Finding the value in franchising
Friday, May 27, 2011/
WA-based business What Scratch? is an automotive scratch repair business, founded in 2008 by husband-and-wife team Matthew and Dale Burke.
What Scratch? is now a thriving mobile franchise, boasting revenue just shy of $1 million in the previous financial year. Matthew Burke began the business as a one-man operation and there are now 16 What Scratch? vans in WA and NSW.
But according to Dale Burke, the decision to move into franchising proved to be one of the most challenging aspects of the business.
“Franchising a business may sound like a great idea but you certainly don’t get rich quick. It costs a lot of money, is a huge amount of work and nobody thanks you or tells you [that] you are doing a good job,” she says.
Dale says she and her husband made the decision to franchise their business after struggling to keep up with consumer demand.
“We tried different things – employing staff and having extra vans on the road. We had a business partner buy into the business,” she says.
“None of those things really worked. We still couldn’t keep up with the demand for the services.”
“We could see that there was so much work, so that was the main reason [we decided to franchise the business], and my husband liked the idea of perhaps being able to one day get off the tools.”
After nearly a year of preparation, including hiring a consultant to help them through the process, the Burkes sold their first franchise in February 2009.
“The consultant worked with us through all the steps of everything we had to do legally and operationally – writing manuals and all that type of thing,” Dale says.
“We were lucky – we sold our first one kind of through word-of-mouth. But it took awhile to sell the second one because that required advertising and actually having to try and find that person ourselves.”
“It was quite frustrating hoping that someone calls you out of nowhere and wants to buy your franchise. It took us about three months to find the second person.”
Dale says the consultancy service and legal fees weighed down heavily on the business.
“When you go to franchise consultants at the beginning, they’re not going to tell you how difficult it is because they obviously want you to franchise your business so they can get the fees out of you,” she says.
“We spent all of our own savings at the beginning, plus some money we borrowed from our parents. It cost us roughly $110,000 and then everything that we’ve made since then has gone back into the business.”
“It’s been very, very difficult. We had our own reasonably profitable business and, since 2009, we’ve been working seven days a week for no income and now have a business where we’re hoping to make our first profit this year – the last two years have been losses.”
Dale says it can be difficult to stay motivated when your franchisees are earning far more than you are.
“They’re doing really, really well and we’re just struggling on, trying to eventually get to that point where our franchisees will actually cover our costs,” she says.
“We quite often joke that we’ll write a book after this of 101 reasons why not to franchise your business.”
While the Burkes may have mixed feelings about franchising in general, they have no regrets about their decision to operate exclusively as a mobile franchise.
“People don’t want the inconvenience of having to take their cars to a panel shop to have minor things repaired,” Dale says.
“Our customers are mainly dealerships so the cars can be repaired there and then on the lot. They can be repaired quite quickly and they don’t have to move their cars or be without them for days while they’re getting repaired.”
“Being mobile also means no rents and no overheads – we’re using our customers’ electricity and water and utilities, which means the costs are very low and profit margins are very high.”
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