Franchises set up shop in regional centres

Regional and rural Australia is enjoying a revival. Once sleepy hollows like Warwick, Wagga Wagga and Toowoomba are urbanising and emulating the big cities with coffee shops, department stores and a host of other facilities. The revival was sparked in 1997 with a major debate to provide greater services to country towns, and since then such centres have been drawing people in droves from all over Australia to work and live there. Major brands are also moving back in, but this time around they’re not only company-owned businesses, but franchises. In this Special Report Andreina Garofali talks to franchisors and franchisees across different industries to find out if this is all just another cyclical trend, or whether country franchising really is the next big thing.

Healthy Inspirations managing director, Jamie Hayes, believes regional centres are on a growth path. Seven of its health and weight loss centres are in regional towns and two more are about to open outside Brisbane. In fact, for franchises like Mortgage Choice, its Victorian regional franchisees are outperforming their metro cousins and on a national scale, three of its top-performing franchisees are based in Queensland regional centres – Townsville, Mackay and Cairns. For Eagle Boys Pizza , its most successful franchisee turns over $1 million a year and is based in Emerald in western Queensland, a mining town with a small population of 9000.

So what’s the story? Eagle Boys Pizza founder, Tom Potter, says it is far easier for franchisees to market and quickly gain critical mass in regional centres. Indeed, Potter has built his entire franchise system based on this advantage.

“It’s a lot easier to open stores in places like Young, Albury, Wodonga and Wangaratta,” he maintains.

Potter, who opened his first pizza outlet in Albury, NSW, and has proceeded to build a $100 million business, of which 110 of 155 Eagle Boys are based in regional centres around Australia, points out that the cost of advertising is substantially less than city centres. Unemployment is also higher, making it significantly easier to find staff that will stay loyal to the business. For franchisees new to an area, it’s also easy to integrate into the community and become well known quickly if you make the effort to get involved in community events, join sporting clubs and the local Chamber of Commerce.

Ecowash managing director, Jim Cornish, recently launched a franchise in the Southern Highlands of NSW. He says one of the major benefits of building a business in such centres is how much further your marketing dollars stretch. For a three-day radio campaign, a quarter page ad, editorial, a letterbox drop and a display car at the local mall in Bowral, the company spent approximately $1600. For the same amount in Sydney, Cornish says all he would get is a display car in Warringah Mall for two days.

He adds that the difference between marketing in regional centres over the CBD is the way you approach your positioning.

Everybody knows each other in small towns, so the marketing needs to reflect this communal culture and be centred on building trust with individual customers. For this reason Cornish has devoted a lot of energy to first promoting the personality of the franchisee, then the service.

“This is a completely different approach to how we market in the metro areas,” he declares. According to Telcoinabox franchisee, Jeremy Moffatt of NQ Telecom, people tend to like to deal with a local.

“Everybody knows everybody, whether you like it or not. In Melbourne and Sydney it’s transient. It’s a dog-eat-dog world making it difficult to build relationships. We use this local parochial behaviour as a key marketing driver,” he says.

Renae McGregor, a Healthy Inspirations franchisee, has lived in Wagga Wagga all her life. The fact that people already know her has really helped her business take off. “Being in a smaller town people know my name and my history. People still recognise me from when they saw me on the local news when I won the Miss Figure competition. The community is very supportive of my successes,” she explains.

Mortgage Choice has also realised the advantage of marketing a franchisee as “the individual” in regional centres. It is currently undertaking a big marketing push with a television campaign on WINNBN, which covers regional New South Wales, Queensland, Victoria and Western Australia. The campaign is also supported by radio, print and direct mail.

Mortgage Choice has also witnessed regional franchisees help recruit other local franchisees.

“We have a franchise who joined Mortgage Choice through an existing franchisee’s referral and set up in Bundaberg with a shopfront. They are doing extremely well and looking to grow their business into the Sunshine Coast,” says Warren O’Rourke, national manager corporate affairs.

Franchisees in regional centres need to be able to work autonomously, adds O’Rourke. While the franchisee has to be well suited to the business type, the Mortgage Choice model allows for less field support in regional areas.

When a regional franchisee is set up they are allocated a mentor who understands regional issues and has had first-hand experience working in a regional centre. Regular training is condensed to one day to accommodate the long distances and specific regional marketing plans are created.

According to Franchise Council of Australia CEO, Richard Evans, there is certainly a future for rural and regional franchising. Such areas have experienced a number of socio-economic changes and the local communities are now reaping the benefits.

Evans says the proof is in the history. Thirty to 40 years ago it was all about the local baker and milk bar servicing the community. In the early 90s regional banks and government departments started to slowly move out, forcing locals to leave. However, the tables have now turned with regional centres reinventing themselves – attracting new industries such as telemarketing companies and regional banking institutions like Bendigo Bank and BankWest, encouraging people to move back.

“Australia Post has been testing the country market for a while, slowly moving more franchise systems into those areas. The next logical step would be for government services to enter regional centres. It would greatly reduce their costs while providing employment opportunities for the locals,” Evans says.

According to Sue Hirst, co-franchisor of mobile financial controller CAD partners, some people see the re-emergence of these centres as an opportunity to move back home, while others actively seek them out in pursuit of a lifestyle sea change.

“Only about five percent of our franchisees are regionally based,” she admits. “However, we would like to cover more rural and regional areas, as there’s plenty of business there for them. The difficulty is attracting franchisees who can see the opportunity.”

Ecowash’s Jim Cornish warns franchisees that while opportunities are abundant, it is also important to be mindful of just how far inland you can take your product or service.

“Even though our business is mobile, people in rural areas don’t really need their utes detailed,” he notes.

A major feature of franchising is that it brings a bit of the city to the country, says Eagle Boys’ Tom Potter. People no longer feel that they have to leave the country to get a taste of the city.

According to Potter, as the population continues to drift back to these areas there will be more scope for franchise brands to grow.

Indeed, it would seem that if you are motivated and like to get involved in community activities, then the time is ripe. You could quickly become a highly recognised local business owner, all the while enjoying a more relaxed lifestyle but with a similar income to that of your city-based counterparts.

Are you ready to take the plunge? Here are four franchisees that have.

FRANCHISE: Ecowash

NON-METRO FRANCHISEES: One

LOCATIONS: Covers Bowral, Moss Vale and Mittagong in NSW

FRANCHISEE: Rob Webb

Based in Moss Vale in the NSW Southern Highlands, in March this year Ross Webb became the first to launch a regional Ecowash franchise.

Webb had been looking for a business of his own for some considerable time. A friend recommended Ecowash, and Webb liked the fact that it was an environmentally friendly business that aligned with his own personal values.

“There’s definitely a market opportunity in the Southern Highlands. There aren’t any mobile car detailers that I know of here and a lot of people in Sydney have weekenders in the area who utilise the service. There is also an aging population that likes the idea of someone coming to their house to get their car done,” he says.

Webb has observed that servicing regional centres is about servicing the individual, not the product (the car).

“You can’t afford to spoil a relationship in a small town. Individual customers are not as easily replaced as in the city. Customer service is far more important in rural and regional centres,” he emphasises.

From a launch spend of just $1600 Webb generated a lot of interest, achieving over a dozen bookings at launch and six follow-up bookings.

“Being a one-person operation, 18 bookings is enough to fill an entire week of work,” he says.

In terms of ongoing promotion, Webb plans to rely heavily on his car to attract attention.

“People generally see my bright orange Daihatsu while I’m working on the job. They come up to me while I’m working and ask how the concept works. When they learn more, they normally make a booking on the spot.”

While it’s still early days at this stage, for Webb the interest generated at launch is enough for now, although he does plan to do more advertising in the future. This will almost certainly consist of a heavy radio component, as the medium worked so well for him during the launch.

He is not worried about competition, believing that once the business is firmly established customer loyalty will be such that they will not change suppliers. As such, his current main focus is to make sure his customers are well looked after. Over the next 12 months he says he would like to expand to another vehicle and an employee.

“I firmly believe there’s future viability for business in this area. It has a reasonably high-income population, which obviously opens up a great market to other franchises,” he says.

FRANCHISE: Healthy Inspirations

NON-METRO FRANCHISEES: Nine (by end July 2005)

LOCATIONS: Tamworth, Wagga Wagga, Queanbeyan, Ballarat, Bunbury, Port Macquarie, Toowoomba

FRANCHISEE: Paul and Melinda Lewis

Previously based in Sydney, husband and wife team Paul and Melinda Lewis moved to Melinda’s hometown, Bunbury in Western Australia, to start a Healthy Inspirations franchise.

“We were always looking for a sea change from Sydney and Bunbury was always our choice. The challenge was finding a franchise that could work in a small centre and that met our criteria – something that didn’t tie me up in a job, was ethical and within our comfort zone,” Paul Lewis says.

He believes small towns are crying out for a gym alternative. Obesity is a national epidemic and it’s not getting any better, particularly in small rural centres where the problem is greater than in city centres. Australia Bureau of Statistics (ABS) statistics show that approximately 40 percent of females based in small rural centres are overweight.

Overweight women, in particular, are often too embarrassed to work out in a public space, he says, and in the towns like Bunbury there aren’t many alternatives.

Lewis maintains that one of the great advantages of operating a franchise in a close-knit community is that it’s much easier to form networks.

“For an outsider it’s very easy to fit in if you put the effort into it,” he says.

When they moved to Bunbury, neither Lewis knew anyone in the local business community. Yet in only four months they forged a wide network of business and potential referral contacts by becoming involved in community affairs, Chamber of Commerce, Business Enterprise Centre (BEC) events - even political events – and signing up to local sporting clubs.

“All these people know a whole lot of other people and as a result we now receive a constant stream of leads,” he says.

Paul and Melinda Lewis launched their franchise in May with an open day. They showcased free circuit classes, had various stands, including one with a local doctor who is a specialist in women’s issues to answer medical questions, a massage therapist, a cooking demonstration of their ‘on-plan’ foods and free body composition analysis. They also took the initiative to strengthen their networks by cross-marketing with local boutiques, allowing them to also have their own stands on the day.

“We used radio as our primary vehicle to get people to the event and supported that with mail drops and co-marketing with local businesses. To add that touch of credibility we invited the local MP and his wife and negotiated an advertising arrangement with Radio West, which incorporated live crosses throughout the day,” Paul Lewis says.

The results from the PR event were extremely positive. Approximately 120 people passed through and 85 new members have signed up since the launch. The Lewis’ aim was to sign up 50 members by the end of the first month of business. Instead they are well on track to double that figure.

Since the Lewis’ were last scouting the town some five years ago, they are amazed just how many franchises now operate there.

“All the amenities and services that you would expect in a city are now here. My wife and I really feel right at home and we haven’t looked back,” Lewis says.

FRANCHISE: Mortgage Choice

NON-METRO FRANCHISEES: Approximately 50

LOCATIONS: Regional NSW, Qld, Vic, WA

FRANCHISEE: Ian McPherson

Ian McPherson started the first mortgage broking franchise in Cairns in 1994. Since then he has seen a big shift in the attitude of locals.

“Ten years our challenge was educating customers to try us out instead of loyally going back to an institution for a loan,” he says. “When we started only two percent of home lending went through brokers, so we spent a lot of time building one-on-one relationships with clients. The community has now come round to all sorts of options.”

Although people today have moved away from the much-maligned ‘small-town’ mentality, this has presented a new challenge – working within the demands of what McPherson calls a “transient culture”.

“People move up here for a couple of years and then move back down south again, so it’s harder for us to keep a customer,” he says.

McPherson, who has always been in finance, working out of both Sydney and Brisbane, was looking for a franchise where he could be based in his hometown but still stay in the industry.

He says one of the problems – although not a major one – of working in a town far from the metro centres is a sense of isolation. The only time he gets a chance to mix with the other franchisees is at state conferences every quarter. The franchisor-franchisee contact is also limited and is more on an as needed basis.

However, already having financial experience means franchisees like McPherson do not necessarily feel they need field support, but for those that want more Mortgage Choice will be rolling-out regular seminars across the regional centres from next financial year onwards, and swapping teleconference advisory calls to face-to-face meetings.

“Living in the tropics means that the typical Mortgage Choice standard of wearing suits and ties doesn’t apply here,” McPherson adds.

While adapting to your surroundings is important to assimilate, sometimes there are also commercial constraints that limit this.

“We can’t always have the same access to price cuts as city franchises because some lenders do not include low population areas, which obviously restricts the options we can offer clients,” he says.

McPherson’s clients are from Cairns and its periphery. He has about 2000 clients on his books, of which approximately 50 to 60 percent are referrals from clients’ friends and relatives. Others come through networks and marketing activities.

According to McPherson, the split isn’t any different to city-based franchises – it just depends on at what stage your business is at. In other words, the customer base grows as your business grows.

FRANCHISE: The Coffee Club

NON-METRO FRANCHISEES: 12

LOCATIONS: Bundaberg, Toowoomba, Wagga Wagga, Mackay, Cairns, Port Macquarie, Port Douglas, (centres in regional SA are currently being researched)

FRANCHISEE: Dan Davis

Dan Davis had been waiting to buy a Coffee Club for some time. Eventually, a shop came up in Mackay, Queensland. He packed up his life in Brisbane and moved two years ago to take up the opportunity.

Coffee Club founder and managing director, Emmanuel Drivas (pictrued right), says that the Gladstone and Toowoomba stores are turning over 20 percent above their like-for-like city stores. In fact, all regional centres are working above the average of their metro centre counterparts, which is an attractive factor for franchisees like Davis.

The cost of a Coffee Club store is the same no matter where it is located, so the biggest challenge is encouraging locals to spend the money to buy into such a large franchise. Because of this The Coffee Club’s expansion has slowed in these areas, despite the obvious potential.

“People travel around a lot these days and they see the brand and know what to expect from it,” Davis says. “We have a lot of loyal customers. It’s not like the old days when locals were totally loyal to their local ‘ma and pa’ cafes. People in these centres want a quality product just as much as the people in the city.

“While we do have competitors there’s not a lot of places to get a nice cup of coffee around here.”

According to Davis, his customers don’t really look at him as a franchisee. Rather, they simply see the business as an attractive and comfortable place to read a book and drink coffee. Location is also very important for an outlet like The Coffee Club, so for Davis’ franchise, being situated in an area with a large shopping centre provides great foot traffic.

Davis is self-sufficient and doesn’t require extensive support from the franchisor, which is key factor for Drivas when recruiting regional and rural-based franchisees.

“Population size is the biggest obstacle. There is a limited market to attract so you need to be enterprising with your marketing and focus on repeat business,” Drivas says.

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The Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.