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Which are the 10 best Franchise Systems in Australia?

Written by Business Franchise magazine

topfranchise.com.au Top 10

1 Smartline
2 Mortgage Choice
3 Mrs Fields
4 Signwave
5 Mr Rental
6 Snap-on Tools
7 Xpresso Delight
8 Chooks Fresh & Tasty
9 Bakers Delight
10 Snooze

Selecting the right franchise should not be an overnight snap decision. Prospective franchisees will take an average of nine months researching to find the franchise system that fits their needs. What is right for one person will not necessarily be for another, so if you are thinking of buying a franchise, be prepared to embark on a journey of self assessment and research on the 1000 plus franchise systems in Australia.

To make your job of sifting through the opportunities easier, 10 THOUSAND FEET, an independent research firm, have been studying what is important to prospective franchisees and existing franchisees for seven years now, and it is these works that lead us to start our Topfranchise.com.au Awards project in 2008.

Topfranchise.com.au is designed to encourage and promote best practice in franchisee satisfaction, and give you, as prospective franchisees, an insight into what some of the best franchise systems are in Australia and what to look for in all franchise systems you are considering.

Now into its second year and having surveyed more than 2000 franchisees (from over 65 systems) Topfranchise.com.au rates franchise systems according to how satisfied their franchisees are on a number of key criteria. In order for a franchise company to feature in the Topfranchise.com.au Awards they need to take the step of showing they care about their franchisee relationship by doing a survey of their franchisees satisfaction.

For a franchise system to be considered for our Topfranchise.com.au Award they must have at least 10 franchisees. For franchise systems of over 10 franchisees and up to 50 franchisees to ensure we attain a representative look at a franchise system, we require a minimum 50 per cent franchisee participation rate. For franchise systems with over 50 franchisees we require a minimum 35 per cent participation rate.

10 THOUSAND FEET independently administer a survey via email of all franchisees in the participating franchise companies. In turn we assess each participating franchise company on 35 key characteristics which filter into seven major areas of importance.

No matter your background, our research shows there is little doubt that one of these seven major areas will be of importance to you as a prospective franchisee. For some it will be the lifestyle and work life balance you will achieve out of owning your own business, for others it is the support you will receive from a franchise organisation and for many of you it will be the opportunity to gain a greater financial reward than you would be able to get in your current employment situation. How passionate you can get about the business and what opportunities for expanding to two, three or more locations may also be important to you. For most prospective franchisees it is a combination of these different attributes, and for franchisors, performing well in the seven major areas, leads into performing well in the overall Topfranchise.com.au Awards ratings.

The seven major areas include:

Renewal: intention of franchisees to renew their agreement beyond the current term.
Recommendation: willingness to recommend a franchise to friends and colleagues.
Rewards: level of financial & social rewards franchisees feel they receive.
Lifestyle: whether franchisees are satisfied with the lifestyle their franchise affords them.
Support: examining levels of support offered by the franchisor.
Passion: how passionate franchisees are about their customers, brand, product or service they offer.
Opportunities: whether franchisees feel there are opportunities to expand their business within the system.
*to find out who rated best in each of these categories visit the topfranchise website.

All the companies that have made the Top 10 overall most satisfied franchisees in the Topfranchise.com.au ratings will have excelled in one or all of these areas of importance.

On the next page you will get a greater insight into why some of these top franchise companies excelled, but no matter which franchise system you are considering, be sure to ask them how they stack up in the seven key areas of importance.

Best of luck in your research!

Ian Krawitz is the founder and Head of Intelligence at research house 10 THOUSAND FEET and franchise rankings website topfranchise.com.au . A desire to more intimately connect businesses with their customers sparked 10 THOUSAND FEET’s creation 7 years ago and since then the company has assisted hundreds of companies have more profitable relationships with their customers and internal stakeholders.

KNOW WHAT TO ASK Questions for existing franchisees

Janine Allis, Founder – Boost Juice Bars

Whether you are buying a business that has no brand or a franchise business; there are risks. You know what they say: “Four out of five businesses fail in the first five years”.
Research shows that when buying a franchise business the odds are a hell of a lot better, but the reality is that all businesses can fail for a multitude of reasons, including a franchise with a brand.
To minimise the risk in business, you need to make sure you do an enormous amount of due diligence in the franchise system that you want to be a part of. You need to ask yourself: How long has the franchise being going? How many stores? Who is behind the business? What is my experience with this franchise network - through the application process? etc, etc etc.
One of the most effective ways to truly find out about the inside running of a business is to ask the existing franchisees in the business.
Below are some questions that I would be asking if I was looking at buying a franchise and also some tips on how to approach this part of the process.
First of all, the key thing is to be respectful of the franchisee’s time; they have a business to run and you need to be mindful of meeting them at a convenient time that suits them. You will find most franchisees are generous with their time and very willing to share their experiences as they were once in the same position as yourself.
Some of the questions, along with the reasons and what I would be considering are below:
Marketing
Most franchisees contribute to the marketing fund as a percentage of sales. I would be asking:
What type of marketing the franchisor does?
How do they monitor the success of each promotion and marketing campaign?
And, extremely importantly, How do they communicate the promotion to the network?
What tools do they offer the franchisee for them to help with their SLAM PLAN (strategic local area marketing, as we call it)?
Do not get caught up in the ‘Do they do TV’ as TV may not be the best way to market that franchise. For example; if you have a young brand, there may be better options, such as outdoor advertising and radio - and it is much cheaper.
POS
The type of POS (point of sale) the business uses is important for you to manage your business. I would be asking the franchisee: What type of POS do they have? And, What information do they obtain from it?
Communication
Communication is the key in any organisation and franchising is no exception. In fact, probably even more important, as you are often running a business remotely from the head office of the franchisor. Consider the communication strategy that the franchisor has.
IT
IT is the way of the future. You would want the franchise network that you are getting involved with to have a strong on-line or e-commerce strategy. Check out with the franchisee what systems they use for their business and for communication.
Accounts
This is where the story about your financials is being told. Find out:
What system do they use?
Do they do they own accounts? or, Do they use a book keeper?
Does the POS have an integrated system that they can use?
What are the requirements that they need to fulfil for the franchisor?
We insist that for both of our businesses, Salsa’s and Boost, the franchisees submit their P&Ls (profit and loss) monthly. The reason for this is that it insures that the basic business disciplines are followed which allows for greater success. If you do not have strong financial disciplines in your business then this is a risk to the success of your business.
Brand Protection
One of the great things about being part of a franchise network is the brand. One thing I would like to know is:
What action does the franchise take with people who are damaging their brand that the entire network is working hard to grow and protect?
Seeing in the disclosure document that you will receive from the franchisor that the franchisor has terminated a franchisee can be seen as a positive thing, as you can see that they do take steps to protect the brand at all costs. This is an important role for any franchisor.
There are a dozen more questions to ask – this is just a start. The final question would be:
“If you had your time again would you choose this franchise and if so why”?

Buying a business, whether a franchise or not, is a huge decision as it is not only monetary, but it is a whole lifestyle change. You will need to live and breathe this business for it to succeed. You need to make sure that you do as much research as possible to ensure your decision is the right one.

Janine Allis opened the first Boost Juice Bar in Adelaide in 2000. Boost is the largest and fastest growing juice and smoothie chain in the Southern Hemisphere.
Janine’s company; Boost Investment Group, has now bought Salsa’s Fresh Mex Grill, which they are now franchising. Details: www.boostjuice.com.au

Marketing Funds - Money Well Spent?

Written by Tony Garrison, HWL Lawyers

One of the most important considerations with any business will always be “how do I let people
know that I am here and what I am selling?”

The average business has to consider on an annual basis how much money has to be put towards advertising and then the headache begins in terms of which is the best medium to get you the most business.

In many franchise systems, these concerns are taken away from the franchisee by the existence of a marketing fund. These systems use marketing funds as one of the primarysources of financing marketing initiatives.

A marketing fund allows a number of franchisees to pool together revenue and use it to create local, regional, state based or national marketing campaigns.

There is no requirement, whether legislative or otherwise, for a franchise system to have
a marketing fund. However, the law has acknowledged the prevalence of marketing funds in the franchising sector and has accordingly created regulation in this area to ensure that franchisors are held accountable to their franchisees.

The aim for most purchasers of a franchise is that they are buying a brand that has already proved itself to have selling power. The aim of the marketing fund is to ensure the selling power continues and is improved upon.

Before entering into any Franchise Agreement you should always carefully read the provision relating to contribution to a marketing fund or advertising levy so that you know exactly what you will be required to contribute andwhat your rights are.

The best way to truly assess the marketing fund in the franchise you’re considering buying or already own, is to review both the positive and negative aspects. The following points are a few of the pros and cons:

What are the positive aspects of a marketing fund?

• The worry and hassle of arranging the advertising for the business is taken out of
your hands.

• Your franchise will have access to better and larger marketing campaigns such as radio, television and magazines, that, as an independent business, you might not have been able to afford.

• The more franchises there are, the larger the amount of money going towards building brand recognition (and hopefully as a result drive up business with more money for you).

What are the negative aspects of a marketing fund?

• Fees. There is no easy way of putting it, but the money has to come from somewhere and it will be out of your business, whether you want to spend it or not.

• Even though taking the responsibility for advertising out of your hands can be a positive, it can also be a negative in that you have to trust a third party (who, chances are, you’ve never met nor will) to best decide how to advertise and sell your product for you.

• A large marketing campaign might not necessarily let people know where you are located and therefore whilst building brand recognition is always a good thing it may not assist you as much as a concentrated
local advertising campaign would have.

Obligations under the Franchising Code

Marketing funds are primarily dealt with in the Franchising Code of Conduct (the Code).

The Code creates obligations for fanchisors that have elected to set up a marketing fund for their particular franchise system. These obligations are in place to ensure that franchisees have access to information about how the marketing fund is being expended.

Under the Code, franchisors must:

• Prepare annual accounts of the marketing fund;

• Have the accounts audited by a registered company auditor by 31 October each year (unless 75% of the franchisees who contribute to the fund have voted and agreed that the franchisor does not have to
comply with this requirement); and

• Provide its franchisee with the accounts/audited financial statement within 30 days of the audited report being prepared.

[Note: Since the Code was amended in March 2008, the financial statements for a marketing fund must now include all of the fund’s receipts and expenses for the last financial year.]

In addition to the franchisor’s reporting obligations, there is also a specific section of the Disclosure Document in which the franchisor must set out information in relation to the marketing fund. Franchisees should review this section carefully when considering a franchise system as it contains information such as who is required to contribute to the marketing fund, who controls and administers the marketing fund, the kinds of expenses it may be used for, the expenditure for the last financial year and whether there is any
obligation for the franchisor to expend any proportion of the marketing fund specifically
on the franchisee’s business.

Is there anything I should be aware of?

Your Franchise Agreement and the Disclosure Document should contain everything you need to know in respect of the marketing fund in question and the franchisor is obligated to provide you with a copy of the
Code. If you don’t understand the Agreement or the Disclosure Document you should speak to a franchise solicitor or suitably qualified individual who can explain to you what your obligations are.

Some of the key issues you should
look for are:

• If the franchise is a national franchise how much money will be spent on national rather than state or territory based campaigns?
• How much of the marketing fund is spent on administrative costs related to marketing?
• Will there be a forum whereby you will have a right to voice your opinion?
• Will the advertising be directed towards the general public who you want to buy your product or will it be towards potential franchisees?
• What are the expenses of the marketing fund that can be deducted?
• Is the fund audited?

Marketing funds are integral to any business and it is important that they are utilised correctly to ensure that the maximum benefit is derived.

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