Faced with what amounted to a dead-end in her first start-up, few would’ve judged Nicola Mills harshly for returning to the safety of the corporate world.
After all, it’s not as if she would’ve had trouble landing a comfortable, well-paid job. She was with radio group Austereo for 14 years, rising to marketing director and assistant general manager of 2Day FM.
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Mills left her radio career behind in 2003 to launch Kick Juice. The business soon hit a roadblock and friends expected Mills to move back into the employed fold.
But she decided to learn from the errors of her original entrepreneurial foray to come back with a bigger and better business. Today, Mills’ Pacific Retail Management Group has a turnover in excess of $9 million.
“I was doing my MBA while I working but I did my real MBA by starting a business,” she explains. “I wanted to run my own business and a learned a lot from Kick Juice.”
“I don’t regret how I started. We are a very experienced franchisor because of the experience. I learned a lot of lessons and I thought it was crazy to not continue. On the other hand, a lot of people felt I was crazy to continue, but I felt I was so close to the finish line.”
Kick Juice launch
Mills launched Kick Juice thanks to her own money and a select band of investors, including her brother.
Admitting she was “very green” with business practice at the time, Mills found her way to shopping centres such as Westfield barred due to this lack of experience.
She managed to get around this barrier by buying three outlets of the California Yoghurt Company, which were already positioned within Westfield centres.
Mills overhauled the menus, boosted turnover and rebranded the stores to Kick Juice outlets. She decided to franchise the model, but found that there were significant obstacles to growth.
Firstly, Kick Juice wasn’t exactly operating in a competitor-free sector. Mills says that “everyone jumped on the Boost bandwagon”, resulting in 18 players in the juice market.
“We got a nutritionist on board and tried to offer something the public wanted, but you’re either operating to a solid trend or a bubble,” she says. “It felt like the next big thing at the time, but that juice market was a bubble.”
“Every franchisor doesn’t make much money until they get 25-plus stores. This provides you with proper support, operations and marketing. There are a lot of overheads and costs in franchising and you need to get the right franchisees in to support the business.”
“If you sit under 20 stores, you really struggle. We had 10 or 12 stores and it was very difficult. I was at a crossroads where I either went back to corporate life or make use of the lessons I learned. I took a deep breath and went back to it.”
Back to the drawing board
Realising that Kick Juice couldn’t thrive as a standalone concept, Mills looked to broaden the offering. In 2007, she purchased a sushi retail chain. After speaking to around 30 franchisors, Mills settled on Go Sushi, using cash from Kick Juice and three of the investors who originally backed her first business.
“Go Sushi had that healthy side to it, like Kick Juice, and that appealed to me,” she says. “The cost was low and the model was strong. The management was letting the franchisees down but with the right support I knew they could do well.
“They hadn’t managed their cashflow well, but we managed to get them out of trouble. We closed five or six franchises, mainly down to some of the franchisees not liking the controls and systems we brought in. We’ve since grown it back by seven outlets.”
Getting the plan right
Mills implemented the kind of checks and balances gleaned from her first stab at entrepreneurship. One of the major stumbling blocks to Kick Juice’s growth was rent. She set about putting this right with her new business model, which offered Go Sushi and Kick Juice outlets as a combined package to franchisees, rather than standalone offerings.
“With Kick Juice, the rents were driven up and the rent turnover ratios were too high,” she says. “Too many juice companies came in and venues knew that there was always another business they could charge.”
“We didn’t want the same problems with Go Sushi. We did another business plan and did a lot more research in. We looked at where all the risks were and all the areas where things could go wrong.”
“It was less ‘let’s stick around for a party’ and more about being stricter on things like rent turnover ratios. We were less bowled over by a site because it was in a great location. If it cost us above a certain percentage of turnover, then it was a ‘no’.”
“We took the emotion out of it all. We thought more about ‘red lights’ and ‘green lights’ in the business plan.”
Mills took over Go Sushi when there was no clear market leader in the category and saw the opportunity to capitalise upon this.
She overhauled customer service standards and renegotiated prices with suppliers. “Talking to suppliers was all about finding the market benchmarks and building a relationship with them,” she says. “We involved marketing and promotions to improve these relationships. We looked for a bigger story from suppliers than just trying to beat them up on price.”
Mills introduced business analysis reports for franchisees that she doggedly chases up every month to ensure that targets are being hit and issues are resolved. A monthly newsletter highlights well-performing franchisees and she encourages franchisees to report any problems.
The monthly reports help eliminate a number of issues, including staff theft.
“You can look at yield to turnover so if, says, the average is $600 per seaweed sheet and a franchise is doing $200, you can ask why,” she says.
“One franchise had a very low yield to turnover and it was getting worse. It was letting staff take leftover sushi home with them but they had a university student who was making 20% ore sushi to take home and sell to housemates. Theft comes in many forms and often the owner gives it the green light.”
“It’s good to know the averages across the group. We have KPIs because a difference in labour costs between 30% and 38% is a lot.”
Mills heeded other lessons from Kick Juice, such as being careful about signing personal guarantees, which she says cost her “tens of thousands” in the past. “Only sign things you’re okay to exit from,” she advises.
Mills is an adherent of profiling franchisees before taking them on, likening the process to a job interview.
“It’s about do they fit into an organisation and how they work the systems, not just getting people who are happy to be on holiday all of the time and let a manager run things,” she says.
“It’s about systems, checklists and transparency.”
Pacific Retail Management, the group that was created in 2008 to house Mills’ brands, has since expanded to include Love Coffee & Crepes and Wasabi Warriors, the latest addition.
Wasabi Warriors was introduced as a premium offering after customer research revealed that Go Sushi wasn’t entirely hitting the mark with consumers. Other launches are planned as well as an acquisition that will boost overall store numbers from 30 to nearly 100.
“We will stick to foods – we don’t want to do an Allied Brands!” says Mills. “The main focus is franchisee profitability rather than introducing 300 stores and half not making money.”