THE FASTWAY STORY - PART 2: BEYOND AUSTRALASIA
in this article:
December 2005 - In the second of two articles on building a global franchise, the founder of Fastway Couriers, Bill McGowan, discusses the development of national master franchises and the challenges, pleasures and pitfalls of overseas expansion.
In part one of this article, I outlined the Fastway story and discussed the stylistic, structural and management changes we had to make as we expanded from New Zealand. Of course, we also had our share of challenges and crises on the franchising side of the business too, and these grew even further once we took Fastway beyond Australasia.
The support we give to new Regional Franchises is immense but, as every experienced franchisor knows, there will always be those who don't make it for a variety of reasons. In Australia we had some instances of Regional Franchises who fell into this category during our crucial start-up years. These situations certainly put us into crisis mode, as we had a policy of not letting any region close. In each case where the franchisee was found to be unsuitable we were able to find another purchaser, but I can recall some occasions where we ended up with a region on our own hands for a period of time. This put pressure on our resources and threw everyone into crisis management as they tried to cover their own jobs and do the full-time job of running a franchise region.
We managed to get through those times thanks to the dedication of our team, who all pulled together to overcome the predicament. One year we got an Australian Fastway Regional Franchise back right on Christmas Eve, but our staff gave up holidays and other commitments to go there and run it and then to help the new franchisee settle in. That those same people are still all with Fastway today speaks volumes about the dedication and support I've had from my team over the years.
Nowadays we have a very settled and satisfied group of franchisees in Australia who have built those regions into long term sustainable businesses. In hindsight, I can see that there are some people who are very much suited to start-up franchise opportunities while others are much better off to take an established franchise.
Despite our success in New Zealand, the first three years we were in Australia were very much a start-up phase and it was a very intense time. There was a lot of juggling cash-flow and management by crisis, but we did have a clear vision as to where we wanted to go and, despite the various set backs, we were driven by our business plan. We were also unswerving in our total commitment to our franchisees. My senior team and I worked days, nights, weekends - whatever was required to help our franchisees establish their businesses. Our commitment to developing Fastway was 100%, which meant that everything else had to come second. For me personally, this commitment was made slightly easier by the fact that my wife Suzanne worked in the business too and was just as passionate about what we were building. I like to think that I created a family atmosphere, where my expectations were high and loyalty was expected but those who stuck with me were well rewarded and became part of a very close knit team.
Several years after we'd commenced in Australia, we began to notice that our two national Franchise Support Offices in New Zealand and Australia were being operated more and more differently and were heading in separate directions. At first it was just a change to a form, or a different quotation letter, and then it became different designs for brochures and changes to text in the manuals. We realised that we would soon end up with two different systems if we didn't bring some sort of co-ordination to the two countries to deal with updates and changes.
The answer that we came up with was to establish a franchise structure at the national level to keep both national offices uniform. Thus we established the National Master Franchisee level, and despite both businesses in Australia and New Zealand being owned by us, we made the senior staff who were running those offices report to us in line with the National Master Franchisee structure.
Over time we emerged from our reactive management mode as a structured organisation working in a proactive way. Fastway New Zealand kept growing sales wise and profits were consistent, but with the added advantage of a larger population Fastway Australia's sales went through the roof. Yes, we had issues to deal with, as we all do all the time, but sales kept growing and growing. In 1998 Australia's BRW magazine named us the fastest-growing private company in Australia, and by year eight we had become the largest domestic courier operator in the country. Profits grew alongside, and we began to look at other possibilities for expanding our business interests.
We identified several possibilities, and the board agreed to embark on two of them. The first was Fastway Post, and the second was global expansion of the Fastway Couriers brand.
In New Zealand, the government announced the deregulation of the postal service, freeing up the market for independent operators. I knew that if we could be one of the first companies to establish a rival postal operation right at the time that the first stage of deregulation occurred, we would benefit from the publicity. With several staff to assist, we worked on a franchise model and put together a business plan based on establishing a chain of franchised postal outlets throughout New Zealand. Most crucial was the establishment of an interconnection agreement with New Zealand Post. This took time, but we eventually arrived at an arrangement that was suitable to us both and we've been able to maintain that relationship ever since.
Today, Fastway Post is a very important profit centre to the Fastway Group. It has the added advantage of bringing extra freight into the Fastway Couriers system, as our Courier Franchisees get each Fastway Post outlet as a customer.
By the late 1990s, with New Zealand and Australia in good consistent profit mode and Fastway Post well-established, we began to think about how we could expand to other countries. But the thought of starting up all over again in another country like we had done in New Zealand and then Australia was more than I or my senior staff could contemplate. We'd already stretched our resources thin during the first few years to establish Australia and now that we had both countries working so well we didn't fancy going back to scratch to do it again somewhere else.
We decided that we could use the National Master Franchisee structure to set up new countries by granting a National Master Franchise to individuals for an entire country and then teaching them to replicate what we had done.
When we thought about teaching a stranger to replicate what we had just accomplished in Australia our minds did boggle a bit. We'd been a close knit team with a lot of Fastway experience, led by myself - the founder and developer of the business - and yet we'd had some challenges that we felt only our experience had saved us from. Could we really teach someone else how to do it?
After further discussion we reasoned that we could, based on the experience that we would be able to pass on and the hugely improved systems that we had developed. So we established another entity, Fastway Global Ltd, to control the activity of the overall Fastway Couriers brand and develop this idea further.
We reasoned that we would need to involve our most experienced senior people but that we couldn't just remove key staff from the business in New Zealand or Australia and, of course, we had to have sufficient finance available. Fastway Global Ltd began as a fledgling enterprise headed up by me, my wife Suzanne (the group Sales and Marketing Director) and one of our most senior people, Mark Currie, whose expertise is operations. We did our research, attended overseas franchise trade shows to test the interest level and developed a business plan.
With this new enterprise there were various considerations:
We knew that we would have to provide very comprehensive training, and the documentation of our system had to be in perfect up-to-date condition with efficient processes for updates and changes.
- Our various IT applications would have to be capable of working in other countries.
- Our website would have to represent all countries equally.
- We would need a workable system to monitor compliance.
- We would need procedures by which we could roll out new marketing and training initiatives.
- We would have to decide to what extent the franchise system could be altered to allow for cultural or legal differences.
- Most importantly, we needed effective, efficient, and cost-effective ways of communicating across distance and time zones.
We set about establishing procedures for these considerations and developed a six month training programme for new National Master Franchisees which they would undertake in New Zealand, Australia, and their own country.
The three Fastway Global personnel were based in Australia when we began, so perhaps inevitably our first foray into our new venture began with nearby Asia.
Singapore, our first National Master Franchise, commenced with most encouraging signs, granting the three Regional Franchisees needed to cover the island state and signing up 30 Courier Franchisees very quickly. The Singapore market and geography was ideal for our system and the operation grew quickly. However, owing to the National Master Franchisee's failure to take our direction and ongoing breaches, we chose to terminate his franchise agreement with us. This was a most disappointing outcome for us as it was the first franchise we had ever had to close down.
We were very stung by this failure, and perhaps if we hadn't been training more people at the time we might well have given up. But that wasn't an option, so we had to move forward. We took a long hard look at all the areas that we felt could be improved. We rewrote a lot of our training course, introduced more practical modules and increased the length of the course, too.
On reflection, we felt that the culture in Asia at that time wasn't conducive to the basic tenets of franchising: that is, being in a partnership where openness and honesty about your financial situation is required, and being willing to follow a system. We were already training people for Europe, and we were dealing with a lot of enquiries from there, so we decided to put our efforts into the European countries which we felt had a closer affinity with our business approach.
To facilitate the expansion into Europe my wife and I moved there and employed staff to assist us. We received back-up support and expertise from our senior New Zealand and Australian staff, who contributed to the European effort as well as doing their normal jobs.
Europe is now the region where we have established the largest number of countries. The complication of different languages and cultures has caused its difficulties and took a lot of patience and understanding. Each European country has a different approach to business and it is only by going there and getting to know the people that you really start to understand them.
Language, and the translation of it, is the biggest challenge we face in Europe, and my advice to anyone wanting to expand there would be to set up fully in an English-language European country first before entering the non-English language countries. Translation is not a science. Words cannot be translated literally; the translator has to understand the meaning of the sentence, and then consider how a French, or German, or Spanish person would express that sentiment. So translations are totally subjective, and ten people translating even the most simple sentence will give you ten different versions. Furthermore, we tend to be very direct in Australasia, and we use a lot of colloquialisms, which makes translation work difficult.
Put simply, our system was set up with a NZ attitude and approach in mind. It was fine-tuned in Australia, and so became Australasian, but we would have written our manuals and marketing material quite differently if we'd known then what we know now!
Interestingly, our National Master Franchisees in Europe were able to recruit Regional Franchisees very quickly and easily. There were some issues with this though. Unfortunately, and against our very vocal and insistent advice, some of our National Master Franchisees focused on granting Regional Franchises rather than focussing on providing start-up support to the Regional and Courier Franchisees who were commencing. We kept telling those countries that their businesses would fail if they took this route, but in some instances they had money signs in their eyes and ignored us.
As predicted, the countries that went down this path did come to a point where they had Regional and Courier Franchisees close to failing and began to seek our help. We then had to lead them through the right steps to get back on track.
Lessons were learned, of course, the most important being that now we will not let a new National Master Franchisee expand until they have first developed a successful Regional Franchise pilot operation. They have to have a financial stake in the pilot, be involved in a hands-on way and can only begin to grant new Regional Franchises when we are convinced that they are ready to progress. This also provides great practical experience for their support staff; there is no better training than practical and hands-on experience.
Happily, we also have some fantastic success stories in Europe, the most notable being Fastway Ireland and Northern Ireland. Having commenced in March 2002 they now have nine Regional Franchisees and 80 Courier Franchisees, which gives them full coverage of both countries. Their turnover right now exceeds 1.2 million pounds (NZ$3 million) per month and they are profitable. They've reached that wonderful stage of exponential growth and the courier work is just racing in the door at them.
For the moment the board of Fastway has decided on a policy of consolidation and a strategy that will see us develop our existing countries for growth rather than more international expansion. Despite receiving enquiries from other countries every day, we're not developing any new countries for now. There are enormous opportunities for us, particularly in the United States, but as our global business comes ever closer to a comfortable position of stability we are asking ourselves whether we really want to embark on all that hard work again in a new region of the world. That's a decision to be made later, but North America does beckon very enticingly...
Decisions on future expansion will be made by the Fastway board, and carried out by the staff that we have in place. On a personal basis, I'm now hanging up my boots! I currently consult to the Fastway group on specific areas that require my attention, but I expect to gradually move myself away from even these day-to-day aspects of the business. I'm immensely proud of what we have achieved and am pleased to say that I have the utmost confidence in the management and staff that we have in place to take Fastway to the next level.
This article was first published in Franchise New Zealand magazine Volume 14 Issue 4
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