ACCC targets rogue franchisors

ACCC targets rogue franchisors

BRISBANE: Australian Competition and Consumer Commission (ACCC) chairman, Graeme Samuel, has warned that those who blatantly deceive potential small business owners with offers of bogus or unworkable small business ‘opportunities’ are effectively criminals and can expect no leniency from the regulatory watchdog.

More particularly Samuel, speaking at a recent Australia-Israel Chamber of Commerce luncheon, said the ACCC is targeting rogue operators in the franchise industry.

“The ACCC is taking a hard line against blatantly deceptive conduct and those involved risk possible criminal sanctions,” he said. “We are already examining a number of different scenarios which we believe are criminal and are taking steps to not only shut down the perpetrators but to impose criminal sanctions.

“The ACCC is assessing the options available in taking criminal proceedings against people that are flagrantly in breach of the law. In particular, we are targeting those that grossly misrepresent the benefits, financial rewards or viability of a particular operating system. People that seek to prey on potential small business operators are on notice that the ACCC will not tolerate, what effectively, is criminal behaviour.”

Under the Trade Practices Act 1974 the ACCC can seek criminal penalties of $1.1 million for corporations and $220,000 for individuals for certain contraventions.

“Franchising is an extremely successful and rapidly growing aspect of Australia’s small business sector, which now accounts for $80 billion in turnover per year, about 12 percent of GDP,” Samuel noted. “Its attractiveness is not hard to fathom. It offers franchisees the chance to establish their own small business while at the same time allowing them to take advantage of an established and often very successful brand with product support and promotion. It also allows legitimate businesses to expand while minimising financial risks.

“However, the success of franchising has also attracted a number of unscrupulous operators looking to capitalise on the successful reputation of franchising.”

According to Samuel, key areas of concern are:l Non-compliance with the Franchising Code of Conduct – not admitting that the arrangement is a franchise agreement, not providing disclosure and not attending mediation;l Misrepresentations – misrepresenting profit expectations, benefits or viability of the franchise; andl Unconscionable conduct – bullish and thuggish behaviour by franchisors to implement unnecessary and unreasonable changes on franchisees.

Samuel emphasised that people wishing to buy a small business can help avoid being victims of such conduct by exercising due diligence when considering a particular business offer. Purchasing a business, he maintained, should not be a quick decision, and people should seek business and financial advice.

Highest accolades for Michel’s franchisees

CANBERRA: Michel’s Patisserie recently announced the winners of its 12th Annual National Awards at a gala dinner held at Parliament House in Canberra.

“We’re delighted to once again celebrate these awards. They are not only an opportunity for franchisees to be acknowledged for their achievements, but it’s also a chance for Michel’s Patisserie to say thank you for exceptional results,” Michel’s Patisserie joint managing director, Noel Carroll, told the 500-strong crowd.

Analysis was conducted according to sales growth, customer service, presentation and promotional participation, and awards were presented in the categories of First Year Excellence (Rookie of the Year), Michel’s Espresso Excellence, Best Promotions Supporter, Most Improved Franchise and Customer Service Excellence.

The franchisee that excelled in all areas was presented with the prestigious Franchisee of the Year award. This year’s winner was Michel’s Patisserie in Forestville, NSW, however as competition was so tight a special Highly Commended was awarded to Michel’s Patisserie Greensborough, in Victoria.

“My wife and I run the business, together with our team, and we have all worked very hard to get the store to this level,” Michel’s Patisserie Forestville store owner, Emad Berro, said. “We owe a great deal of our success to the support we have received from the local community, which has enabled Michel’s Patisserie Forestville to win this award.”

Established in 1988 by Noel Roberts and Noel Carroll, Michel’s Patisserie has 290 outlets nationally. Internationally, it opened two stores in Shanghai in 2004. For a detailed interview with both Noel Roberts and Noel Carroll, see page 44 in this issue.

Howards Storage World launches internationally

SINGAPORE: Howards Storage World (HSW) has opened a retail outlet in Singapore, marking its first entry into the international market. The franchisor plans to open up to 15 stores in Singapore over the next five years, in addition to expansion further afield.

“Reaction from all markets has been positive and it will not be long before some of the larger markets, including the United Kingdom, South Africa and Canada, also have Howards Storage World retail outlets,” HSW chief executive officer, Dirk Spence says.

In the first week of trading the HSW store in Singapore recorded the highest revenue of any outlet in the chain in an opening week.

According to Spence, the franchise’s offering fits well with Singaporeans who are looking for smart storage solutions to accommodate inner-city living issues such as lack of storage space and confined living areas. Indeed, one of the most popular items has included the synchromatic easy-to-assemble chrome shelving system.

The opening of the store – located in Singapore’s Parkway Parade shopping centre – follows the awarding of a master franchise to John Veness in May 2004. HSW is using the same master franchise model internationally as it used in South and West Australia.

The master franchise model allows for a franchisee to buy and own the rights to a territory. Franchisees undertake a training program in Sydney prior to opening a company store in their territory, which they must do successfully for at least three months prior to rolling out sub-franchisees. They are also required to undergo master training in Sydney that equips them for sub-franchisee recruitment, leasing and sub-franchisee support methods.

Over coming months, Spence will be meeting with potential franchisees in Vancouver and Toronto, as well as attending franchise fairs in Canada and London. He says the franchise is also fielding interest from China, Middle East and India.

Small firms struggling

with governance issues

SYDNEY: The Implementation Review Group (IRG) of the ASX Corporate Governance Council has released its second report on the implementation of the council’s corporate governance principles and recommendations. A key conclusion is that while the current arrangements offer the best framework for listed companies, many – particularly smaller companies – have not embraced the flexibility of Australia’s ‘if not why not?’ disclosure requirements. This is despite the strong messages delivered by IRG and the council.

“Our views regarding the council’s principles and recommendations remain unchanged from our first report released in March last year,” Dr Ian Pollard, IRG member and a director of both large and small listed companies, says. “The ‘if not why not?’ reporting platform offers Australian companies of all sizes a robust and flexible structure for developing and reporting their governance practices. What remains to be done is to communicate this effectively so that companies can meaningfully engage with shareholders on governance issues.”

The report follows a review of submissions and actual governance disclosure by smaller companies, predominantly junior mining and exploration companies. Key findings are:l There is continued misunderstanding of the governance reporting framework in Australia. Many smaller companies, sometimes on the basis of professional advice, misunderstand the council’s 28 corporate governance recommendations to be mandatory, rather than advisory.l A number of companies remain concerned that investors will be critical of alternative governance practices that differ from the council’s recommendations, without considering their appropriateness for that company.l The current ‘if not why not?’ reporting by many smaller companies does not go far enough to explain the board’s choice of governance practice to investors.

In a bid to assist awareness and understanding, IRG has developed examples of ‘if not why not?’ reporting, covering selected corporate governance recommendations.

“We hope that this second report will be heard more loudly than our previous report,” Pollard says. “The majority of concerns, raised by companies and advisers with IRG, were resolved through the existing flexibility of the ‘if not why not?’ reporting regime. This regime offers companies a valuable opportunity for meaningful discussion among directors and communication with shareholders, while leaving a wide discretion to boards. This is in stark contrast to having governance standards prescribed by law, as is the case in the United States.”

Resi franchisees speak up on job satisfaction

SYDNEY: A survey of its franchise network by non-bank lender Resi Mortage Corporation has revealed that the primary source of job satisfaction for franchise operators is not making money or being their own boss but, rather, helping others realise their home ownership ambitions.

While advertising and marketing were voted by Resi franchisees as the single most important factor in determining the success of a business, establishing strong referral networks with customers, business associates and the like was a close second.

The value of receiving advice and ideas from fellow franchisees was also highlighted in the study, with 48 percent of franchisees viewing this as ‘very important’, and 52 percent as ‘useful but not that important’. No franchisees saw this as ‘not important’.

“People don’t always tend to think of finance-related businesses as being all about the human element – getting to know people and helping them realise their dreams,” says Resi national manager for consumer advocacy, Lisa Montgomery. “However, this survey highlights the fact that, when it comes to owning and running a ‘grass roots’ home loan franchise, that’s exactly what it is all about.

Fifty-two percent of Resi survey respondents said that ‘helping people fulfil their dreams to buy a home or investment property’ was their main source of satisfaction as a Resi franchise operator.

The next most popular source of job satisfaction was ‘the challenge of successfully building a business’ (32 percent); ‘the experience of using and developing a wide variety of skills’ (12 percent); and ‘mixing with a wide range of people’ (four percent). Interestingly, no franchisees chose ‘being my own boss’ or ‘making money’ as providing their main job satisfaction.

When asked what they considered to be the single most important factor in determining the success of their business, 28 percent of respondents chose ‘advertising and marketing’, while 24 percent nominated ‘establishing strong referral networks’, and 20 percent opted for ‘product appeal’. ‘Business planning was selected by 16 percent and ‘hard work’ by eight percent.

Brands in no-gain

sponsorship crisis

LONDON: In a shock finding, a new study has revealed that more than three-quarters of advertisers seriously doubt whether sponsorship deals improve the visibility of their brands in the media.

Just 10 years ago only half of advertisers expressed any doubts about the merits of sponsorship.

The new worries come on the heels of Adidas signing a 100 million pound deal last year with Chelsea Football Club and HSBC sinking 10 million pounds into golf tournaments after its Formula One sponsorship crashed and burned with no increase in brand awareness in the US.

According to the study, a measly three percent of TV viewers notice billboards at sports events, with 97 percent focusing their attention on the action.

The problem for sponsors is compounded by logos occupying just a small portion of the screen, whereas a TV or press ad covers the entire screen or page. On top of this, in most cases sponsorship does not put forward a message to the viewer like a traditional ad does.

Call for entries in

savewater! awards

MELBOURNE: World Day for Water, 22 March, marked the official call for entries in the 2005 ‘savewater! awards’. All Victorian service providers that have implemented change to conserve water in the past year are encouraged to enter the ‘service providers’ category.

Now in their fourth year, the savewater! awards recognise and reward outstanding achievement in water conservation. Nominations will close on Monday 22 August 2005 during World Water Week, and the winner will be announced at Melbourne’s Regent Theatre during National Water Week in October.

In 2004, the service providers category was won by Australian Graphic Servicing, which designed a simple water saver circuit that controls water requirements on pre-press equipment. The average results are water savings of 40 to 60 percent, with one company reporting savings of more than 100,000 litres per month.

Entries are welcomed in the following areas: Manufacturing, Service Providers, Government, Primary Industries, Education Programs, Built Environment, Garden Management, Product Innovations, and Community Action.

Entry forms and detailed category information are available from www.savewater.com.au.

Austrade tips for

aspiring exporters

SYDNEY: In a bid to assist more Australian businesses become successful exporters, Austrade has compiled some export ‘tips’ to help businesses assess whether they have potential.

Austrade manager education programs, Leigh Derigo, believes international competition encourages businesses to be more innovative and use new processes or technology.

“Exporting businesses tend to generate growth in infrastructure, production facilities, research and design, as well as ideas,” she says. “Austrade recommends that when businesses explore their export potential, they analyse their business before considering overseas markets. They should consider whether their products or services are exportable, why they want to export and whether they are capable of exporting now or in the future.”

According to Derigo, planning and research are essential. Before focusing on possible overseas markets, a business should first review its products or services and current clients.

If businesses are interested in exporting, she suggests asking the following questions to see if they are ready to take the fist steps towards a successful global future:

l Are my current products/services able to be marketed overseas?

l Are my products/services unique in Australia and overseas?

l Am I selling successfully interstate?

l Are my products/ services competitive without protection (tariffs or regulations)?

l Can my products/services be used overseas?

l Do existing customers buy my products/services for quality, price, brand, uniqueness or after-sales service?

l Why do customers buy from me, rather than competitors?

l What is my value position?

l Can I modify my products/services to suit overseas markets?

l Must I repackage my products/services for overseas markets?

l Can I transport my products overseas at reasonable cost?

l Are there seasonal trends overseas that provide opportunities?

l Do I provide warranties, guarantees or service contracts?

l Can I increase production to meet greater overseas demand?

Austrade is an Australian Government agency that assists companies of all sizes to develop their businesses overseas. Additional information about exporting can be obtained by visiting www.austrade.gov.au/newexporter.

Shift from sales

warns Deloitte

SYDNEY: “Letting sales drive your business is like letting the tail wag the dog.” This is the warning to growing companies from Deloitte, which has just released its latest Reality of Growth guide.

“Businesses which believe they will grow by taking and filling orders are simply chasing their tails,” says Deloitte Growth Solutions partner, Walter Dinale. “In the meantime, competitors are snapping at their heels by investing in marketing to win market share and create new business.

“Businesses must get into the hearts and heads as well as the wallets of their customers. Yet, growing businesses find it easier to focus on sales, mistakenly thinking that marketing is for the bigger end of town. But no matter what size business, the reality is that customers’ needs will change and the business must innovate – or customers will stray.”

According to Dinale, marketing will keep a business synchronised with the market.

“They need to work hard to understand their customers, define their target market, increase their customers’ perception of value and exert 100 percent of their energy into customer service. Then the sales will follow,” he maintains.

Gay loyalty a lure for marketers

WASHINGTON: In findings bound to attract the interest of advertisers, a new study has found that gays and lesbians tend to show brand loyalty to gay-friendly companies, and they are likelier to keep up with the latest styles and upgrade to the newest version of a product.

In the nationwide study of self-identified gay, lesbian or bisexual (GLB) people two thirds (64 percent) said they were likelier to consider buying products and services (69 percent) from companies that market directly to gays and lesbians over competing brands that do not.

Seven in 10 (70 percent) of GLB respondents also said they were likely to consider a brand that is known to provide equal workplace benefits for all their employees. Half (51 percent) also said they were likely to consider brands that support causes that are important to them as GLB people.

McLibel Two have the last laugh

LONDON: In an amazing legal development, two campaigners known as the ‘McLibel Two’ should have been given legal aid by the British government to defend themselves against a libel action by McDonald’s, Europe’s highest court has ruled.

The McLibel Two lost a libel case against McDonald’s in 1997, in which the relatively penniless environmental activists famously represented themselves against the firm’s expensive lawyers. The firm had sued them for libel because of leaflets the two Londoners had distributed, but not written, entitled: ‘What’s Wrong with McDonald’s’.

After an incredible 1095 days in court – it became the longest trial in legal history – McDonald’s had a Pyrrhic victory in being awarded around A$140,000. However, throughout the libel epic it spent close to A$23 million and suffered incalculable damage to its brand in what has since been described as “the biggest corporate PR disaster in history”.

The court’s decision is a clear victory for the sheer perseverance of the two litigants, and may well force the UK government to change the libel laws.

ATM ads come of age

LONDON: While banks have long used cash machines to advertise, the latest development is for full-scale animated or television-style advertising on ATM screens.

Shoppers expectantly awaiting a wad of cash from an ATM have been identified by the likes of British Airways and Nestle Rowntree as a captive market ripe for the taking, with the number of ATM advertisers expected to quadruple this year. Advertisers have recognised that they have the undivided attention of consumers for about 30 seconds, but that to generate real interest they have to apply the same creative techniques used in mainstream mediums.

“Wouldn’t you rather be taking out money in Europe?” one British Airways advert asked cash machine customers.

The ad then showed a map of the nearest British Airways Travel centre. Research showed 44 percent of people that remembered the ad were more inclined to buy a BA ticket, according to the airline.