aus & nz business franchisor issue 4#3 jul-aug-sep-oct 2015

BUSINESSFRANCHISOR 1

FranchisorVOL 04 ISSUE 03, 2015

AustrAliAn & new zeAlAnd

B u s i n e s s

Perils & Pitfalls

fC business

solutions influencing the

people and their businesses

a fresh look at franChise finanCials

2 BUSINESSFRANCHISOR

A franchise is not like any other business and Walker Wayland are not like any other Accountants.

We know Franchising. Walker Wayland Chartered Accountants provide a friendly, efficient and professional service for both developing and established franchises. We are currently members of the Franchise Council of Australia (FCA). Our qualified experts can assist with: • KPI & Benchmarking• Due diligence services when buying and selling franchises• Feasibility and growth strategies to facilitate franchise system start-ups• Franchisor solvency audits for disclosure documents• Marketing fund audits• Structuring and business advice• Management services• Bookkeeping services• Valuation services for franchisees and franchisors• Tax planning advice• Carbon management services Arrange a meeting with us to see how we can help and receive the initial consultation FREE. To find out more, call us on 9364 9988 or visit walkerwaylandwa.com.au

Walker Wayland WA | Chartered Accountantswalkerwaylandwa.com.au Connect with us

A lOt HAS CHANged IN tHe FRANCHISINg COmmuNIty SINCe OuR lASt ISSue OF tHe AuStRAlIAN ANd New ZeAlANd BuSINeSS FRANCHISOR.

Griffith University’s Asia-Pacific Centre for Franchising Excellence released their 2014 Franchising Australia survey, which showed that while the number of franchise systems within Australia has declined to 1,160, the franchise sector grew by an estimated 6,000 franchise units, taking the total to 79,000 units operating; sales turnover grew by $3 billion, taking the total sales turnover to $65 billion in 2014.

1st January 2015 saw the reforms to the Franchising Code come into effect, giving the ACCC stronger powers and greater flexibility in how it enforces the Code. To ensure that your franchise system is compliant, download the Franchisor Compliance manual today, available on the ACCC website.

In this issue, on page 14 Warren Wilmot, the Chairman of the Franchise Council of Australia reports on the continued consultive role they have

taken with the Federal Government on proposed legislative changes whilst assisting members to understand their compliance obligations.

This edition of Business Franchisor is packed with advice from experts across the franchising industry. Andrew Graham explains how the start to the new financial year is a great time to review your current financial position and advises how to avoid the risk of becoming stale on page 10, Dan Ratner from uberbrand explains how to create a successful visual brand on page 28, and Timothy Mak from DC Strategy highlights the perils and pitfalls of issuing your own franchise documents on page 44.

There’s all this and much more, including profiles of the businesses that can assist you in your journey to become a successful franchise business.

As always, at CGB Publishing we welcome your feedback. Enjoy the read.

Joanne tuffy Editor

business franChisor

VoluMe 4 issue 3

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ContentsISSUE 4, vOLUME 3, 2015

ON tHe COveR8 FC Business Solutions: Influencing the people and their businesses

10 A fresh look at franchise financials Andrew Graham, RSM Bird Cameron

44 The Perils & Pitfalls of issuing your own Franchise Documents Timothy Mak, DC Strategy

AlSO IN tHIS ISSue

2 WALkER WAyLAnD

6 nEWS ITEMS AnnounCEMEnTS fRoM ThE inDuSTRy

13 AUSvAnCE

16 AyERS ROCk RESORT

22 nFC 2015

38 FRAnChISInG EXPO

40 ShAPE ShOPFITTERS

47 JEJAk GRAPhICS

50 A-Z DIRECTORy


28

20

expeRt AdvICe14 Bringing a value Proposition to Franchises Large and Small franchise Council of Australia

18 Don’t expose yourself to unnecessary risk Rachel Burdett-Baker, BDo

20 International Franchise Development Andrew Lyme, Global Retail Partners

24 Building Franchisee Trust Anthony Grace

28 how to create a Successful visual Brand Dan Ratner, uberbrand

30 Overseas/Foreign Franchisors and the new Australian Franchising Code 2015 Robert Toth, Marsh & Maher Lawyers

34 Four reasons to automate Employee Absence Management Leslie Tarnacki, WfS Australia

36 how to build Social Proof and Engagement on LinkedIn nathanial Bibby, Bibby Consulting

42 Training: The key to Minimising Litigation and Business Failure Steven Clare, MyAfSA

48 Incorporating science into your site Peter Buckingham, Spectrum Analysis


18

40

24 3610

newsitems

Zambrero management return from

humanitarian mission to Vietnam

Zambrero’s top executives recently visited the city of Danang in vietnam to see its Plate 4 Plate humanitarian program in action.

The Zambrero team spent two days visiting a school, kindergarten and an elderly women’s home with its aid distribution partners Children of vietnam and Stop hunger now.

At the Thanh Tam School for 300 children with special needs they helped serve soup made from the Plate 4 Plate meal pack of rice, soy, lentils and vitamins.

General Manager karim Messih said: “This trip was really inspiring to me as it was an opportunity to see the kids who benefit in a real life environment really enjoying our food and being so grateful for its provision through Plate 4 Plate.”

Zambrero funds aid projects worldwide through its Plate 4 Plate initiative. For each burrito or bowl meal Zambrero sells in one of its Mexican restaurants, it donates one meal to someone in need.

Zambrero CEO Stuart Cook also participated in the vietnam mission and said: “Providing a hot meal during school in developing nations like vietnam gives parents an incentive to send their children to school. This helps ensure a child receives an education, which Zambrero and Stop hunger now believe is the first step in breaking the poverty cycle that will otherwise determine the trajectory of that child’s life.”

Business FrAnChisor


Finance expert Justine Davies has partnered with Officeworks to help small and medium enterprises (SMEs) take the stress out of tax time and identify opportunities to minimise your business tax bill this financial year. Most importantly, as a business owner you need to know what deductions you may be entitled to.

Small and medium businesses operating in the retail, trades and professional service industries are entitled to a number of industry-specific deductions. For example:

•Retailindustrymaybeabletoclaim:cashregisterrolls,stocktakesoftware, POS scanner, coat hangers, in-store security systems/cameras, PC or laptop for POS transactions and in-store furniture.

Also, consider completing a stocktake audit prior to 30 June so you can claim any lost or damaged goods this financial year.

•Tradebusinessmaybeeligiblefordeductionson:notebooks,stationery,clothes, boots, sunglasses, travel expenses (remember to check fringe benefits tax obligations), sunscreen, mobile, tech, office furniture, tools and work vehicles such as a Ute.

•Professionalservicescouldclaimdeductionsacross:travelexpenses(remember to check fringe benefits tax obligations), notebooks, stationery, accounting software, food expenses for entertaining clients/meetings, tech, office furniture, mobile, office kitchen appliances and office security systems/cameras.

Once SMEs know what they may be able to claim, there are two types of deductions to be aware of:

1. Immediate write-offs: Immediate write-offs: thanks to the small business initiatives in the recent Federal Budget announcement (subject to Senate approval), SMEs can claim an immediate tax deduction for each and every item they purchase up to $20,000 (previously $1,000).

2. Depreciating assets: those that cost $1,000 or more and are purchased after 1 January 2014.

head to the Australian Taxation Office website and locate the Simplified Depreciation Rules section for the full eligibility criteria.

minimise your tax bill this

financial year

Continuing Fastway Couriers’ commitment to technology and innovation, the friendly courier experts have invested in Flirtey, the world’s first commercial aerial delivery service, marking the beginning of an exciting collaboration. Fastway and Flirtey recently successfully trialled their first drone parcel delivery in Auckland, transporting auto parts from the Fastway office in Penrose to the TR Group headquarters in Mount Wellington, a trip over factories and traffic clogged roads delivering car parts. To see the journey of the drone, visit https://youtu.be/nhX2qo0P7gy.

Scott Jenyns, Chief Executive Officer at Fastway Couriers, says, “We’re always exploring new and innovative ways to enhance the customer experience and the development of drone technology is an exciting prospect for the future of courier delivery. Although there’s no substitute for courier drivers, drone technology is rapidly progressing and it displays a way of increasing speed of delivery, particular in traffic congested areas, therefore it may be suitable in some delivery instances.”

By road, a delivery between the Fastway office and the TR Group office is approximately 1.9 kilometres and takes close to 20 minutes to complete, depending on congestion. During the trial, transporting by aerial drone, took less than a quarter of the time, as it was able to travel uninterrupted.

Matthew Sweeny, Chief Executive Officer at Flirtey, adds, “This is a significant moment because it is the first commercial drone delivery over a populated area in new Zealand. Together with companies like Fastway, we have an opportunity to offer safe and reliable technology to turn drone delivery into a reality. As the entire concept and its technology continues to evolve, the sky is the limit.”

The Flirtey delivery drone is constructed from carbon fibre, aluminium and 3D printed components. It has a range of over 15 km return and can deliver packages weighing over 2.5 kg. It has built-in safety features such as low battery return to safe location and auto-return home in case of low GPS signal or communication loss.

This marks the beginning of a collaboration, which will see Fastway and Flirtey expand their use of drone delivery technology with trials across new Zealand.

fastway’s first flirtey drone deliVery beats

the traffic


The Australian Competition and Consumer Commission recently warned small business operators to think twice before opening email files that could contain ransomware after the 2014 Targeting Scams Report revealed that almost $1 million was lost to these scams last year.

Ransomware is a type of malware that infects a computer system by restricting access unless a ransom is paid to a scammer for the restriction to be removed.

“The ACCC received over 2,500 ransomware and malware complaints last year with over $970,000 reported lost by small businesses and consumers. Several people reported losing over $10,000 to these scams, which can have a devastating effect on a small business. It can also see your business losing all of its business and financial records, which can be catastrophic,” ACCC Deputy Chair Dr Michael Schaper said.

victims reported receiving an email purportedly from a reputable sender such as Australia Post or FedEx, with a file attached that will install ransomware on your computer once opened.

“Many small businesses and consumers have reported that their computer has been frozen, with a pop-up alert that claims to be from the Australian Federal Police stating the computer has been locked because they have visited an illegal website or breached various laws,” Dr Schaper said.

“Scammers claim that they will unlock the computer if a fee is paid. however, even if you pay the ransom, there is no guarantee your computer will be unlocked and you’re likely to be up for expensive repairs to your computer and the loss of your invaluable data.”

“Scams like this often succeed because they look like messages from a government agency or reliable large corporation. It’s important that small businesses are aware that government agencies will not send these demands and they’re dealing with a scammer,” Dr Schaper said.

TIPS:

•Ensureyourcomputerhasafirewallandup-to-dateanti-virusandanti-spyware software.

•Donotclickonlinksordownloadfilesinemailsyoureceiveoutoftheblue; especially if they are executable (.exe) files or zip files. These files are likely to contain malware.

•Useapop-upblockerasalotofransomwareisdeliveredafterfollowinglinks in popup alerts.

•Ifthereisanydoubtaboutthelegitimacyofanemailsupposedlyfroma legitimate business, do not rely on contact details or links provided or open any attachments - contact the organisation using the number in the telephone directory or on their official website to verify.

•Regularlyback-upyourcomputer’sdataonaseparateharddrivesothiscan be easily re-installed if your computer is infected by malware or ransomware.

Further information is available at www.scamwatch.gov.au

small business warned to watch out for

ransomware

https://youtu.be/

http://www.scamwatch.gov.au


FC Business solutions

inFluenCing the people And their

Businesses The franchise partner of tomorrow is well

informed, resourced and looking for a true partnership when investing in a

franchise brand.

In order to ride the wave of growth in today’s tight market franchise brands need to display strong leadership, have operational systems that add value to the franchisee’s day-to-day business operations, embrace the franchisee’s entrepreneurial spirit, and create a community which enriches the brand, the lives of the franchise partners, their teams and the local communities, all of which aim to support the success of the franchise brand in the local area. Franchise brands which have the tools to cultivate the spirit of business success through its community of franchise partners will pave the new frontier of franchise excellence in the years to come.

The founders and creators of many household franchise brands of today are the inspiration for the love affair with franchising as a business format that has been embraced throughout the world. The vision of a dream, supported by systems that are able to be replicated with a brand to provide a financial win for both parties underpinned by passion, belonging and the will to own and operate your own business are the foundations of franchising as we all know it.

In order for franchise brands to survive, they require continued innovation at all levels within the system. Innovation is not exclusive to the marketing discipline. Too often the franchise brand is looking for sales growth and the ultimate measure is top line sales. With the rapid rate of competitors joining the market, new methods of doing business, and different systems, equipment and processes delivering greater business operational savings, franchise brands

too often find themselves lagging behind their corporate counterpart and the new franchise competitor. Management teams within franchise systems require a change in mindset if they want to grow and survive. Research from within and outside, innovative forums, and swift, well planned execution will grow franchise numbers, franchisee profitability, the brand power, and relevance of the franchise offer.

Franchise executive teams are recruited to explore the vision, develop the strategy and empower and educate the franchisees on the way forward. Too often leadership teams are stuck in the trenches, micro thinking operational matters and not setting, sharing and leading the business to its next stage of growth.

Since the Global Financial Crash of 2008, growing the franchise footprint has been a little slower than what franchise brand leaders would prefer. The average franchise brand is perhaps opening 3-6 new franchises each year with changeovers of approximately 6-10 per year. The franchise sales executives are quick to tell us that it’s tough to secure new franchisees and even tougher for the prospective to secure funding for their new venture. The practices of outstanding franchise ambassadors who grant franchises are not the traditional sales methods of yesterday. Executives who believe in the foundations of franchising, who understand the brand they represent and who strategically engage, promote and display the heartbeat of the brand at all touch points are the winners in today’s competitive franchise offer.

This new breed understands the new franchise buyer. The buyer is younger than the average franchisee to which we have become accustomed. The buyer is well informed on franchising as a business format by educating

oneself on what a good vs. great franchisor looks like. Franchise buyers are not looking for a short term business venture. They are looking for the right business format, the right franchisor, the right franchise culture, and the franchise brand with social representation. They are seeking franchisor executives who embrace excellence in business practices and franchisors who are investing in leadership, growth and empowerment at all levels. Tomorrow’s franchisee is not interested in average performance. They are driven to lead their businesses with high integrity and extraordinary operational and social practices as the local consumer expects nothing less.

Social media quickly shares business success within the local community, far and wide. Targeted online media conversations such as existing franchisees sharing their stories, websites built to cater to the prospective franchisees, and trusted and informed networks of like-minded people are all driving the integrated strategy which is adding new franchisees to franchise networks. Innovation in the recruitment discipline is all about developing relationships with people who are somehow connected to the brand - perhaps a customer, client or someone within a stakeholder network.

Promoting one’s brand as a business opportunity is not something a franchisor takes lightly, with an estimated average investment of $25,000 per franchisee to seek out and qualify a prospective from start to finish. When did you last shake up your franchise offer and consider if you are open, inviting and personable when I come knocking as a prospective franchisee?

Franchisor support is the cornerstone of the franchise system. The business coach, the support services, the business tools and the


communication platforms which are all supplied as part of the franchise system form this integral ‘hub’. Is your support hub and its services assisting or hindering the franchisee’s business growth? As a business owner I am always looking for the conversation, for the snippet or for the gem which will motivate innovation, new beginnings and learnings for the business, the team, and myself.

Traditional compliance adds minimal value to today’s franchisee. Protecting the brand and minimising brand damage will always be one of the roles of the field coach. When will it become the secondary motivator, rather than primary, as has been the history of good franchise operational practice?

Tomorrow’s field coach role is to facilitate the new learning and the inspiration. Franchisees are humans with business and personal challenges. If franchise systems continue to invest in franchise field coach roles then let’s commit to effective business coaching not ad hoc reactive fire fighting coaching. The role of the field coach is to grow the franchisee’s leadership and operational know-how, enrich the business owner in leading their teams, growing the skills of their personnel, and grooming the next generation of brand ambassadors and the next generation of franchisees.

Alignment to the vision and purpose of the brand will be cemented by the level of belonging the franchisees feel to the franchise community. Small business owners embrace the social and business networks within a franchise system. Franchisees seeing reward for their efforts, building their wealth goals and having a business

mentor who is able to set goals, set the reality, explore the options and wrap it all up with actions to be taken will have no reason not to stay aligned.

Forget the ratio of field coach to outlets. Forget the audit tool. These will always be debated and improved. The field coach for the new generation franchisee is skilled in business leadership, people enrichment, people engagement and motivation, local area engagement planning, and social media – the importance and best practices adopted by small business owners to capitalise on this new community looking for content and belonging.

The field coach will be a facilitator empowered to guide the franchisee as a people coach who mentors and facilitates learning within their business every day. Field coaches will be the knowledge hub of the system, have the passion to educate across all disciplines of the business, and know when the business owner requires a nudge, a motivator or an exit strategy for the betterment of the franchisee, the person and the brand. Too often franchisors have been accused of not seeing or reading the early signs of when a business has superseded its leaders’ contributions.

What value is your greatest investment, your people, returning? When did you last talk to your franchisees to determine the return on the investment of their coach? how often have you stripped back the field operations list of tasks and validated that the bulk of their time is spent on growing the relationship and the business outcomes of the franchisees’ investment? Or are they too busy putting out another fire which has been smouldering for a long while with no definite decision making? Finally, are the field personnel

skilled to do the coaching role?

Franchising is the future; the challenges lie with the franchise teams and their appetite to innovate, lead and inspire franchisees - the business owners of the brand - to deliver the purpose to the end customer.

For us at FC Business Solutions it is all about influencing the people and their businesses. It’s all about making a significant difference, empowering business leaders and their teams to deliver on what they do so well. Our role is to probe into the business and its inner workings. We do this with the permission of our clients to inspire them to achieve their goals with enriched teams of individuals who make a difference.

Franchising transforms the lives of those who choose to deviate from the standard plan and construct their own life adventure; our role is to lead the change from the beginning through the business milestones.

Corina Vucic has been involved in the franchise industry for more than 16 years and is the Director of FC Business Solutions. She was named the 2012 Franchise Council of Australia (FCA) Woman in Franchising (Vic/Tas) and the 2012 and 2013 FCA Supplier of the Year.

FC Business Solutions are a fully integrated consultancy firm specialising in developing, growing and marketing franchise systems. The team of professionals has been providing specialised and expert services to franchises for many years.

T: 03 9533 0028 E: [email protected] W: www.fcbs.com.au

FRANCHISINg IS tHe FutuRe; tHe CHAlleNgeS lIe wItH tHe FRANCHISe teAmS ANd tHeIR AppetIte tO INNOvAte, leAd ANd INSpIRe FRANCHISeeS.”


L-R – Samantha Roach, Corina Vucic, Dan Sheehan, Jessie Caudry, Alexandra Giudice


http://www.fcbs.com.au

Andrew grAhAm


Fresh look At FrAnChise FinAnCiAls In ThE nEW FInAnCIAL yEAR

TAkInG A

The beginning of the new financial year is

a great time to review your franchise’s

financial position and put in place

changes or improvements to increase your

chances of success in the year ahead.

Businesses that run according to a proven

system, such as franchises, are at risk of

becoming stale and failing to identify potential

improvement opportunities that can enhance

the bottom line unless they regularly undertake

a wholesale review of the business.

RSM Bird Cameron advises franchisors to take

four key steps at the beginning of the new

financial year.

1. RevIew emplOyee RemuNeRAtION

April 2015 saw a temporary increase in the

fringe benefits tax (FBT) rate from 47 per

Andrew Graham, National Head of Business Solutions, RSM Bird Cameron

cent to 49 per cent, which impacted small businesses. If your franchise has employees, you may need to reconsider your FBT arrangements in light of this increase for the new financial year, if you haven’t already.

The increase prevents people earning over $180,000 from salary sacrificing into fringe benefits to avoid paying the temporary two per cent debt levy. Competitive salary packages are often the key to success for small businesses. They let employers attract the right talent, minimise staff turnover and increase productivity. There are many different possibilities and options to offer as salary sacrifices, including vehicles, healthcare, school fees, entertainment and cheap loans.

For employees on packages under $180,000 per annum, it may be beneficial to provide remuneration via salary and allowances rather than fringe benefits. Employees will then be taxed at the normal marginal rate, which will be much lower than that FBT rate of 49 per cent.

The increase in FBT means that employers should reconsider all current fringe benefits arrangements. If not passed onto the employees, this will result in additional costs to the employer. Employers should review their salary packaging arrangements with their staff to limit the impact of the additional cost and ensure that any arrangement is still as beneficial as possible, for both the employee and the employer.

2. pROFIt ImpROvemeNt Increasing profits should always be a key aim for the business but the beginning of the new financial year is a good time to review specific

changes that can be made to help boost the bottom line.

For example:

• Improve market penetration – selling more of the products and services you already offer to existing customers and markets relies on building deeper relationships with customers and proving the value of your offering. To do this effectively, your sales team should review their current customer lists to see what additional products and services might be appropriate, then work to upsell and cross-sell accordingly. Even small improvements can lead to significant profit gains.

• Expand into new markets and products/services – selling to new markets or adding new products can increase sales but may also involve additional investment and costs. It is important to do due diligence to ensure the expansion is commercially attractive and provide an acceptable return on investment.

• Diversify – selling new products and services to new customers and markets is ideal for an entrepreneurial franchise. Diversification can let franchises tap into a much broader potential customer base as well as trial new products. however, it can be risky and it requires a significant investment of time and money up front. If both the products and the market are new, this heightens the risk of success. Careful planning and sound financial advice are needed to help the current business operations continue to work smoothly while the diversification takes place.


Fresh look At FrAnChise FinAnCiAls In ThE nEW FInAnCIAL yEAR

3. ImpROve yOuR CASH FlOw A positive cash flow is key to keeping a business running: without it the business cannot pay suppliers or employees. Cash flow is always important but it is especially important when credit is expensive or difficult to obtain.

There is a fine balance when it comes to cash flow. Too much cash on hand means that cash is not working for the business so it needs to be put into investments or a deposit account. Too little cash means the business will need to look at alternative ways to pay suppliers, such as loans. Good cash flow management requires access to good information, discipline to following collection processes and good management decision-making.

RSM Bird Cameron has identified 10 ways to improve cash flow:

1. Prepare a cash flow forecast and plan for potential delays.

2. Consider discounts for early payments, encouraging customers to pay sooner.

3. Conversely, take the maximum allowable time before paying bills to keep the cash on hand for as long as possible, then pay regular suppliers first to generate goodwill.

4. Pay the most important debts first, not the biggest.

5. Invest in a high-interest bearing account if you have surplus funds.

6. Issue invoices as soon as possible and follow up promptly.

7. Offer payment options, emphasising direct debit.

8. If working on longer-term projects, split the payments so you’re not waiting until the end to get paid.

9. It takes cash to have stock on hand, so ensure cash isn’t wasted on holding too much stock. Monitor stock levels closely and focus on offering better-selling, higher-margin items.

10. Link sales commissions to invoices paid rather than revenue billed.

4. pRepARe FOR gROwtH Business growth is the goal of any franchisor and franchisee, but the growth must be directed towards what will add the greatest value to the business. It’s about growth for profits sake not simply just growth. Unplanned and uncontrolled growth can cause problems for organisations that are not well-prepared.

Growth becomes essential when there is a limited market size for existing products or services. As the business starts to reach that market limit, the return and security that can be offered by the business declines, making growth and diversification the only options for sustainability.

When business owners accept that growth is required, they must also accept that they may need to fulfil a different role. Owners that were previously focused on operational and customer service functions must shift their priorities towards marketing, planning, management and personnel oversight instead. This can be a difficult change and transition to make, especially for owners without experience in these areas. Franchisors can support franchisees in this shift by providing training and education.

Businesses that have successfully navigated the

growth pathway share six common traits:

1. They have set clear objectives for growth.

2. They have examined the marketplace more

broadly than just their own immediate

environment and identified gaps and

opportunities.

3. They have offered new products and service

levels that have exceeded the market’s

expectations.

4. They have differentiated themselves clearly

and are prepared to adjust to meet customer

demands.

5. They recognise the essential role of marketing

and the sales process to connect and engage

with customers.

6. They have established a team of employees

and advisors who provide support, innovation,

counsel and ideas that help drive the business

towards its new objectives.

Andrew Graham is the national head of

business solutions for RSM Bird Cameron.

With more than 20 years’ experience, Andrew

has a proven record of strategy development

and managing growth to deliver substantial

improvements to business. Andrew works

closely with his clients to deliver results and

outcomes that make a real difference to their

business and personal goals.

For more information contact:

T: 07 3221 7888

W: www.rsmi.com.au


Andrew grAhAm

http://www.rsmi.com.au

FrAnChise CounCil oF AustrAliA

As the peak body for Australia’s

$144 billion franchise sector, the

Franchise Council of Australia (FCA)

is responsible for spreading best practice

franchising and representing the interests

of franchises that range from the small and

emerging systems to those with a global reach

and the resources to match.

One of the key ways the FCA does this is by

engaging with the Federal Government and other

stakeholders on proposed legislative changes.

Recently, this has included involvement with

the consultation on the development of the new

Franchise Code of Conduct, which came into

effect on 1 January 2015, amongst other things.

Assisting members to understand their

compliance obligations under the most significant

changes to franchising regulation since the

enactment of the Code in 1998 remains a focus

of the FCA.

It is with that in mind that I would remind

franchisors that while there has been a transition

period for the production of new disclosure

documents that are required under the Code, the

grace period ends on 31 October this year. So if

you are yet to turn your attention to making sure

your disclosure documents are Code compliant,

the time to do so is now.

Additionally, the FCA has been actively involved

in consultations, and will continue to do so,


FrAnChises lArge

And smAll

BRInGInG A vALUE PROPOSITIOn TO


the new office of the Small Business and Family Enterprise Ombudsman. The new Ombudsman, who is intended to be a Commonwealth-wide advocate for small business and act as a ‘concierge for dispute resolution’, is expected to be operational from 1 July this year. Pleasingly, many of the stipulations contained in the initial FCA submission were acknowledged in the draft legislation released in March. The FCA has provided a submission of the draft legislation reiterating its support and stipulations for the proposed Ombudsman.

NAtIONAl FRANCHISe CONveNtION 2015Providing opportunities for members to gain ongoing professional development and network with fellow franchising professionals is, of course, another core role of the Association. This is achieved through a range of networking and roundtable events held throughout the year, as well as the Certified Franchise Executive program, which now has six inductees and is on track for more at this year’s national Franchise Convention.

The nFC is in 2015 set to offer a bumper program, with keynote speakers including business leaders Steve Sargent and Andrew Demetriou as well as Winter Olympic gold medallist Alisa Camplin OAM already confirmed.

Steve has been the CEO of Australia/nZ for General Electrics for the past four years and is also President and CEO of GE Global Mining, with responsibility for operations in 55 countries, while Andrew was the CEO of the Australian Football League for 11 years before stepping down in

FrAnChises lArge

And smAll

BRInGInG A vALUE PROPOSITIOn TO

around the proposed changes to the unfair

contracts legislation. At the time of writing, the

Federal Government has released exposure draft

legislation that would see the unfair contract

terms apply to businesses that employ less than

20 persons, for transactions under $100,000, or

$250,000 for contracts that last longer than 12

months, and the FCA was preparing to make a

formal submission on the draft legislation.

The FCA has also been involved in discussions on

wHIle tHeRe HAS BeeN A tRANSItION peRIOd FOR tHe pROduCtION OF New dISClOSuRe dOCumeNtS tHAt ARe RequIRed uNdeR tHe COde, tHe gRACe peRIOd eNdS ON 31 OCtOBeR tHIS yeAR.”

mORe pROgRAm ANNOuNCemeNtS wIll Be mAde OveR tHe COmINg weekS ANd mONtHS, SO Be SuRe tO vISIt tHe weBSIte tO keep up tO dAte.”

June 2014. Their respective business insights will undoubtedly yield some valuable takeaways for attendees of this year’s nFC, while Alisa’s Olympic story and her post-skiing career are sure to motivate and inspire.

More program announcements will be made over the coming weeks and months, so be sure to visit www.franchise.org.au to keep up to date.

We are also excited to take the event back to the Gold Coast this year, where the RACv Royal Pines will play host from Sunday 11 October to Tuesday 13 October, and would encourage you to take advantage of the early bird registration rates that are now on offer.

W: www.franchise.org.au

Warren Wilmot, Chairman, FCA

http://www.franchise.org.au

http://www.franchise.org.au


Ayers roCk resort

A ConFerenCe CompleX

Ayers Rock Resort’s two unbeatable assets - its location in Australia’s iconic red centre and connection to

Indigenous culture – come together in its conference complex.

Since its complete redevelopment in november 2012 the Uluru Meeting Place at Ayers Rock Resort has become one of Australia’s most iconic meeting and conference destinations. Popular with large franchise conferences and smaller recognition events, the Uluru Meeting Place is located just a few kilometres from Uluru and kata Tjuta - both places of great spiritual significance for Indigenous Australians.

tHe ultImAte CONFeReNCe expeRIeNCeEvent planners can draw on a flexible menu of Indigenous activities such as dance workshops, didgeridoo performances, bush yarns and dot painting workshops. Conference programs can also be enhanced with other activities in and around the resort and within the Uluru-kata Tjuta national Park such as camel rides, watching sunrise and sunset over Uluru and guided walks.

Second to Uluru, food and wine experiences take centre stage as part of any business event at the Uluru Meeting Place. From poolside fine dining

and formal occasions to outback bbq style feasts under the outback sky, every dining experience combines local culture with inspired outback fare catering to intimate groups and large delegations. For an intimate dining experience under the sparkling night sky, Tali Wiru is a unique reward for a small group of delegates atop an isolated sand dune with Uluru and the distant domes of kata Tjuta as your backdrop. Offering the finest gastronomic fare with a four-course table d’hote menu, matched perfectly with premium Australian wines.

FACIlItIeSThe conference complex itself includes two main conference spaces which can host 306 delegates and 420 delegates respectively with theatre-style seating. The rooms can be sub-divided with acoustically rated walls, or opened up to become one common space for exhibitions or trade shows. A light-filled pre-function area adds more flexibility to the complex while a permanent marquee caters for up to 280 guests and an outdoor amphitheatre can host up to 350 guests. Advanced audio-visual equipment is seamlessly integrated throughout.

With easy access from all east coast capital cities, Ayers Rock Resort encompasses a diverse offering of accommodation, from 5-star

Sails in the Desert through to the authentic 3.5-star Outback Pioneer hotel. This diverse offering ensures all conference markets are accommodated. Outside the Resort’s four hotels, lies a collection of resort and community style facilities that add depth to a delegate’s overall conference experience.

The Uluru Meeting Place has won two consecutive Australian Tourism Awards in the Business Events category, in recognition of its state-of-the-art facilities and range of unique dining and touring options.


T: 02 8296 8067 E: [email protected] W: www.ulurumeetingplace.com.au

700 million yeArs in the mAking


http://www.ulurumeetingplace.com.au


R• • •

• • •

n r r

rAChel Burdett-BAker

don’t eXpose yourselF to unneCessAry risk The 2015 Federal Budget handed down

by Treasurer Joe Hockey last month had some great incentives for small

business.

Businesses with an annual turnover of under $2 million are now able to immediately claim tax deductions on purchases under $20,000; a great incentive to give the small business and retail sectors a confidence boost.

Assets valued at over $20,000 can also be placed

in a depreciation pool and can be immediately deducted if their value falls below $20,000 before 30 June 2017 when this program ends.

While it’s an attractive incentive that’ll be a lifeline for some, those small businesses considering taking advantage of the new budget measure should do so with caution.

Organisations need to be measured and strategic when considering whether it’s something their business should pursue.

Buy, Buy, Buy?Firstly, you need to ask yourself whether you are in a solid financial position before committing to additional expenditure.

Small businesses across Australia are still doing it tough and for many of them cash flow is one of the biggest concerns. Although these incentives are enticing, businesses need to be prudent with their spending and consider what other impacts it may have.

If the availability of a tax deduction is the main reason your business is making an investment under the new rules you could be exposing yourself to an unnecessary risk.

new spending still means cash coming out of the business, regardless of the amount or whether it can be claimed back. The business should be able to handle the additional outflow and if it impacts on the business’ ability to meet its other financial commitments, the tax deduction may not be worth it at all.

It is imperative to understand and have an effective working capital cycle – ie. how are you converting debtors and stock into cash, and what


are your creditor terms? This will determine how much cash you have at any point in the business.

If businesses are looking to borrow to fund further investment, it is important to ensure appropriate debt facilities are utilised. Avoid the use of high interest credit cards and overdraft facilities and consider longer term fixed loans. Also ensure that any ongoing interest charges and principal repayments can be met.

As the immediate tax deduction is only available to small businesses it will be important that taxpayers consider their eligibility for the $20,000 asset write-off. In particular whether annual turnover is and will remain under the $2 million threshold.

This may require greater scrutiny on the business’ turnover throughout the year, particularly around the timing of the purchase intended to be written off, because you may not know whether you will be under or over the $2 million turnover limit at the end the year.

get tHe RIgHt AdvICeAbove all of this, one thing to remember is while there are considerations that need to be made

before launching into spending new money, there are always support networks that can help you make the right financial decisions.

It’s absolutely vital you work with a bank and other financial advisers to ensure any new spending – whether it’s eligible for a tax deduction or not – does not place pressure on the most important thing in your business, your bottom line.

From a professional perspective, I’ve seen an increased demand from businesses seeking to engage advisers when they find themselves in financial distress, hoping to return to a solid financial footing.

Any business that wants to focus on finding the right structure and strategy to thrive as an organisation, rather than resisting assistance, is giving themselves the best opportunity to continue growing.

As advisors we know how much hard work, passion and sacrifice goes into building a business, and it can be heartbreaking when they falter.

What we frequently discover however, is many

business owners are so close to the businesses they’ve built it’s hard to imagine a different way of doing things, but sometimes it’s a necessary evil.

That’s where an independent, expert perspective can be the difference between getting back on track and closing the doors for good.

Rachel Burdett-Baker is Partner-in-Charge of BDO’s East Coast Practice for Business Recovery & Insolvency. She has over 20 years of experience working in various restructuring and risk management roles within both chartered accounting firms and the banking industry. Rachel specialises in stabilisation, restructuring, turnaround and insolvency.

BDO offers a wide range of business and corporate advisory services to large corporate organisations, Government & Public Sector entities, private businesses, entrepreneurs, and individual clients across a wide range of industry sectors.


T: 03 9603 1700 E: [email protected] W: www.bdo.com.au

New SpeNdINg StIll meANS CASH COmINg Out OF tHe BuSINeSS, RegARdleSS OF tHe AmOuNt OR wHetHeR It CAN Be ClAImed BACk.”



http://www.bdo.com.au


InternatIonal FranchIse Development

Andrew lyme

A Franchisors international success will almost always be determined by the experience of its international partners

and strength of its system.

It is not unusual for a brand to receive unsolicited approaches from oversees parties interested in taking your concept to their shores. This can be flattering, and after all, an international approach is in many ways an endorsement of a brands concept and achievements.

however, before entering a Master Franchise Agreement, License, Development Agreement or Joint venture half way across the world, it is

crucial that every franchise concept ensures:

1 The domestic system is sound, prepared and the business has the required procedures and resources to train, support and manage international partners in an overseas environment, and

2 They select the highest calibre partner in a subject country to develop the brand, i.e. experienced, appropriately qualified and financially resourced.

Some franchise systems secure international partner agreements without having first reviewed the subject territory to determine who

could ultimately be the most suited partner to develop their system. Simply actioning a first approach without diligent consideration of alternative partner options has often resulted in unsatisfactory long term partner selection. This can be a lost opportunity for the Franchisor with partners failing to deliver the brands expectations and development objectives in the subject territory.

The consequence of this typically has long term repercussions for the Franchisor, who can be left repairing brand reputation and managing;

• Loss of concept and product integrity in the

subject territory, potentially damaging your chance to either continue, sell or re-enter this market in future.

• high legal and compliance costs correcting issues, and or dealing with early exit or termination.

• Franchisor not achieving satisfactory financial returns from the international exercise in the form of unpaid royalties and fees, increased management costs, and lost future earnings.

As mentioned earlier, two of the most important factors to consider before entering into an international agreement (excluding commercial, legal and financial considerations, which I have not touched on in this article in order to elaborate on two main principals) can be better understood by firstly considering the following:-

1 yOuR BRANd & SyStema. Are the foundations of the existing domestic

business solid and profitable?

b. Are the systems, procedures, guidelines and training documents in place and tailored to be effective for an international program?

c. Does the business have the human resource to properly train, support and manage ongoing compliance of international partner activities alongside its domestic operational requirements?

d. Are you satisfied with your international business and development plan, including local product or service supply chain considerations, product quality, localization and financial assumption and forecasts?

2 yOuR INteRNAtIONAl pARtNeRS

a. Does your potential partner have direct experience and business exposure in your particular business category?

b. Does your potential partner possess a suitably qualified and experienced team to implement and manage the key areas of your system?

c. Does your partner have the required funding and financial resources to achieve the desired goals?

d. Are your partner’s development and growth plans realistic and achievable?

e. Does your partner have an existing real estate footprint, influence and connections (this is often more critical to a brands oversees growth than it may be in the brands home country)?

f. Is your partner aligned to your brand vision, share your passion, understanding and enthusiasm for your system, products or services?

g. Can your partner demonstrate a track record of staff training and customer service?

If you are not comfortable after reviewing these initial considerations, then it’s prudent to re-assess your potential partner and/or your systems before proceeding.

Finding the right partner is absolutely critical to the success of your brand oversees, and by all accounts, is the number one factor determining your systems international success.

Taking time to thoroughly research and canvass a wide group of potential candidates within a subject international market is critical to making an informed decision and ultimately selecting the most experienced and suited partner. Franchisors need to closely screen each candidate and be satisfied they only choose partners who possess the relevant background, infrastructure and capital needed to successfully launch, develop and operate the system for the long term.

In addition, be sure to implement proper guidelines, systems and training procedures specifically tailored for an international development program. your partner training program will need to cover all areas of the development process and concept, along with the provision of detailed manuals and procedures for each area of the business to guide your partner’s activities, including:-

• Initial start-up and implementation considerations;

• Organizational structures and hiring of key personnel;

• Product or services procurement and or local production and manufacturing;

• Real estate acquisition, store design/equipment and development;

• IT operating systems and reporting;

• Marketing, promotions and product development;

• Store operational systems and ongoing compliance/management;

• Training and staff development;

• Sub-franchising recruitment, training and compliance procedures.

In addition, the Franchisor should ensure they have suitably experienced domestic personnel in place to closely assist international partners during the establishment and implementation stage, plus to provide ongoing support, training and management throughout the entire agreement.

Andrew Lyme is Managing Director of Global Retail Partners, a franchise system development, management and advisory firm based in Sydney.

Andrew specializes in international franchise development, and assists both Australian and oversees franchise systems successfully expand to international territories by sourcing and securing international partners, providing management of international franchisees, licenses and joint venture partnerships, and establishment of systems and procedures to facilitate international growth.

The GRP team also provide services in corporate advisory/capital raising, franchise system establishment, franchisee recruitment and product development.

For more information contact Andrew at:

P: +61 408 230 760 E: [email protected] W: www.globalretailpartners.com.au

tAkINg tIme tO tHOROugHly ReSeARCH ANd CANvASS A wIde gROup OF pOteNtIAl CANdIdAteS wItHIN A SuBjeCt INteRNAtIONAl mARket IS CRItICAl.”

Andrew Lyme, Managing Director, Global Retail Partners



http://www.globalretailpartners.com.au


NatioNal FraNchise coNveNtioN 2015

nFC 2015

The keynote speaking program will be supported by franchisor expert concurrent streams and in-depth workshop sessions.

BOOk yOuR eARly BIRd NFC15 tICketS NOwIf you are planning on multiple people attending the convention this year, you can save up to $750 per registration.

If you are planning on attending Legal Symposium along with the main convention, you can book as a package and save $776 on your registration. Package pricing will only be available for a limited time.

ACCOmmOdAtIONBook your accommodation at RACv Resort - Royal Pines now to avoid disappointment as limited

rooms are available. To book your room please call the Reservations Team direct on 1800 886 880 or (07) 5597 8700 and mention to the reservation team that you are attending the national Franchise Convention.

Steve SARgeNt, CEO of Australia/nZ for General Electrics. In addition, he is the President and CEO of GE Global Mining, with responsibility for operations in 55 countries. he was named by The Australian newspaper in 2013 as being one of the top 20 most influential leaders in Australia.

ANdRew demetRIOu, recently retired CEO of the Australian Football League, a position he held for 11 years. he was also the AFL’s General Manager - Football Operations for three years and previous to that the CEO of the AFL Players Association, where he was instrumental in establishing programs to look after players during their careers and after their retirement.

AlISA CAmplIN OAm, Olympic champion aerial skier who won gold at the 2002 Winter Olympics in Salt Lake City. It was the second skiing gold medal ever won by Australia, and the first won by an Australian woman. She also won the bronze medal at the 2006 Winter Olympics.

keyNOte SpeAkeRS keynote speakers sharing their inspiration and expertise at nFC15 will include:


& growth expansion

NATIONAL FRANCHISE CONVENTION 2015 11-13 OCTOBER GOLD COAST

NFC15 promises to build your knowledge on all things franchising to help ensure your business flourishes in any conditions. A must-attend for all franchise professionals in Australia, highlights of the event will include:

• Inspirational keynote speakers sharing their expert knowledge and insights

• Concurrent panel sessions featuring industry speakers and franchise case studies

• Workshop sessions providing an in depth examination of the core issues and challenges facing franchisors today

• Abundant networking opportunities and a bustling trade show

Join hundreds of Australian franchisors for the franchising information and networking event of the year.

The FCA gratefully acknowledges the contribution of the following sponsors for NFC15

Early bird registrations are now open

For more information and to register, call 1300 669 030

or visit franchise.org.au

For sponsorship and exhibition opportunities, call Angie Cooksey

on 1300 669 030, email [email protected]

or visit franchise.org.au

NFC15 ad A4 BF.indd 1 12/05/15 10:46 AM



Franchising involves collaboration between

the franchisor (concept-developer) and

the franchisee (concept-implementer).

The franchisee not only places their trust in the

proven operational blueprint, but also in: the

franchisor, the members of the franchisor’s team,

other franchisees in the system, the brand, and

their own employees.

The late yale scholar William Deming suggested

that trust is essential for the optimisation of a

system because without trust each component

will protect their own immediate interests, to the

detriment of the long term success of the entire

system.

Anthony grACe

Building FrAnChisee trust

Research conducted through Griffith University revealed the importance of four critical components necessary to build healthy levels of franchisee trust.

Firstly, Franchisees must feel engaged in the system; franchisees who feel engaged and empowered are more likely to have trust in their franchisor. Engagement involves substantial emotional and intellectual commitment both in their work role and in the wider franchise system. One franchising consultant said, “franchisees who buy mentally into the system do the best” and those who do not are in danger of falling through the cracks and becoming disenfranchised.

Secondly, the franchisee must have confidence in the strategic direction of the franchise system. Typically, the franchisor is responsible for creating – and perfecting – the proven blueprint of the business and the franchisee is responsible for

implementing it. A franchisee’s willingness to comply with the franchisor’s leadership – even on divisive parts of the system – allows trust to be built. But there will be times when difficult (and sometimes controversial) decisions have to be made, this is when the franchisee must place their trust in the leadership team.

Thirdly, the culture of the franchise system is a crucial element necessary to create an atmosphere where trust can flourish. The CEO of a retail franchise described his personal belief in the power of developing a strong organisational culture. he said, “the values underpin the culture of a franchise. If everyone buys into the culture – and all the people who work for me buy into the culture – then it’s infectious.” Ensuring certain values are understood and shared between all members of the franchise – such as honesty, cohesion, kindness, encouragement – allows the people within the system to work to the best of their ability.

FRANCHISeS tHAt FAIl, FAIl BeCAuSe tHey dON’t HAve A CultuRe; tHey ARe mISSINg tHe mOSt ImpORtANt tHINg. tHey mAy HAve A gReAt CONCept But AS tHey gROw, tHe CultuRe BegINS tO plAy AN INCRedIBly ImpORtANt pARt IN mAkINg tHe mACHINe wORk.” Retail franchisor

Anthony Grace


Fourth and finally, franchisor trustworthiness is fundamental to building franchisee trust. Trustworthiness includes competence (proven ability or an expertise in a specific area) and character (high levels of integrity and benevolence). The research revealed seven traits of a trustworthy franchisor.

1 tHey SAy – ANd SHOw – tHAt INtegRIty IS AN

ImpORtANt vAlue wItHIN tHe FRANCHISe SyStem.Integrity is an important value to cultivate within a franchise system. Acting with integrity means that one acts in accordance with strong moral and ethical principles. Franchisees judge the level of the franchisor’s integrity if he or she is seen to be honest, have a strong sense of justice, and consistently fair. however, integrity also filters down to the members of the franchisor’s team. For example, area managers, marketing managers, master franchisees, as well as administrative staff also need to act with integrity for it to be viewed as an important value upheld across the entire franchise system.

If integrity is high, it is more likely that the franchisor will be viewed as trustworthy, therefore franchisee trust will increase. As one franchisee said, “I believe that more transparency will lead to more trust.” Acting with integrity, and being upfront, open, and honest, in a competitive business environment is not always easy, however the benefits outweigh the costs.

It is also important to remember that “it is still possible for honest people to have disagreements” (franchising lawyer). The franchising relationship is a type of relationship that involves high levels of sincerity, frankness, and straightforward communication. Saying – and showing – that integrity is an important value within a franchise system is an essential trait of a trustworthy franchisor.

2 tHey pROve tHeIR ABIlIty, expeRtISe, ANd SkIllS IN

leAdINg tHe FRANCHISe.The ability of a franchisor captures their knowledge, expertise, interpersonal skills, prior experience, and general wisdom necessary to lead the franchise through the good times and the turbulent times. Role performance was found

to be an important attribute of a trustworthy franchisor. A franchisor – as well as the members in his or her team – must prove their ability to perform their duties in an effective and timely manner.

Furthermore, franchisees require visible examples of their franchisor’s ability, such as a successful and well implemented marketing campaign, an effective pricing strategy to suit the current market trends, or a well handled resolution of a dispute. A franchisor who can consistently prove their ability, expertise, and skills in leading the franchise allows the franchisee to perform better in their own work role because they have faith in the leadership.

“i have a very competent team of management that have been with me for many, many years. They are experts in their silos, but they’re also very well connected with our franchise partners.” - Retail Franchisor

3 tHey ARe wIllINg tO tAke tHe BlAme ANd AdmIt tHey

mAde A mIStAke.As the leader of the franchise system is a highly visible personality, franchisees take notice of their franchisor’s actions – especially when a mistake is made. Everyone makes mistakes, this is human nature, yet the important thing is how the situation is handled. Franchisors who can demonstrate the confidence to admit they were wrong, take the blame, and admit they made a mistake, are more likely to be trusted. however, a mistake and the wider implications should never be ignored. Even if the franchisor was not fully responsible for the mistake – acknowledging and fixing the problem – will enhance their overall reputation and perceived trustworthiness.

“Where we make decisions that are fairly at the fault of the franchisor, i won’t walk away from them – i will fix those at our cost.” - Franchisor

4 tHey dO tHeIR BeSt tO eNSuRe CONFlICt IS

CONStRuCtIve INSteAd OF deStRuCtIve.Conflict between people can take many forms. It can also intensify over many years so that the initial reason for the conflict is long forgotten. The typical length of a franchisee’s contract is five

years (renewable), thus it is in the best interests of the health of the relationship to deal with conflict early, comprehensively, professionally, and fairly. Edward de Bono, the father of lateral thinking, defined conflict as simply a clash of interests and unmet expectations.

Unfortunately, most conflicts tend to be destructive because of strong personality clashes, ego, reputation, and dogmatism. however, conflict can be constructive whereby emphasis is placed on flexibility and working together to accomplish mutual goals, as opposed to always being ‘correct’ for the sake of being ‘correct’. Constructive problem solving requires high levels of communication skills, patience, and a commitment to working toward a favourable resolution for both parties. It may also require the flexibility to allow the other party to ‘save face’ and uphold their reputation. Franchisors who focus on constructive conflict instead of destructive conflict are more likely to be trusted.

“you can have good conflict and bad conflict – but most conflict is bad – and unless it is managed, often it is not possible to resolve the conflict. All you can do is manage it in a constructive way, if it is not constructively managed there are real challenges down the track.” - Franchising mediator

5 tHey eNSuRe tHe pSyCHOlOgICAl ClImAte

ReFleCtS ReCOgNItION, INNOvAtION, ANd FAIRNeSS.The psychological climate of the franchise plays a considerable role in the overall levels of franchisee trust. In the daily running of the business, franchisees are susceptible to the psychological climate set by the franchisor who has the power and ability to influence the overall mood within the franchise. For example, a franchisor may wish to emphasise high levels of performance in strict time-frames, thus increasing the pressure levels on the franchisees. however, this type of climate had the least favourable results.

The top three types of climate were fairness, innovation, and recognition. Franchisees placed great emphasis on fair objectives and reasonable decisions made by the franchisor. Consistently fair and reasonable actions were highly valued by franchisees. Secondly, franchisees enjoyed the freedom and flexibility to innovate. They reacted favourably to being empowered to

develop their own ideas and improve existing methods and procedures. Finally, franchisees reacted favourably to being recognised for good performance. They enjoyed receiving a ‘pat on the back’ from their franchisor when they did well. Thus, the ability to shape the psychological climate within the franchise is an important trait of a trustworthy franchisor.

6 tHey demONStRAte tHAt tHey CARe FOR tHeIR

FRANCHISeeS.An important trait of a trustworthy franchisor is their commitment to showing genuine care for their franchisees. This display of care and support is an essential contributor to building franchisee trust as the interaction between the franchisee and the franchisor is susceptible to outside pressures, difficult economic conditions, increased competition, personal issues, as well as the challenges and stresses that come with running a business.

The franchisee and the franchisor are inextricably linked to one another in many ways: commercially, legally, professionally, and to an extent, personally. One franchisor said, “we tell our franchisees we are proud to have them as part of our franchise and we also do our best to empower our franchisees to be amazing.” The power of the emotional connections made (and sustained) within franchising relationships is often underestimated, however this research suggests it is not only important - but necessary - for franchisors to show genuine care for their franchisees throughout the duration of the franchising relationship.

“if the franchisor doesn’t sincerely care for their franchisees and how they succeed in the business, then trust is never going to happen.” - Franchisor

7 tHey ACt IN gOOd FAItH tOwARd tHeIR FRANCHISeeS.

The new Australian Franchising Code of Conduct, effective from the 1st January 2015, introduces an obligation to act in good faith. A failure to comply can incur a civil penalty of up to $51,000 (currently) per contravention.

It is clear from the new provision that actions of good faith by both the franchisee and the franchisor are an important factor in the

Anthony grACe

Building franchisee trustfranchising relationship. At the core of the

good faith provision is the importance of acting

honestly. As suggested earlier, an important trait

of a trustworthy franchisor is their commitment to

saying and showing that integrity is an important

value within the franchise system. Trustworthy

behaviour is indicative of acting in good faith

as the behaviour is considerate of the other

party involved. It also shows a commitment to

sustaining the relationship for the long-term.

In summary, franchisee trust is built when they

feel engaged, when they have confidence in

the franchise system, when the culture of the

franchise system is positive and supportive, and

when the franchisor acts in good faith.

The benefit of acting in good faith is increased

levels of trust. Where trust is high, the franchise

system can perform at its optimal potential.

Without trust (and good faith) each person will

look after their own self-interest to the detriment of the long term success of the entire system. As one retail franchisor said, “we were acting in that way before the good faith provisions in the legislation. It’s just the proper way to act - we don’t wait for legislation to tell us what to do. What we do is simple: be transparent, keep our promise and make sure the franchisee is getting the best possible return that we can manage.”

Anthony Grace currently lectures at Griffith University in the Marketing department. He is in the final stages of completing his PhD through the Asia-Pacific Centre for Franchising Excellence, his topic is centred on the importance of building franchisee trust.

For more information contact Anthony at:

T: (+61) 410 809 643E: [email protected]: franchisecollaboration.org



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Australia is being continuously flooded with new franchises and brands. Increased choice and the ability to shop around

more easily means it is more important than ever to establish a loyal customer base. A strong brand identity can help do this.

Getting the visual element of a brand right can be a difficult task but, if done correctly, can really drive customer engagement and improve your bottom line.

having a strong visual brand can help franchisees achieve growth by connecting with their target markets and driving engagement. The best visual representations accurately and concisely reflect the overall brand message. But getting it right is no easy task. Franchisors should create a set of visual guidelines for their franchisees to easily follow. The biggest issue for franchisors is if there is inconsistent delivery of the visual identity across their franchisee base.

Franchises such as McDonald’s is an example of how powerful coherent branding can be across the world. It only works because it is consistently delivered regardless who operates the franchise.

It is important for franchisors to understand that creating a successful visual brand identity is not as simple as designing a logo. Everything needs to link back to and support both the business and the brand’s intention. While there is no magic formula for getting a brand’s visual identity right,

there are elements that successful franchisors consistently use. People say ‘never judge a book by its cover’ but, in franchising, the ‘cover’ certainly contributes to the overall impression.

Franchisors who follow these six key steps are more likely to develop a successful visual identity for their franchisees to follow. Franchisees must understand this process and the importance of following visual branding guidelines.

uNdeRStANdINg tHe AudIeNCe

The first step for franchisors is to understand who you are talking to. One of the greatest challenges of visual branding is creating something that evokes the right feelings about your brand in your audience. your brand is simply a perception, it is how people perceive you; ultimately it is the sum of every impression your customers receive from you. This is particularly important for franchises, where visual branding is vital to connect with audiences and to attract franchisees owners themselves.

Once you know who your audience is, you can consider what you want them to think and feel about your brand. Don’t try to convey too many messages at once as the messages may end up diluting each other and get lost. It’s best to select one idea that you really want your customer to understand, then focus on designing the visual identity to communicate that.

Franchisors must understand that what evokes a positive reaction with one group might have the opposite reaction in another, so an accurate representation and understanding of your audience is vital for brands when developing a new logo or visual identity. Understanding your customers is the most fundamental step in building your brand’s visual identity, but it’s often overlooked.

This must be communicated to franchisees in detail, so they know who they are targeting. This will affect how employees market themselves and converse with consumers.

A SINgulAR meSSAgeWhile evoking that right feeling through your visual identity is vital, it is important not to represent too many messages at once or you risk diluting your image. Decide on the single most important idea you want your customer to get when they look at your brand. Design a visual identity that truly represents that one idea. This helps to provide a clear and concise design objective and also makes briefing your designer much easier.

For example, harley Davidson’s slogan, ‘American by birth. Rebel by choice’, is targeted at the high-end market of successful men who want to relive their youth and feel cool and rebellious.

kFC’s ‘finger lickin’ good’ gives the impression the

dAn rAtner

how to CreAte A suCCessFul visuAl


food is so delicious you don’t care who sees you licking your fingers.

It is vital for the franchisor to communicate this idea to their franchisees to ensure they are delivering on the same message at the front end.

CleAR BRANd AttRIButeS ANd BeNeFItSIf you are designing a visual for a brand then think about the specific benefits the brand provides. It is important to differentiate between features and benefits. Features are product specifications, while benefits are about fulfilling needs. For example, some of the features of Curves gym include the gym facilities and nutritional advice available. The benefits would be helping women feel empowered to get fit and feel healthy. Reflecting these benefits in your brand creates an association between the benefits and the brand in the minds of your customers.

Again, these must be communicated to franchisees so they can clearly outline features and benefits. This will also ensure their marketing is coherent.

SymBOlSFor some brands, symbols can be a simple but clever way to create shortcuts that evoke feelings or represent a brand’s attributes. For example, the deceptively-simple Amazon logo has an arrow pointing from the A to the Z, creating a subtle representation that they have everything you could need. The arrow also forms a smiley face, suggesting customers will be happy they chose Amazon. nike uses the ‘swoosh’ symbol and this is also reflected in its slogan, ‘just do it’, because for nike the brand is all about determination, effort and success.

Domino’s is renowned for its two dice, using red and blue, while vodafone uses its renowned bold red letters. 7-Eleven also has a well-known symbol using the 7 in numerals and the 11 in letters, which makes it easy for consumers to spot the sign when they’re driving. These symbols are used to help consumers think of the brand and what it stands for as soon they see it.

Dan Ratner, Managing Director, uberbrand

Symbols are a significant part of the visual branding guidelines. It helps to make sure franchisees understand the importance of the brand’s symbol, what they mean and how they reflect the overall brand and its message.

CHARACteRSFor some, having a brand mascot can be a great way to bring a brand to life, giving it personality and lifting it up from obscurity. This can work well for brands that otherwise might seem dry. Starbucks famously uses a twin-tailed mermaid in their logo to represent the strong seaport roots of the Seattle-based company and to provide an alluring mystery around the brand.

McDonald’s has Ronald McDonald the clown, suggesting it’s a family friendly restaurant. kFC also uses the famous face of Colonel Sanders, the man who started the chain using his secret chicken recipe.

Characters can be effective but it is important to choose or create a character that is suitable for your audience. For example, childish characters are unlikely to work with some adult audiences.

Again, franchisees will need to ensure they are using the character in the right way across the entire franchisor model. For example, Ronald McDonald is used on children’s happy meals and to promote children’s parties. you never see him being used to market Big Macs.

tHe RIgHt typeFACeS ANd COlOuRSColours and fonts can elicit different feelings and responses in people, making them an important consideration. Famous brands have done this well. Barbie uses soft, rounded fonts and even has its own pink Pantone colour. Toys ‘R’ Us uses a backwards ‘R’ and bold primary colours to reflect its whimsical childlike personality.

your font should reflect what you are trying to convey, so they need to be considered and chosen carefully. Serif fonts (e.g. the little feet on Times new Roman) give the impression of maturity, where sans serif (like Arial or helvetica) can appear more contemporary.

Using upper case can give the impression of

loudness or shouting while lower case typefaces appear more softly spoken, conversational and accessible. Different colours can also evoke different feelings. yellow may be perceived as cheery, blue as clean and calm, and orange as energetic. Just like the Barbie pink, certain brands have created strong colour associations (‘Donut king pink’ or ‘vodafone red’, for example).

Sometimes combining carefully these chosen attributes with hidden or overt symbols can help underline brand messages. McDonald’s is another example which uses its colours and font to represent its core audience, families. This is evident through its use of bright, strong and bold colours.

By contrast, Gloria Jeans coffee shops uses darker brown colours and a coffee mug to attract an older, coffee-drinking audience.

visual identity is a fundamental part of any brand. Franchisors need to seriously consider what exactly they are trying to convey and the emotions they wish to elicit. Once this is decided, franchisors must ensure all of their franchisees understand the brand and what message it is trying to convey. This will ensure that the brand is consistently delivered from head office right through to the front door and beyond.

Dan Ratner is managing director of branding and communications agency, Uberbrand. He has more than 15 years’ experience in marketing, communications and branding and is passionate about branding as an enabler to fulfil organisational objectives. Working closely with Uberbrand’s clients Dan works to understanding the current customer perception in the context of business goals. Dan works with well-known Australian brands across a variety of sectors including financial services, travel and education.


P: 02 9331 7001W: www.uberbrand.com.au

HAvINg A StRONg vISuAl BRANd CAN Help FRANCHISeeS ACHIeve gROwtH By CONNeCtINg wItH tHeIR tARget mARketS ANd dRIvINg eNgAgemeNt.”


http://www.uberbrand.com.au


overseAs / Foreign FrAnChisors And the new AustrAliAn FrAnChising Code 2015

roBert toth

The new Franchise Code commenced on

1st January 2015 and has introduced

some significant changes for overseas

franchisors.

key CHANgeS FOR OveRSeAS FRANCHISORS

The key change is removing the requirement

for an overseas/foreign franchisor to provide

to a sub-franchisee disclosure documentation

in addition to the disclosure that is required

to be given by the master franchisee to a sub

franchisee.

This has reduced unnecessary red-tape, costs

and delays in rolling out franchise units for

overseas franchisors.

The new Code has also altered the terminology of

‘Master Franchisor’ & ‘Unit Franchisees’.

• A Master Franchisor is an overseas franchisor

or Australian franchisor granting rights to a

Sub Franchisor (Master Franchisee) or Sub

Franchisee (Unit Franchisee).

• A Sub Franchisor (previously Master

Franchisee) now issues rights to Sub

Franchisees.



overseAs / Foreign FrAnChisors


New COde deFINItIONS:1. A Master Franchise arrangement is one where

a franchisor grants a right to a Sub-Franchisor to grant sub-franchise rights or participate in a sub-franchise.

2. A Sub-Franchisor is a person who is:

(a) a franchisee to a Master Franchisor;

(b) a franchisor to a Sub-Franchisee.

The disclosure document has substantially changed and now needs to be updated in the prescribed form under the Code from the 1st January 2015.

Overseas franchisors also need to be aware of the civil penalty provisions that can be imposed by the ACCC for breaches of the Code.

dISClOSuRe RequIRemeNtS ANd tHe FRANCHISe AgReemeNt Clause 7 – Master Franchisors no longer need to provide separate disclosure to sub-franchisees.

Clause 12 – A Master Franchisor does not need to comply with the requirement for disclosure to sub-franchisees of information that the sub-franchisor (master franchisee) must disclose.

• A Master Franchisor is still required to fully comply with the Franchising Code and provide disclosure to its sub-franchisor, but the double disclosure / joint disclosure to the sub-franchisees has been removed.

• There is no need for an overseas Master Franchisor who appoints a sub-franchisor to now provide a separate Disclosure Document in addition to the Disclosure Document provided by their sub-franchisor to sub-franchisees.

Item 7 – mASteR FRANCHISeS If a franchisor is also a sub-franchisor it must give the following details in relation to its master (overseas) franchisor:

• name and address;

• name, position held and qualification of its officers;

franchisor (overseas franchisor) must still provide a Franchising Code compliant disclosure document and franchise agreement to its master franchisee. The master franchisee appointed usually pays a fixed fee or a percentage of the royalties it receives from sub-franchisees to the master franchisor.

Master franchisees need to have significant capital resources not only to acquire the rights, but also to develop the territory.

The master franchisee becomes responsible for recruitment, training and support of sub-franchisees. The sub-franchisees enter into a franchise agreement with the master franchisee. Master franchisees take on considerable risk and responsibility and returns on their investment can take some years.

tHe RISkS OF eNteRINg A New mARket From our thirty years of experience in the franchise industry we have seen many overseas franchisors enter the market, some more successfully than others.

Many succeed but some do not. The reasons for this in our experience are as follows:

• Overseas franchisors do not conduct sufficient market or demographic research.

• A franchise that might be successful in one state in Australia may not translate successfully to another. There are considerable differences in demographics and market consumer demand between, for example, Queensland and victoria.

It is important overseas franchisors understand the market and select the correct state in which to enter the Australian market.

• Failing to prepare a proper development plan with local expertise.

• Unrealistic expectations placed on master franchisees. For example, where an overseas franchisor asks for A$350,000 for the grant of the master franchise rights, a percentage of the royalties and an additional sum for each of the sub-franchise units, it will be difficult to attract a master franchisee who carries all the legal risk and responsibility to roll out sub-franchises.

• We are now seeing a trend where overseas franchisors are reducing the upfront licensing fees and offering terms that allow payment from each sub-franchise sale. This means

• number of franchise agreements terminated, or not renewed; and

• details of the master franchise agreement.

FINANCIAl StAtemeNtS tO Be pROvIded By AN OveRSeAS mASteR FRANCHISORMaster franchisors (Australian franchisors and overseas franchisors) must now attach to their disclosure documents the following financial information:

• A statement signed by the Director as to solvency of the Company at the end of the last financial year attaching the last two years financial statements; or

• An Auditor’s report, supporting the Directors solvency statement.

There are additional obligations of disclosure on master franchisors in relation to:

• End of term arrangements;

• Disclosing information relating to rebates, and incentives from suppliers;

• Disclosing the impact of online sales on individual franchisees.

mASteR FRANCHISe OR AReA develOpmeNt ARRANgemeNtSMaster franchising has been the most popular model to enter the market by overseas franchisors. There has been, however, an increase in area development and joint venture arrangements.

An area development agreement is similar to a contract with provision of services usually for a fixed term. The area developer is engaged to develop, recruit, train and support sub-franchisees. The franchisees enter into the franchise agreement directly with the overseas master franchisor. The area developer is paid a fee for their services which may be a percentage of the upfront fees and ongoing royalties paid by sub-franchisees.

An area development agreement is not a franchise arrangement under the Code. no disclosure documents are required to be given by an overseas franchisor to an area developer. The termination provisions are therefore not restricted by the Code.

Master franchise rights are granted to operate in a territory or area and to establish franchise units and appoint sub-franchisees. The master


Rpbert Toth

a master franchisee can fund the costs over time and retain their working capital to support and propose the brand and attract new sub franchisees.

• We have renegotiated a number of master franchise agreements where unrealistic kPIs were set for master franchisees. Setting a commitment to establish 10 - 12 franchise units in the first 12 months to 2 years is unrealistic. Establishing 2 to 3 sub-franchisees in the first year and then increasing that gradually over time will be more achievable and avoid disappointment. Setting unrealistic kPI’s on master franchisees place them under unrealistic pressure.

• Locally appointed master franchisees now expect overseas franchisors to provide sophisticated online and real time accounting and support systems.

• Franchisees now expect a greater sharing of risk. Overseas franchisors now more than ever need to share the risk with local franchisors and take a longer term view by lowering the entry costs to make it more affordable for sub-franchisees.

• Despite Australia’s relatively strong economy and low interest rates it is still a tight financial market and franchisors need sufficient working capital to fund the roll out costs.

SummARyIn summary, overseas franchisors should:

• Engage local franchise specialists, lawyers, accountants and consultants who are members of the Franchise Council of Australia (FCA) – the Australian nationally recognised industry council.

• Conduct market and feasibility research and prepare a development plan before entering the market.

• Engage local consultants who know the demographics and local market trends.

• Set realistic fees for the grant of the rights.

• Set realistic expectations in relation to kPIs for roll out of units by the master franchisee.

• Be prepared to invest considerable sums of money before seeing a return on investment. As with any business opportunity, a return on the capital invested may not be achieved for some 2 – 3 years.

roBert toth

Robert Toth is a recognised leader in

franchising law in Australia and a published

author on franchising law and establishing

business operations in Australia with over

thirty years of experience in the industry.

Marsh & Maher franchise lawyers have a

network of franchise consultants ready to

assist overseas clients to ensure their legal

compliance with the new Code and currently

act for a number of overseas companies and

foreign franchisors that have successfully

established their business operations in

Australia.

Contact Robert at:

T: 03 9604 9400

E: [email protected]

mASteR FRANCHISeeS Need tO HAve SIgNIFICANt CApItAl ReSOuRCeS NOt ONly tO ACquIRe tHe RIgHtS, But AlSO tO develOp tHe teRRItORy.”



Building Retail

Experiences

Shape Shopfitters understand the customer experience and work with you to bring your brand’s vision to life on the shop floor.

dedicated office staff

We build inspired customer experiences through our customised offering, in-house joinery and our highly technical expertise, particularly in the food space.

Shape Shopfitters work across every state and territory of Australia. For more information call our Head Office on (03) 9432 1044 or go to our website for more examples of what we do at www.shapeshopfitters.com.au

http://www.shapeshopfitters.com.au


leslie tArnACki

Four reAsons to AutomAte employee ABsenCe mAnAgement


The financial impact of employee absence is significant, yet managing it is increasingly complicated, time consuming and

expensive. Automating absence processes across the organisation help mitigate and reduce these costs.

Each time an employee is absent from work there is a cost involved due to lost productivity on the day, having to cover the missed shift, and the impact of not being able to accurately track various absence and leave types.

The more employees an organisation has, the higher the costs.

Leslie Tarnacki, GPhR, vice President human Resources and General Manager, WFS: A WorkForce Software Company, says, “The Aberdeen Group found that organisations not actively managing absence are subject to several overlapping costs*. While hR managers spend approximately two hours per week on absence-related tasks, line managers spend almost as much time on tasks such as finding last-minute replacement workers and communicating with hR about employees taking time off.

“The same study showed that some organisations call in temporary workers and some simply accept that the work won’t get done. The majority, however, rely on existing staff or supervisors to provide coverage, which can result in unplanned overtime costs.”

Top-performing organisations are integrating absence management tools to relieve the financial and emotional burden of handling short- and long-term employee absences. WFS Australia has identified four key reasons to automate absence management:

1 ReduCed mANuAl pROCeSSeS An automated system provides a clear,

documented channel for handling absence requests. It can recognise patterns in absences, alerting the right people at the right time when occasional absences become more frequent. It also means all absence-related communication is contained within a single system, including medical certificates.

2 gReAteR ACCuRACy The chances of error are reduced with an

automated system, preventing instances where employees continue to be paid despite using all of their allocated leave.

3 ReduCed lABOuR COStS If absence tracking is not accurate,

employees may take off more time than they have earned, costing the company money. With automation comes greater transparency in how leave requests are made and granted, and how that information is communicated to the payroll department. It also lets managers plan for extended absences in advance.

4 ImpROved emplOyee SAtISFACtION

When employees have clear communication channels, immediate receipt confirmations and clarity around processes, confusion is reduced. Employees are therefore more likely to feel that leave policies are fair, making them more loyal to the organisation.

Leslie says, “It’s clear that automating absence management tasks has many benefits for

Leslie Tarnacki

tOp-peRFORmINg ORgANISAtIONS ARe INtegRAtINg ABSeNCe mANAgemeNt tOOlS tO RelIeve tHe FINANCIAl ANd emOtIONAl BuRdeN OF HANdlINg SHORt- ANd lONg-teRm emplOyee ABSeNCeS.”

employers and employees alike. While hR directors can’t always anticipate or prevent employee absences, they can empower their organisations to respond with improved efficiency by implementing automated absence management throughout the enterprise.”

WFS: A WorkForce Software Company (WFS Australia) is a leading provider of cloud-based workforce management solutions for Australian and New Zealand employers. The company’s EmpCenter and EmpLive suites enable organisations to automate time and attendance, streamline absence and leave management, optimise staff rostering, gain real-time visibility into labour costs and productivity, and mitigate the risks of employee fatigue.

Based in Sydney, WFS Australia pairs local expertise with the strength and stability of a global provider. More than 250 Australian and New Zealand companies rely on WFS Australia solutions today.


T: +61 2 8399 1688W: www.wfsaustralia.com *The Aberdeen Group – Absence Management (2013)

http://www.wfsaustralia.com


hOW TO BUILD SOCIAL PROOF AnD engAgement on linkedin

nAthAniAl BiBBy

Social Proof is one of the key influencers that people use when making a decision on who to do business with via the

internet. People look to the experiences of other customers, and that’s why testimonials and celebrity endorsements have been so powerful for businesses for decades.

In fact, social proof is one of the main reasons why social media itself became so popular. We saw our friends, family and other professionals using it, and mastering this concept can make a huge difference in your success on social media.

When done right, social media success grows exponentially over time. your time and money investment – unlike other most traditional media – becomes more and more profitable over time, and those numbers and the benefits grow exponentially.

That is why it’s so hard to track accurate metrics, if you’re only looking at the short-term financial return on investment. The longer you have been

using social media and the more strategic you are

about the time you put into it, the more results

you get from it.

The basic Social Proof items to be mindful of on

LinkedIn are:

• Network

• Engagement

• Endorsements

• Recommendations

• Projects

• Publications

• Groups

here are some tips on how to generate more

engagement on LinkedIn:

CONtRIBute IN lINkedIN gROupS

Find relevant groups talking about your brand

or industry and join them to better understand

customer needs and industry trends. Apply these

insights to the Company Updates you post to

engage followers with relevant content. you’re

welcome to join the Group that I manage, The

Entrepreneur Club Australia & nZ.

FOllOw CHANNelS ANd INFlueNCeRS

It’s important to stay in the know — follow

channels and thought leaders (Influencers) to

create a curated feed of industry news and

insights that can inspire your own Company

Updates.

pOSt COmpANy updAteS

Showcase your expertise and build relationships

with followers with Company Updates. Share

articles, company news, industry trends, and

insights. On average, companies that post 20

times per month reach at least 60 per cent of

their unique audience. Follow a regular posting



schedule to develop relationships with your

followers, drive brand loyalty, and bring about

new opportunities.

demONStRAte vAlue tO FOllOweRS

Build engagement and trust with a stream of rich,

insightful content. For every post promoting your

company, make sure four posts focus on thought

leadership or industry trends.

eNCOuRAge eNgAgemeNt

Prompt colleagues and followers to take action

on your post – every like, comment, and share

increases your reach throughout the LinkedIn

network.

CReAte dIveRSIFIed CONteNt

Rich media such as photos and video is known to

increase both comments and shares. Incorporate

these formats — along with SlideShare presentations and links to articles — to maximise engagement with your posts.

mONItOR ANd ReFINe COmpANy updAteSMonitor your Company Update reach and engagement numbers to see what’s resonating with your audience. Test days, times, topics, and formats, and adapt as you learn.

leveRAge yOuR CONteNtUse successful blog posts, articles, and updates from your other social platforms to create a high-quality stream of LinkedIn Company Updates.

dIve INtO COmmeNtSEngage with followers who comment on your updates to help build loyalty, continue the conversation, and further establish your thought leadership. People like to know they’re heard - give them some encouragement!

BROAdCASt tHROugH yOuR NetwORkS INHOuSePrompt colleagues to share your Company Page updates. not only will this increase your company’s visibility to new customers and potential hires, it’ll also help establish a company culture where employees are engaged with your brand and mission.

SpONSOR yOuR updAteSSponsored Updates let you reach beyond your follower base and target your exact LinkedIn audience to raise brand awareness, build

relationships, and drive quality leads. Sponsored Updates appear in feeds across devices (smartphone, desktop, and tablet), giving you more opportunities to reach the people that matter.

BeCOme A puBlISHeRThe Publications section is a great place to get the word out on your writing and show the world you are an expert. Everyone can be an author or publisher on LinkedIn. Do not think this section is only for books you have written. you can add already published articles or post new ones, you’ll have an option to add pictures, links to share it with the readers of your LinkedIn profile. Publishing posts and articles is a great way to build credibility on your profile.

Even with franchise sales that you can’t source back to the internet, you can safely assume that a vast majority of candidates will research your franchise system online either before or during their decision making process.

Managing Director Nathanial Bibby has assisted over 3,500 businesses with their sales and marketing strategies and is a regular commentator and speaker in the Digital Marketing and Social Selling industries.

Bibby Consulting Group provide Australian businesses with cutting-edge sales and marketing services to help fulfil their business objectives.

For more information on how to use LinkedIn to grow your business visit:

W: www.bibbyconsultinggroup.com.au

Nathanial Bibby


http://www.bibbyconsultinggroup.com.au


FrAnChising eXpo

Pizza, coffee, sweet treats and quick service restaurant (QSR) franchises are flocking to the Franchising & Business

Opportunities Expo, with leading brands among the many companies exhibiting soon in Brisbane and Melbourne.

“We are thrilled to welcome back established brands such as Lenard’s, Movenpick, and La Porchetta, as well as newer players including new york Slice and Woodfired Pizza,” says Exhibition Manager Fiona Stacey.

In addition the team from Retail Food Group will be on hand at both Brisbane and Melbourne to discuss opportunities with Donut king, Michel’s Patisserie, Brumby’s Bakery, Crust Gourmet Pizza, Pizza Capers, Gloria Jean’s Coffees, The Coffee Guy and Cafe2U.

“Franchised cafes, QSRs and restaurants are appealing because very often they represent well known, established brands,” kym De Britt, General Manager, Franchise Council of Australia.

he adds that food, and particularly fast food, is a strong part of the franchise industry, with food retailing comprising around 18 per cent of franchise systems in Australia, which includes a few very large fast food franchises and a mixture of emerging systems.

“Almost everyone at one time or another has visited a franchised café or quick service restaurant so the brands are easy to relate to,” De Britt says. “This familiarity provides prospective franchisees with peace of mind in the stability and security of the franchise brand.”

Sara Pantaleo, CEO of the largest Italian food franchise in Australia and new Zealand, La Porchetta, will again be a keynote speaker in Brisbane after a hugely popular presentation in

Food FrAnChises heAdlining eXpo

Sydney. “People love our food but they also love

the experience,” she says. “Food brings people

together.”

A former Franchise Woman of the year,

Pantaleo had wise words for franchisors in her

presentation. “know where you are heading.

know what you are doing. Build a foundation so

it will survive. Franchisees look for a business like

this.”

Fiona Stacey says while franchises in the

hospitality industry are sure to be a drawcard,

there will also be a plethora of other businesses

to consider. Poolwerx CEO John O’Brien will also

be presenting a keynote seminar in Brisbane,

and the Malaysian Government will be bringing a

contingent of Malaysian franchises to Melbourne

for the first time.

“We are gearing up now for another exciting two-

day show in Brisbane this July, followed by three

days in Melbourne in August,” she says.

“The Franchising and Business Opportunities Expo

is an event where the industry comes together to

educate, inform and network – it’s the highlight of

the year for many franchisors.”

For information about participating in the 2015

Franchising & Business Opportunities Expo

contact Fiona Stacey on:

T: 03 9999 5464


sPeCial reader offer - register now

for your FREE ticket using code BFM11 at

www.franchisingexpo.com.au

In BRISBAnE AnD MELBOURnE

La Porchetta CEO Sara Pantaleo – “Food brings people together.”


http://www.franchisingexpo.com.au

Food FrAnChises heAdlining eXpo


the power oF loCAl mAnuFACturing

For many franchisees the cost of the actual fitout will be the deciding factor of the economic viability of the franchise

system and whether or not they are able to finance the start-up costs.

Over the years I have been asked many times the same question by different franchisors, “What can we do to reduce the cost of the fitout?”

This is an obvious question for a franchisor to ask their fitout partner, but not often an easy one to

an impending opening date. All these things need to be considered for each individual component.

It’s not always the case that taking the cheaper imported option is the best option.

When we start to look at the joinery and furniture components that go into an individual fitout and in many cases, the significant cost they carry to the bottom line it is often tempting to look at a cheaper imported product. While this is done successfully for some products, it’s not often the case for retail food tenancies or in particular Quick Service Restaurants.

Why? There is a high priority to keep the operational needs of the system to its proven formula. Ovens, fryers, grills, refrigeration and washing facilities are required to be positioned to allow for a practical workflow. What’s left of the tenancy is the opportunity to create the customer experience. As most tenancies will differ in size and shape this is where the joinery and furniture items will need to bend and mould to fit both the space and the design intent. If we look at the three criteria previously mentioned you will start to see some grey areas over the viability of procuring and importing a product manufactured offshore at a cheaper price.

The drop in quality of the finished product is reflected in the price point, which is the only positive I have found in my personal experience with this. Procurement can be a nightmare with a lack of control of the production run as well as shipping hold ups and problems through customs. Once that’s been negotiated there is the risk of damage during transport and then the added concern of manufacturing errors. If that’s the case then its modifications to a brand new unit, more than likely at the closing stages of the fitout.

answer. There are many things that need to be considered with every component that goes into the fitout, but the top three would be Quality, Price and Procurement.

quAlItyFrom fittings, fixtures, equipment to finishes, everything needs to be the right quality to uphold both the design integrity and the franchisors’ brand image to deliver the customer experience over the time of the lease. This doesn’t necessarily mean it has to be the best quality money can buy, but it has to be the right quality for its chosen purpose.

pRICeThere’s truth in the saying, “Look after the pennies and the pounds will look after themselves.” If the individual components that go into making up the fitout are overpriced or over specified then it’s no surprise what the final fitout cost will look like against the budget. At Shape we do a lot of work identifying areas of potential reductions in component prices and making our clients aware of the options, working together to maintain the intent but minimise the cost. Price point is always going to go hand in hand with Quality, which is why I would always put the right quality ahead of a cheaper option; otherwise it’s just a false economy.

pROCuRemeNtWhatever the selected item is, it needs to be available in the required time frame, the right quantity and in many cases to be available over time for future stores. It is difficult to manage specified items with long lead times from overseas suppliers in a 6-8 week fitout program. Shipping delays etc. create unnecessary uncertainty for all involved and added pressure on

Wayne Billings

shApe shopFitters


fea

ture

That said, there starts to become some real advantages with choosing a locally manufactured product and partnering with a fitout company that has a quality and competent manufacturing capability. Quality is definitely going to be far superior. Price may be a little higher but given the risks of the cheaper option the value is by far better and procurement is a one sided argument.

There are also a number of other advantages to using locally manufactured joinery and furniture.

The use of recycled materials including bricks and timbers has been very popular in recent times and while creating some great ambience and character to many fitouts, it also has a significant positive impact on our environment. What used to go into landfill at a rapid rate is now being picked apart, salvaged and reused and often the recycled product is far better quality than what is currently available.

The local economy is supported by people supporting local manufacturing. Manufacturing in Australia peaked in the 1960’s at 25 per cent. Today this sits below 7 per cent and with big companies like holden packing it in, the situation looks like getting worse. It’s now more important than ever to support local manufacturing and Australian made products.

Research and development is a key area. At Shape we spend a lot of time working with our partners developing exactly what it is they require from particular joinery or furniture items. This can be anything from the look and feel of the material being used to the practicality or functionality of a specific item. Small samples are always easier to look at, re-work and approve before investing in a custom designed piece therefore avoiding a potential costly mistake. This service can only be provided by a local manufacturer particularly given the tight time frames that this is normally undertaken in.

In my opinion there is a definite advantage of maintaining a high level of manufacturing capability locally at Shape. It provides a far better service to my clients allowing me deliver the highest quality product in the shortest time. It allows me to continue to develop products to suit their needs and it gives me 100 per cent control

“The local economy is supported by people supporting local manufacturing.”

over production and delivery. To me, that’s the power of local manufacturing.

Wayne Billings is the founder and Director of Shape Shopfitters P/L and has spent the past 17 years developing Shape’s local manufacturing capabilities. He is focussed on partnering with retail food franchisors and producing outstanding results while delivering exceptional service.

Shape are one of Australia’s largest retail

food shopfitters and excel at producing iconic

tenancies. Shape have completed hundreds of

fitouts and continue to work with many major

retail food brands Australia wide.


P: 03 9432 1044

W: www.shapeshopfitters.com.au



trAining: ThE kEy TO MInIMISInG LITIGATIOn AnD BUSInESS FAILURE

steven ClAre

Australians love franchises, we have the highest number of franchises per capita in the world, contributing $168.7 billion

to the Australian economy and employing around 561,000 Australians.

Whilst there is a high success rate amongst franchisees, the amount of legal disputes is still high, with 21 per cent of franchisors involved in disputes, and a median of 2 franchisees in dispute with a franchisor - the main reason being lack of franchise compliance. [1] Unfortunately, the end result of some of these disputes is business failure.

Ralph Anania, an executive member of MyAFSA (Australia’s first Franchise Alliance) said many

people purchase a franchise upon retirement investing millions to “buy themselves a job”. But without the necessary business skills and knowledge there is the potential for litigation, or at the very worst - the loss of life savings.

“In the past, some franchisors have had the attitude of ‘my job is done once I’ve sold a franchise and handed it over to the Franchisee, with no more responsibility taken’. But franchisees need training, marketing and business support in order to succeed,” said Ralph.

One of the reasons McDonalds franchises are so successful is the training McDonalds offers. hamburger University, founded in 1961, emphasises consistent restaurant operations

procedures, service, quality and cleanliness. It has become the company’s global centre of excellence for McDonald’s operations training and leadership development, graduating restaurant managers, mid-managers and owner/operators. [2]

But many franchisors lack the budget, resources and knowledge to offer good quality training for their franchisees. So franchisees often experience a business knowledge gap, and this can result in litigation - or worse - business failure.

The Federal, State Government and the ACCC have sought to rectify the issue of franchisors and franchisees not acting in good faith by introducing

Steven Clare


amendments to the Franchising Code of Conduct, and enforcing the changes with penalties of up to $51,000, infringement notices of up to $8,500, and giving the ACCC the power to enforce amendments and penalty system without seeking to obtain a court order.

Whilst these changes have been necessary to streamline the franchise industry, the knowledge and business skill-set gap remains, and training has become even more important than ever.

Ralph Anania trained on the job with his father from an early age in their family owned business – ‘Anania’s Quality Fruit Centre’ in St Marys.

“Growing up, I worked before and after school. My father was my greatest teacher, and this is when I learnt some of my greatest lessons, particularly around respect and integrity.

“During those early years, I observed my father’s business skills like a hawk, not realising that many years later, this would help pave the way for my own entrepreneurial future. I remember going to the Sydney Markets early each morning and watching my father negotiate with suppliers and then explaining to me how important it was to make sure you paid the right price for produce. This taught me to respect money as you have to work hard for it. I also learnt how important it is to employ good staff that share the same values and levels of respect.”

By the time Ralph was 20 he had bought his own store (a harris Farm fruit market franchise) with sales of $1million per year. Five years later, in 1989, it rated in the top ten produce stores in the state with sales approaching $10 million.

he credits this success to selling quality produce, excellent customer care, and giving the customers a good experience, which brings the customers back.

Ralph then went on to enter the wholesale sector, and in 1994 he was approached by an IGA supermarket franchise owner for guidance on taking his business to the next level. Ralph’s changes doubled the store’s fresh produce sales within four weeks.

In 1999, after months of negotiations, Ralph acquired his biggest competitor and took his company sales to $25 million a year, servicing the IGA supermarket franchise chain. Using his wealth of experience, sales quickly approached $50 million.

This success saw Ralph searching the world for the most efficient distribution facilities. he then went on to build a state-of-the-art distribution facility in Sydney in 2004. This centre is still regarded as a leader in fresh produce logistics. And in 2006, Ralph was awarded ‘Entrepreneur of the year’.

Integral to the success of this distribution centre was a fully equipped training centre which helped Ralph’s customers, fresh produce retail outlets and franchises, grow their own businesses, a concept that grew his company’s annual sales towards $130 million.

After decades of business success, Ralph has developed a talent and a passion for teaching and motivating others. he now travels the world running training programs and is sought after as a business mentor.

he is also giving back to the franchise industry.

As a MyAFSA Executive, Ralph will be presenting

regular webinars on the MyAFSA website about

how to manage and grow a successful franchise.

The webinars will be structured in a logical

order and there will be various topics aimed at

franchisors around effective leadership and how

to better collaborate with franchisees, marketing,

understanding your competition, the importance

of key staff, etc.

The webinars also give franchisors an effective

training platform to offer their franchisees.

Giving franchisors a central location where

their franchisees can get important business

knowledge any time of the day or week to fit in

with their busy business schedules.

Their franchisees can benefit from webinar

training around creating and maintaining a good

work culture, negotiating, local area marketing,

sales, understanding your demographic,

understanding your product and developing

business and marketing plans, etc.

Webinar Topics like - effective leadership for

Franchisors; how to follow the direction of your

Franchisor whilst also being given the opportunity

to work in a collaborative manner; and creating

and maintaining a good work culture in small

business; are just some of the topics that will

harness harmonious relationships between

franchisors and franchisees, with the result

being happy franchisees and ultimately business

success.

Steven Clare, LLM Honours, Founder and CEO

of MyAFSA, brings a wealth of knowledge

to MyAFSA. He advises Boards on legal and

business strategy, presents information about

franchising and has been published in Business

Review Weekly.

MyAFSA is Australia’s first Franchise Support

Alliance bringing Franchisors, Franchisees

and SMEs together. It’s an online business

accelerator platform for all those who join as a

subscriber, bringing together thought leaders

and more into the one place to help franchisors

and franchisees succeed in their business.

For more information go to:

W: www.myafsa.com.au

[1] Franchising Australia 2014, Lorelle Frazer, Griffith University

[2] http://www.aboutmcdonalds.com/mcd/corporate _careers/training _ and _ development/hamburger _university.html

Ralph Anania (left) at his award winning Harris Farm fruit market franchise

http://www.myafsa.com.au

http://www.aboutmcdonalds.com/mcd/corporate


Some franchisors slip into the habit of issuing their own franchise documents internally and do not use a lawyer to

issue a range of legally binding agreements. They may have initially engaged a law firm to develop the franchise documents but then they prepare, issue and arrange for signing themselves as they continue to grant franchises, sign leases, issue licenses to occupy and the like.

wHy SOme FRANCHISORS ISSue tHeIR OwN AgReemeNtS This practice is more prevalent where the franchise fee and entry point is low – for example home-based or mobile franchises often under $100k. It appears some franchisors are concerned that the additional cost of engaging an external law firm for this ‘administrative’ task may be an impediment to recruitment. Although the franchisor can and generally does pass this cost on to the franchisee, they may still consider the

added cost could jeopardise the deal.

Is this a good idea? The obvious answer coming

from a law firm is ‘no’ – but not for the self-

interested ‘give us work’ reasons you may

assume.

tweNty peR CeNt OF dOCumeNtS NOt exeCuted CORReCtly

When our firm conducted an internal survey we

discovered that approximately 20 per cent of all

documents left to clients to execute themselves

(without guidance or supervision from a lawyer)

were not executed correctly – even when ‘sign

here’ stickers were provided in the documents! In

client’s archive records were documents that we

either needed to send back to be re-executed or

we had to obtain an authorisation to complete.

In most instances ‘part performance’ cured the

defect, but this still indicates the difficulties in

properly executing legal documents.

Most frequent errors were:

• Leaving commencement dates or dates of

agreement incomplete;

• not having two directors sign when the

company had more than one director;

• not having guarantor sections witnessed,

or having the guarantor sign in the ‘witness’

section;

• having the guarantor not sign the guarantee

section on the assumption that signing as a

director means that person has signed the

document;

• Missing signatures on a page (such as

a guarantor annexure or a certificate of

independent legal advice);

• not initialling annexures or appendices; and

• Documents signed by counterpart not

matching (ie. an earlier version being signed by

one party).

timothy mAk

the perils And pitFAlls

OF ISSUInG yOUR OWn FRAnChISE DOCUMEnTS



wHAt’S tHe RISk? If these errors occurred in a lease, most of them would be picked up (in registration states) by the registration authority when registration is attempted, and the documents would then be returned for re-execution (as many lessors and lessees have found out).

however if there is no external review of legal documents and the documents are executed internally without any supervision from an external or in-house lawyer, the chances of these kinds of errors being left undetected and corrected are very high, especially where no registration is required (such as with franchise agreements and licenses to occupy).

On a number of occasions we have had franchisors who have prepared and issued their own documents come to us to enforce a franchise agreement or sub-lease or license to occupy. They then find that the guarantor has not signed the relevant section, or the franchisee has not signed the certificate of independent legal advice, or has not signed the disclosure document receipt page, or signed and dated the disclosure document at the same time as the franchise agreement.

All these errors compromise (sometimes fatally) the ability to recover monies and/or enforce the agreement in a Court. We had a particular instance where a ‘basic’ business sale agreement was drafted internally essentially for the purchase of some stock and an unregistered business name. The vendor then came to us saying their accountant noticed the business sale agreement did not state that the business was being sold as a ‘going concern’. The accountant advised they must now issue GST invoices for the transfer of stock – 18 months after the sale – and lodge a revised statement to the ATO. This would have resulted not only in payment of tax they had not factored into the cost but in serious penalties for late lodgment of tax, had we not negotiated a mutual acknowledgement from both parties

Timothy Mak

confirming that the business was sold on a going concern basis.

Given the complexity involved in extracting parties from the mess of misunderstanding and confusion that can arise from such situations, it is simply common sense to leave the preparation and scrutiny of all legal documents to those who have a professional responsibility to ensure this is done correctly. And if they do not, have a legal liability attached to their failure to perform. As a law firm, we are required to have professional indemnity insurance and ensure – as a matter of professional service – that legal documents are legally enforceable and correctly executed.

For this reason alone, engaging a law firm is commercially prudent (whether or not it is our law firm that is engaged!). This applies even where the initial franchise fee is relatively small and the franchises turn over frequently – because these are the cases where mistakes and oversights tend to occur most often. The relatively small cost (to the franchisee) of engaging lawyers to prepare legal documents is an investment in ensuring the documents are enforceable when you come to breaching or otherwise enforcing the agreement.

OtHeR SeRIOuS RISkS ASSOCIAted wItH ISSuINg yOuR OwN legAl dOCumeNtS In addition to this, two other factors make a compelling argument for the external preparation of franchise agreements.

Frequent changes occur to the law which can impact on the franchise sector so franchise agreements can quickly go ‘stale’. Minor errors can easily creep in (such as old references to the Trade Practices Act when it has changed to the Competition and Consumer Act). These are trivial compared to the very significant issues that can arise from not having this important legal document as up to date as possible.

Much more serious examples in recent years

include the introduction of the Personal Property Security Act and the impact this has had on the procedures relating to charges and other encumbrances franchisors may elect to secure under the franchise agreement. We still see some franchise documents currently being issued by franchisors referring to outdated concepts such as fixed and floating charges or retention of title clauses for supply of goods to franchisee - and have no mention of the new regime.

Often franchisors will seek professional advice when they hear that the Franchising Code of Conduct has been amended or updated – but they do not realise that other legislation (such as updates to the Privacy Act, or the Personal Property Securities Act, or the legislation relating to registration and cancellation of business names) can also have a significant effect on the franchise business and must be reflected in updates to the franchise agreements and other legal documentation.

For example, what appeared to be a relatively minor administrative change to the electronic system of registering and transferring business names with ASIC several years ago became a serious headache for franchisors who previously used hardcopy consent forms from franchisees to cancel or transfer business names. These forms are now useless. Some franchise agreements issued by franchisors still do not adequately deal with the new electronic system of registering and terminating business names.

SO pROteCt yOuRSelF ANd yOuR BuSINeSS ANd lAwyeR up Law firms have a professional responsibility to ensure legal documents issued by the firm are up to date and reflect the current laws relating to all aspects of your franchise agreements. After all, that is what they are in business to do.

Finally, with the introduction in the new Franchising Code (January 2015) of infringement

AppROxImAtely 20 peR CeNt OF All dOCumeNtS leFt tO ClIeNtS tO exeCute tHemSelveS (wItHOut guIdANCe OR SupeRvISION FROm A lAwyeR) weRe NOt exeCuted CORReCtly.”



notices and penalties (up to $58,000 for pecuniary penalties), there is a real risk that relatively minor errors in franchise agreements and disclosure documents will draw the displeasure of the ACCC – a potentially costly event.

Ensuring your agreements are compliant with a range of legal acts and codes that pertain to the

FRequeNt CHANgeS OCCuR tO tHe lAw wHICH CAN ImpACt ON tHe FRANCHISe SeCtOR SO FRANCHISe AgReemeNtS CAN quICkly gO ‘StAle’.”

franchise sector is imperative to the successful growth of your business. And making certain their issuance and execution renders them effective and enforceable protects the enterprise value you are building, now and at some future exit point. A failure to do so may be uncovered in the due diligence a potential investor will conduct and can reduce the salability and value of your network.

Using a lawyer with franchise experience to manage your legal requirements is a simple, cost-effective risk mitigation policy that will serve you now and in the future as it is certainly cheaper than either remedial work or litigation.

For franchise systems issuing their own franchise agreements, we have to ask a couple of simple questions:

• Are you really aware of the risks of what you are doing?

• Is it worth the hassle as the cost is borne by your franchisees and you both warrant good documents you can enforce?

• Is it worth the penalties, both legal and commercial if you get it wrong?

As Red Adair the renowned oil well firefighter

famously said: “If you think it’s expensive to hire

a professional to do the job, wait until you hire an

amateur”.

Timothy Mak, Managing Partner of the

legal team at DC Strategy brings diverse

experience in franchise law from commerce

and international finance to Global Counsel for

several large international franchise networks

to intellectual property.

For 30 years DC Strategy has been the region’s

only end-to-end franchise consulting, legal,

recruitment, brokerage, brand, marketing and

technology firm. Franchise programs developed

by their highly experienced specialist teams

have built over $1.7 billion in enterprise value

for their clients in the last decade alone.DCS

have specialist franchise lawyers, franchise

consultants and trademark lawyers looking

after all your commercial, franchise legal and

IP and franchisee recruitment and brokerage

needs.


timothy mAk



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peter BuCkinghAm

inCorporAting sCienCe

As a Company Director of a franchise

system you may find yourself at

serious financial risk if the retail

locations that are selected turn out to be poor,

and with little logical process if challenged.

A site selection mistake costs the business in

terms of being a failure in many ways – bad

publicity, disgruntled franchisees and loss of

confidence in the system. As the franchisor, this

can become the ultimate problem, namely a

legal case aimed at showing negligence on the

Director’s behalf in the site selection process.

There have been a litany of legal cases over the

last 15 years, and whether you win or lose, it

will have created a huge amount of stress on

the business and the senior executives along the

way. Cases like Billy Baxter (sent the group into

liquidation), Lenards and Muffin Break all proved

extremely costly and detrimental to the business,

especially in these days of social media.

In an effort to minimise risk, I believe you should

be asking yourself:

1. Do you have a process for selecting sites?

2. Do you have any quantitative analysis to

support this?

3. Are there any sales prediction tools you use to

assist in this decision?

levelS OF ReSeARCH AvAIlABle tO A CORpORAtION.The more sites you have operating, the better the information and ability to have predictive tools to use in site selection should be. I have been a great advocate of process in site selection, probably built into me from my 20 years of oil industry experience.

I believe all businesses should be able to demonstrate a process they use in site selection, which probably covers as a minimum:

• Initial site identification

• Suitability from a demographic view

• Physical site suitability

• Economic feasibility

• Final approval.

In the oil industry, we had records going back 80 years that show how old depots had been agreed upon, and over 60 years (solo marketing started in the 1950’s) to show the justification on how a petrol station was selected and approved.

lOw SIte NumBeRS (5 – 20 StOReS)If you have 5 – 20 stores, you may be able to logically assess why the best sites are doing well, and the lower performers are not so successful.

At this level of stores, a company should be able to model the demographics around the stores, and see if the better stores match your perception of the customers in terms of demographic of the area.

A Check Chart can be formulated using a combination of customer perceptions, plus show the statistical results of the demographics of the best performing stores.

medIum StORe NumBeRS (20 – 50 StOReS)If you have 20 – 50 stores, maybe a percentage of those in the country, then you should have a much better Check Chart based on a larger

sample size. At these numbers you can undertake a regression modelling process to identify the drivers of the business, and then use some flexible logic to insert other variables you are confident assist in making better stores.

lARge NetwORkS (50 - 150 StOReS)For established large networks (50 - 150 stores); you can build a sales prediction model based on the sales being achieved by the network using regression modelling. This is done by a ‘Market Analysis’ where:

• All existing stores are surveyed. The survey can incorporate issues such as size of building, number of counters and tills, seating (if a food business), access, store visibility, signage visibility, parking spaces and convenience, nearest neighbours and other business generators, and many other items. A survey like this also produces digital photographs showing all aspects of the site, and gives a benchmark for comparison of stores and standards.

• Around 400 demographic variables are extracted for each store in the network either at different radii, by sales territories and/or by catchment areas.

• Competition and generators are then measured to determine which categories of business have positive or negative effects on sales. Possible distance effects, wherein the competitive or generative effect is only active within certain radii, are also examined.

• ‘Exposure’ is approximated based on traffic counts, signage and visibility, and a measure of pedestrian volume and flow.

• Sales information for all applicable outlets completes the dataset, plus any internal operations measures where available.

Statisticians then go to work to look for the best variables that explain the sales that are being achieved. Sales Prediction models

InTO yOUR SITE SELECTIOn

Peter Buckingham


typically incorporate variables from each of the above categories (survey data, demographics, competition/generators, exposure, and internal data). Though no guarantee can be given of individual results, most analytical companies would expect to obtain models that can be said to be 70 – 80 per cent accurate. The more consistent a brand is, the more accurate you would expect the results to be.

The typical graph displays all stores in a network, each point showing where that store sits in comparing the actual vs. predicted sales.

NetwORkS OF 150+ StOReS – NeuRAl NetwORkSThe large networks we work with usually extend past regression modelling, into the use of neural networks. This is often called artificial intelligence and works on looking for patterns in the data that allow it to combine and create new variables that give a better result than can be achieved from pure regression modelling.

One of our clients had over 200 stores all in strip shopping centres, and all selling the same product. Regression modelling gave us 78 per cent accuracy, whereas the neural network gave us an 86 per cent level of accuracy.

ApplyINg tHe SCIeNCe ONCe develOpedThe sales prediction model aims at predicting the sales on mature or established sites that have been open at least one year. In the oil industry, the sales of most service stations went through a ‘ramp up’ of 85 per cent year 1, 92 per cent year 2 and reached their full sales potential (100 per cent) in year 3. Different businesses will have different ramp ups. In the fast food industry, we have seen cases where with big opening promotions, some stores never again reach the sales level achieved in the first four weeks!

Once a Sales Prediction model is built, any new sites being considered can be run through the model to give a sales prediction at maturity. This

inCorporAting sCienCe

may be done by a consultant, or internally if the company has all the necessary resources. Our experience is most companies tend to leave that with the consultants as:

• They do not have the internal statistical expertise to run the models.

• They do not have all the data necessary. Often the model includes some variables from Census 2011 and ABS Business Counts.

• Staff changes, or staff are busy or on holidays, and they cannot keep up a 12 month service, but external consultants can provide these services all year round.

The Sales Prediction Modelling then becomes an integral part of the approval process that a company undertakes. It should not be seen as the only part of the decision, as exceptions do occur, however it should be seen as a good ‘flag’ as to what is expected.

Though this is never 100 per cent accurate, it should allow the company to have a set of ranges that guide further decisions in the process. For example, a sales prediction in a range below the network Average would provide a strong warning against proceeding, and special circumstances would need to be demonstrated to achieve approval. On the other hand, if a new store’s prediction is in the top 25 per cent of network average, then a higher level of comfort in approving the proposal can be felt.

StRAtegIC NetwORk plANNINgWith a sales prediction tool in place, and the knowledge of what makes for your good stores compared to the poor stores, you are now in a position to undertake a Strategic network

Planning (SnP) process to formulate how you can

expand in the future.

SnP is all about prioritising areas and

opportunities, or having a plan for the network

Development Team to follow. This leads to lists

of shopping centres, strips, CBD areas and other

opportunities, prioritised so that there is a clear

path to follow.

SummARy

Use logic and science to make better site

decisions. Implementing a Site Selection and

a Strategic network Planning process can be

very good insurance, and should help in making

better decisions for the long term. As a Company

Director, you need to know there is methodology

in store and site selection if you have any

involvement with retailing, be it operating a

company owned chain of stores, or a franchise

network. Investing in having a good process for

retail site selection is a good insurance policy, and

should minimise risk.

Peter Buckingham is the Managing Director

of Spectrum Analysis Australia Pty Ltd,

a Melbourne based geodemographic

consultancy. Spectrum specialises in assisting

clients with analysis and decisions relating to

store and site location using various scientific

and statistical techniques.

Peter’s background was in the oil industry,

with a strong focus in property issues, both

nationally and internationally.

T: 03 9830 0077


InTO yOUR SITE SELECTIOn


A-z direCtory


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