New Zealand
15 October 2007
Business owners need a different set of skills to become good franchisors. Tina Law finds out about the difficulties they face.
Julianne Liebeck and Carl Watkins have spent much of the past 18 months in a lawyer's office.
They've been putting the franchise contract together for Mod's Hair, the Paris-based company that has about 400 salons worldwide.
Mr Watkins, the 1991 New Zealand hairdresser of the year, jokes they could have employed a lawyer full-time and it would probably have been cheaper.
It wasn't difficult, says Ms Liebeck, just time-consuming.
There were so many things to think about because the contract had to cover everything from the amount of training hours required to how to keep up Mod's Hair standards.
The two had the added difficulty of some documents being in French and having to get them translated into English.
"It's been a massive process. It's taken a year and a half. Learning about contracts is all we have done this year. But it's done now and that's it."
The pair, who already own four Mod's Hair salons, three in Christchurch and one in Auckland, own the franchise rights for New Zealand and Australia.
Part of the agreement was that they had to own four salons before franchising.
"For three years we've been testing some things. Some things work, some don't."
They plan to open 15 salons in the next five years, focusing on Auckland and Wellington, but they will also look at smaller centres like Hamilton, Palmerston North and New Plymouth, if the right person came along.
"It's not about doing it quickly but doing it right," Ms Liebeck says.
Franchise New Zealand magazine editor Simon Lord says setting up a franchise always takes longer than expected because it demands a lot of organisation and investment.
"When you franchise your business, it's not a licence to create money. You do have to invest quite heavily before you start seeing the returns."
A Mod's Hair franchise will cost from $240,000 for a small salon to more than $400,000, including the fitout and building cost.
Franchisors also have to be mindful that just because they can run a good business doesn't mean they could be a good franchisor, Mr Lord says.
"As an operator you have a very close and narrow single focus on running a business. Once you become a franchisor you are responsible for helping other people to have a single focus on the business.
"You stop being an operator and start being a leader, motivator, policeman, site-selection expert and the list goes on."
He says a lot of people start out in franchising without the right skills, but it is essential that people seek good advice from an experienced franchise consultant.
"If you don't get it right, then it will come back and bite you on the bottom three years down the track when other people are involved, and it will be messy."
Mr Lord's magazine has been going for 16 years and has a readership of 50,000.
It is believed there are between 15,000 and 20,000 franchised businesses in New Zealand.
"Lawn-mowing businesses have stopped growing as fast as they were growing five years ago, but there are always new ideas coming out."
Mr Lord says choosing the right business has the biggest impact on a franchise being successful.
"There are good franchises and not-so-good franchises. What makes the biggest impact whether or not it will be a success is choosing the right business for you. There's no such thing as the best franchise, but there's something as the right franchise for you."
Mr Watkins and Ms Liebeck recognise that and say they know it is important that they work with the right people who understand the concept.
"I think we will grow through our own team," Mr Watkins says.
They have about 50 employees among four salons and some are lining up to take on the franchises.
By the end of next year they also want to open one or two salons in Australia.
Mr Watkins has clocked up 27 years in the industry and Ms Liebeck 24, so they see owning salons and franchising them as a natural progression and a way to continue challenging themselves and moving forward.
They decided to expand via franchise rather than ownership because they like idea of the owner working in the salon.
"It's a healthy way of owning a business, having someone in the salon that loves it," Ms Liebeck says.
A 2001 New Zealand Franchise Association survey found that 94 per cent of franchises were still in business after the first three years, but 66 per cent of small businesses overall failed in the first five years.
Mr Watkins reckons that's a statistic that cannot be ignored.
Ms Liebeck, who worked for Mod's Hair in Athens for eight years as the education manager, bought the concept back to New Zealand in 2003, opening a salon in the well-heeled suburb of Merivale in Christchurch. It was the first Mod's salon to open in an English- speaking country.
Mr Watkins bought into the business about 18 months ago.
Though some might say New Zealand is already overrun with hairdressers, Ms Liebeck and Mr Watkins believe there is room in the market for another salon franchise. They say Mod's Hair has a point of difference from other salons because the head office is in Paris and it teaches its hairdressers different techniques.
"It's a boutique concept. It's not for the masses. We're trying to stay away from the malls." Mod's in Paris also releases a new collection of styles every season, distributed to salons around the world.
"People are paying for a product that is current and relevant. They can be wearing the same hair as someone in Paris at the moment," Ms Liebeck says.
Clients should expect to pay for that privilege, with cuts ranging from $55 to $120 with either Mr Watkins or Ms Liebeck.
Every year they send employees to Paris to train and learn the techniques at Mod's Hair. So far nearly 20 staff have gone. Staff pay for their airfare but get a daily allowance and the training is paid for by the company.
Providing the franchise option also gives staff a great career path, they say. They could come in as an assistant, rise through the ranks and end up owning their own salon. "We can offer them a complete career," Mr Watkins says.
Mod's Hair will also provide franchisees with buying power and support on the technical side of the business, including employment contracts and health and safety issues.
Franchisees, or business partners, as Ms Liebeck and Mr Watkins prefer to call them, will pay a percentage of turnover and some of that will end up in Paris.
Source :
www.stuff.co.nz
