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Beyond Main Street: Franchising Strategies for Indigenous
Business Development
Cary Di Lernia
Lecturer
The University of Sydney Business School
The University of Sydney
Sydney Australia
Andrew Terry
Professor of Business Regulation
The University of Sydney Business School
The University of Sydney
Sydney Australia
Presented at the Economics and Management of Networks Conference
Agadir, Morocco
21-23 November 2013
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Abstract
Australia’s Indigenous population today faces disparities which tarnish Australia’s image
as ‘the lucky country’: a life expectancy of 10 years less than non Indigenous Australians,
lower education standards, poorer health, greater unemployment. The list goes on.
Having developed a culture which enabled them to survive, and, indeed thrive, for over
60,000 years in all areas of Australia’s massive landmass and challenging climate and
conditions, Indigenous culture has foundered upon the rock of european invasion and
settlement just over two hundred years ago. Successive Australian governments from
both sides of the political spectrum can claim precious little success in effectively dealing
with the challenges faced by Indigenous Australians living within, and alongside, modern
europeanised and increasing asianised Australia. With over $25bn in services being spent
in 2010 – 2011 for Australia’s 575,000 reported indigenous people ($44,128, or about
€30,000, per capita), yet without the attendant results one would expect of such
expenditure, government indigenous policy cannot be regarded as a success.
There is increasing recognition from Indigenous leadership that there is a need to find a
way out of welfare dependency and that economic empowerment is likely to be a more
effective strategy: ‘We need to be participants, rather than bystanders… we need to
develop Indigenous businesses and entrepreneurs’. While a multi-pronged strategy will
need to be employed there are, given the significant disparities which exist, specific
additional barriers which prevent Indigenous Australians from participating in the
economy as any other Australian. In the face of the basic lack of conception of Western
business concepts which many take for granted, a lack of basic educational skills and a
dearth of indigenous business role models, targeted strategies will be required. This paper
analyses the role of franchising, albeit not as practised in Main Street Australia, in
addressing Indigenous business disenfranchisement.
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1. Introduction
Australia is by any measure a lucky country. It has bountiful natural resources, a high
standard of living, and legal, economic and commercial systems which enable the
realistic aspirations of the vast majority of its 23 million population to be realised.
However, Australia’s Indigenous population – the world’s oldest surviving culture which
dates back 60,000 years, some 59,760 years before white invasion and settlement – is
largely disenfranchised. On any measure very significant disparities exist between
Indigenous Australians and non-Indigenous Australia. This sad reality continues despite
significant mining royalties which flow into remote communities by virtue of Native Title
legislation granting land rights to Indigenous communities and a massive welfare budget.
There can be little argument with the proposition that ‘economic disadvantage leads to
social dysfunction and has a dramatic negative impact on education, health and general
well being’.1 The plight of Indigenous Australia is stark and compelling proof of this
proposition. A massive welfare budget is recognition of the extent of Indigenous
disadvantage but even the most generous government thinktank would question its
effectiveness in lifting Indigenous Australia from its current predicament. New models
need to be considered. In this context the words of Kirk Magleby resonate:
The development community should wean itself away from aid models in favor of genuine
enterprise sustainability through pervasive local ownership.2
There can be little argument with the proposition that ‘increasing Indigenous participation
in enterprise development activity would provide widespread economic and social
benefits for Indigenous communities’.3 To this end, there is an extensive range of
government, industry, and community organizations offering specific enterprise support
programs and services to Indigenous people – so much so that the government itself has
recognised that ‘the sheer number and complexity of programs and services [is] often
1 Gunya Australia, Indigenous Economic Development Scheme: A solution to create employment opportunities within Indigenous communities (Discussion Paper, 2007) 3. 2 Kirk Magleby, Microfranchises as a Solution to World Poverty (31 October 2013) Brigham Young University, Ballard Centre for Economic Self-Reliance <http://marriottschool.byu.edu/selfreliance/wiki/UserFiles/Kirk_Magleby.pdf> 17. 3 Gunya Australia, Indigenous Economic Development Scheme: A solution to create employment opportunities within Indigenous communities (Discussion Paper, 2007) 3.
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confusing and daunting to emerging Indigenous entrepreneurs’.4 What is clear is that
despite the “smorgasbord”5 of support programs and services to encourage Indigenous
business participation, successive governments, both State and Federal, have ‘failed to
engage Indigenous Australians in sustainable economic development’.6 There is a need to
consider new models. It is against this complex milieu that franchising – albeit not in its
familiar downtown main street guise – is proposed as an Indigenous enterprise
development strategy worthy of serious consideration. While governments in developing
countries encourage franchising as a vehicle for stimulating economic growth there has
been much less attention paid to franchising by governments in developed countries as a
strategy which can be applied to foster business development in Indigenous communities.
This paper considers the role of franchising in Indigenous business development in
Australia and suggests that while franchising in any iteration cannot solve the problem of
Indigenous business disenfranchisement, it would be remarkable if it was not part of a
solution.
2. The Indigenous Business Challenge
For too long Australia has held back remote Indigenous people on the fringes of the economy,
trapping them in a hopeless circle of poverty, with governments adopting a socialistic and “noble
savage” approach. We must have the courage to treat remote Indigenous populations like other
human beings who can – indeed must – play a role in Australia’s economic future.7
Indigenous Australia
Australia’s Indigenous nations – acknowledged as having developed the world’s oldest
surviving culture8 – have lived across the full breadth of Australia’s massive interior and
along endless stretches of its vast coastline and developed successful modes of existence
which saw their culture survive and thrive over a period of 60,000 years. However, since
4 Department of Employment and Workplace Relations, The Resources Guide: A Guide to available resources and services to assist indigenous enterprise development (Australian Government, 2006) 3. 5 Ibid. 6 Gunya Australia, Indigenous Economic Development Scheme: A solution to create employment opportunities within Indigenous communities (Discussion Paper, Gunya Australia, 2007). 7 Warren Mundine, ‘Indigenous commerce must come next’, Australian Financial Review (Australia), 10 October 2012 available at
<http://www.afr.com/p/opinion/Indigenous_commerce_must_come_next_y6F2m9YFWcWXPkIZ9RYj7L>. 8 Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 17.
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European invasion and settlement in 1788, Indigenous Australians have faced
overwhelming difficulties which have impacted on their ability to flourish on land which
has long played a definitive role in their existence. Successive Australian governments
from both sides of the political spectrum can claim precious little success in effectively
dealing with the challenges faced by Indigenous Australians living within, and alongside,
modern Australia which is primarily westernised, but increasingly ‘asianised’.
Dealing with the challenging climatic conditions posed by Australia’s geographical
location and landscape saw the development of a deep relationship between Indigenous
peoples and the land which sustained them, with marked differences in cultural, and
indeed survival, practices between coastal and desert areas. The interconnectedness
between people and their land shaped what might be referred to in the singular as
‘Indigenous culture’ although it is inaccurate to assume a single defined, homogenous set
of social practices across all Indigenous peoples. Indeed, indigenous Australia is
characterised by massive diversity. At the time of the English invasion of Australia over
500 Indigenous nations existed across Australia. Each nation had different cultural
practices and beliefs unique to the exigencies facing that particular group in their
particular area.9 To give the reader a sense of the scale here: consider the cultural
diversity across Europe, from Portugal in the west, up to the UK, and across to the
Balkans and Romania in the east. To refer to each country’s cultural practices, norms and
beliefs with the homogenous ‘European’ does a great disservice to these unique bodies of
culture and their history. Likewise for Indigenous Australia, which covered an area larger
than the body referred to as ‘Europe’ today. In that space, some 145 distinct languages (as
distinct as Spanish and Italian and French) were spoken.
The variegated richness of Indigenous Australian cultures did not make much of an
impression on early English colonisers and Australia was regarded as Terra Nullius – an
‘unsettled’ land belonging to no one. The playground adage describes the situation well:
‘finders keepers, losers weepers’. This perspective, dictated by western conceptions of
property and cultural practices and modes of existence around it, ignored Indigenous
interaction with country, and set about colonising what was seen as empty land waiting to
9 ‘Although Indigenous cultures around the Australia shared many values and has similar worldviews, great diversity was also present, explained to a large extent by the vastly different environments and climates across Australia’: Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 9.
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be claimed.10 Indeed, because Indigenous peoples “built neither cities nor monuments,
European cultures have tended to describe their societies as ‘primitive’”,11 a view that
“fails to appreciate that, although many modern cultures are thousands of years old,
Aboriginal cultures have been around for more than 60,000 years and, over that period of
time, were able to manage all of the major issues that face a society – social cohesion,
environmental destruction and degradation, sustainable population growth and renewable
resources”.12
What is clear is that white settlement has had a negative impact to say the least on
Indigenous Australians. Colonisation ‘devastated Indigenous people and cultures –
populations were decimated, traditional lands and means of self sufficiency were taken,
and government policies aimed at assimilation legitimised the taking of Indigenous
children from their families so they could grow up as ‘white’ Australians’.13 Given the
depth of Indigenous connections to traditional lands, invasion and colonisation marked
the first step in the debasement of Indigenous culture. The ability to practice ceremonies,
manage their land and feed and shelter their families was almost instantly taken from
Indigenous peoples. Indeed, many Indigenous communities were ‘shifted off their
traditional lands and eventually clustered on missions and reserves, the edges of larger
towns and in communities within urban areas’.14
Indigenous disadvantage
The brutal impact of the introduction of western diseases (not to mention practices around
alcohol and tobacco) has seen swathes of the Indigenous population wiped out as they did
not have immunity from such diseases. This had the resulting effect that ‘social structures
of Indigenous communities were severely disrupted. Health was further impacted by the
impact of European settlement, particularly farming practices that destroyed traditional
food bases. So from the earliest days of the colony, a cycle of poor health began in
Indigenous communities’.15
10 Land rights were not acknowledged until 1993 in the Native Title Act 1993 (Cth) following the High Court decision in Mabo and Others v Queensland (No. 2) (1992) 175 CLR 1 which rejected the fiction that inhabited land could be terra nullius. 11 Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 59. 12 Ibid. 13 Ibid, 7. 14 Ibid, 24. 15 Ibid, 361.
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The Indigenous population of Australia at the time of invasion and settlement in 1788 has
been estimated to have been approximately 1 million people. At the date of the 2011
census it was estimated that the resident Indigenous population was 575, 000, or 3
percent of the Australian population.16 Today, 32 percent of Australia’s Indigenous
population live in cities, while 43 percent and 25 percent respectively live in regional
communities and remote areas. Despite the fact that the majority of Indigenous people
live within, or in close proximity to, modern westernised Australia, living standards of
Indigenous Australians fall well below those of other Australians. Indigenous Australians
exhibit the poorest levels of health of all Australians, with life expectancy rates between
Indigenous and non-Indigenous males and females differing by as much as 11 years on
average.17 Indigenous education is also in what might only be described as a woeful state,
despite strong recent improvements, with completion rates for schooling nearly half that
of non Indigenous students.18 Unemployment rates are higher amongst Indigenous than
non-Indigenous Australians. They are much more likely to be employed in low-skilled
occupations such as labouring and trades (78 precent vs 60 percent) and twice as likely to
work part-time (75 percent vs 39 percent) than non-Indigenous Australians.19 This is also
reflected in self-employment rates with only 6 percent, as compared with 17 percent of
non-Indigenous Australians who are self-employed in their own businesses.20 The result
is a vicious cycle:
All the socioeconomic factors that affect the lives of so many Indigenous people – poor health,
literacy and numeracy, housing, education and income – create a cycle of poverty poor health,
which can be exacerbated by poor-quality housing and overcrowding, affects the ability to
engage in education and employment.21
The plight of indigenous peoples has not gone unnoticed and as public awareness of the
scale of the crisis in Aboriginal Australia has escalated during the past decade so has the
reach of government:
16 Australian Bureau of Statistics, Estimates of Aboriginal and Torres Strait Islander Australians (June 2011) Australian Bureau of Statistics <http://www.abs.gov.au/ausstats/[email protected]/mf/3238.0.55.001>. 17 For the 2005–2007 period, life expectancy at birth was estimated to be 67 years for Indigenous males and 73 years for Indigenous females, representing gaps of 11.5 and 9.7 years, respectively, compared with all Australians. Australian Institute of Health and Welfare, The health and welfare of Australia’s Aboriginal and Torres Strait Islander people, an overview 2011 (2011) Australian Government <http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=10737418955>. 18 Australian Bureau of Statistics, The Health and Welfare of Australia's Aboriginal and Torres Strait Islander Peoples (17 February 2011) Australian Government <http://www.abs.gov.au/AUSSTATS/[email protected]/lookup/4704.0Chapter350Oct+2010>. 19 Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 373. 20 Ibid, 375. 21 Ibid, 357.
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Under pressure to address the deepening levels of disadvantage, bureaucracies went into
overdrive, programs multiplied, money was spread over more and more policy platforms.22
There is nevertheless wide agreement that the aid budget has, especially for remote
communities, has yielded "dismally poor returns". Robinson has argued that:
Past approaches in Indigenous affairs had "clearly failed". Despite a plethora of "complex and
confusing" Indigenous programs, many lacking evidence of performance and effectiveness, the
health, housing and employment status of Aboriginal people had steadily worsened.
Rationalisation in Indigenous programs was needed, and mainstream service providers must be
held accountable to Indigenous people.23
It has even been argued that ‘benevolently intended, though theoretically flawed,
economic welfare programmes have created havoc in Indigenous societies’.24 A new
approach to the problem which has increasingly been gathering steam is the idea that
many issues faced by Indigenous Australians could be and should be dealt with through
their economic status – that rather than being placed on the drip feed of welfare, they
should be assisted to start their own businesses. While expenditure on health and
education programs is essential, it has been argued that ‘the vast majority should be going
into lifting our economic status, getting us into enterprise development, getting us skin in
the game’. 25 A former head of a government Indigenous agency eloquently explained
almost four decades ago why economic empowerment is necessary:
[W]e need to find a way out of welfare dependency. We need to find replacements for the
traditional economic activities of the past… our young people are growing in number and they
will need something productive and meaningful… we need to be participants, rather than
bystanders… we need to develop Indigenous businesses and entrepreneurs.26
22 Natasha Robinson, ‘Money that fails to serve change’, The Australian (Australia) 26 May 2012 <http://www.theaustralian.com.au/national-affairs/Indigenous/money-that-fails-to-serve-change/story-fn9hm1pm-1226367361643>. 23 Ibid. 24 Craig Furneaux, Indigenous Entrepreneurship: An Analysis of Capital Constraints <http://eprints.qut.edu.au/12947/1/Furneaux_and_Brown.pdf> 134 (citation omitted). 25 Natasha Robinson, ‘Money that fails to serve change’, The Australian, (Australia) 26 May 2012 <http://www.theaustralian.com.au/national-affairs/Indigenous/money-that-fails-to-serve-change/story-fn9hm1pm-1226367361643> quoting mundine.
26 Former ATSIC Chair, Mr Gatjil Djerrkura, cited in Craig Furneaux and Kerry Brown, ‘Australian Indigenous Entrepreurships: A Capital-based View’ (2008) 9(2) International Journal of Entrepreneurship and Innovation 133-144.
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Indigenous business
Given that the traditional Indigenous conception of business activity was and largely is
completely different to that underpinning westernised modes – with the collectivist,
cooperative nature of the former folding in the face of the dominant individualised latter
– it is no real surprise that it has taken time for Indigenous peoples to respond to the
change in circumstances confronting them and the cultural values they have held sacred
for 60,000 years. Indigenous engagement with westernised business forms has produced
poor role models. Having been pushed off their land and herded into missions, many
Indigenous people began working on European pastoral stations set up on that very land.
Schaper notes that
Most of this work was unpaid; remuneration was largely in kind. It was not until the 1940s that
Aborigines began to receive monetary wages for this work, and such a practice did not become
widespread for another twenty years. In contrast, Aborigines living in urban areas found
themselves in a variety of poorly paid jobs, where work was usually marginal and uncertain.
Participation in the white Australian economy almost exclusively took the form of providing
labor for European businesses. There were few opportunities for Aborigines to establish their
own independent enterprises. As a result, many became dependent on welfare programs
provided by governments and charity organizations for their survival.27
When matched with the lack of basic factors including education and health which act as
‘pre-requisites’ for successful participation in the modern Australian economy,
Indigenous entrepreneurship and business has not been able to break through social
disadvantage as it may have been able to in indigenous cultures in other countries which
have similar basis to Westernised modes.
When compared with non Indigenous entrepreneurs and business people, the latter face
significant hurdles in any attempt to participate in the economy as anything other than a
paid worker (which itself can be a struggle for reasons of entrenched disadvantages).
Becoming an entrepreneur requires the surmounting of another set of factors, constituted
by those usually faced by any entrepreneur as well as additional factors specific to
Indigenous peoples. Factors critical to success in starting a business include education,
financial literacy and access to finance. Due to the history of Indigenous peoples in this
27 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 88.
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country these factors are in short supply.28 Relatively limited exposure to Western
markets and business owners makes it difficult for many Indigenous peoples to begin to
understand how such businesses work. The fact that very few Indigenous Australians
have family members who have started their own businesses and therefore lack close
networks of business role models29 prevents familiarity with, and no doubt interest in,
starting one’s own business. Indeed traditional cultural practices around household capital
management and obligatory sharing mean that what many might consider basic financial
management skills are not so much non-existent but rather not applicable in many
Indigenous communities. None of this bodes well for access to financial capital in
modern markets, with low inter-generational transmission of wealth due to Native Title
laws and cultural practices around them30 and potential prejudice or at the very least the
perception of a lack of cultural sensitivity from financial institutions working against the
ready availability of capital necessary to begin and continue operating a small business.31
A recent Report by the Australian Taxation Office on Indigenous business owners in
Australia32 recognises that ‘unique’ challenges face traditional Australians considering
opening a business including business relationship constraints, a lack of business
networks and a culture of obligatory sharing. The former manifests itself in
discrimination, whether intentional or as the result of ingrained prejudices arising from
seemingly widely held cultural beliefs on the part of non-Indigenous Australians about
Indigenous peoples to the point where ‘many Indigenous small business owners… felt
that using non Indigenous accountants and business mentors provided greater credibility
and internal security’.33 The report cites the words of an Indigenous interviewee:
28 Dennis Foley, ‘The function of Social (and Human) Capital as antecedents on Indigenous entrepreneurs networking (2010) 35(1) New Zealand Journal of Employment Relations 65-87, 66; Craig Furneaux and Kerry Brown, ‘Australian Indigenous Entrepreurships: A Capital-based View’ (2008) 9(2) International Journal of Entrepreneurship and Innovation 133-144, 133. 29 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 91; Don Fuller, Myles Howard and Eileen Cummings ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1-21, 4. 30 Craig Furneaux, Indigenous Entrepreneurship: An Analysis of Capital Constraints <http://eprints.qut.edu.au/12947/1/Furneaux_and_Brown.pdf> 134, 136; Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 91.
31 Aboriginal people have historically had little opportunity to accumulate capital, and many were paid in kind rather than cash until thirty years ago. Furthermore, Australian banks have been slow to recognize Indigenous businesspeople as a specific market and to tailor their products accordingly. As a result, most capital must be obtained from government agencies or Aboriginal community organizations. Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 90. 32 Australian Taxation Office, Indigenous small business owners in Australia (Commonwealth of Australia, 2009) Available at http://www.ato.gov.au/Business/Starting-and-running-your-small-business/In-detail/Industry-specific/Indigenous-small-business-owners-in-Australia/. 33 Ibid, 10.
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Indigenous business people walk into a world of prejudice and stereotypes which is so out of
whack with the notion of Aboriginal people being successful entrepreneurs… They had to walk
into a world which is replete with stereotypes that created all sorts of problems for the business
itself: in terms of its relationship with suppliers… credibility within marketing and gaining a
profile within their industry sector, it’s very difficult.34
This makes it harder to develop strong business networks which might provide basic
financial, informational and advisory support to the business. While migrant communities
are apparently able to provide such support to each other, Indigenous peoples with the
education, skills sets and capital to assist others in their communities in a way useful for
participating in a modern economy are in short supply. There is also a limited number of
qualified Aboriginal accountants, lawyers, and other professional business advisers that
managers rely on for ‘culturally-sensitive advice’.35
Instead, the networks that are available are premised on different cultural values –
including obligatory sharing and gift giving. What would have been a rational economic
practice for thousands of years might actually work against Indigenous entrepreneurs
trying to make it in a westernised system operating on a differential basis. This has come
to be referred to by Indigenous communities as ‘humbugging’ whereby those Indigenous
peoples who have attempted to make it in western economic systems are continually
harassed by members of the family and extended family for what they have made. This
has given rise to the practice of Indigenous peoples opening multiple bank accounts, one
with the majority of their earnings and another with a portion of it which they can direct
humbuggers to.
Given the effect that social networks can have on the success of a small business, the
impact of features of Indigenous culture noted above on the social capital of Indigenous
business aspirants cannot be underestimated.36 Foley has suggested that:
34Ibid. 35 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 90. 36 Dennis Foley, ‘The function of Social (and Human) Capital as antecedents on Indigenous entrepreneurs networking’ (2010) 35(1) New Zealand Journal of Employment Relations 65-87, 67 comments that:
“it is generally accepted that social networks can have a strong influence on entrepreneurial activity, influencing the decisions which entrepreneurs take and their chances of success …Entrepreneurs obtain resources from those in their social networks and it is the composition of an entrepreneur's network that determines available resources.”
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For the Indigenous entrepreneur social capital is the sum of the actual and potential resources,
both embedded within and available through their own sociocultural networks, that to a large
degree is subject to colonisation and the contemporary socio-cultural environment within the
dominant society. The dominant society determines the Indigenous entrepreneur's ability to
function outside of or within structures of cultural oppression, often born of negative
stereotypes. Social capital is also subject to both 'material' and 'relational' functions within a
varying trust-intensive relationship between the subject parties.37
The problem arising from this more detailed conception is that on the one hand, the
elements of Indigenous culture that might be of assistance to the Indigenous entrepreneur
are fading due to the continuing effects of European invasion, and that as a result of the
decaying or at the very least differential influence of same that elements which survive
are a hindrance to westernised modes of business operation rather than a benefit. While
myriad programs exist for Indigenous peoples, many of which are designed to facilitate
business and entrepreneurial ventures, the level of Indigenous participation in the
economy at this level raises serious questions as to their efficacy. Relatively little
research has been conducted that addresses questions such as the appropriate scale and
types of businesses most likely to have some chance of commercial success within
Indigenous communities in Australia38 and there appears no real evidence that any
change has occurred which might draw more Indigenous peoples into the economy.
3. A Franchising Strategy for Indigenous Business Development
Franchising is an ‘increasingly popular form of economic organisation providing an
alternative means of expanding an existing business or an alternative means of entering
an industry’.39 It is a method of business operation which has revolutionised the
distribution of goods and services in virtually all industry sectors and has transformed the
business landscape of most countries. Because a franchisor provides a franchisee with not
only a proven business concept and system, but also with training, and ongoing support in
relation to all operational and managerial aspects of the business it a particularly effective
37 Ibid, 70. 38 Don Fuller, Myles Howard and Eileen Cummings ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1-21, 2. 39 Commonwealth of Australia, Finding a balance: towards fair trading in Australia (May 1997) House of Representatives Standing Committee on Industry, Science and Technology, 3.4-5.
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strategy in encouraging SME development in developing countries. The franchisee gains
from access to ‘established business systems, developed products or services, training and
business advice, group advertising and lower risk’40 The appeal of franchising for a
franchisee lies, in the words of Australia’s recent Opportunity not Opportunism report, in
‘the potential benefits of being able to conduct the business under an established brand
name using tested operational systems’41 and it is this characteristic that makes
franchising an effective strategy for SME development. The advantages may be
particularly significant for Indigenous business start ups in which role models and
networking are sufficient considerations. Foley argues that
Networking is an almost essential attribute. It enables the participants to develop and make
use of relationships and in so doing provide increased opportunities to build credibility, a
positive image and customer access. Networking provides role models, industry advice, the
sharing of experiences and access to suppliers and customers. Networking enhances the
Indigenous entrepreneurs’ ability to succeed and survive.42
Franchising of course enshrines networking as a basic ingredient. But despite the proven
credentials of franchising as a business development strategy it would be naïve to suggest
that its success in empowering minority groups and disadvantaged sectors of developed
countries, as well as in promoting SME development in developing countries, transfers
seamlessly to Australia’s Indigenous peoples. The entrenched disadvantage of Indigenous
communities including their extreme remoteness and massive cultural diversity requires
solutions more creative than Main Street concepts. Franchising is, however, a very
adaptive business strategy. Its capacity for reinventing itself is a matter of record. Indeed
its continual adaptation to accommodate changing circumstances and market conditions
is a major factor in its increasing influence throughout the world. The original model has
been through many iterations. The franchising relationship is based on a prescribed
business model developed by the franchisor and carried out under the franchisor’s
guidance and oversight by franchisees who are granted the right to trade under the
franchisor’s brand and using its system. But the manner in which the franchise model is
implemented is nevertheless capable of infinite variation. Franchising is not a business in
40 ibid 41 Parliamentary Joint Committee on Corporations and Financial Services, Opportunity not opportunism: improving conduct in Australian franchising (Australian Government, 2008). 42 Dennis Foley, Understanding Indigenous Entrepreneurship: A Case Study Analysis (PhD Thesis, University of Queensland, 2005) <http://espace.uq.edu.au/eserv/UQ:179923/Foley_V_24_PhD_Thesis_6_April_2005.pdf> 230.
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itself but is a method of doing business – an innovative and dynamic method of
distributing goods and services. It encompasses a wide variety of different practices that
are used in different ways, and with varying degrees of sophistication, in virtually all
industry sectors. It is an essentially practical strategy which, in the words of Martin
Mendelsohn, ‘did not derive from one moment of inventiveness by an imaginative
individual [but from] the solutions developed by businessmen in response to the problems
with which they were confronted in their business operations’.43 It is franchising’s
capacity for adaptation and innovation which drives its relentless development and it is
this quality which offers the opportunities for its role in contributing to Indigenous
business development.
Franchising’s success as a business strategy is a result of the manner in which it harnesses
the key business drivers – systems, management, technology, marketing, networks,
brands – in combination with the franchisee’s proprietorship and the franchisor’s training
and ongoing support. But, despite its impressive credentials, franchising is not a universal
or inevitable solution to the challenge of small business empowerment. While franchising
relationships can be built at different levels of sophistication to accommodate practical
commercial and cultural realities, the challenges of Indigenous business development,
particularly in remote communities, may require solutions that are far removed from a
traditional franchise model. While social franchising, micro franchising, tandem
franchising, community franchising and quasi-franchising models may be applied in the
Indigenous space, the solutions are likely be variegated and owe more to practical
demands than theoretical constraints. It may be that it will be franchising principles rather
than franchising itself that will provide the most effective solutions at least in the short to
medium term. What is surprising is that franchising and franchising principles have
received so little attention in government policy surrounding the economic development
of Indigenous Australia.
4. Facilitating Conventional Franchising
While conventional franchising may be a bridge too far for Indigenous business
development in a remote community, in an urban environment conventional franchising
43 Martin Mendelsohn, The guide to franchising (Thomson Learning, 7th ed, 2004)
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techniques may be more effectively employed. Public and private sector strategies to
encourage Indigenous business participation through franchising can undoubtingly be
better exploited.
At the private sector level a range of admirable and worthwhile initiatives are developing
among socially aware franchisors. As social responsibility becomes more prominent,
franchise systems –in common with the wider business community – are developing
strategies to give back to the local community. Many franchise systems donate leftover
product to the disadvantaged, including the Indigenous disadvantaged in local
communities and the provision of services on a pro bono basis is not uncommon.
However there are less known initiatives relating to the development of franchising
programs specifically targeted at minorities. While individual systems may provide
financial assistance to assist minorities acquire franchises, and or institute diversity
awareness and training programs, and have a minority employee recruitment policy, the
developments are ad hoc. A particularly interesting initiative is Australia’s peak
franchising body, the Franchise Council of Australia, working with the Australian
Football League to matchmake Indigenous football players at the end of their
professional football careers with appropriate franchise systems to facilitate their post-
football transition to business. Government support possibly through tax incentives to
encourage Indigenous franchisees is a matter worth serious consideration.
At the public level, a “smorgasboard” of support programs and services to encourage
business participation exists. It is nevertheless the unfortunate reality that the efforts of
successive governments both State and Federal have “failed to engage Indigenous
Australians in sustainable business development”.44While franchising does not appear to
be a particular focus of such programs, it is among the mix. The Victorian Aboriginal
Economic Development Group appears forward looking in its approach, stating that:
… there are also business models that offer a more supportive and accessible way to business
ownership such as franchises and joint ventures. Employees working in a franchise have the
opportunity to lease and/or purchase a business. Ongoing support is then provided to ensure long-
term business success. Targeted promotion and support by Government and franchisors should be
provided to enable more Aboriginal people to operate a franchised business… [and that ] tailored
44 Gunya Australia, Indigenous Economic Development Scheme: A solution to create employment opportunities within Indigenous communities (Discussion Paper, 2007).
15
support is needed to give more Aboriginal people access to commercial finance and business
services, and to encourage more franchises and joint ventures involving Aboriginal Victorians.45
The report noted types of support of particular benefit to Indigenous groups: a finance
broker to determine appropriate finance (including microfinance); business planning,
accredited business training, and mentoring; a loan underwritten by the Government in
conjunction with accredited business training if required; entry into a business incubator;
social investment funds for community enterprises; accredited business training and
planning; and ongoing business mentoring and post-establishment support. The report
recommended that the government provide ‘targeted support to assist Aboriginal
employees to lease and/or buy franchises including awareness raising, business
preparation, an underwritten loan, accredited business training, and ongoing
mentoring’.46
The most comprehensive example of a government using franchising as a deliberate
policy for the economic employment of a disadvantaged sector is that of Malaysia where
franchising is a key government economic strategy to increase indigenous Bumi Putra
participation in business otherwise foreclosed by a combination of cultural and
commercial factors. Opening the Franchise International Malaysia conference in August
2000 the Deputy Prime Minister commented that: Franchising is one mode of entrepreneurship that can help us achieve higher standards not only
in the goods and services offered, but also in upgrading effective management systems and
skills. This will enable organisations to respond to competitive pressures accordingly.
The level of bumiputra participation in the retail sector is still on the low side. The government
intends to increase bumiputra participation in the retail sector through franchising.
Franchising ensures immediate entry, the learning period is shortened and the rate of success is
enhanced. Franchising can also be used as an instrument to enable the transfer of technology
from systems developed elsewhere. We will be able to benefit from such transfer.47
The lead agency in the franchise sector in Malaysia is Perbadanan Nasional Berhad
(PNS), an agency of the Ministry of Domestic Trade, Cooperatives and Consumerism
45 Victorian Aboriginal Economic Development Group, Moonda Wurrin Gree – Pathways to a Better Economic Future (2010) 38. 46 Victorian Government, The Bridge to Work <http://www.dpc.vic.gov.au/images/documents/Aboriginal_Affairs/Moonda-Wurrin-Gree-Pathways-to-a-Better-Economic-Future-Part-2.pdf> 47 Anita du Toit, ‘The financing and mentoring of emerging franchisees through tandem franchising’, 3rd International Conference on Economics and Management of Networks, June 2007, Rotterdam School of Management, Rotterdam.
16
which has the mandate to lead the development of Malaysia’s franchise industry. It
provides financial support to the franchising sector through loans and investments in
addition to providing a range of educational, consulting and entrepreneurial services. PNS
is an active participant in the developing Malaysian franchising sector and offers lessons
for government and other countries seeking to encourage the economic empowerment of
disadvantaged communities.
5. Tandem Franchising
Tandem franchising is a strategy to facilitate franchised business operations by
franchisees from disadvantaged backgrounds through funding and mentoring programs.48
Anita du Toit explains that its focus is on ‘creating an alternative funding mechanism that
enables transfer of ownership over time in tandem with achieving skills transfer through a
mentoring program’.49 Lack of funding and lack of business experience are particular
problems for disadvantaged and minority groups. Tandem franchising overcomes these
hurdles through empowering individuals. The franchisee acquires a minority stake in the
business which increases over time while he or she works alongside, and is mentored by
‘an experienced person who knows the business and imports this knowledge to the
franchisee’.50 The most prominent examples of tandem franchising are found in South
Africa within a framework of the government’s Black Economic Empowerment policy. A
range of alterative models exists for both the mentoring and the financing dimensions.51
Du Toit suggests that Tandem franchising could be an answer to some of the problems
associated with the development of entrepreneurship in South Africa. The combination of
skills transfer, positive role models and access to finance could provide a powerful
mechanism to create jobs and stimulate economic growth. It offers similar possibilities in
relation to Australia’s Indigenous communities.
48 Ibid. 49 Ibid. 50 Ibid. 51 Ibid.
17
6. Social Franchising
Social franchising entails the application of franchise mechanisms to achieve social rather
than strict commercial goals. There are a variety of social franchise models. Under the
socially-acquired franchise model a not-for-profit organisation acquires the right to
operate a franchised outlet of an existing franchise system to provide employment
opportunities for the minority or disadvantaged group it is seeking to benefit as well as to
provide funds for other good causes. In the more holistic manifestation of the socially-
developed franchise model a not-for-profit develops a franchise system to empower a
disadvantaged constituency or to provide essential services. In the former iteration the
beneficiary of the social franchising model is the franchisee who provides a service under
the social franchise model. In the later iteration the intended beneficiary is the ultimate
consumer who acquires the service from a franchisee under a social franchising model.
An example of the former iteration is Buffed – which claims to be Australia’s first social
franchise business model. Its website52 explains that Buffed is an innovative social
business comprising a network of shoe shine stands which assists individuals secure
economic participation through business ownership of a shoe shine stand:
Buffed works with individuals who have been excluded from the mainstream workforce
and who have a desire to work in their own business. Each franchise bsiness is owned
and operated by an individual that receives extensive upfront training and ongoing
development both personally and professionally. Our franchisees become integral
components of the social business.
Individuals are able to ‘purchase’ Buffed shoe shine stands and operate them as their own
franchise business. Buffed franchisees receive comprehensive training in the art of shoe
shining, customer service skills and business training development. To ensure this
opportunity is available to individuals who might not be adequately resourced to launch a
new business, the Wise Foundation which established Buffed has developed tailored
initiatives for this unique social franchise:
52 Buffed (1 June 2012) <www.buffed.org.au>
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Buffed provides high-level support for franchisees through no-interest loans, business
mentorship and dynamic marketing to ensure franchisees have the best chance of
creating successful businesses. While growing their own businesses, franchisees
develop skills, experience and confidence that will greatly assist them for any future
goals or aspirations.53
In another iteration social franchising is implemented as ‘a distribution model for social
services or products and services that pursue social goals’.54 Interest in social franchising
is gaining momentum around the world, as Non-Governmental Organisations, mostly
operating as not-for-profit organisations and social aid programs consider franchising as a
mechanism to deliver services and products with social goals particularly health services.
Du Toit explains that the benefits of franchising, including expansion with reduced
capital and the replication of a proven business system, are attractive to practitioners in
the not-for-profit sector as ‘franchising, including training and ongoing support,
contributes to the increased likelihood of survival and sustainability at the franchisee
level’.55 Although there is a social purpose a social franchise is operated on commercial
franchising principles. Du Toit explains that social franchises seek sustainability through
operating on commercial principles, making enough profit to sustain operations and
reinvesting surplus profits into the community it serves.56 It follows that franchisees, who
may be fractional franchisees who incorporate the social franchise within a wider
business, generally pay a franchise fee and are motivated by financial incentives to
deliver services effectively and efficiently and that the consumers who are the intended
beneficiaries of the product or service must be prepared to pay for the service.
Given the early developmental stage of social franchising it is not surprising that there is
debate as to definition and models.57 It would nevertheless be unfortunate if definitional
demarcation disputes deflected attention from the ultimate aim which is the achievement
of social goals through commercial franchising mechanisms. The aim of a social
franchising model may be to empower disadvantaged persons or to deliver necessary
53 Ibid. 54 Anita du Toit, ‘Social Franchising as Organisational Format – An Overview”, 18 in International Society of Franchising Conference, Las Vegas US. 6 March 2004. 55 Ibid. 56 Ibid. 57 Elizabeth Spencer, ‘Deriving Meaning for ‘Social Franchising’ from Commercial Franchising and Social Enterprise’ 27th Annual International Society of Franchising Conference, Zhuhai China, 13-16 March 2013.
19
goods or services to those in need of them. Social franchising simply exploits innovative
and creative adaption of conventional franchises to achieve social goals. It is a strategy
which demands consideration in relation to facilitating Indigenous business development.
7. Microfranchising
It has been uncontroversially suggested that:
The concept and theory of entrepreneurship through the development of micro and small
enterprises is likely to be particularly relevant to the achievement of economic development of
Indigenous communities.58
Micro franchising – franchising on a small scale – is an important strategy in this context.
As with conventional franchising micro franchising is built on replicable business
systems, but with scaled down business concepts and low entry costs. Although the full
suite of franchise services are not offered Henrique and Herr note that, ‘the involved
enterprises can gain very substantial advantages, which allow them to move towards
higher levels of productivity and competitiveness, and ultimately formalization’.59 Given
its small scale, micro franchising is invariably applied to produce business opportunities
for the poor or the otherwise disadvantaged. In terms of the subtitle of Fairbourne,
Gibson and Dyer’s book Microfranchising60 it is aimed at ‘creating wealth at the bottom
of the pyramid’. Microfranchising is frequently associated with micro financing61 and
usually, but not invariably, associated with social franchising in the context of those
geographically or socially excluded from mainstream economic activity.
Microfranchising is an important tool for small business in the developing world and is
potentially a very effective strategy for indigenous business development by fostering
economic self reliance.
58 Don Fuller, Myles Howard and Eileen Cummings, ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1. 59 Michael Henriques and Matthias Herr, ‘The informal economy and microfranchising’ in Jason Fairbourne, Stephen W Gibson and W Gibb Dyer(eds), Microfranchising: Creating Wealth at the Bottom of the Pyramid (Edward Elgar, 2007) 52. 60 Jason Fairbourne, Stephen W Gibson and W Gibb Dyer(eds), Microfranchising: Creating Wealth at the Bottom of the Pyramid (Edward Elgar, 2007). 61 Opportunity International Australia for example in 2012 provided two million families, primarily farmers of small scale crops or livestock in India, Indonesia, the Philippines China and Ghana, with loans averaging A$150. The vast majority (97 percent) of the loans were repaid on time.
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8. Community Franchising
It is perhaps ironic that a franchising model developed in Australia in the context of the
rarefied world of commercial banking may find effective expression in the very different
context of Indigenous business development. In the mid to late 1990s there was a rash of
bank branch closures in Australia, with about a third of bank branches, in both
metropolitan and regional areas, closing. In 1998 Bendigo Bank – then a small Victorian
based bank – launched its Community Bank concept on a very different model to the
existing models of big banks. Bendigo Bank explains that its Community Bank model is
‘a private franchise branch of Bendigo Bank, but that private franchise is owned by
literally hundreds of shareholders who have bought in a local level’.62 It is modelled on a
conventional commercial franchise. The Community franchisee carries the cost of the
infrastructure while Bendigo carries the credit risk through its statutory obligation to
guarantee and underwrites all transactions. The Community Bank has access to all
Bendigo’s products and full support and although it is bound by Bendigo’s lending
policies it has autonomy on a range of operational issues. Community franchises are
established as public companies with their own Board of Directors. There are provisions
in the franchise agreements setting a limit on the amount that can be paid as dividends as
the bulk of the profit, generally 80 percent, must be dedicated to community projects.
Since 1998 when Bendigo Bank launched the Community Bank model it has grown from
74 branches to over 500 branches, over 300 of which are community branches many of
which are serving regional and remote communities not serviced by competitors.
A form of franchising based on the Bendigo Community Bank model – where the
community rather than an individual is the franchisee – may be particularly effective in
the context of Indigenous communities. Fuller, Howard and Cummings suggest that,
‘Indigenous people living within [remote] communities prefer to deal with businesses
owned and operated by Indigenous people from their communities’,63 and Furneaux notes
that, ‘sharing resources within Indigenous communities is more than an economic
62 Craig Furneaux, Indigenous Entrepreneurship: An Analysis of Capital Constraints <http://eprints.qut.edu.au/12947/1/Furneaux_and_Brown.pdf> 134 63 Don Fuller, Myles Howard and Eileen Cummings, ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1, 3.
21
investment – it is also a social investment [which] acts as a form of socialism through the
redistribution of wealth throughout the community’.64 Fuller et al argue that:
Most successful local development initiatives are embedded in an economically based, broader
setting of cooperation - particularly from within the surrounding region. Thus, the chances of
development 'success' are not likely to be primarily determined by the degree of local
enthusiasm for a particular project, but by the opportunity of integrating community assets
within the regional economic, social and political structure.65
While other cooperative forms may provide this opportunity it is franchising, and
particularly community franchising, which offers the most effective ‘opportunity of
integrating community assets’.
9. Quasi Franchising
Quasi franchising refers to ‘back-of-house’ franchising arrangements under which back-
of-house functions in the form of tried, tested and proven systems and procedures not
directly visable to the consumer are replicated without front-of-house features
represented by the brand and visible manifestations of brand architecture.66 The essence
of ‘back-of-house franchising’ is simply franchising without the brand and associated
trade dress, image and external indicia that symbolise membership of a standardised
chain. It is a form of B2B franchising under which the business proprietor benefits from a
range of back-of-house systems which remove many of the challenges in establishing a
business and without which business entry is difficult if not impossible, while retaining
discretion in relation to front-of-house features. The underlying arrangements are
imperceptible to consumers.
While it is the combination of system and brand which drives conventional franchising,
there may be niches in which front-of-house banding is not inevitable or compelling and
may in fact be an actual disadvantage. In particular niche markets such as neighbourhood
64 Craig Furneaux, Indigenous Entrepreneurship: An Analysis of Capital Constraints <http://eprints.qut.edu.au/12947/1/Furneaux_and_Brown.pdf> 134. 65 Don Fuller, Myles Howard and Eileen Cummings, ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1, 5. 66 See generally Andrew Terry and Cary Di Lernia, ‘Quasi-Franchising: A New Model for Strategic Business Cooperation’ in Thomas Ehrmann et al, Network Governance (Physica-Verlag, 2013).
22
cafes, bars, restaurants and pubs the opportunity for entrepreneurial individualisation, the
scope for which is linked in the conventional business format franchise, may be attractive
to both the proprietor and customer. And in the context of indigenous business
development, the cultural and commercial need is for the provision of back-of-house
systems and not for brand and brand architecture and standardised ‘one-size-fits-all’
solutions.
The concept of replicating back-of-house functions without brand identification is of
course not uncommon in business. Systematising back-of-house functions is a key factor
in successful business operation and a necessary pre-requisite for replication of the
business. Systems are an inevitable ingredient not only of business format franchising but
all viable business operations. The company owned and managed chain operating under a
brand –in effect a company owed franchise network – will of course have developed and
documented a range of system issues equivalent to that of a franchise chain, including
technology, purchasing arrangements, training, bookkeeping, and a range of other
management services. However, even a company owned group which operates as a series
of individual businesses rather than under a network brand will improve profitability and
management through applying back-of-house systems. Such arrangements are also
common in various forms of groups of independent proprietors – from informal
cooperative arrangements to more structured groups formed to obtain the benefits of
proven systematised and efficient management systems.
The provision of back-of-house services through specialist providers is today not
uncommon. Outsourcing arrangements and unbranded management contract
arrangements operate in this space. Management contracts involve the service provider
moving in-house to manage a particular asset and although an effective model for large
scale assets such as full service hotels are unlikely to be a viable vehicle for business
operation on a small scale. Outsourcing provides the mechanism for contracting out a
business function to an external service provider. Business proprietors may utilise a range
of outsourcers for the provision of a range of business services. Although back-of-house
franchising may be thought of as a sophisticated form of outsourcing under which the
back-of-house franchisor provides a complete range of business services, this analogy is
limiting. A back-of-house franchisor provides not only the complete package of back-of-
house services, but also an integrated back-of-house system which outsourcing does not
23
pretend to offer. The concept of B2B back-of-house services being provided in a
systematised, structured and disciplined manner by a back-of-house service provider
transcends traditional notions of outsourcing.
As with traditional franchising, back-of-house franchising is a practical strategy for
which there is no one model. It is driven by a market for back-of-house services to enable
an independent business entrepreneur to build a business free of the confines of brand and
image but with the benefit of key back-of-house support services without which entirely
independent business operation is difficult and risky. In some iterations an “umbrella”
brand may be employed by the back-of-house franchisor. Outlets would be identified by a
generic system name but back-of-house franchisees would retain discretion in relation to
servicescape aspects. Other iterations owing more to traditional business format
franchising than back-of-house franchising results in a more personalised form of
business format franchising allowing, to some extent, franchisee flexibility in the
provision of system services.
It is suggested that quasi-franchising concepts such as back-of-house franchising offer
real opportunities for Indigenous business development. Particularly in regional and
remote communities, brand, and brand architecture in the form of look and feel, are
unrealistic and unnecessary expectations. The provision of comprehensive back-of-house
systems will nevertheless be an inevitable and essential prerequisite for business
operation and a form of quasi-franchising which accommodates such practical realities is
a commercial strategy with real potential, not only in the franchising of essential services
in Indigenous communities but also in the franchising of Indigenous businesses in areas
such as ecotourism, bush tucker restaurants and bush holiday resorts to other Indigenous
communities.
10. Management Contracts
Under a management contract the operational control of a business is vested in an
enterprise which manages the business for a fee. Management contracts are particularly
common in relation to hotel operation – the hotel’s owner contracts with an operator to
run the hotel. They enable investors with ‘relatively little knowledge and experience in
24
the hotel industry, or who cannot directly manage hotels for a variety of reasons, to invest
in hotels.67 The management company may be a branded operator which provides the
hotel brand as well as the hotel management or it may be an independent operator simply
providing management services. While franchising is common at the lower end of the
accommodation hospitality sector, management contracts are more common at the upper
end - a reality driven by the size of the property investment and the complexity of
management.
Although high hotel operations are a world apart from Indigenous business opportunities,
the management contract is potentially an effective strategy for Indigenous business
development. An Indigenous community may have the resources, perhaps from mining
royalties, to invest in a business which would bring benefits to the community but not the
management knowledge and experience to actually operate the business. An Indigenous
community may have the opportunity to establish an Indigenous business – ecotourism
for example – but not the resources to manage it. In such circumstances, management
contracts provide a viable strategy to exploit the opportunity
11. A Variegated Cooperative Model
Given the complex cultural constellations which surround Indigenous peoples’ thinking
about starting a business, any business model or business support plan must take local
conditions and cultural practices into account. Practical imperatives must trump
distribution theory. While sophisticated business format franchising may prove too rigid
to be viable at this point in time, especially in remote communities, there are interesting
and important initiatives through which services are provided in remote communities, not
through franchising as such but through a mixed model adaptation of the traditional
model.
Indigenous people assert that ‘they themselves should be given the key role in finding
solutions to the problems that affect their communities’.68 One unique example of
Indigenous peoples doing so successfully, and in the absence of direct government
67 Hans Detlefsen and Matt Glodz, ‘Hotel Management Contracts: Historical Trends’, Hoteliers (7 March 2013) http://www.4hotelliers.com/features/article/7493. 68 Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 356.
25
support, is the Arnhem Land Progress Aboriginal Corporation (ALPA). Headquartered in
Darwin and established in 1972, ALPA is an Indigenous owned organisation which
operates a number of owned as well as managed unbranded community retail stores.
Originally established with help from the Methodist overseas Mission as a cooperative of
community stores in seven remote Arnhem Land communities, ALPA currently exists as
a corporation with its own board of directors. While the Indigenous peoples of North-East
Arhnem Land, the Yolŋu, have been economically active traders for centuries, their
community stores were originally owned and operated by the church.69 ALPA was
incorporated with seven initial member stores - Ajurumu (Goulburn Island), Gapuwiyak
(Lake Evella), Galiwin’ku (Elcho Island), Milingimbi, Minjilang (Croker Island),
Ramingining and Yirrkala. Current member communities in which stores are located
have two representatives on the ALPA board which governs and directs the business as
any other board of directors would. These two representatives include a traditional
landowner’s representative and a community representative (generally nominated by the
local store committee).70
While the board is constituted by Indigenous peoples, senior management charged with
responsibility for day to day management of the organization is predominantly
constituted by Balanda, the Yolŋu word for non-Yolŋu people. Communication between
balanda and Yolŋu is facilitated by an independent interpreter who provides explanations
of issues of import facing the organization using relevant language and concepts from
traditional Aboriginal economic and legal parallels:
ALPA has developed a unique method to give a visual hands on and readily understood
explanation of profit and loss statements and budget planning sessions. This methodology, or
'money story,' is in demand at a number of other external Aboriginal client organisations.71
ALPA’s chairman has explained that senior management is predominantly balanda
because ‘we need their skills and experience. They work for us. They answer to us. They
share our commitment and our vision for a successful Yolŋu enterprise. We don't see this
as a 'Yolŋu and Balanda' issue. Balanda are part of the ALPA family'.72 Store managers
69 Brief History, The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/Brief-History.html> 70 ALPA structure, The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/ALPA-Structure.html> 71 Board of Directors, The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/Board-of-Directors.html>. 72 Frequently Asked Questions, The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/FAQ.html>.
26
in remote areas themselves are also balanda. While this makes sense given the sheer
numbers of balanda who have the necessary supermarket management experience
compared with Yolŋu peoples, it might be asked why Yolŋu do not yet fulfil this role.
Demonstrating its attunement to local needs (given its board of directors is representative
of member communities this is not a surprise), ALPA has stated that although it is able to
impart necessary skills through its training arm, that it is unable to provide the necessary
cultural authority.
This, coupled with cultural and family obligations creates enormous pressure for our Indigenous
managers making it difficult for them to choose store management as a career. The ALPA board
has decided that until these cultural barriers can be overcome, ALPA would continue to seek
managers from outside its cultural base when necessary. ALPA is committed to an evolving
Indigenous management program.73
While ALPA runs a financially successful operation, with a turnover of approximately
$75 million across the Group, it is engaged in much more than simply trying to make a
profit. Income made from the operation of all stores is reinvested on a needs basis across
all owned and managed stores. It is also used to support benevolent activities throughout
its member communities including secondary and tertiary education costs, medical escort
to and from remote areas, credit advisory programs, small business mentoring, and
community events. Money for such purposes is managed by a member store committee.
Volunteers to the committee support managers and workers to resolve local issues that
arise in relation to the store.74 In this way local communities are the prime beneficiaries
of ALPA’s activities.75
In understanding what a successful Indigenous business might look like it is important to
appreciate that success ‘can mean something more than balancing the books and
something less than continued expansion’.76 Indeed, as noted by Schaper, traditional
73 Ibid. 74 The store committee is responsible for managing the Molu Rrupiya Gungayunamirr (Special purpose money for the people) or Community Benefit Funds allocated to their community by the Board of Directors based on store performance. The use of these funds raises important issues of governance and the need to comply with taxation laws and the rules of the Corporation, including the Store Committee Guidelines. Store Committees, The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/Store-Committees.html>. 75 Income generated is spent maintaining and improving store infrastructure, to better serve members and to fund benevolent activities, support community events and provide employment and training opportunities: Where does the money go?, Frequently Asked Questions, The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/FAQ.html>. 76 Australian Taxation Office, Indigenous small business owners in Australia (Commonwealth of Australia, 2009) 6.
27
economic values of Indigenous cultures mean that success may just as much be measured
by impact upon the community and one’s relations alongside the turning of a profit.77
Given its mission to – strive to enhance the social and economic development of its
members, giving primacy to their cultural heritage, dignity and desire for equality with
their fellow Australians78 – ALPA has branched out from its initial core business of
supermarket ownership to offer additional services. Operating a registered training
organisation, ALPA ‘standardised policies, systems and procedures to benefit Yolŋu
staff, who [can] … [are] trained in all store operational duties’.79 ALPA was also
instrumental in the provision of banking services in the region, initiating and providing
initial financing for the establishment of the Traditional Credit Union80 which is
Australia’s only Aboriginal credit union owned by Indigenous peoples and which
provides financial products, services and ‘culturally appropriate employment as well as
training for Aboriginal people… [to] assist Aboriginal people to overcome financial
disadvantage’.81
Of particular interest in the consideration of appropriate business models for Indigenous
communities, especially in remote settings, is ALPA’s ‘consultancy’ stores, which are
operated on a management contract model. While starting out with seven member
communities, two stores opted to leave the group in the 1980’s. These stores promptly
returned as ALPA managed stores when they were unable to operate successfully and
financial viability became a concern. These, and several other community stores – ALPA
now runs 12 stores in addition to its five ALPA owned and branded stores – invite
comparisons to the back-of-house and management contract options discussed above.
Importantly, ALPA does not seek to become involved with any community unless that
community wishes ALPA to do so, and even then ALPA, having acknowledged the need
for local participation in the store, states ‘it is a prerequisite of ALPA managing a store
that the community wants to have active participation in the operation of their store at all
levels’.82 This includes training services, provided by a business incorporated in 2011
77 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 90. 78 Welcome to ALPA (1 November 2013) The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/> 79 Brief History (1 November 2013) The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/Brief-History.html>. 80 Home (1 November 2013) Traditional Credit Union <http://www.tcu.com.au/>. 81 Ibid. 82 Indigenous Employment, The Arnhem Land Progress Aboriginal Corporation <http://www.alpa.asn.au/pages/Indigenous-Employment.html>.
28
Australian Retail Training which offers training services and expertise to stores outside
the group.
ALPA has also established Australian Retail Consultants (ARC) which provides ‘cost
effective access to more than four decades of stable and continuous remote retail
expertise [and] offers a flexible service model with experienced professional personnel in
retail, finance, governance support and consulting services’.83 Spotting a need in the late
1990’s for expertise in the management of community owned stores across remote
Indigenous communities, ARC was established to offer tailored business support. ARC’s
website explains that:
While there were many "consultants" with financial or commerce backgrounds there were few
consultants offering specific retail support particularly with any experience in the remote
communities in Australia. There were many stores in financial difficulty and many communities
lacked the retail expertise to identify and rectify operational and financial anomalies. Other
communities were simply looking for independent advice on how their store could be improved.
Communities, however, still wanted to retain ownership, run a sustainable and reliable store and
have real input into their business.
Australian Retail Training and Australian Retail Technology were both formed in similar
circumstances. There was, and still is, a need for remote store specific training and IT support.
The environments we all operate in are so different to the rest of the country that many "experts"
from the major cities just have no idea what they're getting themselves into. ALPA has
developed contextualised resources and proven methods in training and through trial and error
perfected the right POS systems and back office resources to run and improve your business84
In providing such services, ALPA does not seek to lock communities in for any specified
period, and only works in communities it is invited to. Culturally and community
sensitive, the retail consultancy business given birth by ALPA’s success in running its
own stores provides ‘relief management, on-the-job training and a health and nutrition
focus for community stores. When ARC assists a store, it liaises with the client
representatives to ensure their input is valued, and that their requirements and
expectations are met’.85 In addition to retail services, ARC also provides purely back
office services necessary for the operation of community stores, including bookkeeping,
payroll, stocktake, performance reviews, budgeting, accounting and finance service
83 Australian Retail Consultants, Australian Retail <http://www.australianretail.net.au/pages/Australian-Retail-Consultants.html>. 84 Ibid. 85 Australian Retail Consultants, Australian Retail <http://www.australianretail.net.au/pages/Australian-Retail-Consultants.html>.
29
provisions tailored to the literacy and numeracy competencies of its clientele. ARC can
offer support behind the scenes in a way other providers either would or could not,
because margins might be too slight for the investment involved, or because of the lack of
local knowledge. Local knowledge and its own networks through the operations of ALPA
also assist ARC to provide support around product range decisions, including
nutritionally balanced product ranges, and the logistical realities of remote areas:
To guarantee a reliable supply of competitively priced quality products, Australian Retail
Consultants have an extensive network of wholesalers, distributors and transport companies,
both local and interstate, with a choice of suppliers available to meet the collective and specific
needs of our clients. This has been a crucial element in the success of our organisation, with the
majority of client enterprises servicing regions that are remote and at times inaccessible.86
There is very little left for the community organisation to do other than provide a store,
and local community members interested in becoming employees.
The arrangement is a practical and innovative form of unbranded quasi-franchising
drawing on both back-of-house franchising and management contracts. It differs from the
former in that the back-of-house services provided by the ARC are implemented by
ARC’s in-house team. It differs from the latter in that the ARC team operates as a
management consultancy basis rather from assuming complete operational proprietorship.
The next step in the evolution of the arrangement is likely to be a move away from
management contract type arrangements to back-of-house franchising arrangements with
the local community managing the store itself with back-of-house systems and consulting
services provided by ARC.
ALPA’s expertise in this area was no doubt a factor in its CEO’s one year secondment to
manage a government funded bush retail operation, Outback Stores. Outback Stores runs
remote stores and to make them become commercially self sufficient, then works with the
‘store committee to decide how to spend the profits for the benefit of the community, in
line with the rules of individual Store Corporations’.87 In 2007 the Federal Government
extended funds to Outback Stores to support a number of community stores which were
teetering on closure in the face of debt and management concerns. In 2009 Outback stores
was provided with funding to support stores outside the Northern Territory. Similarly to
86 Ibid. 87 How we Operate, Outback Stores <http://outbackstores.com.au/stores/how-we-operate/>.
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ALPA, Outback Stores works with Indigenous communities for a fee and has a ‘strong
policy that it can only help manage a store once it has been invited by the local
community’.88 This involves an assessment of the store requesting management services
and support, ‘talk[ing] to community leaders about its financial status, their expectations,
and Outback Stores’ operational procedures.89 Importantly, ‘Outback Stores can provide
management services to stores which are already commercially successful or those that
require funding to continue to operate. If a store requires funding to continue operating,
the government must agree to fund to the store before Outback Stores starts managing’.
While contracts between Outback Stores and communities are tailored to meet the needs
of local communities, there are three constants: Outback Stores is responsible for the day-
to-day operations but ownership of the store remains with the store owners; Outback
Stores employs the store managers; and no “book up” (short-term credit provided by a
trader that allows goods to be purchased and paid for later) is allowed to be used in the
store.90
Like ALPA, each store establishes a committee consisting of local residents. Outback
Stores also provides other back of house support such as that offered by ALPA. In
contrast to ALPA however, each store Outback Stores operates is branded an Outback
Store. For ALPA, this is not a concern. Give the remote areas being serviced, it is
unlikely branding will matter when this might be the only store in town, and then for
many hundreds of kilometres.
As ALPA’s success demonstrates, the particular model which is chosen requires tight
tailoring to local exigencies if is to work. ALPA appears to have borrowed elements from
several of the options discussed earlier in this paper and stitched them into a coherent yet
variegated model which is best suited to the circumstances it faces. Adaptation to local
conditions, is the key. Given its self-sufficiency as compared with other providers such as
Outback Stores, ALPA’s preference for real world as opposed to strictly textbook based
solutions is both admirable and effective.
88 Ibid. 89 Ibid. 90 Ibid.
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12. Conclusion
It may be thought ironic that, in the words of Kirk Magleby, ‘Fast food restaurant chains,
icons of profligate Western consumer culture, epitomize a business model that may be a
key solution to the daunting challenge of global poverty.’91 It is nevertheless not
surprising that franchise models have a significant role to play in reducing global poverty
through empowering minority business. While franchising developed to assist companies
achieve economies of scale through the countering of management, commercial and
financial limitations, there is nothing inherent in the model which prevents its application
to different settings and to the achievement of different goals. In the real world, as
Henriques and Herr observe, ‘each franchise system like every business enterprise is a
unique response to the particular entrepreneurial opportunity it seeks to fill and to the
particular environment in which it operates’.92 Franchising provides a supportive
environment and an effective platform for social and economic development. It would be
surprising if franchising – albeit in a different guise to that practised in Main Street
Downtown – is not a significant force in the development of viable strategies for the
economic empowerment of Indigenous peoples.
91 Kirk Magleby, Microfranchises as a Solution to World Poverty, Ballard Centre for Economic Self-Reliance, Brigham Young University <http://marriottschool.byu.edu/selfreliance/wiki/UserFiles/Kirk_Magleby.pdf> 92 Michael Henriques and Matthias Herr, ‘The informal economy and microfranchising’ in Jason Fairbourne, Stephen W Gibson and W Gibb Dyer(eds), Microfranchising: Creating Wealth at the Bottom of the Pyramid (Edward Elgar, 2007).
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