and what are their characteristics?

• Where do they live and what are their habits?

• What is the fee structure which will support your group as it begins and as it matures?

The list is long…

But once you know the answer you will be able to set the structure of fees.

You really need to get this right as you will be stuck with it and not easily able to make changes. You need to look at the annual franchise fees and work out a figure which makes both your franchisor business and your franchisees viable. If you are supplying product to franchisees you will have to work out the margins. You may be supplying other services as well such as marketing and advertising and need to raise a charge to cover this.

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suppliers to give you rebates, but be sure to disclose them to your franchisees so there is no feeling that you are making some extra on the side.

What about renewal fees? Goodwill? Fit out? Plant and equipment? There is a lot to think about when setting your fee structure and professional advice is clearly the right avenue to take.

Returning to the question of how large you want your group to grow, it’s about sustainability and your critical mass – what’s your tipping point with outlet numbers? Some say any less than 60 outlets and you will not succeed.

I do not agree.

And neither does the market. The trend in the US is for micro franchise groups to grow, servicing a particular niche or a particular regional area.

Certainly I know a number of smaller groups, satisfied with being where they are. A small family owed franchise group of bakers on the Mid North Coast and its hinterland only have about eight outlets but this is enough to give the group what it needs. They are known and loved locally and compete healthily with the likes of Bakers Delight.

Others work hard at growing the franchise group to meet the needs of a much wider audience.

The thing is, you stand to become successful faster if you work all of this out at the beginning; then be adaptable and move with the market into the future.

BE ADAPTABLE OR DIE

Remember the video store. First the huge expansion of free-to-air television, then online piracy. Now, with programs re-playable on demand, Netflix has taken over.

Any franchise group which has been around for years will not look anything like it did when it began. If you want to have a franchised business which goes the distance, you have to adapt. It’s Darwin’s Theory of Natural Selection all over again: Adapt or Die. I am watching Macca’s go through its latest round of adapting in Australia.

Originally just a burger store offering ‘chips with that’, they realised in the 90s that if they were going to get the kids, they needed something to attract Mum as well and McCafe and a suite of healthier food followed.

Today it is all about choice, they have just introduced a concept, new to them, the flexible burger – you choose what is in there. Shades of one of their biggest fast food competitors – Subway perhaps.

We’ve seen the rapid emergence of gourmet pizza with Pizza Capers and Crusty Pizza. And now the third generation of local niche franchises such as New York Slice and Pizzarazzi cater to a new niche of foodies with palates influenced by My Kitchen Rules and MasterChef.

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HOW TO FRANCHISE YOUR BUSINESS SIMPLY

And don’t be fooled into thinking this does not apply to you because such changes apply to a lot more than food.

Keep an eye on what is going on in the market and adapt to keep up. It might just involve a change in branding to keep your look fresh or it might mean changing the way you offer your product or service to press those ‘buying’ buttons or it might mean finding a completely new product to keep up with today’s rapid changes.

Another reason for you, as franchisor, to be so interested in marketing.

ARE YOU FIT TO LEAD? Franchising is not for everybody.

You may know everything there is to know about franchising but you have to ask yourself the question, “Is franchising right for your business?”

And more importantly, “Is it right for you?”

Do you have the business skills, the confidence and personality to make your franchise system work?

One of the other deciding factors when analysing whether a business is ripe to franchise, is the personality of the business owner or owners. Is that person a natural leader? Does he or she have the characteristics to manage a franchise chain? From perhaps dealing directly with your products and customers you will suddenly become a manager of your franchisees.

However, as Jim Collins so succinctly puts it in his bestseller ‘Good to Great’, leadership can be learned and some of the most successful leaders in business and politics are just weird.

The key is to understand three things:

• Be humble and listen to what others are saying to you and be able to respond.

When things go wrong be prepared to sit down and discuss the problem.

Hear what your franchise partners are saying.

• Stand up for your franchise principles and be prepared to take the hard decision when needed.

• Understand how different character types and different skillsets fit into your business. Personality profiling is an essential part of selection for both your franchisees and staff. Profiling will help ensure the right communication and decision making styles fit into the different levels of the franchise.

And don’t restrict the understanding to others in your team – if you understand how you fit into the scheme of things, you will not only be able to adjust your style to lead different groups of people more effectively, you will realise you really need to employ others to fill the gaps your personality and skillsets show.

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Business FranchiSe Guide

DON’T SELL - RECRUIT At last, as you move onto recruiting your franchisees, remember, it is about attracting really good people. As John O’Brien from Poolwerx explains, “Think about it this way, you are not selling franchises, you are selecting franchise partners and it is important to have that clear difference in mind”.

You are looking for people who are driven, who are energetic, who are experienced, and who have the required skills and want to see the group succeed.

These days a broad range of people are interested in becoming franchisees. A lot of younger people who previously would have gone into a career are now seeking more exciting opportunities. Perhaps they are uncomfortable in the job market where the hire and fire mentality combines with the vulnerable economy and promotes a sense of insecurity. Owning a business seems a far more stable proposition and franchising is a perfect way to get started in their own business.

Franchising also attracts people of middle age. They may have come out of middle management, taken early redundancy and are now looking to invest in their own business. A lot of tremendously successful franchisees have come from those sorts of backgrounds, but franchisees really come from all walks of life.

Take care though, there are people who just want to buy a job and that can be a bit risky for the franchisor. It really depends on the sort of franchise they are buying. Be sure that they have the commitment, experience, and right goals in place to succeed in business.

Franchisees can come from anywhere but make sure you have a good fit for your group.

AND FINALLY – IT’S TRUE – YOU REALLY CAN’T BEAT THE SYSTEM As I said at the beginning, the foundation of any good business, especially a franchised business, is a great system.

And the thing is, a systemised business gives you a great exit strategy; this was proved by a client of mine.

Speedy Lube is a car servicing business. My client was thinking of franchising and I worked with him to systemise the business. We got all the documents in place, uniforms and scripts for each employee to greet and treat customers.

Everyone needed to deal with clients in the same way.

My client became unwell and decided not to go down the franchising path but to sell the business. The systems and standards meant that the business sold - 154 -

HOW TO FRANCHISE YOUR BUSINESS SIMPLY

fast and for significantly more than it would have otherwise done.

As a standard car servicing business the market would have been restricted to mechanics, not generally a group with easily accessible funds. The purchaser of this business was not a mechanic, he was a white collar businessman and car enthusiast with limited mechanical skills who knew that he could slip into Speedy Lube easily because the systems were there and the staff well trained.

To conclude, if you are looking to franchise your business, remember you do need to look at how the whole franchise will be structured and to review each aspect of the business to make sure you grow a group of happy, profitable franchisees. That way you will become happy and profitable too.

To Your Success

Brian Keen Managing Director How To Franchise Simply (AUS) 1300 960 136 brian@howtofranchisesimply.com.au www.howtofranchisesimply.com.au

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Business FranchiSe Guide

Franchise Listings categories: Beauty Products & Services............................................................................................... 157 Building & Construction........................................................................................................ 158 Business Services........................................................................................................................... 159 Cleaning and Lawns & Gardens.................................................................................... 161 Clothing Alterations. ................................................................................................................ 162 Courier Services.............................................................................................................................. 163 Entertainment................................................................................................................................... 164 Financial Services......................................................................................................................... 165 Food – Coffee & Cafes. ............................................................................................................... 166 Food – Restaurants & Dining rooms. ....................................................................... 168 Food – Takeaway.............................................................................................................................. 171 Furniture & Bedding.................................................................................................................... 173 Health & Fitness............................................................................................................................... 174 Rent or Hire........................................................................................................................................... 175 Retail. ........................................................................................................................................................... 176

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What is a Franchise?

beauty products & services

Hairhouse Warehouse Level 1, 605 Doncaster Road, Doncaster Vic 3108 Contact: Peter Fiasco | Phone: (AUS) 0451 370 060 Email: franchising@hairhousewarehouse.com.au | Web: www.hairfranchise.com.au BUSINESS DESCRIPTION: As the market leader and Australia’s largest retail hair and beauty salon franchise Hairhouse Warehouse has a brand that consumers have come to rely on for over 20 years. The brand is enjoying strong sales growth in Australia, and the franchisees are enjoying solid returns. This has given Hairhouse Warehouse the prime opportunity to open up the brand to more franchisees in Australia and share in the success.

Hairhouse Warehouse is launching the next phase of its expansion, with a focus on regional centres as well as key suburban locations. This opens the brand to more possible franchisees that have a passion to run their own successful business.

As a franchisee, no hair or beauty certification or experience is required - just a passion for success.

COMPANY DETAILS: Date of first franchise: 1998 Membership: FCA, HBIA - 157 -

Training provided: Intensive workshop and in store training, as well as ongoing training and support in-store Territories available: NT/Darwin Metropolitan and Regional NSW Metropolitan and Regional SA/Adelaide Metropolitan and Regional WA/Perth Metropolitan and Regional Queensland Metropolitan and Regional FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 138 FINANCIAL DETAILS: Initial franchise fee: $66,000 +GST Minimum investment: $250,000 to $350,000 for Greenfield sites Royalty fee: 6% of gross sales +GST Advertising/marketing fee: 3% of gross sales +GST

Business FranchiSe Guide

building & construction

Reliance Roof Restoration 3/6 Trade Street Ormiston QLD 4160 Contact: Justin Eldershaw | Phone: 1300 300 748 Email: Justin@relianceroof.com | Web: www.relianceroof.com.au

BUSINESS DESCRIPTION: Roof cleaning, basic repairs, sealing, and re-coating. We take roofs that look old and worn-out and make them both functionally sound, and look fantastic. Using our specialized protective coatings in the choice of over 30 colours, we can protect the home, and make the roof look brand new again.

COMPANY DETAILS: Date of first franchise: May 2011 Membership: FCA since 2012 Training provided: Full-time for 3 weeks, then on-going coaching in all areas of the business

FRANCHISE OUTLETS AUSTRALIA: 2012: 7 2013: 10 2014: 18 Current: 21

FINANCIAL DETAILS: Initial franchise fee: $47,000 Minimum investment: $47,000 Royalty fee: $550 per month Financial assistance: We assist the franchisee in obtaining finance Advertising/marketing fee: 0%

Territories available: Territories available right across Australia

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What is a Franchise?

business services

INXPRESS 1/26 Flinders Parade, North Lakes QLD 4509 Contact: Meredith Ham | Phone: 1300 469 773 Email: sales.au@inxpress.com | Web: www.inxpress.com.au

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: As one of DHL’s largest shipping partners, InXpress provide heavily discounted shipping to SME’s by leveraging small orders into large volume discounts.

Current: 34 Nationally over 250 Globally FINANCIAL DETAILS:

With massive global buying power and an international network we’re passionate about our service and our customers. With an expanding National brand, InXpress Franchisees leverage the savings to build a business with long term residual income and lifestyle

Initial franchise fee: $49,000 + GST Minimum investment: $49,000 +GST Royalty fee: 30% of gross margin

COMPANY DETAILS: Date of first franchise: 2002 Membership: FCA and BFC Training provided: Business development in successful model, with sales training and ongoing support.

Territories available: National opportunities across all capital cities and metropolitan areas - contact us for more details.

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Business FranchiSe Guide

business services

THEXTON ARMSTRONG business success partners Email: thextonhq@thextonarmstrong.com.au Web: www.thextonarmstrong.com.au/presentation BUSINESS DESCRIPTION: Become a Thexton Armstrong Business Success Partner!

Thexton Armstrong is a network of people with a common passion for business and helping business owners.

We work long term with Business Owners (of all sizes) to help them improve the profit, growth and value of their Business.

We use a system, we call the “Business Success Programme” to guide us through the process, it is unlike anything else available to assist Business Owners.

Our Programme is designed to give a trained Thexton Armstrong consultant the tools and resources to form a long term partnership with Business Owners. A partnership and a relationship to assist the Business Owner with the missing parts of their Business so that the original dream they had prior to starting the business can be achieved.

This programme will change your life too. It will give you the training required to take on a new profession as a Business Consultant, it will allow you to combine the experience you have gained over your lifetime with our proven tools and resources to turn you into the Ultimate Business Consultant.

With over 100 Franchisees across Australia, NZ and Europe we believe that we have the No1 Business Consulting System in Australasia.

Enquire now to receive more information on joining our great network of people.

COMPANY DETAILS: Membership: Franchise Council of Australia Training provided: • Initial training is six days and covers the entire Business Success Programme (BSP) process.

• Ongoing support & mentoring provided.

Territories available: Across Australia and New Zealand FRANCHISE OUTLETS AUSTRALIA/ international: Current: 100+ FINANCIAL DETAILS: Minimum investment: Options available from $25K-$75K

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cleaning and lawns & gardens

V.I.P. Home Services Offices in NSW, VIC, WA, SA and QLD Contact: Kevin Magee | Phone: 13 26 13 Email: info@viphomeservices.com | Web: www.viphomeservices.com.au BUSINESS DESCRIPTION:

COMPANY DETAILS:

As Australia’s oldest and most experienced Home Services Franchisor, multi-award winning V.I.P. has helped over 4,000 people just like you become successful business owners in cleaning and lawns and garden maintenance by providing:

Date of first franchise: 1979 Membership: FCA Training provided: 4 weeks initial training and ongoing training throughout the life of the franchise.

Territories available: Australia wide

• Industry leading training, coaching and mentoring

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

• Unparalleled national, state and local support

Current: Over 1000 (AUS)

• Proven marketing, products and systems • Affordable franchise options

FINANCIAL DETAILS:

• Everything you need to start a great new life and ‘love your work’

Initial franchise fee: From $10,000 Minimum investment: $13,000 Royalty fee: Flat fee that includes marketing Financial assistance: POA

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clothing alterations

LOOKSMART ALTERATIONS Level 3, 73-75 Dunmore Street, Wentworthville NSW 2145 Contact: Ray Bryant | Phone: (AUS) 02 9637 8222 Email: contact@looksmartgroup.com | Web: www.looksmartgroup.com

BUSINESS DESCRIPTION:

COMPANY DETAILS:

LookSmart Alterations is The Stylist Tailor in the Australian and New Zealand marketplaces.

You don’t need to be a tailor to own a LookSmart Alterations franchise. A LookSmart franchise can be run under complete management.

Date of first franchise: 2000 Membership: FCA Training provided: 2 to 4 weeks in-store training and ongoing support Territories available: All States in Australia and New Zealand

• 54% of franchisees are non-tailors • 49% of franchisees are multi-site owners • 53% of LookSmart franchises are under complete management LookSmart Alterations’ loyal customers include one million consumers per annum, Sass and Bide, SABA, Review, Marcs, Specsavers, David Jones, Myer, ACS, Tarocash, YD, Virgin Australia, Roger David, Qantas and Jetstar.

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FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: Over 120 stores in major shopping centres across Australia and New Zealand FINANCIAL DETAILS: Initial franchise fee: $25,000

courier services

FASTWAY COURIERS Level 9, 491 Kent Street, Sydney, NSW, 2000 Australia Shed 5, Level 1, Lever Street, Ahuriri, Napier, NZ Contact: (AUS) Fastway FSO or (NZ) Fastway FSO Phone: (AUS) 1300 FASTWAY or (NZ) 06 833 6333 | Email: (AUS) fso@fastway.com.au or (NZ) recruitment@fastway.co.nz | Web: www.fastway.com.au or www.fastway.co.nz BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA:

Established in New Zealand in 1983, Fastway Couriers’ global network includes 63 regional depots and 1,200 Courier Franchisees across Australia, New Zealand, Ireland, Northern Ireland and South Africa.

2012: AUS 660 and NZ 260 2013: AUS 695 and NZ 265 2014: AUS 700 and NZ 270 Current: AUS over 700 Courier Franchisees and NZ over 270 Courier Franchisees

Through its industry-leading franchise system, Fastway Couriers has developed a reputation for providing fast, friendly and cost-effective service to its customers – an achievement which has earned the franchise over 50 industry accolades.

FINANCIAL DETAILS: Initial franchise fee: From $25,000 + GST ($AUS) and from $15,000 ($NZ) Minimum investment: From $25,000 + GST ($AUS) and from $15,000 ($NZ)

COMPANY DETAILS:

Royalty fee: N/A

Date of first franchise: 1984

Financial assistance: N/A

Membership: FCA and FANZ

Advertising/marketing fee: N/A

Training provided: Ongoing training and support is provided to our franchise partners.

Territories available: Various territories are available throughout Australia and New Zealand.

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entertainment

simulator ride 9D Action Cinemas PO Box 1333 Double Bay NSW 2023 Contact: Nigel Corne | Phone: 1300 550 132 Email: franchise@9dactioncinemas.com.au | Web: www.9dactioncinemas.com.au BUSINESS DESCRIPTION: This is a Simulator Ride suitable for both children and adults. The seats move significantly while people watch the short movie in 3D and enjoy 9 effects such as rain, wind, smell, sound, lightning, snow, fog and feel. Patrons select the film of their choice. No bookings are required except for birthday parties and vacation groups that are popular.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

2012: 1 2013: 3 2014: 4 Current: 4 FINANCIAL DETAILS: Total franchise fee: $180,000 - $295,000

COMPANY DETAILS:

Minimum investment: $180,000

Date of first franchise: 2012

Royalty fee: 12%

Training provided: Yes

Financial assistance: Considered

Territories available: Capital cities and major regional and tourism precincts

Advertising/marketing fee: Included in franchise fee

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financial services

The Interface Financial Group – IFG 50/50 8901 Woodbine Avenue, Suite 207, Markham, Ontario, Canada L3R 9Y4 Contact: David T. Banfield | Phone: (AUS) 1300 940 908 Email: ifg@interfacefinancial.com | Web: www.interfacefinancial.com.au

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: Interface franchisees provide short-term working capital for small, expanding businesses through a unique and proven invoice discounting programme.

Current: Australia 4 Canada 6 U.S.A. 49 UK & Ireland 9

COMPANY DETAILS: Date of first franchise: 2014

FINANCIAL DETAILS:

Training provided: Extensive initial training (5 days) covers both theoretical and practical aspects of the business.

Ongoing regular training and coaching is also provided.

Initial fee: $24,500

Territories available: Single units are available in all territories.

Advertising/marketing fee: N/A

Minimum investment: Franchise fee+ working capital of $30,000+ Financial assistance: All funding is done together - franchisee and franchisor

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food - coffee & cafes

theobroma 3A Kia Court, Preston VIC 3072 Contact: Ben | Phone: (AUS) +61 431 727 004 Email: Ben@theobroma.com.au | Web: www.theobroma.com.au

• Site selection, fit-out expertise and property leasing experience.

BUSINESS DESCRIPTION: Theobroma is a Total Food and Beverage Concept offering consumers high quality chocolate and chocolate beverages with the added enhancement of a full food menu, with some stores even offering a licensed venue.

From handcrafted artisan chocolate jewels using real Belgian Coverture chocolate to hot and cold chocolate beverages, desserts, melted chocolate dips and retail products, there is something for everyone and for every occasion.

A professional team backs the franchise at Theobroma with extensive franchising, marketing and retail experience.

COMPANY DETAILS: Date of first franchise: 2007 Training provided: 3 weeks and ongoing support Territories available: Australia, New Zealand and International

Our coffee blend is specially roasted for us by our Italian barista and is rated as one of the best in Australia.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

All this enhances the commercial viability and strength of the business model. The brand has 4 concepts - Lounges, Lounge Bars, Pavilions, Pavilion Bars.

Current: 20 Across Australia, New Zealand and International

FINANCIAL DETAILS:

What the Franchise Offers • Innovative and unique concept that includes all of life’s pleasures. Chocolate, Coffee, Food, Alcohol and Retail.

• Highest quality chocolate products.

• Professional team with a range of skills to assist you.

• Easy to manage and full training provided.

Initial franchise fee: $40,000 Minimum investment: $150,000 to $500,000 Royalty fee: 6% Financial assistance: referral available Marketing fee: 3%

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FOOD – COFFEE & CAFÉS

food - coffee & cafes

ZARRAFFA’S COFFEE 1/54 Siganto Drive Oxenford QLD 4210 Telephone: Fax: &NBJM 8FCTJUF Contact: Position:

07 5500 0800 07 5500 0900 BENJO![BSSBGGBT DPN XXX [BSSBGGBT DPN Christine Allsopp Franchise Manager

ZARRAFFA’S COFFEE

1/54 Siganto Drive, Helensvale QLD 4210 FRANCHISE BUSINESS DESCRIPTION: Phone:OUTLETS (AUS) 07AUSTRALIA/ 5500 0800 INTERNATIONAL Ranked 20th in BRW Fast Franchises in Email: franchise@zarraffas.com | Web: www.zarraffas.com 2009, Zarraffa’s Coffee is an award winning 2006: 3 specialty retail coffee outlet. It has been providing premium coffee products and BUSINESS DESCRIPTION:2007: 3 freshly roasted coffee beans since its 2008: 7 Zarraffa’s Coffee is an Australian-owned establishment on the Gold Coast in 1997.

brand is on track to continue successful expansion, providing a proven business opportunity for potential franchisees.

retailofcoffee franchise chain, Recently awarded and Gold operated Coast Business Current: 35 stores as at 18/05/2009 with with head office based on the the Year in 2007 and 2008 and winneroperations of 5 stores due to open by 31/12/2009 Gold Coast, 1997. The successful various Equal Golden Bean Coffeesince Roaster COMPANY DETAILS: awards. growth of the company stemsFINANCIAL from a DETAILS:

Date of first franchise: 2001

dedication a consistently high offee: $50K The business is founded on the to mantra Initialstandard franchise Membership: FCA to create ‘An individually perfect of product andcup service, in addition to business Training provided: Yes coffee - every time’innovations which encapsulates such as drive thruMinimum stores. investment: $300K the Company’s mission and our customers’ States available: & NAB The award-winning franchiseFinancial group assistance: Westpac expectation. Great service is our practice QLD, NSW, WA operates over 70 stores throughout and fresh, quality coffee is our business.

Advertising/Marketing Fee: 3%

Queensland, New South Wales and

COMPANY DETAILS Western Australia. The company’s healthy

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

expansion Date of ďŹ rst franchise: 2001can be attributed to their strong commitment to crafting an individually

Current: 73 stores as at 1/9/2015

Membership: FCA perfect cup of coffee for each and every

customer, with a concerted focus on Training provided: Yes

FINANCIAL DETAILS:

convenience. These key business principles form the foundation of the successful QSR business – from frontline customer service to ongoing franchise training; ensuring delivery on this promise to the loyal customer base.

Territories Available: QLD

Minimum investment: From $800,000 175 plus GST Financial assistance: Westpac, NAB, ANZ Advertising/marketing fee: 3%

With available franchise sites in areas such as Queensland and Western Australia, the

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food - restaurants & dining rooms

FASTA PASTA PTY LTD Level 1, 137 The Parade (ENT Via Edward Street), Norwood SA 5067 Phone: (AUS) 08 8304 8600 Email: franchise@fastapasta.com.au | Web: www.fastapasta.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

With our authentic Italian background and 30+ years success story, Fasta Pasta is now Australia’s largest, independently owned group of ‘fresh pasta’ Italian restaurants.

Date of first franchise: 1990 Training provided: 12 weeks training in one of our company stores which will cover areas such as, front of house, kitchen (all areas), necessary bookwork, Point of Sale, Management Skills.

An innovative ever-changing menu, with more healthy options and commitment to outstanding service, have all contributed to Fasta Pasta being voted Roy Morgan’s ‘Quick Service Restaurant of the Year’ in 2012.

Territories available: Nationally FRANCHISE OUTLETS AUSTRALIA: Current: 31

A Fasta Pasta franchise is a great opportunity to be part of our winning national franchise team of people who are pasionate about fresh food and delivering outstanding customer service.

FINANCIAL DETAILS: Initial franchise fee: $50,000 + GST Minimum investment range: $500,000 - $800,000 Royalty fee: 6% of net sales Marketing fee: 3% of net sales

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food - restaurants & dining rooms

HOG’S BREATH CAFE Level 1, 152 Shore Street, Cleveland QLD 416 Contact: Peter Josefski | Phone: 1800 HOGSTER (AUS) or 0800 HOGSTER (NZ) Email: peterjosefski@hbca.com.au Web: www.hogsbreath.com.au or www.hogsbreath.co.nz Territories available: Nationally and throughout New Zealand

BUSINESS DESCRIPTION: Hoggies set out to be unlike any other restaurant. In a nutshell, it is about providing quality food and beverages in a casual environment with an over-riding friendly, party atmosphere. The diverse menu is centred around our famous 18 hour slow cooked Prime Rib, an unbelievably tender steak that melts in your mouth.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 80+ FINANCIAL DETAILS: Initial franchise fee: $50,000 AUD (excluding GST)* *Dependent on site selection

COMPANY DETAILS: Date of first franchise: Established in Airlie Beach in 1989 and opened it’s first franchise store in 1990.

Minimum investment: $750,000 - $950,000 AUD Royalty fee: 5% of Net Sales*

Training provided: The eight-week Franchisee Training Program at Hog’s University covers: Management procedures, Front of House procedures, Back of House procedures, Account management, Introduction to the Support Office Team and Theoretical and practical instruction. We also provide comprehensive Operations, Kitchen and Staff Training manuals. Additional 3 week in-store training for new store opening.

Financial assistance: Accredited with a number of banking institutions Advertising/marketing fee: 2% of Net Sales* *Net Sales is Gross Sales less promotions, discounts and merchandise sales

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food - restaurants & dining rooms

La Porchetta 192 Mahoneys Road, Thomastown VIC 3074 Phone: (03) 9460 6700 Email: franchising@laporchetta.com.au | Web: www.laporchetta.com BUSINESS DESCRIPTION:

COMPANY DETAILS:

La Porchetta has over 70 restaurants in Australia and New Zealand, and are the market leaders in cooking quality, Italian food with fresh ingredients.

Date of first franchise: 1990 Membership: FCA & FANZ Training provided: Our informative and intensive training program includes a 6-week session that covers every aspect of owning a La Porchetta franchise.

The session involves practical, on-site training including purchasing, recruitment, products, suppliers, customer service, financial reporting and marketing tips to provide you with the all the necessary information and skills required to successfully run restaurants.

The first La Porchetta Restaurant was opened in 1985, in Melbourne’s inner city Italian hub. It soon became renowned as a special place to experience delicious food, love, and, a passion for life. Currently celebrating 30 years in business, La Porchetta is now looking to expand their network of Franchises throughout Australia and New Zealand.

Purchasing a La Porchetta Franchise provides a fantastic opportunity to be your own boss. Your partnership with our established brand will guide customers to your door under the umbrella of our proven reputation.

Territories available: NSW, QLD, WA, VIC, TAS & NZ FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 70+ FINANCIAL DETAILS: Minimum investment: Site dependent $300K + - 170 -

food - takeaway

DOMINO’S PIZZA ENTERPRISES LTD Level 5, ‘KSD1’ 485 Kingsford Smith Drive, Hamilton QLD 4007 Contact: Ashleigh Williams | Phone: (AUS) 1300 131 888 Email: franchise.recruitment@dominos.com.au | Web: www.dominosfranchise.com.au FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 588

BUSINESS DESCRIPTION: Established in 1983, Domino’s Pizza Enterprises Limited (“Domino’s”) is the largest quick service pizza franchise in Australia.

FINANCIAL DETAILS:

Domino’s strong growth plan across Australia and New Zealand means it is always on the lookout for passionate and motivated people to become franchisees.

Our whole focus is to help franchisees sell more pizza, make more money and, most importantly, have more fun.

Initial franchise fee: $60,000 + GST Minimum investment: 40% of cost Royalty fee: 7% Financial assistance: Accreditation with all major banks.

Advertising/marketing fee: Maximum 6%

COMPANY DETAILS: Date of first franchise: 1983 Training provided: 6 weeks Territories available in: VIC, QLD, NSW, SA & WA

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food - takeaway

RED ROOSTER Level 1, Unit 17, 202 Ferntree Gully Road, Notting Hill VIC 3168 Contact: Gary Glen | Phone: (AUS) 03 9582 8716 Email: gary.glen@red-rooster.com.au | Web: www.redrooster.com.au FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 335

BUSINESS DESCRIPTION: ‘Be in business for yourself…but not by yourself’ with one of Australia’s most recognised brand identities.

FINANCIAL DETAILS:

Red Rooster offers ‘rippa’ business opportunities for the right candidates.

Initial franchise fee: $50,000 Minimum investment: $700,000

COMPANY DETAILS:

Royalty fee: 5%

Date of first franchise: 1986

Financial assistance: Bank accreditation

Membership: FCA

Advertising/marketing fee: Up to 6%

Training provided: Full structured training program Territories available: VIC, NSW, QLD, WA

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furniture & bedding

snooze 21A Shierlaw Ave, Canterbury VIC 3126 Phone: (AUS) 03 9830 4166 Email: franchising@snooze.com.au | Web: www.snooze.com.au

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: As one of Australia’s longest-running, most successful and innovative franchised business, Snooze’s experience in the bedding industry is second to none.

Current: 77 FINANCIAL DETAILS:

Boasting more than 75 stores across Australia. Snooze offers a great return on investment.

Initial franchise fee: $50,000.00 plus GST Minimum investment: $450,000

Royalty fee: 3.5% Franchise Fee

COMPANY DETAILS:

Financial assistance:

Date of first franchise: June 1977

• Vendor finance options

Membership: FCA members

• NAB & ANZ accreditation

Training provided:

Advertising/marketing fee: 5% + 1%

• Sales and product training • Business management support • A national marketing program • IT Services

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health & fitness

Bodiez 24 / 7 Level 1 / 471 South Pine Road, Everton Park QLD 4053 Contact: Ann Longmuir & Stephen Southgate Phone: 0488556631 (Ann) / 0411220086 (Stephen) Email: ann@bodiezfitness.com.au / stephen@bodiezfitness.com.au Web: www.bodiezfitness.com.au BUSINESS DESCRIPTION:

COMPANY DETAILS:

It’s now time to share the experience of Bodiez 24 / 7 Fitness Clubs with all Australians with the launch of the Bodiez 24 / 7 Fitness Club Franchise.

Date of first franchise: First company owned store opened 2010.

Our unique wellness system includes a virtual personal trainer which records all of the client’s details and can then customise a work out for them each and every time they come to the gym. Each of the workouts are recorded and so the fitness programs are able to be modified overtime to increase the client’s level of fitness. The result is an effective affordable workout at a time that suits the client. It can also be viewed from anywhere and anytime.

Training provided: Initial and ongoing training

Membership: FCA , Australian Institute of Fitness Corporate partner programme.

Territories available: As per website listings FRANCHISE OUTLETS AUSTRALIA: Current: 2

FINANCIAL DETAILS: Initial franchise fee: $35,000

It’s because of this great combination of convenience, affordability and results that has seen Bodiez 24 / 7 first fitness club in Ipswich which opened in 2010 grow from strength to strength. Today it has more than 700 members and continues to grow.

Minimum investment: $180,000 full turn key operating facility Royalty fee: 10% of gross weekly turnover Financial assistance: Available to approved purchasers Advertising/marketing fee: Included in royalty fee

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rent or hire

RENT WITH STYLE Contact: Manish Verma | Phone: 1300 73 23 83 Email: admin@rentwithstyle.com.au | Web: www.rentwithstyle.com.au/franchise

We offer a proven unique business model, with outstanding systems and support for you as a franchise owner.

BUSINESS DESCRIPTION: Rent with Style was originated from within our electronic security alarm and appliances business which began in 2000 and branched out as a separate business in Melbourne in 2012 and is a family owned and operated company.

COMPANY DETAILS: Date of first franchise: 2014 Training provided: Training and ongoing support package

Work began on preparing to franchise in December 2013 and Rent with Style sold its first franchise in Western Australia in April 2014 and sold 2nd franchise in Victoria in September 2014

Territories available: Australia-wide FRANCHISE OUTLETS AUSTRALIA:

Rent with Style is an affordable home and commercial appliance, furniture, electronics items rental (rent and own) franchise. Each Rent with Style franchise is a ‘hands-on’ business where our franchisee is directly involved in the day-to-day operations, building client relationships, marketing their services in their local community and gaining referrals from existing clients.

Current: 3 Franchisees with 6 Territories Sold

Rent with Style is currently seeking franchise owners for a number of franchise territories which we have identified as being ideal for a Rent with Style operation.

Financial assistance: Contact us for more information

FINANCIAL DETAILS: Initial franchise fee: Starting from $60,000 Royalty fee: Contact us for more information

Advertising/marketing fee: Contact us for more information - 175 -

retail

7-ELEVEN STORES PTY LTD 357 Ferntree Gully Road, Mount Waverley VIC 3149 Phone: (AUS) 03 9550 0600 - VIC, (AUS) 02 9798 1200 - NSW, (AUS) 07 3291 9400 - QLD Web: www.7elevenfranchise.com.au BUSINESS DESCRIPTION:

FRANCHISE OUTLETS AUSTRALIA:

7-Eleven is a global success story with more than 53,500 stores world wide.

Current: 615+

7-Eleven Australia is growing rapidly and you can be a part of the growth opportunities by becoming a 7-Eleven Franchisee.

FINANCIAL DETAILS: Initial franchise fee: Site specific Minimum investment: $400,000 - $1,000,000

As a 7-Eleven Franchisee you will benefit from our position as market leader in convenience retailing. You will be backed by our comprehensive support system. Our system gives you a complete turn-key set up including state of the art POS systems, product innovation and promotion as well as operational support.

Royalty fee: Gross profit split Advertising/marketing fee: N/A

COMPANY DETAILS: Date of first franchise: 1977 Membership: FCA, AACS Training provided: Our extensive training program includes classroom, in-store hands on training and also support in your store during your first four days of trading.

Territories available: VIC, NSW, QLD, ACT, WA - 176 -

retail

battery world PO Box 46, Brisbane Markets QLD 4106 Contact: Alex Forbes | Phone: 07 3373 1764 Email: franchise@batteryworld.com.au| Web: www.batteryworld.com.au

Training provided: 6 week induction course (4 weeks in-store training at a Battery World approved store in your state and 2 weeks in a classroom at Battery World Support Office, Rocklea, Brisbane)

BUSINESS DESCRIPTION: Join the leading battery retailer in Australia!

Battery World is embarking on a new era of rapid expansion and provides franchisees the chance to be your own boss but have the security of a national market leader with 18 years of stable growth behind it.

Territories Available: Various areas in NSW, VIC, WA, QLD, SA and TAS

Count the number of batteries you rely on every day. Now, multiply it by 9,117,033* households. Whatever figure you come up with it’s a very compelling reason to join Battery World, the nationally established franchise that a growing number of Australians rely on for their everyday battery needs.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 85 franchise outlets FINANCIAL DETAILS:

private dwellings in Australia 2011)

Initial franchise fee: $49,900 + GST

COMPANY DETAILS:

Minimum investment: From $150,000 + GST

Date of first franchise: 1997

Royalty fee: 7%

Membership: Franchise Council of Australia, Australian Retailers Association of Australia, Australian Battery Recyclers of Australia.

Financial assistance: ANZ accreditation

(*Source: Australian Bureau of Statistics, number of

Advertising/marketing fee: 3.4%

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retail

BRIGHTEYES franchising PTY LTD “The Dock - Retailer House” Level 1, Unit 3 321 Kelvin Grove Road, Kelvin Grove QLD 4059 Contact: Ralph Edwards | Phone: (AUS) 1800 178 251 Email: enquiries@brighteyes.com.au | Web: www.brighteyes.com.au

BUSINESS DESCRIPTION:

COMPANY DETAILS:

Searching for true work-life balance in a fun and friendly retail environment focused on enhancing Australia’s active outdoors lifestyle, then look no further than BrightEyes.

Date of first franchise: 1985 Membership: FCA Training provided: Full training provided & ongoing support Territories available: Australia wide

If you like the idea of simply opening the shutters when you arrive in the morning, with no early morning preparation or late night clean-up, this is the franchise opportunity for you.

FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL: Current: 48

Established in 1985, BrightEyes is Australia’s largest privately-owned retail sunglasses network and is eyeing new store opportunities throughout the country for Franchise Partners to share in its bright future.

FINANCIAL DETAILS: Initial franchise fee: POA Minimum investment: $120,000 Royalty fee: 5% Financial assistance: No

Owning and operating a BrightEyes franchise can be the most satisfying and fun way to earn a living that you’ll ever know.

At BrightEyes, we are not simply selling sunglasses – we are selling an enhanced way of life.

Advertising/marketing fee: 1.5%

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retail

DR BOOM COMMUNICATIONS 103-105 Queen Street, North Strathfield Nsw 2137 Contact: Jack Zervos | Phone: (AUS) 1 800 DR BOOM Email: jack@execucon.com.au | Web: www.drboom.com.au FRANCHISE OUTLETS AUSTRALIA/ INTERNATIONAL:

BUSINESS DESCRIPTION: Dr Boom Communications have been offering accessories, repairs and support to mobile phone devices and more recently tablets, audio and Bluetooth products since 1994.

2013:

6

2014:

9

Current: 13

With a national repair center and central warehouse in North Strathfield (NSW) established stores and greenfield sites available in both metropolitan and regional areas we welcome likeminded, enthusiastic, hardworking and entrepreneurial phone lovers to make our success their success.

FINANCIAL DETAILS: Initial franchise fee: $75,000 Minimum investment: $150,000 Royalty fee: 10% (all inclusive) Financial assistance: To approved applicants up to 50% Advertising/marketing fee: Included in royalty fee

COMPANY DETAILS: Date of first franchise: 2013 Membership: FCA Training provided: 4 weeks Territories available: VIC, NSW, QLD

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Business FranchiSe Guide

Professional Services categories: Accountants. ...................................................................................................................................... 181 Financial Institutions. ............................................................................................................. 182 Insurance Brokers....................................................................................................................... 184 Lawyers..................................................................................................................................................... 185 Point of Sale........................................................................................................................................ 189 Support Services/Consultants....................................................................................... 190

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accountants

babo group pty ltd Level 1, 12 Cramer Street, Preston VIC 3072 Contact: Pat Soldo CPA | Phone: (AUS) 03 9466 0200 Email: pats@babo.com.au | Web: www.babo.com.au BUSINESS DESCRIPTION: Babo Group provides a complete accounting and business structuring service to aspiring business entrepreneurs and to those entering into franchising.

Our in-house services and dedicated partner to your specific requirements will make sure that you are ready for business.

Our service is independent and objective making sure your expectations can be achieved.

Going into business is not always straight forward and entering into a franchise can be even more complex. We believe there may be a minimum of 92 points you need to consider when considering buying a franchise.

With our assistance and guidance we will make the experience as smooth and friendly as possible.

Babo Group is a proud member of the Franchise Council of Australia.

A Quick Test – ask yourself!

1. Why am I considering this particular business?

2. What are the short and long term rewards I hope to achieve?

3. How can I improve this business?

4. What personal sacrifices does my family have to make for this business?

5. What are my financial and personal risks?

6. Can I realistically achieve the expected business targets?

7. What will prohibit me from selling this business to at least recover my costs?

8. Do I agree with the operational and ethical aspects of this franchise?

9. Will I be happy, wealthy and healthy?

10. Is your advice objective and independent?

Please call us to assist you with the proposal.

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Financial Institutions

CASHFLOW IT® Po Box 867, Samford Qld 4520 Contact: Dan Toms | Phone: 1300 659 676 Email: customerservice@cashflowit.com.au | Web: www.cashflowit.com.au BUSINESS DESCRIPTION: Cashflow It® are the franchise finance experts. We specialise in equipment finance solutions only for the franchise sector.

With competitive rates and flexible terms from 12 months to 5 years, Cashflow It can provide the funding that franchisors and franchisees need today. We offer flexible rental, traditional leasing solutions and business loans tailored to your requirements.

What Can We Fund?

Why Choose Cashflow It®?

• New equipment

• Competitive rates

• Used equipment • Fit-outs

• 24 hours a day / 7 days a week Customer Service

• Store refurbishments

• Preserve your precious capital

• Re-financing

• Simple, manageable, low weekly payments

• Buying an existing franchise

• Terms start from just 12 months

• National equipment roll-outs

• Repayments are 100% tax deductible • Flexible end of term options • Experts in franchising • Fast online application process

Cashflow It is a division of Thorn Group Ltd. Thorn Group is a leading Australian provider of financial services, meeting the needs of niche consumer and commercial markets. They are an ASX 200 company and have over 80 years’ experience in the finance Industry.

Franchise Accreditation Cashflow It Accredited Franchise systems enjoy pre-approval and other exclusive benefits. Talk to us today about getting your franchise system accredited.

Why spend your hard earned capital when you can simply… Cashflow It! In Business Since: 2014 - 182 -

Financial Institutions

silver chef ltd PO Box 1760, Milton BC QLD 4064 Contact: Silver Chef | Phone: (AUS) 1800 337 153 Email: enquiries@silverchef.com.au | Web: www.silverchef.com.au BUSINESS DESCRIPTION: Silver Chef is the only specialist hospitality funder in Australia. We have provided flexible equipment funding solutions to customers for close to 30 years.

Unique to the marketplace, the Rent-Try-Buy® Solution is perfect for franchises who want to keep their options open and save their hard earned working capital rather than spending it on depreciating assets.

With the Rent-Try-Buy® Solution, you aren’t locked into a long-term contract. Instead, Silver Chef offers a simple 12 month term, so you have the flexibility to: • Buy equipment at any time during the first 12 months and receive a 75% rental rebate.

• Return equipment at the end of the 12 month agreement if you don’t need it anymore.

• Keep renting and we’ll continue to reduce the purchase price.

• Upgrade if you decide your franchise has outgrown the original equipment.

If you belong to a Silver Chef Accredited Franchise, you are already pre-approved for finance and you can access other great benefits.

Speak to your franchisor today or call Silver Chef on 1800 337 153 for further information.

In Business Since: 1986

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insurance brokers

NATIONAL FRANCHISE INSURANCE BROKERS (NFIB) PO Box 495, Leederville WA 6903 Contact: Brad Dixon | Phone: (AUS) 1800 776 747 Email: info@mynfib.com.au | Web: www.mynfib.com.au BUSINESS DESCRIPTION: NFIB meets the Australian demand for a dedicated online provider of insurance cover for franchisees, franchisors and franchised businesses.

Our service is fully automated, compliant and provides you with full documentation.

Put simply, our service is the fastest, most affordable way to get the most appropriate level of cover you need to protect your business.

How NFIB can help?

Franchisors are always looking to provide a value adding facility for their franchisees.

Many “blue chip” franchise systems have taken advantage of the NFIB on-line insurance solution to provide this to their franchisees.

When Managed Program franchisees visit our site, they will arrive at a dedicated online area with access to a compliant insurance program created specifically for their franchise business. All information about that franchise will be pre-populated.

To make things even simpler, all Managed Program insurance policies have common due dates.

This creates a win/win situation with NFIB assisting franchisees to save on their insurance costs and you, as the Franchisor, have one less headache when it comes to confirming that each franchisee has insurance which complies with the franchise agreement.

In Business Since: Established in 2010 – A division of LTM Group Pty Ltd (est. 1972)

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lawyers

MADGWICKS LAWYERS Level 33, 140 William Street, Melbourne, VIC 3000 Contact: Chris Verebes | Phone: (AUS) 03 9242 4744 Email: chris.verebes@madgwicks.com.au | Web: www.madgwicks.com.au BUSINESS DESCRIPTION: Australia has some of the most stringent franchise legislation in the world. When considering establishing a franchise system, entering into a franchise agreement or navigating a dispute with a franchisee or franchisor, it is important that you use a law firm with extensive knowledge of the franchising business model and the Australian legal landscape.

Madgwicks is a full service business law firm. Our team of experienced lawyers regularly advise franchisors, franchisees and franchise industry service providers.

Our lawyers also have extensive experience advising groups that operate under similar business structures, including cooperatives and strategic alliances.

We regularly advise on: Franchise system establishment | Franchise due diligence | Franchising Code of Conduct compliance | Franchise agreements and disclosure documents | Business structures appropriate for franchise systems | Supplier and terms of trade agreements | Commercial and retail leasing, as well as general property advice | Trade practices advice, including ACCC notification/authorisations | Acquisition, disposal, joint venture and partnership advice | Employment and workplace relations | Tax, duty and GST advice | Branding, intellectual property and trade marks | Litigation and dispute resolution Madgwicks’ Franchising team is an active member of the Franchise Council of Australia and has an established network of accountants, business advisors and brokers to assist our clients when required.

Madgwicks also provides clients with the benefit of our international affiliation with Meritas, connecting them with member firms across Australia and globally, providing expertise wherever they need it.

In Business Since: 1973

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lawyers

Marsh & Maher Lawyers Level 2, 100 Wellington Parade, East Melbourne VIC 3000 Contact: Robert Toth | Phone: 03 9604 9400 Email: rxt@marshmaher.com.au | Web: www.marshmaher.com.au BUSINESS DESCRIPTION: Wow, what a year in franchising since the new Franchise Code has come in!

Marianne, Robert and Natassja in our group have been extremely busy with existing franchisors upgrading their agreements to comply with the Code.

Overseas franchisors coming into the Australian market require their franchise documents to be updated and to comply with the Code.

There have been a number of high profile franchise failures.

We have been advising a number of franchisees in relation to their rights and obligations when the franchisor is placed into administration or sells their rights.

We are advising on a number of new and exciting franchise systems in a wide range of areas such as childcare, fitness and heath, online sales and other business to business services industries.

We love being part of such a dynamic industry and acting for local and international clients.

We provide a full range of services to our business clients in the areas of leasing, employment law, intellectual property, contract law and dispute resolution.

We also provide the full suite of franchise services to our franchise clients which include franchisors, master franchisors and franchisees.

We have over 30 years’ of franchise knowledge and experience in the industry and provide our clients with fixed fees based on the scope of services.

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lawyers

MST Lawyers 315 Ferntree Gully Road, Mount Waverley VIC 3149 Contact: Raynia Theodore | Phone: (AUS) (+61) 03 8540 0200 Email: raynia.theodore@mst.com.au | Web: www.mst.com.au BUSINESS DESCRIPTION: MST Lawyers is widely recognised as one of Australia’s leading franchising law firms advising participants in the franchising sector, Australia wide, on all aspects of franchising.

We assist both emerging and established franchisors with their franchise strategy and structures, including drafting franchise documentation and managing franchise transactions. We act for franchisors in acquiring, selling or restructuring franchise networks, including providing strategic planning and asset protection advice. We also advise franchisors on Franchising Code compliance, consumer law compliance, leasing, employment law, intellectual property and dispute resolution.

We also assist many overseas franchisors in entering the Australian market, including reviewing, adapting and drafting necessary franchise documents and advising in relation to Australian legal compliance.

MST Lawyers also act for franchisees providing advice in respect of sales and purchases of franchise businesses, advising on franchise documents and leases and providing advice and services on the full range of commercial and other legal matters relevant to small business owners.

Our international affiliations allow us to stay in touch with global franchising trends and assist our clients with their international expansion strategies.

Our dedicated Franchise Team prides itself on delivering great service and sensible solutions to our clients every day.

In Business since: 1959

- 187 -

lawyers

Stewart Germann Law Office

Ground Floor, 2 Princes Street, Auckland PO Box 1542, Auckland 1140, New Zealand Contact: Stewart Germann | Phone: (NZ) +64 9 308 9925 Email: stewart@germann.co.nz | Web: www.germann.co.nz BUSINESS DESCRIPTION: Stewart Germann is acknowledged as New Zealand’s leading franchising lawyer and has over 35 years experience in this area.

Stewart Germann Law Office (SGL) is New Zealand’s longest established specialist franchising law firm and has won multiple international awards.

SGL has been selected by Best Lawyers in New Zealand in the area of Franchise Law in 2013, 2014 and 2015/2016. The firm won Franchise Law Firm of the Year 2013 - New Zealand, in the DealMakers Awards, Boutique Franchising Law Firm of the Year in New Zealand at the 2015 Global Law Experts Awards and Franchise Law Firm of the Year for New Zealand in the DealMakers End of Year Annual Awards 2012. SGL also won Law Firm of the Year – Franchise – New Zealand in the Global 100 – 2015 rankings and Boutique Licensing Law Firm of the Year in New Zealand 2015 – Corporate INTL Legal Awards.

Stewart is a recognised national and international guest speaker at franchise conferences (New Zealand, Australia, USA) and he is listed as a leading lawyer in Licensing and Franchising 2014 in Asia IP Experts. SGL’s clients include many of New Zealand’s best known national and international franchise brands and he has extensive franchising contacts worldwide and locally.

Stewart was instrumental in the formation of the Franchise Association of New Zealand in 1996 and wrote the original rules, as well as being its Past Chairman and a current member. Stewart has been awarded Life Membership of the Franchise Association of New Zealand in recognition of his significant contribution. He was also a board member of the supplier forum of the International Franchise Association (IFA) from 2001 to 2007. He is actively involved in international franchising and has published articles in the International Journal of Franchising Law. Stewart is a notary public and can witness documents for use in overseas jurisdictions and he is also a qualified mediator. He has been listed in Who’s Who Legal: Franchise since 2003 and again in 2015. Stewart regularly advises international clients on legal issues relating to franchising in New Zealand and welcomes enquiries from overseas.

In Business Since: 1993 - 188 -

point of sale

redcat pty ltd Level 2, 70 Park Street, South Melbourne VIC 3205 Contact: Spiro Vournazos | Phone: (AUS) 1300 4 REDCAT Email: info@redcat.com.au | Web: www.redcat.com.au BUSINESS DESCRIPTION: Redcat provides the very latest in franchise technology… Redcat Polygon.

Redcat Polygon is a totally integrated solution that gives you sophisticated tools to effectively manage your entire business including Point of Sale, Accounting, Inventory, Wages, Loyalty Programs and Mobile Apps.

Redcat Polygon has genuine real time management and reporting capabilities. In fact, it’s one of the very few POS products in the world that can deliver real time profit and loss reporting without integration to a third party application.

You can run a global network of franchise stores from head office or even the comfort of your own home. Or for that matter anywhere else in the world.

Redcat Polygon will improve efficiency, reduce costs, manage resources, control your inventory, and ultimately improve profitability.

Redcat continues to lead the way with POS and financial management solutions. Redcat has an ongoing commitment to research and development to ensure that its solutions stay ahead of hospitality industry challenges.

OUR CLIENTS Redcat serves some of the biggest franchise groups in the country. These include Nando’s, Boost Juice, Salsa and many more.

In Business Since: Started in 1991, focusing on the franchising sector since 1998.

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Support Services/Consultants

FC Business Solutions Caulfield Corporate Centre, 3/875 Glenhuntly Road Caulfield VIC 3162 Contact: Corina Vucic | Phone: (AUS) 03 9533 0028 Email: contact@fcbs.com.au | Web: www.fcbs.com.au BUSINESS DESCRIPTION: FC Business Solutions is a multi-discipline franchise consultancy with a dedicated team of professionals focusing on the development of franchise businesses. Established in 1999, FC Business Solutions has the experience and expertise to empower franchisors to grow their business and become market leaders in their chosen field.

With services including documentation standards; marketing, communications and PR; action based training; executive recruitment; system development; business operations and HR solutions, FC Business Solutions have the team and resources to assist you in all aspects of your franchise business.

The team are actively involved members of the Franchise Council of Australia (FCA) regularly attending events, participating in committees and ensuring their skills and knowledge remain cutting edge and current.

With a solid reputation based on relationships and results and a dedication to raising the profile of franchising in Australia, FC Business Solutions stand by their motto of “We help businesses grow�.

System Development: Franchise systems development | Operational support | Strategic planning | Business Health Check Business Operations: Strategic and business planning | Multi-site ownership programs | Franchise recruitment systems | Mentoring and coaching Marketing, Communications and PR: Marketing, communications and brand strategy | Local area marketing | Franchise launch strategies Training Solutions: Training development and facilitation | Franchise focussed and operational public programs | Induction program development HR Solutions: Executive recruitment | HR audits | HR Helpdesk Standard Operating Procedures: Online operations manual platform | Franchise operations manual | Head office department procedures

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Publications BUSINESS FRANCHISE AUSTRALIA AND NEW ZEALAND PO Box 968 Mt Eliza VIC 3930 Phone: (AUS) 03 9787 8077 Fax: (AUS) 03 9787 8499 Email: cgb@cgbpublishing.com.au Website: www.businessfranchiseaustralia.com.au

BUSINESS FRANCHISOR PO Box 968 Mt Eliza VIC 3930 Phone: (AUS) 03 9787 8077 Fax: (AUS) 03 9787 8499 Email: cgb@cgbpublishing.com.au Website: www.businessfranchiseaustralia.com.au

AUSTRALIA & NEW ZEALAND BUSINESS FRANCHISE DIRECTORY PO Box 968 Mt Eliza VIC 3930 Phone: (AUS) 03 9787 8077 Fax: (AUS) 03 9787 8499 Email: cgb@cgbpublishing.com.au Website: www.businessfranchiseaustralia.com.au

THE FRANCHISE REVIEW The official journal of the Franchise Council of Australia PO Box 2195 Malvern East VIC 3145 Phone: (AUS) 1300 669 030 Phone: +61 3 9508 0888 Fax: (AUS) 03 9508 0899 Email: info@franchise.org.au Website: www.franchise.org.au

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Helpful organisations FRANCHISE COUNCIL OF AUSTRALIA Suite 5B, Level 1, 307-313 Wattletree Rd Malvern East VIC 3145 Phone: (AUS) 1300 669 030 Phone:+61 3 9508 0888 Fax:+61 3 9508 0899 Email: info@franchise.org.au Web: www.franchise.org.au

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION GPO Box 3131 Canberra ACT 2601 Phone: +61 2 6243 1111 Fax: +61 2 6243 1199 Email: info.centre@accc.gov.au Web: www.accc.gov.au/franchisingcode

OFFICE OF FRANCHISING MEDIATION ADVISER Level 2, 370 Pitt Street Sydney NSW 2000 Phone: (AUS) +61 2 9267 0167 Fax: +61 3 8660 3399 Email: office@franchisingmediationadviser.com.au Web: www.franchisingmediationadviser.com.au

FRANCHISE ASSOCIATION OF NEW ZEALAND Unit 27, 2 Bishop Dunn Place Botany South, Auckland New Zealand Phone: +64 9 274 2901 Fax: +64 9 274 2903 Email: contact@franchise.org.nz Web: www.franchiseassociation.org.nz

SPECIALISED EVENTS PO Box 209 South Yarra 3141 Phone: +61 3 9999 5460 Fax: + 61 3 9999 5461 Email: info@specialisedevents.com.au Web: www.specialisedevents.com.au

AUSTRALIAN TAXATION OFFICE GPO Box 9990 (In your relevant Capital City and State) Phone: 13 28 66 Web: www.ato.gov.au

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Index of franchises & services NUMERICAL 7-Eleven.............................................................................................................................................................................................................176 9D Action Cinemas....................................................................................................................................................................................164

B Babo Group. ....................................................................................................................................................................................................181 Battery World................................................................................................................................................................................................177 Bodiez 24/7. ....................................................................................................................................................................................................174 BrightEyes Franchising...........................................................................................................................................................................178

C Cashflow It. .....................................................................................................................................................................................................182

D Domino’s Pizza Enterprises..................................................................................................................................................................171 Dr Boom Communications...................................................................................................................................................................179

F Fasta Pasta......................................................................................................................................................................................................168 Fastway Couriers........................................................................................................................................................................................163 FC Business Solutions.............................................................................................................................................................................190

H Hairhouse Warehouse.............................................................................................................................................................................157 Hog’s Breath Café.......................................................................................................................................................................................169

I InXpress Australia......................................................................................................................................................................................159

L La Porchetta....................................................................................................................................................................................................170 Looksmart Alterations.............................................................................................................................................................................162

M Madgwicks Lawyers................................................................................................................................................................................185 Marsh & Maher............................................................................................................................................................................................186 MST Lawyers. ...............................................................................................................................................................................................187

- 193 -

N National Franchise Insurance Brokers. ........................................................................................................................................184

R RedCat................................................................................................................................................................................................................189 Red Rooster. ...................................................................................................................................................................................................172 Reliance Roof Restoration.....................................................................................................................................................................158 Rent with Style.............................................................................................................................................................................................175

S Silver Chef........................................................................................................................................................................................................183 Snooze................................................................................................................................................................................................................173 Stewart Germann. ......................................................................................................................................................................................188

T The Interface Financial Group............................................................................................................................................................165 Theobroma.......................................................................................................................................................................................................166 Thexton Armstrong....................................................................................................................................................................................160

V V.I.P. Home Services. ................................................................................................................................................................................161

Z Zarraffa’s Coffee...........................................................................................................................................................................................167

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notes

195

notes

196

Tired of working for someone else?

Ready to be your own boss?

Worried about going it alone?

Imagine buying a business with a proven system and business model and a brand that people already know!

This guide utilises decades of experience from experts in the franchising industry to help you on your franchising path to success.

A comprehensive guide that answers questions such as: • What is franchising and why is it so good?

• How do I choose the right franchise system?

• What makes a successful franchisee?

• What type of financial structure is best for my new franchise business?

• What can the Franchise Council of Australia and Franchise Association of New Zealand do for me?

All this and much, much more. This guide is your key to financial independence through franchising.

DON’T MISS THE LISTINGS PAGES FEATURING A SELECTION OF LEADING FRANCHISE SYSTEMS AVAILABLE RIGHT NOW!