Secrets for franchise success
Melbournite Stewart Koziora lives and breathes franchising. He helps develop businesses into potential franchises. He says newcomers to franchising have to look for a defendable and sustainable competitive advantage.
In Sydney, Gary Linz is a son of franchising and after building up a successful franchise called Oporto he is building a business around helping successful small businesses into franchising. But it’s not only franchising he's into.
“My new business Fig Jam is an ideas centre to develop business opportunities,” Linz said. “We’re currently looking at an online gambling site, a unique advertising agency and a glass manufacturer.”
He thinks business success involves having a great plan, great people and the finance to make it happen.
Koziora is in the same space helping people to make their business dreams come true, which he says rests on having an important edge.
“I believe success in business and therefore franchising is about having a sustainable and defendable competitive advantage over your nearest competitors,” he says. “I also believe the stage of the cycle is important — the video rental market is far more mature than say fresh, organic based food concepts.”
Accountant Koziora and his then-business partner, Luke Fryer, won the right to develop the UK-founded Wagamama business but has now opened a new business called FRANCHISE Karma.
“I built the Wagamama business to a certain size and that was my job,” he explained. “But it was time to move on as it now has to be run more as a professional financial model rather than an entrepreneurial model.”
FRANCHISE Karma is a franchise consultancy that does everything from assessing management in franchise groups to strategising for growth and actually turning successful small business operations into a franchise chain.
“I founded FRANCHISE Karma, a specialist and pragmatic core offering of providing my assistance to those retail groups ready to grow beyond their initial three to five stores,” Koziora said. “I provide assistance, which aligns with cost savings predominantly achieved in the first 12 months.”
In a sense he is a hired gun to be the objective third party telling potential franchisors what they need to hear.
Linz’s current pet project involves a restaurant that he loved to eat in which he could see the franchise possibilities.
“The food is great and you know it could work anywhere, even in Asia,” he said. “This is the sort of thing I am doing now — looking for opportunities.”
The project involved wooing the owner of the business to share Linz’s dream and then a full financial analysis followed. Once the numbers stacked up the plan was to set up a new restaurant to see if the concept travelled.
“If it can be systemised to work anywhere, even without the original owners then we have something we can franchise,” Linz explained. “Once we can prove the business model works it becomes easier to source outside capital to grow the business.”
The challenge is to find equity partners to fund the early development but there are private equity players out there who are not Macquarie Bank but still have money to punt on a potentially great idea.
FRANCHISE Karma also has been constructed to be a one-stop ideas centre for potential franchisors.
“My resource includes sourcing of financing for the would-be franchisee as well as the franchisor,” he said. “Furthermore, I work with franchisees who wish to re-finance their existing debt facilities.”
On his tips for anyone thinking about franchising he says there are two big lessons for franchisors.
“First, don't be in the business of franchising — you must remain in the business of selling your product to the end consumer,” he said. “ And secondly, the franchise fee must reflect an amount that allows the franchisee to make a decent living.
“A franchisor who takes more than their fare share, does so at their peril.”
Linz offered five take home messages for franchisors, which have relevance with franchisees.
“You must be passionate about your product and it should be unique,” he insisted. “You must pick the right people to be franchisees and you have to have great site selections.
“And finally you need faultless systems and training.”
Linz’s dad was the founder of Barbeques Galore and he said his dad believes successful business builders need ESD.
“He says you have eat, sleep and dream your business.”
It’s a lesson Koziora and Linz clearly have taken on board.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Wednesday, February 17, 2010blog comments powered by Disqus