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MELBOURNE, Australia - Jim Penman is the man behind Jim’s Group, Australia’s second largest network of franchisees, covering a reported 27 brands and 2,950 franchises. Jim was kind enough to consent to an interview for Blue MauMau.
RB: I remember a program on Australian television many years ago where they described the success of a growing Jim’s brand. You were depicted as a bit of an eccentric, a nice guy millionaire driving an old Volvo. How has this frequent media attention impacted your business over the past 30 years?
Jim: We’ve had remarkably good media over the years and it’s been very helpful in raising our profile. Even the stories of the past fortnight have significantly increased both leads and franchise enquiries.
RB: You terminated your master franchisee in the United Kingdom, Paul Carr. How do you see a possible UK court battle playing out and where will that leave UK franchisees?
Jim: We’ll be aiming to take the case to Australia and join it with a defamation action. I’m also supporting cases for several current and ex-franchisees against him, so I think he’ll go bankrupt. The UK franchisees are now getting good support and doing well.
RB: There have been reports of a recent call to vote you out. The Age article suggests you have done a back flip and would refuse to accept such a vote. Jim, how did that begin, was it real and where do you see this going?
Jim: Vote out was never a possibility, as the Age would have known if they spent five minutes checking their facts. We are looking at the possibility of our own referendum, of franchisees as well as franchisors, purely for PR reasons as I have no intention of selling. I’d estimate my support at probably 75% with franchisors, 95% with franchisees. Most of the issues that upset Franchisors have to do with me trying to protect the interests of franchisees.
RB: Franchisees can be extremely demanding. Does your "vote out" system have a safety net to cater for issues that are out of the control of the master franchisee and that cause franchisee voter unrest?
Jim: We have 200+ franchisors and might see a vote out every year or two. They NEVER happen without good reason. The great majority of Franchisors do a good job and the great majority of franchisees recognise that.
RB: How would you describe the difference between good and bad franchising?
Jim: Good franchising is putting franchisees first.
RB: Selection is critical in franchising and with a structure such as yours who is responsible for the selection of franchisees and master franchisees and typically what is involved?
Jim: Franchisors select franchisees and divisional franchisors select franchisors, though there is a secondary screening at Induction training (especially for franchisors). I’d like us to do a great deal better in this area, but not sure how.
RB: I have read that you have 216 divisional master franchisees from 27 brands that oversee over 2,900 franchisees. In the US. Professor Scott Shane suggests that franchising structures such as yours are all but unworkable. So how do you make the Jim’s structure work?
Jim: Franchisees are given personal support by an experienced local franchisor, who in turn is both supported and held to account by a national structure. Entities such as divisional franchisors and admin centres also have dedicated roles, and the whole is held together by a shared ethos of service to clients and especially franchisees. By every measure, including client complaints and franchisee satisfaction and longevity, we’ve actually improved steadily in recent years as we’ve put better systems in place and advanced our IT systems.
RB: Most of the Jim’s brands involve low levels of investment. How would you describe the level of return on the investments of your most successful franchisees and master franchisees?
Jim: One franchisor has just knocked back an offer of $4 million for a business that cost him $130,000. The most successful franchisees pay [royalty] fees of around 1% of [sales] turnover and earn their initial investment back many times a year.
RB: Have you ever considered getting into a higher return on investment franchising concept?
Jim: The Jani-King concept looks attractive at some levels. I employed an ex-manager of theirs who told me their Western Australia office alone earned more profit than my entire company!
RB: In a recent article in The Age, journalist Mary-Anne Toy referred to your sprawling head office complex. The first thing that popped into my mind when I read that was that there must be large infrastructure in place at Jim’s. Could you tell readers what your head office structure looks like at Jim’s?
Jim: We have about 20 people in a rather basic office of 200 square metres [2,153 square feet]. Most of the ‘complex’ is our training and conference centre.
RB: You were recently reported in an article by Chalpat Sonti at Fairfax Media, calling for quality franchisors to ‘come out’ and support the need to make Australian franchising a healthier environment for all participants. Do you have any thoughts on why no other franchisor has come forward?
Jim: Most of the media frenzy has been driven by our peculiarly democratic structure, which greatly limits franchisor power – including mine. For example, the ridiculous idea I could be forced out arose from a voluntary referendum four years back when I offered to sell out if a majority of franchisors [i.e. Jim's master franchises] asked me to. As another example, I don’t have the power to cow franchisors [Jim's master franchises] by refusing to renew their contracts. Other franchisors [competitors and other franchising brands] see this and prefer to keep all power in their own hands.
RB: In recent times the franchising brand has come in for some criticism. How do you see the way forward for the Jim’s group given the recent negative media and have there been any changes to the Jim’s operation as a consequence?
Jim: We definitely need to slow down and consult more widely before introducing changes in future! The fuss hasn’t hurt the brand, and we’ll be all the better for taking a close look at how we do things.