Revised Section 52 Form required from 2 May 2018
March 2018 by Ian Wollermann
Franchisors and franchisees selling an existing business need to be aware that a revised Section 52 statement will be required to be produced from the 2 May 2018. The new rules apply to existing businesses being sold for $500,000 or less, except if they have a liquor licence. This is a change from the previous upper limit of $350,000.
If the Section 52 Statement is not given to a potential purchaser or is incomplete the purchaser may avoid the contract of sale and be entitled to a full refund of any moneys paid.
Section 52 statements are required to be signed by the vendor and their accountant. For further information contact Ian Wollermann at WFD on (03) 9999 5488
What makes a HAPPY network of franchisees
March 2018 by Colin Crawford
Some franchisors have lost the plot and forgotten that their franchisees are their customer, not the end consumer.
Keeping a group of franchisees happy is pretty simple and just makes good business sense. Recognising that franchisees are the franchisor’s customer a franchisor should focus on these three crucial components:
1. Providing services that assist the franchisee to run their business. This can be an IT system, ongoing training, preparing financial reports, through to product development and supervisor support – things that a franchisee cannot easily do themselves when their daily attention is running their own business.
2. Developing and implementing a marketing strategy for the group including brand development
and local area marketing for individual franchisees. Marketing is always best implemented by the franchisor as the party with the broader group perspective and with the resources to devote to professional marketing.
3. Franchisees need to be able to ‘buy better’ than what they could negotiate themselves for goods and services required to operate their franchisee. For example, this includes the flour for a baker, coffee for a franchisee’s customers through to a mower for a lawn-mowing franchisee.
All this might sound simple and obvious, but they are at the core of why well-established franchisee groups like Retail Food Group, 7/11 and Caltex are going back to basics with the aim of looking after their franchisees following recent franchisor departures from these basic principles.
These three components assist the franchisee to operate a profitable business. If a franchisor keeps these principles in mind when managing their network of franchisees, they will continue to have HAPPY franchisees on an ongoing basis. For further information contact Colin Crawford on 0425 838 800.
Territory pre-planning makes sound business practice for franchisors
March 2018 by Roger Dickeson
It is not uncommon for franchisors to simply divide up a city or state into blocks or districts as the basis of territories for franchisees, with little or no regard for the demographic composition of each of these territories. This approach can be fraught with problems for both parties down the track.
In any business, franchised or independent, the business owner really needs to know who his customer is, where they live or work and how likely they are to access the business as a customer.
Without this basic understanding, the business is really flying blind in attempting to promote and attract customers.
From a franchising perspective, a franchisor should at the very least, undertake some demographic research of the area surrounding a proposed new franchise territory. This research should be undertaken in the context of what the business is selling, in order to know how many potential customers it can attract, where they will come from and what their likely preferences are.
For example, a pet-care business should be located in a territory comprising a high percentage of households that have pets, or a food service business should be situated in a territory with a population who will find the menu appealing.
For a franchisee, buying a franchise in a territory that is based on solid demographic and socio-economic data, will provide confidence that they will have a good foundation on which to build up their business.
Research-based territory planning also protects the franchisor in the event of a dispute with a franchisee where the franchisee asserts that they were sold a franchise that turns out to be “under-performing”. If the franchisor can show that the territory has been determined based on statistical research into the composition of its local population, is a reasonable distance from other franchisees of the same brand and with consideration given to the proximity of competition, then the franchisor will be less likely to fall foul of its obligations to appoint franchisees in territories that will support a franchised outlet.
Good territory pre-planning is just good franchising practice. It should become one of the elements that goes to support franchisees who, after all, are buying into a franchise based on the experience, credentials and knowledge of the franchisor, who has “been there, done that” for them.
Master Franchising – Does it have a place in my franchise expansion?
March 2018 by Roger Dickeson
Should I use Master Franchising to expand my business interstate or overseas?
Firstly, let’s consider the role of a Master Franchisee. The master franchisee’s role is to actively recruit and then manage franchisees in their region. Typically, a region is a state or country geographically separate from the home turf of the franchisor.
Master franchisees provide a local presence where a franchisor would find it difficult to effectively recruit and support local-area franchisees.
For their role as “intermediaries” between the franchisor and local-area franchisees, the master franchisee is remunerated with a share of the franchisor’s revenue streams. That is, the initial franchise fees and the ongoing royalties.
So, the first question to ask is: Can my franchise fee structure support paying a master franchisee in exchange for them providing local area services? If the answer is Yes, then the next steps are to define exactly what a master franchisee is required to do (i.e. set some goals and targets), what resources you will need to provide to the master franchisee so that they can operate effectively and how you intend to share franchisee support activities. For example, what role will a master franchisee play in local-area marketing for franchisees and how is this to be delivered to franchisees by the master franchisee?
In effect, a master franchisee becomes the franchisor in their region and takes on all the roles and responsibilities of the franchisor. So, selecting the right master franchisee is critically important. The master franchisee must share the franchisor’s vision and commitment to the business and the brand and demonstrate a capability to grow the franchisor’s business in their regional territory in complete harmony with the objectives of the franchisor.
There’s much to consider before simply assuming that the best way to develop and support a region remote from head office is to delegate to a master franchisee.
Master franchising can and does work where the careful preliminary considerations are well thought out and where the 3-way association of franchisor, master franchisee and franchisee is made a “win-win” for all parties.