The franchise bread winners
What do you do when redundancy cuts your career short? Learning new skills in franchising is one option.
When the economy gives you a kick on the backside it doesn’t have to mean a bleak future. While you can approach the purchase of a franchise as the opportunity to buy yourself job security, it can be so much more; most franchisors are looking for ambitious franchisees who have a vision of a successful business.
And as we discover here, going into a franchised network doesn’t have to mean continuing on the path you have taken so far.
If you’ve always been in IT, why not try retail? If manual work has shaped your employment then why not consider a mobile operation? Just because your experience has been in senior management it doesn’t preclude you from a hands-on business.
There are new skills to discover and old skills to apply in a fresh context, all within the boundaries of a tried and tested system which offers a network of support and guidance.
On a roll
Paul Macarounas, a Bakers Delight franchisee, had a 20 year banking career with posts at ANZ and Hong Kong Bank. But after a 10 year stint as associate director of the treasury division at Rothschild’s it all came to an abrupt end with the closure of the company’s Australian operations.
“When I was made redundant in 2004 the economy was still bubbling away; I’d been with a good employer and didn’t want to start at the bottom again so my initial reaction was to go into mortgage broking. It was my wife who said “you’ll become a slave to it” because I would be the principal and would be going to call outs which are mostly after hours. She told me I needed to get into something I knew nothing about.
“I’m not a baker, I didn’t even cook at home. I knew I would hire a professional baker and manage the business.
“Three things were key to me choosing Bakers Delight: a fantastic brand, a great product and really good margins. Other franchises didn’t have such great margins. I knew even with a downturn in the economy the margins could withstand it.”
Macarounas bought a Greenfield site in a brand new shopping centre and knew he would have to carry the business until both were established. For the first six to nine months either he or his wife were there covering the hours between them and establishing staff.
"If you have the best equipment and product but don’t have good staff, you have nothing. We need someone working from 1 or 2am right through to 7 or 8pm, every day of the week. The bakery is constantly in use and the staff are largely unsupervised.
“Trust is paramount. You have to trust and empower them to take responsibility for their environment. If I do a roster I’m not the boss, I’m working for whoever is in charge.”
Set up with a good team which encourages new staff, says Macarounas, who likes to do three shifts a week. “We need to be in the shop to learn what works, what sells at busy times, what sells when it’s hot. You can read research but being there is the best way to find out. Now the fruits of our labours are coming through.”
His financial background was no doubt a great aid in the management of the business; as he highlights, it’s important to understand the power of cashflow.
“It surprises me how many businesses are going under — you can have a sound business but you must have a cashflow. We have never gone a week without paying staff or suppliers. We only use an accountant once a year because my wife does the books and it keeps us on top of where our business is. I know my customer count and the average spend per customer.”
As yet he can cite no evidence of a slowdown with people buying bread rolls for sandwiches.
“It’s not a business that will go well in the boom time but it is good in a recession, it’s a staple product. People will splurge on a healthy loaf of bread that costs a few dollars.”
From a role of managing money and people, predominantly by phone, Macarounas is now in a customer service environment and loving it. “It’s very refreshing to speak to customers face to face. In fact, now instead of going to an ATM at the bank I walk up to the tellers. Daily conversation is quite pleasant and people have built friendships over the counter.”
He says the business is on solid foundations now. “We’ve passed the time of waking at 1.30 in the morning wondering what we’ve done,” he admits.
But he is vigilant; looking after customers to ensure their loyalty is paramount.
“We’ve doubled our sales in four years. I did something out of my comfort zone and it wasn’t without risk. But it’s more rewarding. The biggest gift is flexibility but if I need to be at work it’s a priority. Whatever I do, have a sick day or day off, it all comes off my bottom line. I’m involved with my kids and know the school teachers; the drop in pay took a bit of adjustment but I’ve learned a lot in four years and some mistakes would be diminished if we opened another bakery.
“If I was in my 30s I might have gone back into finance but at 40 I was ready for a change. I can’t help but recommend it.”
Earning a crust
Paul Schmidt became a Crust Gourmet Pizza Bar franchisee in February 2008.
“I was working for a publicly listed company with four and a half thousand employees, looking where the economy was heading and I could see a decrease in capital spending around IT projects. Then I started to think, what will I do? I’ve always had a passion for food and I was looking for a sound investment. I did consider starting up individually but that carries a lot of risk. With any business if you’re not viable after 12 months you might as well close your doors.
“Franchising, and the Crust model, provides support of the group and a sound business model. I did further research into the pizza market and found it to be fairly recession proof. I knew the Crust brand from Sydney and saw opportunities in Queensland (which is the most profitable state for franchising. It was important not to go into a franchise at saturation point; it’s about growth and opportunity.
“It’s an investment. I have two young kids, for me the aim is to support my family and this is financially viable. Now I’m state manager and I still have a franchise. You have to keep your finger on the pulse. If I’m to promote Crust I have to understand it inside out, and drive the operations from store level.
“Doing something different is a great thing. People need to consider work and life balance. Franchising gives you the opportunity to spend more time with your family, it’s an investment strategy and it reaps rewards.”
Being smart with your redundancy package
The Australian franchising industry is one of the most developed in the world and despite the impending gloom of a global economic slowdown, recent figures indicate that the sector is still growing, making franchising an appealing prospect for those disenchanted with the corporate world.
But before you slap your redundancy cheque on the counter and pick a franchise off the shelf, you would be wise to put some hard thinking into your choice says Ian Krawitz, head of intelligence at franchise oriented research consultancy 10 Thousand Feet, which compiles the topfranchise.com.au website — ranking franchises according to franchisee responses.
1. Take your time
Franchising is not just an employment situation so there are greater implications. “You can’t get out of it easily, it is more like a marriage. As a franchisee if you want to get out of the business you’ll have to go through the process of selling and that’s not just as easy as turning your assets into liquid cash. It’s a long term thing,” he cautions.
2. Know your working mindset
Krawitz believes there are two types of people in this world. There are those with salaried employee mindsets and those with the mind of an entrepreneur. Salaried employees tend to enjoy playing an executional role in their business so they suit a system with strong structures and processes, and regular close contact with their franchisor.
“The more entrepreneurial will prefer a system with flexibility and the opportunity to express their entrepreneurial talent.”
3. Set realistic expectations on return
Salaried employees tend to have a lower appetite for risk and want a good regular income so choose a system with a good financial reward and one that provides guidance for the financial side of the business and helps ensure you run the business tightly to get the return.
4. Look for a simplistic model that’s proven
“You can compete with other employees in a salaried position or you can get into your own business,” says Krawitz.
“There are some industries that are bucking the trend but for most this is not a time to be doing trial and error, that just burns cash. Entrepreneurs are usually happy to take risks but are most likely to flourish within a simple business model. The simpler a model is, the easier it is to understand the cost inputs and revenue streams which will free entrepreneurs up to apply their skills to building their business.”
5. Everybody needs support
Regardless of your background, you should look at the support offered by the franchisor in all parts of the business.
“Realise that you’ll go from being very experienced at managing some parts of a business, to executing or managing all parts of a business”, says Krawitz. “The first 12 months are crucial, as this is the time when you will need a lot of assistance to get your skills and knowledge up to speed.”
Some systems offer stronger support than others, so spend time researching the offering. “It’s not dependent on what the franchise costs or the royalty you pay, it’s the individual company and ethos of support that’s important.”
6. Consider the lifestyle you want
Remember that this is your own business, so it won’t be a case of clocking off at 5pm. ”A franchise usually takes up to three years to become highly profitable, so be prepared to put the hard yards in for a few years up front,” cautions Krawitz.
And of course involve your family in the decision.
“If lifestyle is the main benefit you want from being in your own business, look for franchises where you can dial up or down the number of hours you put in and accordingly the money you take out. You can choose a business that allows you to be flexible (car care for instance) but you need to weigh up the profitability.
“With your own business you’ll be looking to be more committed but you have to be sensible about the hours you want to work. Working 40 to 60 hours is healthy and highly profitable, according to our research. You don’t have to burn yourself out.”
7. Choose something you can be passionate about
When it comes to running your own business, being passionate about the brand, customers, service or product is important. Krawitz suggests mystery shopping the business you are considering to see if you can get passionate about the customer experience.
8. Speak to existing franchisees
Topfranchise.com.au is useful in giving franchisee feedback but once you narrow your search down to two or three systems you need to chat to the franchisees and get an idea of their mindset. A positive peer group is very important.
Ask a franchisee if they would recommend the system to a close friend or family member, and whatever the answer, what is the reason why.
“It doesn’t mean you won’t choose that system if you decide you are comfortable with it, but you’ll get a better insight into the deficiencies or strengths;” explains Krawitz.
9. How will you satisfy your ambition?
“If you’ve come from a well-paid salary position you’re probably ambitious and that motivation won’t disappear. You want a system that allows you to grow, whether that’s as a multi-unit franchisee, as a mentor, or using your skills,” says Krawitz.
Think about your choice of franchise in the same way you would think of your career. Instead of career development paths, you should be considering growth strategies for the business.
Does your system offer multi-unit growth options? Are there opportunities to expand within your geographic proximity? What programs does your franchise offer to help you develop multi-unit ownership skills?
10. Adaptability in today’s economic climate
Consider how the business model will hold up. Franchises that are agile have been able to adapt; you can provide a better service than the competition if you listen to your customers.
“Buy into an adaptable company and you cannot just survive a downturn but excel,” Krawitz advises.
“Given the current economic climate, you need to consider if the business model, product or service is recession proof. Look at how customer habits have changed over the past six to 12 months. Are you entering a business that will flourish as customers cut back, or will you be left high and dry? Signs to look for include understanding whether the company regularly does market research and how long the decision making process takes to make adjustments to market conditions.”