Someone Has To Go First

By Phil Blain, Principal, Business Development Company, Franchise Division

SOMEONE HAS TO GO FIRST!

Taking the plunge and being the first franchisee for a new system.

I initially met Pets Paradise first franchisee, Darryl Stephenson, over twenty years ago, when I became the fledgling system’s third franchisee. 

Darryl, who had been an employee of Pets Paradise, jumped at the chance of becoming the first on board as soon as he heard the then 12-store-strong retail company was franchising.

So Darryl became the first franchisee in a brand new franchise system back in 1985 when he was a mere 19 years old.

Looking back, that was an extraordinarily brave decision. Not only was franchising in its relative infancy at the time, but the general populace were yet to truly embrace the concept of the clean, bright and well managed pet store, that Pets Paradise was creating. Darryl did have an insight into the business, having managed a store for a short time, but he had no doubt he could really make something of the Werribee store. And that too was a risk as back then, Werribee was a smaller shopping centre in a new, expanding suburb.

Let me now take you to the end of the story. Darryl and his wife Sally now own five Pets Paradise stores and also two Pet Goods Direct (Superstore) stores. They have really made retailing and pets their life story and, undoubtedly have achieved success, perhaps even beyond their wildest dreams. But like anything else in life, the journey hasn’t been easy.

I asked Darryl why he had decided to become a franchisee in the first place.

Why? 

“Because I saw all the support I was going to get. That made me feel more confident that I would always have someone (the franchisor) there to assist me.”

Risk? 

“At 19 years of age, I had no assets and my Mum and Dad financed me so I was heavily geared and under considerable pressure – more so than if I had mortgaged my own home! Pets Paradise were using an agent at the time and he did explain a principle of franchising to my parents and myself – that is, the franchisor’s success is dependant upon the success of their franchisees. That gave us great confidence.”

Timing? 

“It took us about two months to make up our minds to go ahead. We did plenty of research focusing particularly on Return on Investment (ROI) and the high margins available in the pet industry. These days, people are forced to go through a strict recruitment process under the Franchising Code of Conduct, so taking your time to decide is enforced, which is a good thing.”

When I became Pets Paradise’s third franchisee I must say I learned a lot from Darryl. And not all that I was supposed to learn either! Like any new franchise system, not every tiny detail of the operations and processes had been fine-tuned and the resulting leeway enabled the early franchisees a bit of slack which was duly exploited. Darryl was an adventurous retailer. I remember he launched into salt water aquariums at one stage, when the franchise model was simple gold fish and a few tropical fish. Being influenced by him I followed suit. Guess what happened? After a while, it proved our franchisor did have the right product mix and we dropped salt water fish and returned to the model. 

Darryl is not afraid to admit that at times he strayed too far from the model and on occasions nearly bought himself undone. Only when he did stick to the knitting did true success and growth occur. The franchisor was very patient with Darryl at the time, and the trust placed in him was consequently justified, as he has now become a fantastic advocate for the Pets Paradise franchise.

In an illustration of the true power of a franchise partnership, Darryl endured several months of serious illness last year when he was diagnosed and then treated for throat cancer. Darryl has realised that had he been a sole trader, while he was away from his business for treatment, it is likely his business may not have survived. Instead, what took place was that his franchisor, Gary Diamond, and the team at Pets Paradise, stepped up to the mark and provided fantastic support to his wife Sally in running the business. Thankfully now Darryl is back on deck steering his ship and his last medical tests give him great hope for a clear and successful future. Obviously we all wish him well.

Looking back Darryl offers the following advice for anyone looking to become the first franchisee in a system

People 

Thoroughly check the background of the individuals you are going to be working with and their personal backgrounds and achievements. Are they capable of driving the business to new levels and hold the necessary skills to do so? The chemistry has to be good between your franchisor and you – it’s hard to work with people you don’t like.

ROI 

Particularly if you are in a shopping centre where fit-out costs and refurbishments may be demanded, it is very important that you analyse the financial capabilities of your business to ensure you can get a reasonable return over and above wages.

Blue sky 

Pick an industry that will survive. People always are prepared to care for and pamper their pets even when times are tough, so the industry itself is important when selecting a franchise. 

Darryl actually commented that he thought it was essential that if you are the first franchisee you need to be very enthusiastic about the industry as, being a new system, you will almost certainly be able to help shape and build the new franchise system as it evolves. However, don’t be too entrepreneurial where you buck the system. In his industry Darryl thought it a pre requisite that a franchisee of Pets Paradise is an animal lover.

I asked Darryl if he had been able to negotiate a lower fee being the first franchisee. He wasn’t able to as he bought an existing company store with goodwill attached, but sweetheart deals are very common for early franchisees. Not just lower fees but perhaps longer periods to pay them off.

Darryl offered the following advice for the first Franchisees of a new system.

“Stick to the system, but don’t be afraid to offer suggestions for enhancements.”

I then asked Darryl the sixty four million dollar question, “Given your time again would you become a pets Paradise franchisee again?” The answer was simple, “Absolutely”.

There is no doubt that the risks attached to being the first franchisee in a system are higher than becoming the next Bakers Delight or Fernwood franchisee. If a business has been duplicated 650 times it stands to reason it is more advanced than a business that has only three franchises. But wouldn’t you like to have been the first MacDonalds Franchisee? All businesses carry risks and the diligent enquiries for an established business should be no shorter than for a brand new one. But just because you are the first you cannot assume this isn’t the next best thing since sliced bread!

Phil Blain has been a franchisee, franchisor and a highly respected franchise consultant for the past two decades. He now heads up the National Franchise Division of Business Development Company. Phil can be contacted direct on 0419 044 862.