Brumby’s share options batten down managers

SYDNEY: Senior management of bakery franchise Brumby’s coffee franchise will be allocated 300,000 share options after a vote of the company’s board of directors aimed at locking in the senior management team for the next three-and-a-half to five years.

The 11 senior managers will each receive an average of about 29,000 share options at a price of $1.25 per share, $0.05 above the listed share price at the time of the announcement of $1.20. Brumby’s shares have traded as high as $1.30 after listing on the Bendigo Stock Exchange in December 2003 at $0.56.

The managers will not be able to exercise their share options for three-and-half years, and will then have 18 months to exercise the option. The 300,000 options represent approximately 2.5 percent of the issued share capital of the company, which has 300 stores in Australia and New Zealand.

Brumby’s retail food franchise managing director, Michael Sherlock, says the share options provide a “golden handcuff” to ensure the franchise maintains its current management team as the company investigates expansion in Asia and the Pacific and the rollout of its new concept store, Brumby’s GO!.

“The issue of the options will provide appropriate incentive for management to maximise the return to shareholders over the long-term and assist in developing a unity of purpose for both Brumby’s management and shareholders,” he says, adding that the share options form the last significant piece in a human resources strategy based on reaching specific targets.

Meanwhile, Sherlock is also calling on non-supermarket retailers to cut the use of lightweight plastic bags.

Pressure is building for a nationwide ban with South Australia Premier Mike Rann warning his state will “go it alone” and ban plastic bags from 2009 if a Australia-wide ban cannot be achieved.

While major supermarket groups have reduced the number of bags issued by 26.9 percent, a survey of 129 non-supermarket retailers has found that 47 percent have not heard of the target of a 50 percent reduction in plastic bag use by the end of this year.

According to Sherlock, raising awareness among all retailers has been identified as the key to cutting plastic bag use. Brumby’s was a pioneer in the introduction of reusable bags in the mid-90s.

“Our original ‘enviro’ bag has been very successful in both the Australian and New Zealand markets. Our objective, of course, is to reduce the use of plastic bags and we reward shoppers who use the environmentally friendly bags. All smaller retailers could benefit from cutting their use of plastic bags and providing an alternative so that they present a greener image to customers, while helping the environment,” he says.

Sherlock says that based on feedback from customers, Brumby’s ‘enviro’ bag has now been improved by being made larger with longer handles.

Michel’s opens 300th

Australian patisserie

SYDNEY: The recent grand opening of Michel’s Patisserie Summer Hill marked another milestone for the Australian-owned franchise business, being the 300^th Australian store to have opened in the company’s 17 years of operation.

Established in 1988 by Sydneysiders Noel Carroll and Noel Roberts, Michel’s Patisserie has become popular with franchisees for its simple franchise system and level of support for franchisees. Stores are now being opened at a rate of one every week.

The short-term goal for store development is 400 retail outlets Australia-wide by 2006. Internationally, Michel’s Patisserie opened two stores in Shanghai in 2004 and one store in New Zealand in May this year, with three more to come by the end of 2005.

A major catalyst for development was the introduction in 1999 of an in-house coffee roasting and training facility. Established to provide coffee exclusively to Michel’s Patisserie, Michel’s Espresso saw the company’s profits and requests for franchises skyrocket.

“The constant and steady growth of Michel’s Patisserie gives me great confidence that our franchise system and business plans are highly effective and will allow us to achieve our goals for further expansion in the near future. We envisage Michel’s Patisserie growing to a total of 600 to 700 stores in Australia quite comfortably,” says Noel Carroll.

Grill’d on growth trail

MELBOURNE: Burger business Grill’d has announced its intention to franchise. Grill’d, which has tapped into a niche market for a healthy burger offering, was founded by Simon Crowe, a former international brand manager with Foster’s, in early 2004.

Crowe says although the original business plan did not include a franchise model, the fact that four stores have opened in quick succession in Hawthorn, Malvern, Windsor and St.Kilda, prompted a re-evaluation of the concept.

“Franchising was not part of our initial plan. Grill’d is built on passion, a great culture, hard work and a fantastic team and it took some time to realise that welcoming franchisees into the Grill’d family will help, not hinder, the culture and ultimately the business,” Crowe says. “I’m surprised by the initial level of interest, with franchisees from other systems already approaching us with a desire to get on board early. The decision to franchise is an exciting one and will allow Grill’d to reach the next stages in its development.”

Crowe hopes to have 25 outlets opened by the end of 2006 and 80 in the next five years. The intention is to have 30 percent company-owned stores, with the balance owned by franchisees. Set-up and establishment costs for a Grill’d franchise will be between $300,000 and $400,000, with exact figures dependent on the site.

According to Crowe, annualised sales for each of the four existing stores currently exceed $1 million.

Domino’s over-delivers

BRISBANE: Domino’s Pizza Australia New Zealand Limited has cemented its position as Australia’s largest pizza maker by opening more stores than expected during the 2004-05 financial year.

The company had expected to operate 376 stores in Australia and New Zealand by 30 June 2005, but instead had 387. Of these, 339 stores were in Australia and 48 were in New Zealand. It still expects to open at least 42 stores in 2005-06 in accordance with its prospectus forecast for the financial year.

Over the last financial year Domino’s opened 93 stores – a new record for the company. This included moving into the Melbourne market for the first time, where it now has 35 stores.

While New Zealand and Victoria have been the focus for much of the new store activity, the company has also expanded in existing territories. According to CEO Don Meij, the expansion has been fuelled by continued strong profits, a listing on the ASX, and a growing national appetite for pizza.

“Over the past year we’ve not only opened a number of new stores, but also merged with a number of other pizza players, including Pizza Haven New Zealand, Mad Dog Pizza in New Zealand and Big Daddy’s Pizza in Melbourne,” he notes. “However, we still see plenty of opportunities in Australia and New Zealand and we will be pursuing those in 2005-06.”

Approximately 30 percent of Domino’s Pizza stores are owned and operated by Domino’s Pizza, with the remaining 70 percent owned and operated by franchisees. It is Australia’s first publicly listed pizza chain, having made its debut on the Australian Stock Exchange in May 2005.

Overcoming China’s challenges

SHANGHAI: Foreign retailers that wish to penetrate Mainland China’s consumer market must first understand China’s complicated and changing economy, according to an Ernst & Young report, ‘The Path to Success for Retailers and Consumer Brands in China’.

“One of the most common mistakes is approaching China as a single, vast market,” says Conway Lee, a partner in Ernst & Young’s retail and consumer products practice. “In reality, China is a series of sub-markets that vary widely by location and demographics. Retailers would be prudent to consider strategies such as structuring outlets to local consumer preferences and allowing district managers more autonomy to tailor operations to local needs.”

China continues to be a hugely sought-after long-term business opportunity for global retailers, with a population of over 1.3 billion consumers keen to acquire a full range of goods and services. Significant increases in China’s domestic consumption have evidenced the transition from an investment-driven to consumption-led retail sector. Consumer-driven demand and growth potential will provide a range of opportunities for both market entrants and existing retailers. However, success in China will not come easily or quickly, as many examples of failure to date have shown.

‘The Path to Success’, which was released to mark the conclusion of Ernst & Young’s recent three day Global Retail and Consumer Products conference in Shanghai, highlights key issues retailers should grasp in order to operate successfully in China, among them:

q There are two distinct market segments in China; wealthier consumers in major cities demanding luxury, branded goods and those in smaller towns and rural markets with low incomes who are still focused on household necessities.

q China maintains a strong bureaucratic structure that may complicate business dealings. Partnering with local firms more familiar with this environment can help navigate the landscape.

q Retailers can consider tapping into ‘emerging’ provinces with growing economies and incomes as part of their market entry or expansion strategies.

q There may be limitations on overseas financing as China still maintains controls over its financial institutions.

“Branding remains a critical aspect for both domestic and foreign retailers in the Chinese market,” says Jay McIntosh, Americas director of the E&Y retail and consumer products group. “Retailers should be prepared to spend time, effort and considerable financial investment to establish their brands with consumers, as Chinese customers are appreciatively brand conscious and distinctly brand loyal.”

“Retailers, both domestic and foreign alike, will need to understand the unique characteristics of China’s consumer markets, the nuances of its retail market and the complexities of its ever-changing economy to more effectively conduct operations there,” Lee adds.

Nando’s hits the ton

CALOUNDRA: Fast casual dining franchise, Nando’s, has opened its 100^th restaurant across Australia and New Zealand. Located in Caloundra, the 100^th restaurant is run by local residents Don Dimitrievski and Fiona Campbell.

First coming to Australia in 1990, Nando’s established 35 company stores across Australia and New Zealand before offering franchise opportunities to interested parties.

According to Nando’s national marketing manager, Carlos Antonius, the fast casual approach is the key to the brand’s success in Australia.

“Although Australians are generally a relaxed bunch, they’re also interested in quality,” Antonius says.

New system to detect fraud

SYDNEY: Pre-employment screening company, Australian Background, has launched Australia’s first end-to-end online background checking system to help employers and recruitment agencies detect fraudulent job seekers.

The Secure Online Pre-employment Screening Solution (SOPSS), conceived and developed by Australian Background, is aimed at providing employers and recruiters with a more expedient method of background checking.

The system means employers can now order background checks online and have real time access to results, while candidates can complete background check forms securely online.

“Employers, particularly in today’s market, are pressured to increase the selection process turnaround time due to the current candidate-short market,” says Australian Background co-managing director, Sally Mooney.

“SOPSS is a ‘one-stop online shop’ for employers who want to order background checks quickly and efficiently and obtain reports in real time.”

According to Mooney, speeding up the checking process will not only create a positive impression of the recruitment agency, but also that of the organisation in front of the candidate.

“Job applicants have expressed an enormous amount of respect for organisations that tell them they have a screening strategy in place. It ensures the integrity, identity and credentials of the staff that work within the organisation at which they’re applying for the job,” she says.

Clients are assigned a unique ID and password giving them access to order any combination of background checks relevant to the role. Checks include: identity, criminal record, employment history, employment references, educational and professional qualifications, entitlement to work, driving history, management and directorship disqualification, directorships and significant shareholdings and bankruptcy.

“This screening tool has been specifically created to tailor to employers’ requirements. For example, a truck driving company may only be interested in a driver’s past driving offences, whereby a large corporation about to hire a board director would want to uncover any history relating to corporate fraud or dishonest acts in the workplace,” Mooney says.

The site can be accessed through a secure restricted access area on the Australian Background website and all checks are made with the candidate’s consent as required under the Privacy Act.

Once the candidate submits a form, their information cannot be changed or amended. The information is then automatically transferred to the final report. Simultaneously, the software validates the data entered to ensure candidates are providing all of the information the company needs to quickly turnaround the check and avoid unnecessary delays.

Candidate data is electronically archived in highly secure restricted access facilities.

“Being in the business of collecting personal data, we have the highest level of security to ensure information is completely out of reach from external hackers,” Mooney adds.

She says that the report can only be released to the prospective employer after the candidate has given consent. Information is only archived for legal purposes. It is not in any way re-used, disclosed or accessed by other parties.

After a period of seven years, all records are permanently destroyed using electronic erasing tools.

The security of the website has been tested and reviewed by IV&V Australia, an independent National Association of Testing Authorities (NATA) accredited security testing company.

Reports detailing the results of the check are completed within two to six working days.

Australian Background has seen an exponential increase in the number of background checks required by companies and is now conducting over 30,000 checks per annum. In November last year it conducted a study of 1000 screened candidates prior to employment between the ages of 18 to 51-plus across management and non-management roles. Statistics showed:

q Twenty-one percent of the applicants lied about their skills, experience and qualifications

q One in 20 had a criminal conviction, and of these 21 percent were for theft and embezzlement

q Eighteen percent of background checks revealed discrepancies in the candidates’ educational qualifications

q Males between 21-30 years of age lie more often than women

q Sixty percent of candidates with criminal convictions did not confess them, even when asked.

Civic Video in Thai venture

BANGKOK: Civic Video has expanded into Asia with the opening of nine stores in Bangkok and plans to open another 20 stores in Thailand by the end of 2005.

Local Thai video group I-See Entertainment investigated different franchise groups in the region and approached Civic Video with a view to competing against several established international franchise groups already operating in the market.

An aggressive growth strategy aims to rapidly increase the number of Civic Video stores in Thailand, driven by the experienced local management team operating under a master franchise agreement with Civic Video Australia.

“While Thailand has a massive piracy problem, strong opportunity still exists in the market for legitimate operators to prosper and grow their business,” says Civic group general manager, Rod Laycock. “The Thailand management team of Veerasak Sibunruang and Chaichana Chiramongkoi share similar business values and company culture to that of the family-owned Civic group. This has given us confidence to entrust the brand to them in Thailand, and we believe that they will be very successful in developing it in what is a very competitive market.”

Thailand is the second international territory for Civic Video, which currently operates in New Zealand through a master franchise agreement with Civic Group NZ Limited. Civic Video New Zealand has doubled in store numbers since its launch in 1998, with 57 stores now operating in the market and further expansion plans projected for 2006/07 to bring the group to over 70 stores.

Fresh franchises for CHOOKS

PERTH: Last month’s opening of the CHOOKS fresh and tasty stores in Keperra, 21 kilometres north-west of Brisbane and Ellenbrook, a northern suburb 30 minutes from Perth, increased the number of stores in the West Australian-based franchise group to 18.

The Keperra store is the first CHOOKS franchise to be established in the eastern states.

CHOOKS managing director, Steve Hansen, who is also currently WA president of the Franchise Council of Australia, says that with the number of potential franchisees in the pipeline on both sides of the country, he anticipates opening eight more stores by mid 2006.

CHOOKS has been on an expansion program since it rebranded two years ago and has been steadily building momentum.

“We have buying power in the marketplace and the profile of CHOOKS fresh and tasty is much higher today. Sales have increased by 10 percent annually over the last six to eight years and by 14 percent in the last 12 months,” Hansen says.

“Franchisee interest has grown enormously. They can see that our business model and locations provide the desired profit margins and our success is based on tried and tested demographic studies. We are exporting this blueprint to the eastern states, where we will continue to give franchisees hands-on support in their business through our bases in Sydney and Perth.”

With each of the stores providing employment for 12 to 15 permanent and casual staff, CHOOKS currently employs over 270 people.

Ellenbrook franchisees, Reinier and Vanessa van Rooyen were, until two years ago, growers of beef and chicken in their farming and dairy business in South Africa. Now they are retailers of chicken and are enjoying the transition.

“We have much more control over the quality of the final product that consumers get to enjoy. It was the high standard of CHOOKS food products, training, and the way the group is managed to ensure we stay profitable that made us choose it as our business direction,” Reinier van Rooyen says.

Keperra franchisees, Dilip Mehta and Grace Nie, have owned and run small businesses in the UK, Sydney and Brisbane for over 18 years, including another franchised business.

For them the decision to buy into a CHOOKS fresh and tasty franchise was made because it offered product choice with both fried and barbecued chicken on the menu, and they could deal directly with the owners who have successfully done it themselves.

“In the bigger groups you don’t see the owners, but with CHOOKS there is communication on a day-to-day basis if needed,” Dilip Mehta says.

According to Hansen CHOOKS, which has its roots in regional towns, selects smaller, local shopping centres so that outlets are convenient for people to get to and can provide a service to the local community.

Targett Retail

targets franchising

SYDNEY: Privately owned retail training institution, Targett Retail Training, has announced that it is accepting expressions of interest from candidates wishing to be part of its new national franchising program.

Managing director Louise Targett established the business in 1999 after an extensive career in retail and shopping centre management.

“The decision for Targett Retail Training to expand into franchising nationwide was made because we have national clients, and many more are continuing to sign up with us,” Targett says. “We need a national infrastructure so that we are able to offer a more localised and more efficient service in all regions and major cities around Australia. By having franchisees operating each office, they are their own boss and can also feed off our national clients.”

According to Targett, ideal franchisees would include retail managers, retail trainers and business drivers. For further information phone (02) 9659 5313 or visit www.targetttraining.com.au.

Milnes makes her choice

SYDNEY: Mortgage Broker Mortgage Choice has announced the appointment of Tania Milnes as NSW franchise marketing manager.

“One of my major challenges is to work with the NSW state office and NSW franchise owners to develop and implement successful marketing strategies in an increasingly competitive environment so as to build awareness of the Mortgage Choice brand name locally and state-wide,” Milnes says.

She has a background in business management, brand management, marketing and strategic roles with organisation such as University of Waikato (NZ), McIntosh Associates (NZ) and Tru-Test (Aust).

Tax relief gives rise to regional makeover

SYDNEY: Recently announced changes to international tax measures will boost Australia’s attractiveness as a regional hub, having the added benefit of luring skilled workers back to the country, according to KPMG international corporate tax partner, Neil Billyard.

“Put simply, this announcement is the last major piece of international tax reform aimed at eliminating the taxation of income flowing through Australia where its source is foreign and its ultimate owners are non-residents. Previously this tax exposure was a major deterrent for non-residents looking to invest via Australia,” he says.

KPMG international corporate tax partner, Jason Chang, believes that the long-awaited conduit tax amendments will be another significant step in encouraging foreign multinationals to set up their headquarters in Australia.

Despite excellent infrastructure, a healthy economy and stable political system, Australia’s international tax system has been a disincentive to foreign multinationals to choose Australia as a base, which instead have often chosen Singapore, Hong Kong or European-based locations.

“It is hoped that the removal of taxes on foreign income as well as the Capital Gains Tax on foreign investment by Australian holding companies will bring Australia into line with countries such as Singapore and Hong Kong and other holding company regimes which have enjoyed the fruits of very favourable international tax regimes,” Chang says.

“The removal of these taxes will have immense benefits to Australia such as attracting foreign multinationals and, therefore, skilled foreign workers, to the country in addition to more involvement in the international market.”

While the proposed changes will make Australia more competitive, more effort will need to be put into further enhancing these measures (which currently are still limited in scope) and promoting these amendments to overseas investors, Chang maintains.