The Matchbox franchise took a deliberately measured path towards franchising, primarily due to the significant cultural changes Cohen knew it would wreak on his business.
It seems not so long ago that franchising was a business model with a dubious reputation and some shady operators. Today, franchising in Australia is an $80 billion business, made up of some 850 chains that employ more than half a million people.
To say that franchising is booming risks understatement. While regular business growth in Australia is only just outpacing inflation, franchise business growth is estimated at around 12 per cent. A code of conduct introduced by the Franchise Council of Australia in 1998 has served to clean up shonky operators, and franchising is now taught at a diploma level.
Despite a looming retail slowdown, there are few indicators that franchises will hit the brakes any time soon. Franchisors talk of adding dozens or even hundreds of new franchisees in the coming years. The biggest problem is finding people to run them.
Franchising has numerous benefits over other methods of business expansion. It allows a high level of control over business processes and branding for franchisors, and it is relatively inexpensive to set up a franchise in comparison to setting up an extension of the company, as rental and fit-out costs are carried by the franchisee. The franchisor can also reduce its exposure to payroll tax and workplace relations matters, as these are also handled by the franchisee. Meanwhile, franchisees have a vested interest in the health of their business.
What successful franchising does require, however, is a high level of documentation and communication. Failure to implement systems and processes can quickly see a franchise scheme go awry, and do immense damage to public sentiment towards the brand.
Melbourne-based retail franchise Matchbox opted for franchising earlier this year when it became apparent that the family-owned business would struggle to expand beyond its 10 stores. The giftware franchise worked with speciality retail adviser Deacons Consulting to develop a franchising strategy, which resulted in one of its company-owned stores moving to a franchise model in October.
"Years back, franchising had a pretty bad name, but things have changed, and with the code [of conduct] and the good press it's getting in Australia, we changed our minds," says Matchbox's general manager, David Cohen.
"You are a lot more limited in the decision making that you can do, because it does affect other people and they need to have a say in that," Cohen says.
But he says Matchbox franchise store managers have also benefited from the development of the franchise model though the documentation of staff positions and business processes into an operations manual.
"As a family business some of that stuff goes by the wayside a little bit. So to formally put people in specific roles was helpful for us, regardless of whether we franchised or not."
Matchbox will retain the majority of its company stores, and will open its first greenfields retail franchise early in 2006. The giftware franchise could open as many as 30 additional franchise outlets around Australia over the next five years.
27-Feb-2007