If you make sales predictions for your Franchisees and really cannot justify those numbers, be prepared to add “Your Honour” to the end of every sentence you make. Gelare International has just found that out. As much as they felt they had done “the right thing”, the Federal Circuit Court and Judge Riley totally disagreed.
This is another case that should highlight to Franchisors that they need a process and sales prediction tools if they are going to make any statements to their potential Franchisees.
I have recently felt the need to send this article (a bit tongue in cheek) to a couple of friendly clients of ours who seem to move from one drama to another without any longer term thought, especially on their site selection policies. I hope you enjoy it, and if you feel it fits your situation – then it probably does! Feel free to pass on as you see fit.
When you are up to your arse in Alligators it is hard to remember that the plan was to drain the swamp...
Fast food and Quick Serve Restaurants across Asia have traditionally been “inline” stores in a shopping strip. Across the western world, the trend over the last 30 years has been to Drive Thru’ s, almost at the exclusion of any free standing restaurant that cannot offer a Drive Thru being sold, or knocked down.
In many countries such as Australia and the USA, we would be expecting around 60 - 70% of all major fast food restaurants like McDonalds and KFC to be what they call FSDT – Free Standing Drive Thru, and probably selling well over 60% of their revenue thru the Drive Thru windows
The science of drive thru’ s has greatly improved over the years where the process now starts well away from the store where you read the menu boards and place your order into the microphone. In many large stores you then drive forward into a window where you pay your money, and then drive on again to the window where you collect your food before heading out. This maximises the efficiency and moves the maximum number of customers thru the service lanes.
Article was published in Business Franchise Australia & New Zealand Magazine Nov/Dec 2013
In a franchise operation you need to have teamwork and cohesion so everybody knows what their responsibility and job is, and by achieving that, we normally see the most competitive and effectively performing franchise systems.
When you are up to your neck in Alligators, it is hard to remember that the plan was to drain the swamp!
As a Certified Management Consultant, it concerns me in many franchise businesses in how they are so short staffed that management move from one crisis to another, without setting up the long term position correctly.
I was recently talking to a client who wants to expand their network into strip shopping centres, and he is continually being offered new strip sites. The company has an issue running that is taking up 80 per cent of his time. Unfortunately they cannot seem to address the local issues, so doing some simple planning to prioritise future expansion areas seems out of the question.
In all steps of the franchise process, be it internal operations of the Franchisor, the interface to Franchisees, or the internal operations of the Franchisees, having delegated roles and responsibilities makes the process of getting the job done far more effective.
It is not very effective having the CEO of McDonalds licking stamps for envelopes, and a young backroom burger flipper telling the CFO how to invest the spare cash!
I had the privilege of attending some of the America’s Cup racing in San Francisco this Spring, and if you want to see how to run an efficient operation, just have look at these teams. 3 years ago the concept of racing 72’ catamarans on hydrofoils was just a dream, and never had such a vessel been built.
International yachting came together and decided to start by building and racing Americas Cup 45 Catamarans, to have sailors become use to racing such vessels, and then to graduate to AC72’s around 1 year before the America’s Cup.
This was a “start from scratch” event where the teams had to design and build their vessels, learn to sail them and become extremely competitive for the racing that was to start in July 2013, with the finals of the America’s Cup in September 2013 in San Francisco.
Despite not regaining the America’s Cup from the Americans, in what turned out to be a nail biting series, let’s compare the Emirates Team New Zealand to a Franchise system, and see where it comes together?
Article was published in Business Franchise AU & NZ Magazine Jan/Feb 2014
Where should I go?
How do I know my territory is sufficient to support me? Do I get what I am paying for?
Service franchises have a great range of entry costs, from free entry and a high level of royalties, to a high entry cost, with lower royalties, or a medium entry cost and a flat weekly or monthly payment. No matter which model you are working with, over a period of time you can estimate the payments to your Franchisor, and is this value for what you receive?
In the Service businesses, we often see large areas set out with very strict boundaries. The Financial institutions such as ANZ, Mortgage Choice, Aussie and CBA all have models like this, as they then allocate leads, and it needs to go to the right franchisee (who has paid for that area).
Before you sign up to a shopping centre site, there are some points to consider...
I was speaking with a few senior executives of some of our largest coffee and cake franchise chains over the last few weeks, and asked the open question: “How are you finding dealing with the big shopping centres at the moment?”
The common thread is that times are relatively tough, and so franchisors are having more success in negotiating new lease deals with lower rentals than probably ever before. The last thing a shopping centre needs is vacancies, and the queue of “Ma and Pa” individual businesses wanting a site has reduced greatly, so the need to fill the big shopping centres falls back onto the retail chains.
If you want to secure a site, this puts you in a far better position than two years ago. One retail chain told me how they had been prepared to walk away from some locations and actually had done so. Playing bluff with leasing agents really only works when you are prepared to close some stores, and actually do so and walk away.
Whilst the very big centres can handle this, and possibly find new tenants, the medium and smaller centres quickly start to take on a look of despair if there are more than a few vacancies on the floor.
In some states, where the law forces the registration of leases (New South Wales for example), it is possible to find out what the other tenants in the building are paying.
Peter Buckingham reported on Billy Baxter case
Published in the Business Franchisor Oct 2012
A recent decision in the Supreme Court of Victoria should be sending some franchisors into shock, and give some current or ex franchisees a sniff that justice may be in the air, in certain circumstances.
In a unanimous decision, a previous decision was reversed into the franchisee’s favour, with $1.22M damages awarded.
The case revolved around the Glenelg Billy Baxter’s restaurant, which was opened in 2004. The franchisee claimed he was told sales should be around $1.3M, and this definitely did not eventuate.
For many years we have campaigned that some franchisors apply little logic to the most important number in a new site evaluation – The Sales Revenue Forecast. Whilst we deal in an ‘inexact’ science, history has shown that some data based evaluation will always be better than the ‘wet finger in the air’ estimate, and if challenged, there should be some statistical base from which the Sales Forecast was derived.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.