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Behind the Headlines

By Jason Gehrke

 

Private takeover for listed real estate brand

Listed Sydney-based real estate group McGrath is in negotiations for a private takeover, according to a media report.

The deal would see McGrath de-listed from the Australian Stock Exchange after listing eight-and-a-half years ago for $2.10 per share, but since then its shares have slumped to as low as 16 cents. 

The proposed takeover by a partnership comprising one of the largest residential specialist agencies in Europe, Knight Frank, and New Zealand-based residential and rural real estate agency Bayleys, is offering existing McGrath shareholders a choice of $0.60 cash per share, an unlisted scrip alternative, or a combination of both.

McGrath consists of company-owned operations, a franchise arm, a mortgage broking business, and project marketing. If the deal proceeds, current CEO and founder, John McGrath, will remain CEO for the division and will reportedly take up the offer of unlisted shares for his majority stake. 

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Franchisor’s huge April Fool’s prank

The founder of the Jim’s Mowing announced the launch on April 1 of a new political group called Jim’s Party with the goal of contesting and winning the next Victorian state election, according to a media report.

The prank announcement Jim’s CEO and founder Jim Penman, a vocal critic of Victoria’s extended lockdowns during the pandemic, included a photo of a campaign bus parked outside Victoria’s state government buildings, a YouTube video featuring a “press conference”, and policy initiatives including that Melbourne’s councils be replaced with a franchise model of Jim’s Local Government. 

Previous April 1 announcements by Penman include his 2023 public declaration of intending to secede from the state of Victoria to create his own sovereign micronation.

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World’s top 3 largest franchise brands revealed

McDonald’s, Starbucks and Subway have been revealed as the top three largest restaurant chains in the world, according to a media report.

Burger chain McDonald’s holds the number one spot with 41,882 locations around the globe generating nearly USD$120 billion in annual system sales. Meanwhile, Seattle-based coffee giant Starbucks has surpassed international sandwich chain Subway for the first time. Globally Starbucks now operates 38,587 outlets generating USD$28.1 billion in annual systems sales, compared with Subway’s 36,516 outlets generating USD$15.6 billion.

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Godfreys to close after 93 years 

Vacuum and cleaning retailer Godfreys will close its doors forever on May 31 after administrators declared that no viable offers had been received for the business, which the owners placed into voluntary administration on January 30 this year, according to a media report.

Administrators had planned to close 54 stores and shed nearly a third of the company’s 600 staff to right-size the business, however all of the 169 stores that were operating in January will be closed by May 31 as the chain trades in the meantime to sell down existing stock. 

Most of the brand’s outlets were company-owned, however 28 franchisees also face closure once the brand is wound up and its central ordering and supply functions cease. Administrators have informed franchisees they can trade until March 31 only to sell existing stock or can return stock for credit against amounts they may owe Godfreys.

Despite receiving 55 expressions of interest and six indicative offers during the sale process, none were sufficient to secure the future of the business. 

Godfreys was founded in 1931by Godfrey Cohen and business partner John Johnston at a time when vacuums were typically sold door-to-door, and became one of the largest retailers of vacuums and specialist floor cleaning products in Australia, and later became famous for its singular television ads featuring long-term CEO John Hardy.

The brand peaked at 220 franchised and company-owned stores at its peak. In 2006 following the death of Godfrey Cohen, it was sold for $350 million to a private equity consortium and listed on the Australian Securities Exchange in 2014 but delisted and returned to private ownership in 2018 when co-founder John Johnston, then aged nearly 100, bought back the business. 

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Fast food chain delays public listing

Australian-based Mexican food chain Guzman y Gomez (GYG) has announced its listing on the Australian Stock Exchange (ASX) will be delayed from early 2025 to later in that year after the company reported a loss for the six months to December 31, 2023, according to a media report.

GYG has been working towards listing since 2020 when it converted from a proprietary company to an unlisted public company and engaged investment bankers and lawyers to fast-track formal initial public offering documents to have a pitch ready for the first half of 2021. In September 2023, GYG re-initiated plans to list in the 2025 financial year or sooner, but market conditions which the company’s CEO described as “not great” appear to have again stalled the process. GYG announced a net loss of $3.9 million for H1 2024, an increase of $2.8 million from the prior corresponding period.  Read more

 

Auto franchisor fined $1.5m for contempt of court 

Automotive repair franchise Ultra Tune has been fined a record $1.5 million for contempt of court after failing to comply with Federal Court orders issued in 2019, according to an Australian Competition and Consumer Commission (ACCC) statement. 

In 2019 Ultra Tune was fined $2.6 million in the Federal Court for breaching both the Franchising Code of Conduct and the Australian Consumer Law (ACL). ACL breaches related to prospective franchisees receiving false or misleading representations, and Franchising Code breaches related to Ultra Tune’s failure to act in good faith including failing to prepare and supply marketing fund statements. The company was also found to have attempted to mislead the Court by claiming it had sent disclosure documents to prospective franchisees when it had not.

Ultra Tune appealed the 2019 ruling and while the fine was reduced to $2.1 million, the company was still under orders to implement a compliance program to ensure no further breaches of the Franchising Code or the ACL, to provide quarterly reports on the program’s effectiveness, to update its disclosure document on time, and to prepare two marketing fund statements within a specified time period. 

Ultra Tune breached these orders by failing to ensure compliance program reporting for three consecutive quarters, failing to update its disclosure document on time, and twice failing to prepare its marketing fund statement on time, including on one occasion when the statement was prepared almost eight months after the deadline.

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Watch the Code Review webinar with Dr Michael Schaper

The Franchise Advisory Centre hosted a free webinar for franchisors with the author of the Franchising Code Review, Dr Michael Schaper on Wednesday, February 28.

During the webinar, Dr Schaper discussed the nature of the review, common themes among submissions received and additional research on the franchise sector to inform the review. He also  discussed the reasoning that led to some of the review’s 23 recommendations for change, including the recommendation to introduce a licensing system for franchisors.

To view a recording of this webinar, click here and enter the passcode 0!jpAxx=

 

How to improve franchise resale processes

A two-part interactive online workshop to help franchisors and franchisees improve and accelerate the process of selling existing outlets will be held in May.

The Managing Franchise Resales workshop provides key insights into the resale process, how to better prepare an existing franchise for sale and how to more effectively engage franchisees and manage their expectations during the resale process. The workshop will be held in two parts on May 22 and 23. For more information, click here.

 

Jason Gehrke is the Director of the Franchise Advisory Centre and has been involved in franchising for more than 30 years at franchisee, franchisor and advisor level. He advises both existing and potential franchisors and franchisees, and conducts regular education courses for franchisors in Australia and overseas. He has been awarded for his franchise achievements, and publishes Franchise News, Australia’s only fortnightly electronic news bulletin on franchising issues.

www.franchiseadvice.com.au