Setting up your business for franchising
David and Charles Cohen helped their parents take over Matchbox homewares in 1996 when it was suffering financial difficulties. Since then, the chain has seen solid growth with revenue of $14.8 million during 2008-09. David says much of the growth has been due to the success of a solid franchising effort, and says businesses looking to expand should consider a similar path.
How did you come to be a part of Matchbox?
My parents bought the business back in 1996, when it was a two shop operation. They basically rescued it from administration, and my brother and I got involved at varying times from that point forward. We got the business to where there were about seven or eight corporate-owned stores, and then in 2003 we looked at taking the business bigger.
We didn't specifically look at a franchise model, but we spoke to people including consultants about that and other things we could do to improve, and of course we went with franchising and that's how it began.
What made you choose franchising out of all those options?
There were a number of reasons. We were at a point with our stores where the merchandise was fairly expensive. Each new store is expensive anyway, with fixtures and fittings, we were mainly located in shopping centres and the cost base was quite high. Franchising was a good choice to keep those costs down going further into expansion.
Speaking to consultants, franchising had the right model in terms of getting motivated owners who understood our brand willing to grow the business with us. If we had the right people who were willing to act on that passion and everyday attention the store needs, then it would be easy for us to grow quicker than we thought.
Essentially, franchising offers a method of growth which minimises capital requirements but also maximises individual flair and allows good relationships with the consumer.
How did you prepare your business for a franchise launch?
We actually did quite a lot. We started off as a family company, and because of that we needed to look at all the systems, procedures and organisation structures we had in order to prepare us from going from a small business to a network enterprise. Our consultants looked at our structure, our individual finances, and our stores. Because of course, they needed to be profitable, so we looked at an economic feasibility study, we prepared all this even eight months before looking at franchisees.
Secondly, we put together all the operations manuals we would need to operate a franchise store. Basically we needed to get down everything we had in our heads on paper in order to help franchisees and make the store more efficient and easy to understand.
Certainly, at the store level we boiled everything down to what makes them profitable. More so on the expense side of things, so we looked at what was required from overheads, wages, etc, to make everything more efficient.
There were obviously a lot of internal changes?
There were a lot of small changes we had to do to prepare our company from remaining small, into a larger franchise. Probably one of the first things we actually did was give all the workers proper job descriptions and responsibilities, because care hadn't been taken before to do that.
In a small business you have everyone doing a little bit of everything, and of course in a bigger business that's obviously not good enough.
Did you have to make any specific changes to your stores in the way they look?
We've had a massive rebranding in the last 18 months, and this was when we had even been franchising for about a couple of years. We had 10 or 12 stores at this point, had just finished up a few more and we just really needed to look at things from a branding point of view.
We wanted to put some thought into these stores were presented, and what would make things more efficient and easier for franchisees. We wanted to make it as easy as possible for them, and for future stores. We chose a core range of colours for the brand to give it some unity, really emphasising that we know what people need when it comes to different areas of a person's home.
What type of person are you looking for in a franchisee?
We've been quite fortunate in that we've got some really good people in the system with us. But as time goes on, the people we want with us are those willing to work a lot of time in the stores, and people who are passionate about the brand and can get involved with the whole home, cooking specialist type of brand. We don't want just passive investors, we want people who will be committed to making the business grow.
What advice would you give to businesses thinking of launching their business as a franchise?
I think patience and caution are the two biggest things I can recommend. We've been fairly methodical in our approach to franchisee selection, and that has held us up in very good stead in regards to being strong on our decisions. We don't want to just grant as many franchisees as we can, we want to think about it and nail down how each store will work. That is especially important now as we've gotten to a certain size – we obviously get a few offers for property and of course, we just have to be more selective.