Franchising has proven to be an enduring business model, yet many Australians are surprised to learn how prevalent the sector is.
OFFERING everything from burritos to bubble tea, mechanics to medicines, franchising is the state’s most diverse business sector.
It contributes $130 billion to the Australian economy annually and employs more than 250,000 people.
Yet when Business News raised the issue of proposed changes to the franchising code of conduct, most insiders spoken to responded with a wry smile and quip at their own expense.
Several remarked that while change was a constant in the sector, constant change (rather than the rules themselves) was often the most difficult aspect to navigate.
The December recommendations – all 23 of them backed by government – focus on conflict resolution, data collection, return on investment, and franchisee paperwork.
Franchising WA chief executive Mark Fernandez is eager to see the changes implemented.
“This is the first time we get an opportunity to [write our own code of conduct], so I am looking forward to being able to influence it that way,” he said.
Among the hurdles is strict regulation, which discourages licensee businesses from adopting franchise models.
“It is like taking a small business and listing it on the stock market; that is how onerous the franchise agreement is,” Mr Fernandez told Business News.
Belt-tightening and a subsequent reduction in support staff was another concern for the sector.
The rule of thumb, Mr Fernandez said, was to have one business manager for every 12 to 15 franchisees.
About two thirds of stores in shopping centres are franchises, which Mr Fernandez said came as a surprise to many people.
Of about 1,500 franchise systems in Australia, 60 per cent have fewer than 20 outlets.
Meanwhile, 60 per cent of new entrants to the sector are women, many of them entering the growing education and homecare markets.
As for the high-profile ASX listing of Guzman Y Gomez this year, Mr Fernandez said that was likely a rarity.
“International expansion is probably higher in boardroom discussions because of the compliance factor [of listing],” he said.
“When we take systems and grow systems overseas, there is also some funding through Austrade to do development work and learn things.”
Long game
When it comes to expansion, Zambrero state operations manager Michael Ogley has a meticulous eye for sites and the patience to wait.
That was the case with one of the burrito franchise’s newest stores, in Nedlands, located in the old Mother’s Foods diner on Broadway.
“I had been looking at this location here for four years,” Mr Ogley said.
“There was no way I was ever going to get this site, so we got the old CBA site just on the corner because we knew the traffic of Stirling Highway and on Broadway between six hospitals, UWA, Matilda Bay.
“It just happened this site became available.
“We will sit back and wait two or three or four years to get the right site, rather than just rush into anywhere.”
That has also been the case for two upcoming outlets: East Perth in October (three-year wait), and Margaret River, next year (five-year wait).
Other stores are focused on the next five years, with new Treeby and Brabham stores, and Bullsbrook, where a store is planned, in areas with strong residential growth prospects underpinned by road and rail projects, and supermarket builds.
“I did a map of Western Australia and put down exactly where we wanted to be,” Mr Ogley said.
“I talk to the guys at GYG, KFC, McDonald’s, Chicken Treat and Red Rooster because we all want to be in the same areas.
“We need to be with other national brands, and we need to be in areas that have got high growth, high foot traffic.”
One of the best-known homegrown franchises is Pharmacy 777, which is headquartered in Osborne Park and has about 95 stores nationwide.
The 62-year-old firm’s chief executive, Jason Brotherson, is focused on positioning pharmacies as a core pillar of community health, rather than a retail shop.
“The role of pharmacies has certainly been highlighted [by COVID] and it has also been a big wake up for the industry to not simply be a dispensing outlet, but actually to be a total health solution outlet,” Mr Brotherson told Business News.
“One of the reasons I came into the industry was that I was amazed at how undervalued the pharmacist was within the community.
“You look at wait times for GPs, wait times for specialists.
“But you can walk into a pharmacy at 8pm and see a health professional.
“It’s a really strong service in that community.”
The pharmacy industry is no stranger to change, most visibly in the rise of discount warehouses.
But there have been recent policy shifts as well, including an increase in the number of medicines available on 60-day prescription, vaccine services rollout, and now responsibility for the sale of vaping products.
“Chemist Warehouse sits in the area of discounting and strong retailing, whereas we sit in the area of health and health outcomes,” Mr Brotherson said.
“Sixty-day dispensing was a big disrupter but what we found – we are working more strongly with the doctors and ... our patients – is that we are managing it well.”
Point of difference and company culture, Mr Brotherson said, were key to survival.
“There are so many brands that you can join, so it is not around what colour you want to be, it is around what are you going to get out of [being a 777 franchise],” he said.
“Our KPIs are among the best in Australia … but pharmacists are around the culture, which is why we won’t compromise on our values.”
Support structure
The sector overall takes a two-pronged approach to assistance: support of franchisees and support for communities.
Pharmacy 777 goes to greater lengths than most to individualise support.
“Every one of our franchises is on a what we call a business development pathway, and we take into consideration all of those factors: access to staff training, onboarding and things like that,” Mr Brotherson said.
“We don’t say, ‘Here’s a coach rulebook ... we will come back and see you in five years’ time’.
“It’s a constant touch point all the way through their journey.”
The company has gone beyond its own brand in two major ways: it runs an independent support network and has launched an initiative whereby it shares knowledge and resources with other pharmacies.
Mr Brotherson said the aim of those initiatives was to address collective challenges in the industry.
“What we want to do is to make sure pharmacists in the communities are adequately trained to be able to deal with the ever-growing health needs in the community,” he said.
“The health industry is not getting easier.
“We are realistic as a brand that we can’t be all things to all people, and some people want to maintain that independence.
“So what we do is offer buying services and pharmacy specialty services to build that trust.”
Zambrero’s WA franchisees are put through an intensive four-week program where they are introduced to the company’s culture before learning the management ropes and meeting players from head office.
“My favourite expression is ‘I’m selfish’, because the more you help them at the beginning, the more they learn, the more they know what to do, the less they call you,” Mr Ogley said.
“That is me being selfish, because I want to help the people who do need help rather than the ones who don’t need it because they have been well trained.”
When it comes to community support, Zambrero’s plate-for-plate counter is a visual representation of giving back.
Running worldwide since 2005, the ticker clicked over 81,499,277 meals donated to those in need while Business News was at the Nedlands store.
Behind the scenes, many franchisees choose their own causes, such as local sport, community groups, education, arts and the environment.
The local flavour of sponsorship reflects the company’s preference for franchisees to be hands-on at the counter and in the community.
“It is actually giving back first and then the profits come with it afterwards, and the sales come with it afterwards,” Mr Ogley said.
Zambrero’s sponsorship of Perth Glory has been its most prominent campaign.
It has helped the company, too, with Mr Ogley pointing to a large sales uplift due to the community involvement and advertising associated with the Glory deal.
Pharmacy 777’s franchises have similar agency to support local causes.
Mr Brotherson said the company prioritised giving back over in-store benefits.
“We see loyalty programs and discounting like a sugar hit,” he said.
“It is a very great immediate response, but it’s not a long-term benefit.
“If you are giving back into that community, you are far more valued … because people can see their money is going and doing good things.
“As a franchisor, we support [franchises] to make sure they have all the relevant marketing materials and how they go about connecting and making sure causes deliver to expectations.”
The WA brand also has the Pharmacy 777 Community Foundation, which donates $38,000 a year to causes such as the Cancer Council, MSWA, Salvation Army, and Adult and Teen Challenge WA.
Store stories
The industry is chock-full of fascinating tidbits and tales.
Take Tony Biancuzzo, for example. The former police officer switched to retail after COVID and became a Muzz Buzz franchisee.
One year on, Mr Biancuzzo runs three stores in the southern suburbs and credits the career switch with improving his happiness.
“There wasn’t one particular moment, but it was a slow realisation that my job was no longer making me happy, and that was starting to impact my home life,” Mr Biancuzzo said.
“The global pandemic was a tough time for many, but I think in particular frontline workers, including police officers.
“I started to think of ways I could put my skills to use differently.
“I’d always wanted to own my own business but didn’t really know where to start, so I thought having the structure and support of a franchise would be the way to go.”
At chicken retailer Lenard’s, John Burns has notched up 25 years as franchisee and has owned six Lenard’s outlets.
Elsewhere, fitness and gyms are a growth area, with Snap Fitness’s striking red façades among the most prominent.
Franchising enquiries to Snap parent company Lift Brands Asia Pacific are up 500 per cent since 2021, resulting in 42 new franchise sales in Australia and New Zealand in the past year.
Jim’s Group made headlines last year when it dived into the beauty industry, and has now revealed a new wellness franchise, Jim’s Remedial Massage.
It appears there is no business Jim won’t take on.
In June, CouriersPlease opened a new warehouse in High Wycombe capable of handling more than 4 million parcels a year.
Spurred on by growth in e-commerce and online shopping, the business is on the hunt for 30 new franchisees.
In the bubble tea space, Bobaboba, run by 2024 40under40 finalist Angela Tran, is a prime mover.
The business has grown since 2020 to 18 stores in a market flooded with new entrants.
Elections loom
With state and federal elections next year, Franchising WA has a suite of policies to address. In the federal arena, backpacker red tape is front-of-mind.
“We almost need to go to Ireland and Canada and bring 3,000 backpackers to Perth, find accommodation, and cut the red tape for their visas to come here down to whatever we need,” Mr Fernandez said.
In Albany, for example, local franchise owners were supportive of moves to ease trading laws, Mr Fernandez said, but doubted they would find staff to work the extra hours.
At a state level, support for franchising in the Pilbara and other remote areas needed a look.
“The state government, in our view, needs to tackle the key issues to bring franchising up there: supply, staffing, how do we get field service and head office people up there?” Mr Fernandez said.
“There is no good accommodation and there is no relief on the supply chain.”
He said addressing high fit-out costs and offering benefits such as discounted flights would also help.
