Franchise Fever

By Smith & Sons Renovations & Extensions

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Australia's economic growth rate and consumer and business confidence levels may have plunged in the past 12 months, but the country’s love affair with franchising has shown no sign of slowing down, the sector still showing annual growth of an astonishing 7%.

We are regarded as the world leader in franchising, the sector accounting for 14% of national GDP and providing an estimated 600,000 jobs. And with about 1000 different franchise systems at last count, Australia has three times as many systems per capita as the US.

It’s not just the quantity that’s impressive. Research has shown owners of franchises have up to four times the likelihood of surviving their first five years in business than owners of non-franchised ventures.

The Sunshine Coast is home to a growing number of franchise systems, and one man who knows more about the phenomenon than most is former builder Greg Gardner. He founded the GJ Gardner Homes building & utilities franchise back in 1995, the group now having 120 franchises in Australia, the US, New Zealand, South Africa and Germany. Mr Gardner later co-founded the highly-successful James Homes Services franchise.

Now he is looking to replicate those successes through his latest venture, Australia’s first building renovations franchise called Smith & Sons .

Based at Mooloolaba, Mr Gardner said he was confident the new group would achieve a similar market penetration to GJ Gardner Homes in a much quicker timeframe. “We only started in February and we’ve got 13 franchises up-and-running already, with another seven in roll-out phase,” he said. “We think we can have as many as 150 franchisees within two-to-three years. We’re basically attempting to do with Smith & Sons in 12 months what we did with Gardners in 12 years.”

Mr Gardner said he had seen a growing need to professionally manage demand in the home additions renovation market, where some home owners were now spending as much as $600,000 upgrading their properties.

“We’re using the same model, the same system as GJ Gardner Homes, but we’ve specifically customised it for the renovation and extension market,” he said. “The whole idea behind the franchise concept is to take the builder and turn them into a rounded-business person.”

Part of that role, on the Sunshine Coast at least, will fall to former Currimundi and Caloundra car dealership owner Steve Jensen. Mr Jensen sold the dealerships last year to buy the master Smith & Sons franchise for the region between the Brisbane River and Bundaberg. He said building franchises had already been sold in Caloundra, Kawana and Maroochydore, with another two to be rolled out soon. “I think the region can support somewhere between eight and 10 franchises. When you consider there are 2300 builders on the Sunshine Coast, to position ourselves with eight-to-10 isn’t a big ask,” he said.

Mr Jensen said he was confident the advantages of a franchise system would make Smith & Sons successful. “The strength of franchising is in its systems. People accessing a tried-and-true system will generally have greater success,” he said. “A lot of small independent builders may have systems, but often they’ve bought them off the shelf and they don’t have the training and support that a franchise system provides.”

It’s that combination of a proven system, backed up by support and training, that solicitor Tony Pattinson from Ferguson Cannon Lawyers said was one of the key advantages of franchising.

Speaking at a recent franchising seminar at the firm’s Maroochydore offices, Mr Pattinson said a lack of expertise and planning were often behind business failures.

“In a franchising system, you get an established product name, generally a sharing of advertising and marketing expenses and combined or bulk purchasing power, not-to-mention day-to-day operating advice backed up by good operating manuals, training and help with a business plan,” he said.

Mr Pattinson said while the odds of success were in a franchisee’s favour, it wasn’t an iron-clad guarantee. He cited disadvantages as having to rely on the expertise of the franchisor, having to pay fees that were generally in the range of 5% to 12% of gross revenue, and the complicated nature of many franchise agreements.

Mr Pattinson’s views were supported by Noosa-based franchising consultant Philip Ciniglio, who also happens to be not only the state president of the Franchise Council of Australia, but also a franchisee after buying the Noosaville Samsara Furniture & Homewares franchise with partner Jennifer Gibson earlier this year.

Mr Ciniglio agreed that said while buying a franchise, or setting up a franchise system wasn’t a guarantee of success, “it’s a lot safer to be in franchising than in your own business.”

“It’s hard everywhere (in business) at the moment ... the economy is tough. Everyone is gearing up to be a survivor,” he said.

“It was a huge decision to buy the franchise when the economy is struggling, but it’s going very well."

“In a franchise system you’re drawing on the strength of the brand, the system and the support. I firmly believe most franchises will get through, provided they’re not over-geared.”

12/09/2008

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