THE CHAMPIONS
STAR PERFORMERS SHARE THEIR SECRETS TO SUCCESS
DANIEL MCDOUALL,
RED ROOSTER
Sales and recruitment just didn’t cut it for Daniel McDouall. He started his fast food career with McDonalds while at high school before trying his hand at more corporate roles. But this Millennial knew when faced with a crossroads in his life that business ownership, and franchising, was his future.
“Fast food was something I was familiar with, I like to be hands-on. That complemented my skillset. I wanted to stick with a biggish brand. McDonald’s was pretty much closed, as were KFC, Hungry Jacks. It was a process of elimination, I spoke to a lot of franchisees, and I was really comfortable with the brand.”
He had been self-employed since the age of 22 so it didn’t even cross his mind that there was an alternative.
Signing up to the franchise was just one major life change at the time. “As we purchased our store, we had our first child three weeks after,” Daniel reveals.
However, it took a further six months to get into the store. The landlord was selling the building so there were leasing issues to settle, and legals and contract problems dragged on.
It was about 10 months before the doors opened and he could leave his previous role.
“It was daunting because there the buck stops with you. If you had HR or maintenance concerns you can go to head office. But ultimately it’s your decision and you’re paying for it.
“I wasn’t a handyman, but when a light bulb breaks you have to fix it. Some things, I’ll just roll up my sleeves and do it.
“If the business isn’t making money, you have to cover that. You have to get up to speed very quickly to find key drivers. But you can’t go in thinking you know it all.”
Daniel admits he made a lot of mistakes to start with because he didn’t understand the business levers.
“You can chuck a lot of labour to improve service but there’s a tipping point where you’re not making money. You learn not to throw product out for the sake of throwing out,” he points out.
But once you’ve learned the rules of the game it’s easy to replicate, he says.
“My strategy from the word go was to go big. I’m confident and back my ability.”
So when, 12 months into his business, he had the opportunity to get a second store he forged ahead.
“One of the biggest challenges to grow is to have the right people. And appreciate you need to let go in certain parts of your business, to give control to someone often a lot younger and less experienced, and have faith they have the right temperament and attitude.
“We didn’t get it right first time. You always want to hire someone similar to yourself, but they are never going to be you.
aniel says he quickly learned the lessons to be mindful of who you bring on board, and to value the team. He pays above award wages for a frontline manager, on award for general staff; and promotes a career path within his stores.
As the portfolio of stores has risen to seven, then dropped to five as two stores were sold to enable the purchase of bigger outlets, Daniel’s role has become a jack of all trades.
Today, with three children under the age of six he regularly works from home yet he can be found instore on a night shift four times a week.
“It’s important for the boss to be in there and hands on, and it gives me a sense of the pulse of the business and what’s going on. I’m still a strong crew person. I’ve seen it when the boss doesn’t understand how a burger is made.”
He hands responsibility for stores to restaurant managers, believing that financial transparency empowers them.
“We dive into financials with managers, not just about our margins but what the store makes, EBITDA, all the controllables, things they don’t have an effect on – royalties, rent. If I can walk away and they can run my job’s done.
“A lot of business owners try to drip feed information and expect managers to have a big impact on P&Ls.
“We’ve had to sit down if they are not doing well, and treat them as an equal. The difference is if they have more buy-in, they have more say. Full transparency makes them more responsible for the outcome.”
While he understands that some franchisees are cautious about sharing financial figures, he thinks an open approach pays off. “People think you’re making millions and driving Ferraris, and it’s not true. It’s important they understand the reality.
“We give crew examples of upselling – what impacts us and impacts our profit over a year. Then they understand why they’re doing it.
“We’re trying to make it as simple” as we can. There are five keyDmetrics: sales revenue, gross profit margin, wages percentage, average hourly rate and average ticket size.
“All restaurant managers and juniors understand those five metrics.”
If those are managed, everything else takes care of itself, he says.
Looking ahead, there could be more stores on the horizon although more stores won’t necessarily mean more money, Daniel points out.
“If we grow it will be strategically with a high-volume store. For us our first store turned over $1.5m, five stores turn over $8.2m. I’ll be happy to get to the $15m mark,” he says.
WARWICK WRIGHT,
SMITH & SONS
Builder Warwick Wright knew nothing about franchising before a business referral put him in touch with Smith & Sons’ New South Wales master franchisee Mark McNulty.
“I was working in project management for some years for a commercial building company but my background was in domestic construction. I wasn’t looking for anything, it just came along.”
Although he had always liked the idea of working for himself, it took a few months for Warwick to commit to the idea – and to persuade his risk-averse wife it was a good move. It was marketing that proved the crunch for him. The prospect of marketing a business had held him back from taking the step to business ownership earlier, but as a franchisee with Smith & Sons he would have marketing tools and advice from the franchisor to help him build his business.
Within four months Warwick had signed up to take on the Castle Hill business, although he didn’t leave his project management role immediately.
“From the time I signed up with Smith & Sons it was five months before I started my first job. I had to transition. You have to source leads and convert these into jobs, and get started – some of the projects are subject to approvals which can take months. It was never going to be ‘finish Friday, start Monday’.”
The biggest initial challenge was the simple change from being an employee to running his own business.
“I think I’m well suited to running my own business but it’s not just about me, it’s about the rest of family as well. There is a risk involved.”
Warwick’s initial goal was to ensure his new income matched his previous income of $130,000. He was confident he could cover that within 18 months, and then double it within two to three years.
“I surprised myself,” he says, exceeding his goals despite a measured approach to business growth. “I wanted to build slowly, not bite off too much.”
He believes he had one advantage over franchisees who joined Smith & Sons after working on the tools: his financial expertise gained as a project manager.
“I was able to practise with other people’s money. I had experience with cost control, and I was working, managing and pricing jobs over $3m. It was good preparation.”
The business got off to a good start with marketing initiatives: exhibiting in a home show which generated a lot of leads, shared marketing, and a website put together by the franchisor, who also put him in touch with an architect.
Success in business has been partly just following the systems the franchise provides, and networking and learning from fellow franchisees and the master franchisee.
Warwick has found a difference in working with domestic rather than commercial customers. “When you’re dealing with renovations you’re dealing with a more emotional side, it’s people’s hard earned money. The lessons learned are not just understanding financials or pricing, it’s about understanding people. Every person is different, has different expectations and a different way to deal with situations.”
On the business side, now the marketing has been conquered, the remaining obstacle is to improve his sales techniques.
Perhaps surprisingly, though, his goal is not continual expansion. “I don’t want to grow the business much bigger. There’s a certain point that’s ideal and I don’t want to be a slave to the business. I want to refine it so I can maximise, and return a profit from what I do, rather than work ridiculous hours.
“In my third year I turned over more than any other [Smith & Sons] franchisee in Australia. It was a bit much for me.
“You don’t want to end up hating it. I was juggling six jobs, it was too much. You don’t know until you’ve pushed the limit what’s ideal.”
In the first calendar year (in which he only started in March) he turned over $700,000 and then doubled turnover in the second year, adding a 50 per cent growth in the third year.
Somewhere between $1.5m and $2m is ideal turnover for him, says Warwick.
With a seven year old and a five year old to watch grow up, he’s fiercely protective of his weekends. The future is all about honing his processes and techniques so that he can achieve the ideal turnover while working fewer hours.
He’s coming to the end of his five-year term and is ready to renew the agreement, and is looking at a 10-year business plan.
By the time he decides to hang up the hammer, Warwick intends to have built the business into a viable saleable asset.
UDAY, SHANKAR AND RAMAN
PACK & SEND
Three friends got together and thought about a new future for themselves and their families. Now it’s a reality. Raman Swaminathan, Shankar Arunachalam and Uday Shankar Sethu Raman have turned their backs on corporate Australia.
Friends and colleagues in the Nielsen Group and IBM, the three of them have turned idle talk into a multi-unit franchise success.
Uday takes up the story.
“Getting into business started with a casual chat. We were just friends. After a few talks it came a bit serious [and we said] ‘Let’s look at some options in 2010’.”
Once the idea had been tossed around for a while, the trio of corporate professionals visited the Franchising & Business Opportunities Expo.
Raman says, “We started to look around at the franchise expo in Sydney. We went round exploring options, we looked at petrol pumps and food businesses. We looked at our skillsets, where we could make a difference.”
Because the trio had no experience of business ownership they felt comfortable with the franchising model.
“We realised many businesses require a lot of work during weekends. We were looking for something similar to our job, with work–life balance and time for family,” says Uday.
The solution was Pack & Send, which the trio found through searching online.
“The model is crystal clear, there are not too many things to get involved in but there are no limits to what you can do to get the business,” says Raman.
Uday admits he had conflicting emotions about the huge leap into business ownership before taking the plunge.
“For me the biggest challenge was the fear of failure. In a job there’s a lot of security – you get your salary,” he says.
That it was a brand new experience also made Uday nervous. He questioned whether or not he was making a big mistake.
“I also had a really good job offer that I was considering. But I thought if I don’t do it now, when will I? What’s the worst than can happen? I lose money and go back into the workforce.”
However the franchisees each had wives still working, so they were not entirely dependent on the new business for survival.
Raman could see the risk but was ready to take action and get stuck in to the new project.
“Whatever we had to do would be rocking the boat. We had to decide who would step in and run the business. I had done a lot in my career – sports journalism, TV, diplomacy and corporate. I decided,
I’ll take the plunge. I’ve succeeded in everything I’ve done.”
However it didn’t go quite according to plan, he admits. “It wasn’t a great start.”
The first job resulted in a customer claim, not through any fault of their actions, but it set the business back.
And there were other errors that strained the business.
“We made some mistakes, like overextending on the rent. The due diligence process doesn’t tell you everything, the amount of work it takes to achieve the returns is not visible,” he explains.
It is crucial for the business to generate profit, and to be able to pay and sustain employees, so keeping costs under control in the initial stages, and growing your business, is important. Raman points out that it’s not always possible to concentrate on all aspects all the time.
What got them through the early tough times was a commitment to and passion for customer service.
“Success, as I see it, is to have a customer focus. View the problems from customers’ shoes, see what you would expect. Don’t underestimate any customer. A $20 or $30 job, these customers will come back to us, and they don’t mind spending extra. What mattered to them was the kind of response they got instore. Service will get you repeat business in logistics.
“In certain areas we promised the world to customers but sometimes things fall apart. But then it’s understanding how to fix it, so you have to know what they really need. Diplomacy and tact is what works. We walk that extra mile; don’t charge extra for service.”
What they did discover is how varied two neighbouring stores can be. The first store in North Sydney had an established pattern of servicing local business requirements when the second outlet at nearby Crows Nest was opened and turned out to have a totally different set of demands. Most of the business was eventbased and delivering pallets.
Each of the three franchisees today is managing a single store, and each store is a profit centre operated independently. The three outlets are combined for the group to view strategy and financials.
“Everybody has access to MYOB reports. Each one of us, we are across the business on a daily basis. We’ve dropped our margin levels and seen how it impacts bottom line. It took us a few errors to get the right mix,” says Raman.
It took the three franchisees four years to start seeing returns on their investment. Last year they took out the coveted Pack & Send Franchisee of the Year award for two stores.
The North Sydney business grew at 24 per cent while Crows Nest, which had a higher starting point, grew at about 13 per cent.
Not only are the three friends and colleagues, Shankar and Raman are brothers-in-law.
Despite this, Shankar says, “We do things a bit differently – we’re not a family business, it’s corporate run. We have to account for everything. We formed a board that meets every three months for normal business. I’m the chairman.
“I look over the whole business from a financial perspective, for growth. The board is the three franchisees and the financial advisor. We discuss the plan and the weekly sales report.”
The franchisees apply any one of 20 different ratios to analyse growth and predict trouble spots.
“Being in corporate business helped us,” admits Shankar. “We’re accountable for everything.”
They spent five years consolidating because they built the business to be long term.
Shankar reveals there are five Cs that nurture and shape the business: character, caring of business, commitment, confidence to scale and drive the business, and communication.
“We had a financial goal that within 10 years each of us would have a business with no debts. We are about 80 per cent there.”
Recently acquiring an outlet in Castle Hill has given them another loan to repay but makes the portfolio stronger and will help them reach their financial goal, says Shankar.
“We had a $500,000 target, it took three years to do that. You have to build a new customer base. We knew what we had to do, how to scale. We’ve taken a careful, methodical approach.”
The ex-corporates have discovered more benefits to running their own operations: for one, there is an absence of office politics.
“We’ve never had any ego issues, we’ve had our pressures and heated discussions. We knew each other socially but got to know each other as individuals, and we knew what we had at stake. That’s been a driving force,” says Uday.
He believes the complementary skills the three bring to the business help their success. “Raman and Shankar have commerce backgrounds, they are qualified accountants. I wasn’t very good with numbers. I am a qualified engineer, and worked in business and marketing.
“I used to work in a market research company. They’ve been operational. We complement each other.
“The franchisor thinks we are doing well. We have to thank a lot of people, customers, family, friends, employees for sticking by us.”
“Whatever we had to do would be rocking the boat. We had to decide who would step in and run the business.
JUSTIN MISTRY,
BACK IN MOTION
Justin Mistry has been on a rollercoaster ride with his franchise business dipping frighteningly close to bankruptcy, then rising to achieve franchisee of the year status and bank $1.2m in revenue.
When he bought into a physio business just as it was transitioning into a Back into Motion franchise, he had no idea of the lows and highs ahead.
As a student Justin had begged for part time work at the practice, took on a full time position after graduation, and worked hard enough to buy a unit within nine months. Within 18 months had bought a 25 per cent stake in the business.
Then he was ready to take the next step. “I realised I’d never be the boss. I was making good money, had responsibilities there but it was not like being a sole owner. In 2012 I left and started my own practice.”
He had ambitious goals, setting up in a 212 sq m site with six consultation rooms, and spending $400,000 on the fitout to ensure it met the franchise standards.
“Looking back, I wouldn’t have gone into such a big practice, I had to grow into it. The standard is to start small, grow out of it, move into a bigger site. That was quite stressful to generate the money to pay off the fitout loan, the staff and franchise fees,” he reveals.
Things were about to take a turn for the worse, however. While he retained a 25 per cent stake in the Mermaid Waters franchise, he had invested in his new franchise at Bundall on a 50/50 basis with the same partner; neither had any responsibility or involvement in each other’s practice.
When his partner had a falling out with the franchise the result was four years of legal proceedings to extricate themselves from the joint businesses – and in his partner’s case, the franchise.
“He wanted to get out and I wanted to stay. The healthcare system is corporatising, and I thought the best chance of success was to stay with the brand, rather than go alone,” says Justin.
“Through that phase, we were a start-up business, so had all those challenges too. We had a revolving door with staffing and I was consulting 60 hours a week, with no capacity to invest in the team.”
In one particularly challenging period Justin’s best hire left the profession, another one joined the army, and the graduate physio moved to Brisbane – all within three weeks.
“I built it up again, and again. The following year one of my physio’s broke an ankle, a week later another had mental health challenges and moved back to Tasmania.”
There was another sharp learning curve when the business ran into strife with the Australian Tax Office.
“BAS comes out every three months and I didn’t know. The ATO put me on a six-month payment plan and I thought that was it. Then there was another BAS. It just kept coming and I had an $80,000 hole.”
Living off his wife’s wages hadn’t been part of the plan and the business was at rock bottom. It was a timely inheritance from his grandfather that saved the business, he says.
What he learned through this time was resilience and persistence.
“Looking back, what I got from the franchisor was moral support. I drew a lot from other franchisees, and that’s probably the biggest drawcard, the experience of people who have been there or are going through the same thing.”
It was a conversation with a long term franchisee that proved the catalyst for the business. “He said when you get to $70,000 in revenue something magical happens, you have money in the bank, you can reduce your clinical hours and it starts to get easier.
“We were stuck at $45,000 to $60,000 for three years and I was losing staff.
“I really invested in myself. I committed to three or four books at any one time. I did a two-year business development program through the Entourage. We’re physios, we don’t know stuff like this. It was good grounding and it plugged a lot of holes.”
He was able to have better, more informed conversations with the franchisor, and he had a mindshift.
“Through all the staff changes, I couldn’t do more hours. I started to think about what the practice would look like in 12 months.
“I reduced my clinical hours. I dropped a day, then two days. I recruited in advance because it takes time to find a physio. I mapped where we wanted to be, new client numbers, and recruited accordingly.”
Justin became a master of the art of goal setting and reverse engineering. As a $1.2m practice the goal was $1.5m, which means monthly billing of $125,000, an active database of 2500, retention rate of 10, and an average consult fee of $60.
The next step was to breakdown these numbers to the individual practitioners and gauge which team members could bring in what revenue according to skills and experience.
“What are the behaviours that need to change or improve that influence those numbers? Look at the numbers but mentor and manage on those numbers,” he advises.
“We also looked at personal life goals, learn what they want to achieve. Because if they use work as a vehicle to achieve personal goals, the chances are we’ll hit our practice goals.”
The first audacious goal was to bill $100,000 in one month, and Justin found that just setting a goal produced a $30,000 increase in revenue. The reward was to fly everyone to Melbourne for a national symposium and a night out on the town.
The process is working. Revenue has more than doubled in 18 months from $65,000 to $127,000.
And the business is reaping other rewards. This year it won the Gold Coast Business Excellence award in the health and wellbeing category and Justin was voted by his peers the Most Inspirational Practice Director, an award based on practice performance, contribution to franchising and to the profession, and peer leadership within the directorship.