Great ideas come to different people in different ways. In the case of John Newton, principal of Australia and New Zealand’s market-leading children’s playing castle franchise, the Jumping J-Jays franchise, it happened one weekend in his native Sydney when he spotted, over a neighbour’s back fence, a castle in use at a kid’s birthday party.
“I saw it as weekend work, it looked fairly simple, fairly easy and clean, and I took it from there. I conducted market research for about six months but as soon as I knew it was going to be successful I didn’t stop. I went across Australia and franchised every state, the reason being that I didn’t want somebody replicating what I was doing in Sydney at the time in Melbourne or Brisbane or Perth. I wanted to make sure we could hold down the entire market and that we would have complete dominance of market share,” Newton says.
“When you find the big one you have just got to go for it. And that, unfortunately, is where I think a lot of existing and potential franchisors come unstuck. They might find a product they think will be successful, but they take the attitude that they’ll just see how it goes for a couple of years. I am very driven and I wanted to be number-one. After all, why run a race if you want to be second? If you wait to see how something goes, you will lose. Somebody will inevitably copy you – you have got to drive forth and have faith in your own product.”
When all this was going on Newton was in his early 20s, having variously done everything from selling manchester at markets to selling garden gnomes to delivering pizzas. He had and obviously still has a knack for sales, having the last job he worked in doubled the company’s turnover in a year only to be made redundant when it decided to introduce a telemarketing team. Being just another number in the workforce, he decided, was all too hard, and he set about succeeding off his own bat and creating his own inflatable castle franchise.
“To me it was all about databases – visiting clients, putting their details into a database and following up. I thought everyone used CRM, but as it happens not everyone does, and it came as a real shock,” he says.
Newton, however, still had a lifestyle to maintain, so he went and got another full-time job while working weekends getting the Jumping J-Jays franchise off the ground.
With an initial investment in 1997 of about $50,000 to buy 10 castles he and his former partner became, overnight, the biggest operators of bouncy castle franchise businesses in Sydney. But not everyone shared their optimism for the venture. Indeed, even the supplier of the Jumping J-Jays franchise questioned their ability to make it pay.
No one, the supplier of the inflatable castle claimed, would ever be able to hire out 10 castles a weekend.
“It was a niche market and others had been plodding along with two or three castles for the last 10 or 20 years, so how were we ever going to get 10 out? There was a lot of negativity, but we had all the statistics with regards to the population of children and didn’t really think of it as a tremendous risk. Still, I didn’t give up my day job,” Newton says.
Then, suddenly, on the back of a strategically planned advertising campaign for the Jumping J-Jays franchise, everything just took off for the inflatable castle franchise.
“Within the first six months we grew to having about 16 or 17 castles and the opposition, such as it was, started attacking us because they claimed we were killing them by spending too much on advertising and selling too cheaply. Today we’ve got 500 and some 260 in stock.”
The Jumping J-Jays franchise, however, is no longer based in the outer reaches of Sydney. Newton has moved the inflatable castle franchise north to inner Brisbane to improve its infrastructure.
“Being close to the CBD is very important. In Sydney we were about an hour out of the city in non-peak hour. In Brisbane we are just five minutes from the city and, of course, a different quality of people live in the city. We run a call centre with about 12 to 15 casual staff, many of them university students. Apart from that, upper management all live in the city and obviously rental and running costs, such as petrol, are a lot less.”
Another reason for the move was to try to sell some bouncy castle franchise businesses in Brisbane – something Newton admits he has not yet had a lot of success in doing. Indeed, the Jumping J-Jays franchise currently has 44 franchised operations Australia-wide and five company-owned outlets, but not one in Australia’s third largest city.
“They are all company-owned outlets in the Brisbane metropolitan area – we have yet to sell a franchise there,” he declares. “However, the first three months after opening in Brisbane generated the highest start-up of any state across Australia. Unfortunately, we just can’t seem to move any franchises because of the stereotypical fact that people there simply do not like to work weekends on account of the great weather. But for that very same reason Queensland has the highest turnover of any state throughout every winter month, and we are achieving that with just staff.”
Regardless of the situation in Brisbane, the Jumping J-Jays franchise has already achieved one of Newton’s long-term objectives.
“We crunched some numbers about a year ago when we were still in Sydney and determined that break-even for us was some 40 franchises. We’ve now surpassed that, but in moving to Brisbane we put on a marketing manager, which is expensive, an additional admin crew, which is also expensive, and now all of a sudden we need 60 to break even again. However, we expect to reach that mark before mid next year,” he says.
The only impediment to achieving this goal is the old bugbear that weekend work simply doesn’t suit everyone in the inflatable castle franchise industry.
“Personally, though, I see it as an advantage,” Newton counters. “In fact, that franchisees do not have to give up their day job is one of my key selling points. Still, it is quite amazing how many people do not want to work 12 hours on a weekend to earn the sort of money we earn. Getting people excited about working on weekends is difficult, and when you talk to the wife of a potential franchisee it is very much a black and white proposition – it’s either a yes or a definite no. That is why we franchised the business in the first place. We couldn’t find enough staff willing to work weekends, so we decided to allow owners do the work.”
For Newton in the year 2000, the concept of franchising in the bouncy castle franchise industry was relatively alien, and one that involved a steep learning curve.
“We had our documentation done by Franchise Developments but after that it was pretty much a case of going to the FCA and all its meetings, reading all the books and completing a Diploma of Franchising in its old format. I had to learn everything from the ground up. We did not bring in another franchising consultant after Franchise Developments built the original contracts. The manuals were all written by myself, all the systems and all the call centre training. You have to do this,” he maintains.
“I have met prospective franchisors who have not done any courses, gone to any franchise meetings or round-tables and I say to them that they have simply got to educate themselves, because if they don’t they are going to be forever paying out in service fees to a lot of lawyers and a lot of accountants. As such, it was very important to learn the back end of the business and I did just that. My operations people also learned it with me to make sure we could pretty much do everything ourselves.”
One thing Newton did not have to acquire for his Jumping J-Jays franchise, however, was marketing nous. A background in sales instilled an intuition for what works and what doesn’t when it comes to marketing a product in the inflatable castle franchise industry, and as he says, from day one it has been the marketing of the Jumping J-Jays franchise that led to it dominating what was then a virgin market.
“When we began there was really just a bunch of operators with a few castles whose idea of marketing was to letter-box drop photocopied one-colour fliers. We came in with full-colour brochures and an advertising campaign that not only made Jumping J-Jays a business, but blew the opposition away. Since then we have continued to be proactive on the marketing front, taking measured risks and constantly building the business. Within two years I had 30 jumping castles and today, of course, we are the only franchise of its kind in the world.”
If anything, Newton has dramatically cranked up his marketing gambit, recently going against the warnings of heavyweight franchisors and the legal fraternity by offering new bouncy castle franchisees a guaranteed $85,000 turnover in their first year, while simultaneously reducing the cost of entry into the Jumping J-Jays franchise to just $30,000 plus stock.
“And of that $30,000, just $4,000 is the franchisee fee,” he emphasises. “The other $26,000 is for things that go back to them for their franchise. So, in actual fact, the cost is $4,000 plus goods, which is a very, very cheap entry level. It is all about attracting the right person, and that is a regular family-type person. I am not saying they have to be married with kids, but we are not looking for investors and we are not looking for executives. What we want are regular people willing to work a weekend business and that is why we dropped the price, knowing that in the future it will generate more sales and we will see a return through royalties and growth of the system. We are not trying to make money on the sale. People ask how we can sell a franchise so cheaply, but the simple answer is that we want those people to come on board and be part of our business.”
Concurrent with this, however, is a significant change to the way in which new Jumping J-Jays franchisees now need to market their business.
Newton explains: “We have shifted from offering a strictly two-day a week franchise to a package that necessitates one additional day a week spent on local area marketing. We have put together a local area marketing action plan and people must sign off on this when they buy the franchise. It outlines what they will need to be doing one day a week for 50 days a year – be it one day initiating a healthy kids activity program at preschools, next week dropping into the local sports ground, visiting five shopping centres the following or setting up alliances the next with local shopping strips. The list goes on.
“Franchisees build their own action plan from our master document, which runs to about 70 pages. They can choose electives in conjunction with mandatory activities to suit their lifestyle, but they have got to want to do that as it is part of the guarantee. To date we have sold six or seven franchises based on the guarantee.
“We at a national level cannot go to a local preschool with, for example, an offer of a free castle once a year in exchange for being allowed to display promotional posters. We used to assume that franchisees working the weekends would instigate these sorts of initiatives themselves, but people tend to get into their comfort zones and actively marketing the business takes a backseat. Head office will cover most of the collateral costs of the local marketing plan, but our ‘new breed’ of operators have to get in there and do it themselves.
“Besides, we have found that being local area oriented helps franchisees to more rapidly build their business. The guarantee is there so that franchisees have some security – they know what their gross turnover is going to be – and for us the risk is minimal because we have only ever had one franchisee in our history not turn over that figure in the first year which, of course, is the hardest year.”
Newton is keen to emphasise the importance of being unhesitant in the pursuit of a Jumping J-Jays franchise opportunity when it arises, having as he says in his early days delved into a wide variety of different activities in a bid to make extra money for his inflatable castle franchise.
“I’m sure there are a lot of people out there now trying to get that same break,” he notes.
It is perhaps significant then that the Jumping J-Jays franchise does not afford an open-ended opportunity.
“We have only 140 franchises available, and I would imagine that in the next two to three years we will hit the 100 mark. We can only sell to how many children live in the territories, and these are fully mapped. That is the total number in Australia and New Zealand. After that, well, that’s the end of it.”
Meanwhile, the Jumping J-Jays franchise has franchisees that are now generating $220,000 gross from a weekend business.
“That nets them about $120,000 after expenses for a Saturday and Sunday, and they still work a day job. The reason they can do this is because they carry more stock,” Newton says. “I cannot emphasise to franchisees enough that while you start with 10 castles, that is by no means where you need to end…”
John Newton, the ‘King of the Castles’, is the living proof of this.
17-May-2006