Wendys Master Franchisor

In July 2015 there was media coverage of Wendy's in connection with a company that previously owned the master franchise in Australia being placed into Voluntary Administration. Following is an article which sheds some light on the situation. It has been written by Shabnam Amirbeaggi who is a liquidator and insolvency expert. Shabnam is  a member of the Franchise Accountants Network and a Managing Partner at Crouch Amirbeaggi.

For those who may have heard a rumour about Wendys being in trouble, it’s not quite as dramatic as it may first sound. Yes it’s true, the company that originally owned the master franchise has been placed into voluntary administration, but Wendys as a brand will live on to see another day.

Wendys master franchisor, established in 1979 in South Australia, sold its brand about 12 months ago to a Singapore based company, Supatreats Australia. Since then franchisees have been negotiating a new agreement with the new franchisor.

Franchise agreements are not usually drafted to cater for the franchisors’ insolvency; and are more often than not drafted with clauses to deal with the franchisees’ possible financial demise. Consequently, it is likely that the franchisees who haven’t reached an agreement with Supatreats Australia are facing possible closure of their stores as they will no longer be able to trade under the Wendys brand. If they fail to sign up with the new master franchisor, the franchisees livelihood will be determined by their ability to cover the costs associated with de-identifying the business and continuing to operate independently, or if possible converting to a like-minded franchise – all of which are subject to the landlord’s consent and ability to negotiate new lease terms where applicable.

FAN members with a franchisee clients should bear in mind that even whilst the franchisee’s business might be going strong, the franchisee needs to be comfortable with the financial strength of the franchisor.

Beware the Federal budget bounty

Just to be clear, in this week's Federal Budget, Treasurer Joe Hockey did not hand out $20,000 in cash to every small business like some sort of generous uncle. But you might think that if you read some of the comments being made on the "Have a go" Federal Budget. Here's a collection of comments I read, made by financial advisers e-newsletters, in online discussions and the inevitable flurry of self-promotion by electronics retailers.

"For the small business person there is an incentive to go and buy that piece of machinery or a car or even a coffee machine, as long as the purchase price is under $20,000." 

Or a question posed to franchisors which was something like "What would you want your franchisees to spend the $20,000 on?"

And this one, by celebrity seller of electronics, Ruslan Kogan, quoted here ...  "Tech isn’t an expense. It provides a huge productivity boost that quickly pays for itself."

(Well, okay, accountants categorise the things Kogan mentioned as assets rather than expenses. But you still need to pay for them up front, and they show up in your Profit and Loss Statement as an expense over a few years. So I reckon they are an expense to your business.)

Anyway, back to Minister Hockey. What he did was allow an immediate tax write-off of capital expenditure rather than a business receiving a tax deduction over a few years. To get that tax deduction you will need to spend cash you have in you bank account - or borrow money - and then spend it on a car, coffee machine, computer or whatever.  

Think before you splash out

There are always alternative uses for money so it always pays to think through spending decisions.

As some food for thought, here are some possible alternative uses for money you're being tempted to spend on nice to have 'stuff', but which might not the most effective use of profit to improve your business or secure your future.

• Pay off suppliers or other business debts
• Repay business loans. This reduces risk and potentially gives you flexibility in case of a downturn, or decision to expand in future.
• Allocate money for marketing or sales activity, or extra staff to help grow sales
• Invest in coaching or business advice to improve the financial performance of your business
• Leave the cash in your business to provide a buffer for quiet months
• Put money aside for a future refurbishment
• Contribute to Superannuation, which provides security for when you can no longer work
• Pay yourself a little more salary, a bonus or dividend

Which is the one for you? Well it depends on your circumstances and on what's coming up in the future of your business. Which is why we say to get advice for your particular circumstances from a qualified accountant.

Do a plan and cashflow forecast

And it will be much easier for your franchise accountant to advise if you have a plan, a budget and a cashflow forecast.

This is a good time of year to make a plan for your business covering the next year or so, and taking into account your future personal plans. The appropriate spending decisions will become clearer when you have an idea where you're heading and what your priorities are.

It's also very wise to prepare a budget and cashflow forecast, or have your accountant prepare one if you're not experienced in that. Looking ahead at your cashflow will give you an idea of whether the money you were thinking of spending on a car, coffee machine or computer would better be used in another way.

No longer flying solo

Why would you give up the freedom of 'flying solo' to join a franchise network? Despite its popularity, some people find the solo business life means long hours and a constant struggle to generate business and stay up to date. For them, a franchise in a related business business could be a good step. In recent years the business soloist sector has boomed. It includes casual soloists making something to supplement their day job, freelancers, and a large number of people working on their own as consultants of some variety.

Some of these soloists are the classic 'consultants' - people who make their living moving from one role with a company to another, often experts in a particular area, hired to fill a short term need. Some are the classic kitchen table startup; people with an idea - often for an online business, having a crack at it from home.

But many soloists have skills that could fit within a larger business. They include bookkeepers, accountants, therapists of various types, tradies, designers, communications and marketing people, mortgage brokers and financial planners.

There are a host of reasons people head down the solo track. Many, I suspect, simply to make a buck; having found it hard to find a job in a business that suits them. There's also that 'stuff the boss' idea; the dream of being free to do your own thing, to choose your working hours, benefit from your own hard work without the boss taking a slice.

Some love it, and make a decent living. But sometimes the dream isn't what you want or need.

It's not easy to create a sustainable business when you are the business. Perhaps there will be times of plenty, but almost inevitably there will also be times of scarcity. That's because the solo operator is either 'selling it' or 'making it', and you're limited by the number of hours you personally can work.

There are other challenges for the solo business person. With only you in the business it is hard to generate new ideas, solve problems and innovate. Possible - yes, but often much harder than when you have others working with you.

Perhaps you want the opportunity to grow your business bigger, or to have the company of others in the same business as you. Perhaps you're tired of the marketing slog that's an essential part of business.

If flying solo is losing its shine for you, it might be worth trading some of your apparent freedom and independence in exchange for what a franchise system can bring you.

Franchising isn't for everybody, and not every franchise is a good business to be in. But my interest in the soloist to franchisee journey was spiked when Robert Gerrish, who has made helping soloists his business, contacted me to record a podcast about franchising.

For some soloists, the move to a franchise could be worth considering. Here are some reasons:

• Many franchises have a good stash of marketing resources you can plug into. This will save you time and possibly money.
• Other franchisees can be a source of business tips and help, or simply someone 'like you' to talk to. It can reduce the loneliness factor.
• Franchises may provide the training which you need to stay ahead in your sector.
• Some franchises provide 'career paths' that help you move beyond solo operator to business owner with a team of staff. I'd like to see more franchisors focus on this.
• A franchise business can have a sale value whereas a solo business can be very hard to sell.

Of course, there are arguments on the other side, and you must must must do thorough due diligence before you make the move. But if the solo life isn't all you want or need, a franchise may be worth a look.

You can listen to the Flying Solo podcast here

https://soundcloud.com/flyingsoloau/53-is-buying-a-franchise-a-smart-move

Franchise Accountants Forum 2015

We're excited to announce Australia's first event specifically for people interested in the financial aspects of franchising: The Franchise Accountants Forum 2015. Recent legal cases, financing challenges, and the new Franchising Code have highlighted the issues relating to the financial side of franchising.

The Franchise Accountants Forum is a one-day event where you’ll have the opportunity to gain new insights, network with your peers, and hear from leaders in franchising and accounting.

The forum is being help on ...

Tuesday 16th June, 9am to 5pm at ANZ Tower, 242 Pitt Street Sydney

Keynote speakers

• Dr Michael Schaper, Deputy Chair ACCC: Keynote address
• Mark Bilton, Former Group MD Gloria Jeans Coffees: "Authentic Leadership"

Other speakers include

• Sean Mura, CFO Anytime Fitness: "The role of the modern CFO in franchising"
• Doug Hutchinson, GM Operations, Barry Plant Real Estate:"Benchmarking:Tips and Traps"
• Peter Knight & Kate Groom: Co-founders, Franchise Accountants Network and Smart Franchise

It will be of particular interest to:

• CFO's and CEO's of franchise groups
• Finance Directors, Financial Controllers and internal accountants
• Accountants in public practice with franchise clients
• Lawyers in practice and in-house counsel

Eligible for 8 CPD/CLE hours

Tickets are now available! (Early bird pricing till 15th April)

Online event registration for Franchise Accountants Forum 2015 powered by Eventbrite

Thanks to the ANZ Bank for hosting this event!

Brisbane Franchising Expo 2014

Last weekend we attended the Brisbane Franchise and Business  Opportunities Expo where local Franchise Accountants Network member, Carwardines & Associates were exhibitors. Also at the Expo was Jason Bertalli from BNR Partners in Melbourne. Peter and I  gave a brief talk on the importance of considering the financial aspects of buying a franchise. It was very well received, with around 40 people attending each talk, and some good discussions afterwards with people who were considering starting a franchise.

The day before the Expo we had a training day with several FAN members, where we discussed the type of advice which can help prospective franchisees make an informed decision.

Here are the slides from our presentation at the Expo