How franchisees are at the heart of the Total Tools business
If you found a franchise that was committed to ensuring strong sales for franchisees, evident in double-digit growth, you would want to know where to sign up.
And it is a challenge that has already been admirably fixed by Total Tools, which is on a limited-growth trajectory and proving to be a favourite with business-savvy investors.
The retail chain is an unusual set-up, developed from a co-operative structure that has given it a strong sense of community, and put franchisees front and centre. Twenty franchisees founded the business in the changeover from a co-op in 2007, and these are all present-day shareholders in Total Tools. Two or three of them at any time serve on the board, which is also overseen by an executive board.
So franchisees are, literally, at the heart of the business. This is evident in the tenure of the franchisees as well. Agreement terms run up to 10 years with renewal options, and as yet no franchisee has sold on their business.
Quite the reverse, actually. The strength of the business model has seen franchisees embrace multi-unit ownership while maintaining a fair level of influence. A single franchisee’s ownership of multiple outlets has been capped at 10 per cent of the overall network size, which by the end of this financial year will be 73.
Fred Pose, franchise and leasing manager, says the growth plan is 131 territories across Australia, already pre-mapped and researched. “We are more than halfway through and have 10 booked for the next financial year. We are looking for franchisees mainly in Sydney and New South Wales.” Just a single location is available in Queensland, and three in Western Australia.
Franchisees are snapping up their second, third and beyond outlets interstate as well, with Total Tools’ female franchisee Lisa Gilbertson running two sites, in South Australia and Western Australia.
Pose says most franchisees are already future-proofing their businesses. “It is part of the culture and has been encouraged because of the nature of the franchise,” he says. “When I started at the business, I was receiving endless emails asking for certain tools. That’s because if anyone needs a tool, the whole business network receives an email. Then there will be a response email saying, ‘I’ll ship it to you’, or ‘I’ll drive it down’.
“Franchisees from another state will even turn up to help new franchisees launch their business. We’re in a privileged position. We have franchisees waiting for sites.”
The franchise is attracting attention
The success of the model is attracting attention from former McDonald’s franchisees, intrigued by the performance and structure of the business. A significant support staff is fundamental to this, says Pose. “Our head office in Melbourne has 80 to 90 people, and we have only 67 stores.”
A marketing department of 26 people is “substantial” he says, and puts out 14 sales calendars each year outlining the marketing campaigns, and is responsible for an app used for marketing and loyalty programs.
For CEO Tim Cockayne, the importance of understanding the customer and their details is paramount. “The broad approach of sending everyone the same offer has gone. When you run loyalty, and e-commerce, gathering data and understanding the customer better, you can tailor offers to customers. For us, it is a part of the overall customer service.”
For six years the business has reported double-digit growth, with comparative sales up 22 per cent for last fiscal year. However, the retail sector overall is facing challenges, namely high rents, labour costs and online shopping. How is Total Tools addressing these issues?
The business is working on its online sales platform to drive sales back to the franchisees, and is focused on bringing in national accounts. Says Cockayne, “We treat all our stores as distribution centres. Being a franchise network, the sales still go through the store and it works well because it links the customer back to their local outlet.
“The other part is that we service our customer wherever they want, whether they are on the end of the phone, online or in a store. If you don’t adapt, there’s a good chance that in a number of years you’ll be wondering why your business is going backward.
Franchise model appeals to the business savvy
“We put a lot of marketing funds into e-commerce, and we continue to challenge ourselves in our ability to improve our logistics. Retail is about thinking similarly – how do I service customers in ways that they want, not what our business wants? Remember, a group of kids is about to enter the workforce who have never known a life without a mobile phone or the internet. We need to be ready for them.”
Total Tools’ model appeals to savvy, business-experienced individuals who have accrued some wealth (investing in a store will cost up to $2 million).
Pose is clear: franchise recruitment is not about replacing a job; the aim is creating lasting wealth for franchisees. “We don’t need you to know how to use a spanner. If you can understand business, marketing, motivating people and numbers, we’re interested.”
These are big businesses, too big to run without a manager in place, says Pose. And the model has benefits. As franchisees expand their empires – a minimum 12 months is mandatory before anyone can invest in a second store – they are turning to their managers for equity partnerships in further sites.
It will be another three to four years before the ultimate goal of 131 outlets across Australia comes to fruition. So could overseas expansion be on the cards?
“The reality is Total Tools will not work in every country,” says Cockayne. “I don’t think it would work in some developing countries or underdeveloped second- and third-world countries, but when you look at places like New Zealand, the US and across Europe, it will work because when you look at the numbers, they have the same requirements regarding construction, they have the same brands and the same needs.”
Watch this space.