Becoming a franchisee, Finance, Funding, Legal

Jim’s Group founder seeks pre-IPO backer to finance new franchisees

Michelle Hammond /

Prospective franchisees looking to join the Jim’s Group network could receive start-up loans as part of the company’s growth strategy, with founder Jim Penman seeking a pre-IPO backer.

 

It’s been announced Penman, who franchised Jim’s Group in 1989, is seeking a pre-IPO backer or backers willing to invest around $10 million into the service franchise company.

 

The ultimate aim of the plan is being able to provide start-up loans to franchisees because, according to Penman, the network loses “hundreds of sales a year” because the banks refuse to lend money to new franchisees.

 

“One of the main reasons for the float is to be able to offer vendor finance to franchisees. There is actually a huge demand for franchises,” Penman says.

 

There are currently around 3,200 Jim’s Group franchisees and franchisors in Australia, New Zealand, the United Kingdom and Canada, across 30 divisions including Jim’s Mowing, Jim’s Cleaning, Jim’s Pool Care, Jim’s Dog Wash and Jim’s Bookkeeping.

 

According to Penman, the company could reach around 3,600 franchisees by 2014, although that figure could “easily” top 5,000 if potential franchisees were able to secure finance.

 

“In 2010 we took 414,831 leads, of which 65,457 were unserviced. In 2011 we took 439,335 leads, of which 80,817 were unserviced,” Penman says.

 

“Demand for our services rose 6% while franchisee numbers grew only 4%. Unserviced leads rose by 23%.”

 

“Our problem is that more and more franchisees are getting booked out and unable to take more work… There’s still too much work coming in.”

 

With regard to the start-up loans, Penman says the company would lend new franchisees “not all the money for the business but a substantial chunk of it”.

 

“Master franchisors would essentially secure the loan, so they’d be very careful about whom they have and would be motivated to help them succeed,” Penman says.

 

According to Penman, the divisions performing particularly well at present including Jim’s Test & Tag, Jim’s Pest Control and the various cleaning divisions.

 

“Jim’s Pest Control only started 18 months ago but already has 40-something franchisees, which is pretty good,” Penman says.

 

“The main ones [are also performing well] – Jim’s Mowing continues to grow, with steady growth of four or 5% per annum.”

 

According to Penman, one of the biggest challenges is finding franchisees that are competent to do the job.

 

“Because it’s franchised, they need the skills but they also need the character to provide good customer service and have good business sense,” he says.

 

“We need the right people with the right skills and attitudes… They’re there but we have to get hold of them and make sure we don’t lose them.”

 

“There are lots of challenges but [the main challenges are] always about people.”

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