Imagine Air New Zealand chairman Sir Selwyn Cushing tapping the former deputy at Qantas Gary Toomey (now Air NZ’s CEO) on the shoulder and saying, “we think you might make fist of running our airline. Why don’t you come on board, and if you’re any good, we’ll start paying you salary after three months. Oh and by the way, you’ll have to put most of your own personal wealth into this business and pay us fee for training you.”
It’s just not the way things work is it? Yet growing number of professionals are willingly trading-in careers in the corporate world for turnkey or prescriptive formula for success. Underpinning the training that all franchise operations provide is the implicit belief that the “manual is king”. This means the franchise system and the training provided, go hand-in-glove. In other words, if you follow prescribed template of systems and processes for running certain type of business, (especially retail), your success is virtually guaranteed.
A ?cookie cutter’ approach typically governs the overarching principles of franchising, says Grant Stapleton, NZ general manager with Bakers Delight. But he says while the manual is road-map for running the business, it’s only as good as its testing and ongoing evolution. “Many aspects of retailing are more art than science. But when it comes to food, it’s becoming much more process-driven. Product and price are having less impact on consumer choices. It’s now branding issues that are making significant impact on bread purchases,” says Stapleton.
Established in Melbourne 20 years ago, Bakers Delight is fast-growing franchise operation with 440 outlets across Australasia (24 in NZ). In fact, with new store opening every four days, Stapleton says within five years there’ll be over 1000 stores throughout Australia and New Zealand employing around 60,000 people. Currently holding 9.7 percent of Australia’s total bread market, Bakers Delight is aiming to control 20 percent share within five years.
What typically attracts people to franchising, says Stapleton, is the opportunity to “hit-the-ground-running” in successful business that’s simply been re-cloned elsewhere. So what kinds of people is Bakers Delight looking for to buy their franchises? Over 95 percent of the people joining Bakers Delight have no former experience within the baking industry. Higher interest by better educated people marks growing realisation that the underlying business model stacks up, says Stapleton. These days, former CFOs, marketing managers, stock brokers and people from the IT and service-type industries are represented within recently-appointed franchisees.
“We look for team players, good communicators and those with fire in their belly, as opposed to nine to fivers. We’re always on the lookout for good business operators, but if people can show leadership skills in other areas, for example on the sports field, they may be able to successfully transpose these qualities into our business.”
Before would-be franchisee gets anywhere near running their own store, they have to satisfy they have “complementary chemistry”. With the reputation of franchise system dependent on the franchisees, Stapleton says it’s critical to ensure they choose people most likely to succeed. In fact, results of National Bank 2000 Survey on Franchising show that sub-standard operators and appointing suitable franchisees are the two concerns most frequently expressed by franchise systems today.
“If you closed your eyes and listened to one of our training sessions, you’d be forgiven for thinking we were part of religious cult. Being successful within this business means living and breathing the underlying culture. We believe that if people have the core principles of honesty, integrity and trust, they can be trained to franchisee level. Typically only one in every 10 ?would-be’ franchisees goes through to opening their own store,” says Stapleton.
So what are the steps to becoming franchisee and what training is provided along the way? Before would-be franchisees get anywhere near training session they’re required to call three different franchisees and talk to them about the business. Assuming they’re still interested, they move onto two-day induction programme. There’s no better way of testing someone’s commitment, says Stapleton, than asking them to roll up their sleeves and check-out the lifestyle of making and selling bread right at the coal face.
Business passion
Assuming the passion for running small business and extended hours still appeals, would-be franchisees are psychologically profiled for suitability. Having passed this hurdle, the would-be franchisee then spends an initial three weeks of (unpaid) in-store training. further review is done at the end of that three weeks to see if they want to commit to an intensive 13 modules of training done over further 13 weeks.
By the time the 13 modules have been successfully completed, the would-be franchisee has paid out $6000 in training fees and has effectively been out of the workforce for over four months. New store openings are timed to coincide with new graduates as closely as possible. The moment of truth arrives, says Stapleton when graduate is finally asked to put his or her money where their mouth is. In fact, it’s going to cost them $350,000 to buy their own store. And after an initial two weeks working alongside franchisee trainer, the new franchisee is left to run their own business.
What management can learn from franchises
Grant Stapleton says:
? Not to underrate EQ as method of intelligence. “In other words, person’s tool-kit of skills is much more transportable than often given credit for. The rest can be coached.”
? How to drive decisions closer to the end customer.
? How to structure rewards so they’re closely aligned to the behaviour staff are expected to exhibit.
? How management can lead by example. The willingness of management to walk around on the shop floor can’t be under-estimated. Especially within retail environment where staff are typically from lower education base.
“Because we train franchisees to think quickly on their feet, they tend to make quicker decisions that are firmer in their resolve. Replicating this ?fire in the belly’ is the perennial dilemma for mainstream corporates. The culture within this organisation is such that when you start to live and breathe it, you’re acting in ways the company wants it to operate.”
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From banking to baking
What attracted former investment banker Scott Paterson to Bakers Delight was the level of support services, financing and the cross-guarantee provided by the Bakers Delight franchisor. Assuming the new graduate can provide $120,000 up-front, cross-guarantee by Bakers Delight helps to provide the lending bank (in this case the BNZ) with greater security levels. In fact, of the 440 Bakers Delight stores currently operating, there has never been single default on bank loan.
As an analyst with broker Ord Minnett, Paterson was charged with performing due diligence on companies prior to them taking IPOs on the main board of the NZSE. He’d been looking to run his own business for some time, and after checking out several options, the Bakers Delight model proved the most convincing. “There are no free lunches in business. You have to offset the costs of getting into this business against future earnings. The prospect of receiving 20 percent operating profit on $500,000 annual turnover (35 percent wages, 25 percent ingredients and 20 percent operating costs) is something very few businesses can deliver.”
Having left Waitako University with post-graduate degree in finance, Paterson had been groomed for corporate career. When he joined Bakers Delight he had virtually no management training. What distinguished his training for the
