How does a family business operating successfully for 72 years approach the task of becoming a coffee shop franchise Shingle Inn Director Andrew Bellchambers reflects on some of the trials, tribulations and lessons learned over 12 months as his family's cafe business is transformed.
November 2007
My brother Peter and I have spent the past few months investigating the various avenues available to us to expand the coffee house business our parents purchased in 1975. Franchising was not initially the obvious choice and we looked at both private equity and bank finance before settling on the franchising model.
Once we'd chosen franchising as the front runner we spoke to numerous companies in the franchising sector for their feedback. Established and growing franchises such as Pizza Capers, Cookie Man, Go Gecko and Muffin Break provided valuable advice regarding what has and hasn't worked for them.
Continuously the same piece of advice cropped up - make sure you get good consultants and good legal advice to avoid weak back-of-house systems and costly legal loopholes down the track.
December 2007 and January 2008
After noticing various franchising articles that referred to or quoted DC Strategy I subscribed online to its quarterly newsletter and email update and within 20 minutes of subscribing I had received a call arranging a preliminary meeting; what great systems. The company has an impressive list of high profile brands such as Boost, Healthy Habits and Fernwood, franchises representing the level we want to reach.
Our initial meeting focused on how the business worked and the current structure and DC Strategy was quick to highlight that not every business, or every person for that matter, is suited to franchising; a thorough economic analysis is required.
All I can say is that there has to be a degree of mutual respect with the consultants who are getting this close to your business because as they pull the business apart and put it back together -to see if it stacks up for franchising - you undertake countless meetings and have to be very transparent in regard to your current business and also your expectations (and it's the same with the franchisee recruitment process).
One of the more interesting processes in the initial phase was a brainstorming day where Peter and I sat in a room discussing everything about the business from the financial structure to operations, marketing and product development.
It was quite an insight, particularly since we'd never done anything like it before, and not without its funny moments (for some), especially when we came back to assign responsibility to each of the actions we'd discussed and they were all given to me. Of course, true to our roles in the business when we reached the financially related areas of the business the scales became more balanced.
The process was helpful in breaking down the business and taking time to review all the projects we were working on - marketing, operations, legal issues and financial. It's the same for any business owner, regardless of the industry you're in. It's easy to drift along, putting out fires or solving problems, but if you take the time to be strategic, to take time out of your business to assess the different areas and consider specific goals, it can only make your business stronger.
I personally dislike the work on your business, not in your business' cliche. On a daily basis this is a highly unrealistic expectation for most small to medium businesses and I think having an ongoing contact with the coal-face of the business allows you to develop strategy that is more insightful and more likely to be embraced by your team. It is about reaching a balance for more SMEs.
February 2008
One of the advantages of regular meetings with DC Strategy was Peter and I were able to get out of the office and visit more shopping centres and strip shops than we'd had time for in the past (or since). Travelling to Sydney and Melbourne got us out of our comfort zone and allowed us to really examine what was happening in our industry.
In considering the big picture we decided to instigate a compulsory quarterly interstate trip that would ensure we didn't get bogged down by office paperwork, instead analysing the competition and broader market to open our minds to different ways of thinking that might, in turn, lead to future opportunities or expansion.
Once the DC Strategy economic analysis was completed the hard work began. The model produced a conservative and aggressive rollout over the next five or so years showing the uplift of the business as store numbers begin to grow.
I can assure you it looks easier on paper. I suppose you can put any spin on it on paper - theoretically you could have 1000 stores in five years but in the end you have to be able to execute it.
Alongside the economic store rollout was an HR development strategy, showing how business growth would ultimately lead to team growth and the priority for employing specific key positions that would be necessary to assist the ramp-up of the business.
March and April 2008
As part of the DCS timeline we spent months collating all the procedures and processes of the business - financial, operations, marketing, legal, HR - into the manual. Ninety five per cent was already in use in the business but a few critical elements were added and collated into a cohesive document.
It's great to know that's the intellectual property on which the business is founded, giving future franchisees the opportunity to follow our lead for their ultimate success.
We're focused on continually innovating and improving so the manual is a document that will undoubtedly change enormously over time.
June 2008
Despite the mountain of work that has already gone into the process to-date, it doesn't feel like we are actually franchising until this month when we can start advertising for prospective franchisees. Now it's all go.
Our first foray into advertising was a franchising feature in Brisbane's The Courier Mail, we also took a stand at Brisbane's Franchising Expo where one visitor proceeded to tell me we'd be paying too much rent for sites as big as ours in our current locations and suggested a few sites in Surfers Paradise where we 'couldn't go wrong'. By the time he finished with what other products we should sell our business model would have been unrecognisable; proving there's an expert on every corner.
Since then we've had regular advertisements in Saturday's Courier Mail and in the Gold Coast Bulletin; the two locations where our new stores will be based in the foreseeable future, in addition to regular advertisements in Franchising Magazine and numerous online directories. This has resulted in a steady stream of enquiries in the second half of this year with the almost real prospect of our first franchisee in early 2009.
Although we were told it was a lengthy process and of course due diligence means it doesn't happen overnight, I'm still surprised by the length of time the process takes. The extensive process seems to be readily accepted in the franchising industry, ensuring all Code obligations are met, but I've also noticed that prospective franchisees themselves need to be convinced in their own mind that they're doing the right thing, to take the final leap.
In saying that we've also had prospective franchisees try to reinvent the system or unable to look at the opportunity through objective eyes. In one example a prospective franchisee was adamant against going into certain shopping centres regardless of the offer. His previous negative experience wouldn't allow him to see that our commercial relationships, negotiation of rent and taking the head lease meant we could be more competitive than individual operators. He was convinced the rental couldn't be right.
On the other hand we've had prospective franchisees that understand this type of operation, who have visited our stores several times and guessed the turnover at more than $200,000 less than it is. Subsequently when actual figures are presented they are more interested in investigating a specific franchise opportunity. The difference here is that the decision is being made based on commerce not emotion.
August to October 2008
With everything moving towards the ultimate outcome of our first franchised store I attended the FCA National Franchising Conference in Sydney keen to get a further insight into the industry. I think it's really good for franchisees and franchisors to have an understanding of how each party sees the relationship and despite it being quite franchisor-oriented I think there's relevant content for everyone.
November 2008
Our focus now is on the brand and improving and refining our consistency across stores.
We're knee-deep in a branding redesign that started with a customer survey in September that has led to the redevelopment of the Shingle Inn brand to bring it into today's more modern setting. I guess there's always a bit of a tendency to hold onto tradition and struggle with change and embracing new ideas.
Peter and I are very conscious of making decisions from a male perspective when our key demographic is female but we are slowly integrating more feedback from employees and customers into our processes.
To some degree I'm surprised by how long the process has taken but I also recognise it's important not to rush, especially since we're changing a logo that's been in existence for more than 70 years.
We're also experiencing changes in other areas of the business that are slowly making our franchising dream seem like reality. The structure is adapting as more people are brought on board as-part of the expansion. Peter and I continue to look after some of the key roles so we have an understanding of how that works from the point of employing people in the roles such as franchise development manager and financial controller but the team is certainly taking shape.
Now the challenge is innovating. How do we attract new franchisees in a groundbreaking way? What hasn't been done before? Watch this space.