THE FASTWAY STORY - PART 1: THE BEGINNING
in this article:
In the first of two articles Bill McGowan, founder of Fastway Couriers, recalls the challenges and rewards of building a global franchise network from scratch in a typically frank way.
It all began 22 years ago, here in New Zealand, when I came up with the concept of a courier service that would be cost effective, pre-paid and easy to use. There would be no complicated weight breaks or formulas, a timetabled cyclic service, and the service would be based on a low mark up/high volume formula. This would be in contrast to the other courier operators of the time who were charging exorbitant rates and using complicated formulas to charge for each parcel.
The industry was regulated in those days, so in early 1983 I purchased a company called Hawkes Bay Security Services which came with three goods and services licences that they'd originally used for carting cash. With the change of ownership I had to apply to the court for the right to use the licences. In so doing I used a comprehensive business plan to support the application, and in the process was able to obtain another 12 licences.
Of course, making sales was a priority so I designed a process I called Saturation Marketing, and set about trialling it myself. Recognising that no one wants to do business with a courier who has no work, I would fill up the van with empty boxes and run from one business to the next with an empty box under my arm, giving the illusion of being a very busy courier. I called on the same businesses twice every day, dropping off flyers and asking them about their courier requirements, thus building a rapport with them. By the end of a month I had built up a core client base and then put a courier franchisee or driver into the run while I set about building up the next one.
During the first year I established 12 courier runs in this manner (six franchised and six company drivers). The benefits of franchising were immediately obvious with the franchised couriers. They quickly realised that this was their own business operation and they actively looked for new business. As you would expect, their productivity levels were consistently higher than the company drivers. Couriers now had the desired incentive to build their business, as they earned on their own performance factor, and it also freed up working capital. These observations proved that franchising was the right model for the Fastway concept.
We began opening branches in other locations of New Zealand and saw very early on that this management level could also be franchised, so the next level of Regional Franchises was born. We trained these people to lead, motivate, and provide business services to their Courier Franchisees.
Those years were very hard work, and we had an extremely tight budget. There were nights where five or six of us would share a hotel room to keep costs down, and even times when I camped on the side of the road by a stream or slept in the car on my way to do a franchise visit! Whenever possible we'd stay with our franchisees instead of going to a hotel, and when we did go to a hotel we always took the free pens and note pads to keep the cost of our stationery down...
When we began our first nightly line-haul operations linking regional franchise locations I worked during the day, drove at night, and only had a few hours sleep in between. So as you can see, Fastway New Zealand was built very much on a hands-on philosophy, and driven by sheer determination and energy.
There were plenty of challenges that came our way, some of them rolling in one on top of the other, and I would just keep dealing with each one. This was a very stressful existence, and one that only a young and very determined individual could sustain. Those years did take a toll on my health, but as the network developed the business became more stable and profits ensued.
Ten years after commencing, we were the second largest courier company in New Zealand, with complete geographic coverage, and a reliable profit stream. It was at this stage that we decided to enter the Australian market.
During 1992, I personally undertook a full year of very thorough and very expensive research of the Australian market. With today's technology we could now do the same research in about three months, and it would cost about one-tenth of what we spent then. Suffice to say, good research is absolutely vital prior to embarking on new markets. If you are considering the Australian market you should be most careful to allocate enough time, expertise, and funds for research. We researched areas like costs, laws (and keep in mind Australia has differing laws at local and state level as well as their federal law), prospective customer expectations, and, of course, the competition.
Despite our extensive research, there were of course, challenges that we didn't foresee and which we had to deal with as we went along. One of our difficulties was the banks, which wouldn't recognise our established business in New Zealand - they treated us as a small start up. They had a limited understanding of franchising back then and they couldn't understand our business model, let alone those of our franchisees when they applied for finance. The banks wouldn't lend, give overdraft facilities or even give us company credit cards, so this put cash flow restraints on us. There was no easy solution - we just had to keep lobbying the banks and put pressure on them through the Franchise Association to understand and recognise the needs of start-up franchises. I also got involved in various networking organisations and some of the contacts I formed with well-connected solicitors and accountants helped us with introductions to banks. Of course, later on when the business was booming, all the banks wanted to know us but that was little comfort - they weren't there when we needed them.
In people terms, the move to Australia was more complicated than we had anticipated. The responsibilities of our senior management team were split across the two countries, and they travelled back and forth on a regular basis. This stretched them too far, and frequently the loser in this equation was New Zealand, because Australia was where the action was and I was based there creating lots of excitement about what we were going to achieve. Getting Australia up and running was a huge task that required all of my attention, so I was travelling back to New Zealand less and less. As a result, our New Zealand franchisees (very understandably) felt increasingly neglected. To help rectify this I organised a private plane and pilot to take me on a whirlwind trip around New Zealand, which enabled me to visit every single Regional Franchise. There were 20 of them to see, with me sometimes doing three visits in one day. It helped to show my face and let them know personally just what our plans for both Australia and New Zealand were, and reassure them that they were still valued members of our franchise system.
The New Zealand franchisees might have been feeling neglected, but in actual fact the franchisees in Australia were sick to death of hearing, "In New Zealand we do this, and in New Zealand we do that!" Looking back, I can say that we promoted ourselves as Kiwis too much, and that doesn't always go down well with the Aussies. We came across as having an attitude that said, "We Kiwis know exactly how to run this business, and if only you Aussies would get off your backsides we'd be able to show you too!" We never said those actual words you understand - but looking back I can see that our actions would have given the impression of this attitude.
In our business dealings we tended to take an aggressive and blunt approach as our first course of action, which had always worked pretty well for us at home in New Zealand. With a predominantly male staff, we were quite a macho group who went by the philosophy of ‘work hard and play hard'. Basically we were straight talking Kiwis who needed the rough edges knocking off us, and the Australia experience gradually did this.
Our style and demeanour has had to become even more refined during our years working in the European market, but I'll mention more on that in part two of this article. What we learned is that here in New Zealand we might find a certain charm in the rough diamond image, but it just doesn't cut the mustard in any other country. If you want to expand your business overseas, leave that image at home.
During this time we had ‘flat line management structures' in our Franchise Support Offices in Australia and New Zealand, which, if the truth be told, meant that everybody got involved in everything that was going on. The result was that lines of responsibility, and therefore accountability, became blurred. This worked ok when we were just a New Zealand company, - I basically made all the decisions and drove everyone by using a lot of energy, motivation, fun and, sometimes, a heavy hand! But it became clear that we needed a proper management structure in both countries and, because I couldn't be everywhere at once, we had to work toward making me redundant. So we created a managing director position in both countries, and then a general manager role for each of the three main business units, being Sales/Marketing, Operations, and Administration/Finance.
We always value experience in our business, so we tried to promote from within to fill these roles - with mixed results. We began to see that some of the people who had been very loyal and hard workers under our old way of doing business just didn't have the goods to fill a management position. We worked with them to show them what we wanted from them, but for some this simply led to confusion and upset at why they suddenly couldn't do anything right. We tried babysitting these managers, but that didn't work either, because the so-called ‘good' managers had to carry the others which led to resentment and burn out. Gradually other roles in the organisation were found for these people and in some instances they left.
Recruiting for these management positions from outside was also tricky at this juncture, because although we'd realised that we needed a professional management structure, we were inexperienced at recruiting and managing the sort of people that we needed. Inevitably, we had some disastrous appointments during this time and we wondered why it was so hard to find decent people. It was difficult for us to see the situation for what it was when we were in the middle of it, but looking back I can see that this was all part and parcel of our development both individually and as a business.
We also needed to break down the macho culture and promote more women into roles of importance. Attitudes were slow to change, but we now have a very diversified staff which has contributed to a more balanced culture in our business.
By necessity we were still being very entrepreneurial at this point so we were half-way between being a business that needed to be based on entrepreneurial management, and one that needed to be led by a strategic MBA style of manager. To the credit of the six key managers who worked by my side through that period - and who are still with me today - we did it!
Greg Nathan, the franchise corporate psychologist from Australia, once did a talk based on the sentiment ‘I want to grow but I can't let go'. That certainly summed up what I was going through during this change in management structure.
I think it is typical of entrepreneurial franchise founders that too often we get involved and make decisions which should be left to the responsible manager. This undermines their authority and is obviously not a good thing to do as it causes people to abdicate responsibility and accountability. As the founder and driver of the business who had always been very hands on, it was difficult for me to stand aside and not interfere. But over time I have learned to do this and it has been the best thing I could have done for our business. Nowadays I'm only involved in Board decisions and I leave the running of Fastway entirely in the hands of Brem Ellingham, our very competent Group Managing Director. I think this struggle to know when and how to let go must be a common scenario for franchisors who take their businesses from start-up to a corporate structure.
This article was first published in Franchise New Zealand magazine Volume 14 Issue 3
This material is copyright © Franchise NZ Marketing Limited, Franchise New Zealand ™ magazine and Franchise New Zealand On Line . While it may be downloaded for personal use, no part may be reproduced in any form whatsoever without the specific written permission of the publisher.