Jim’s Group founder Jim Penman says the secret to successful franchising is good recruiting, tough leadership, developing a strong brand and keeping franchisees happy. He tells JACQUI WALKER how he does it.
By Jacqui Walker
In the 25 years since Jim Penman turned his mowing round into Jim’s Mowing, and started expanding, he has created a network of 20 divisions and 2700 franchisees in Australia, New Zealand, Canada and Britain, and now has a turnover of $200 million.
The four tier business model is unique. Franchisees provide the services, master franchisees recruit, support and provide leads to the franchisees, divisional franchisors support them, and Jim Penman’s company sits above them all.
Penman earns a tiny cut of franchisees’ revenue (less than $1 million a year) and extra revenue from running the call centres, the phone system and doing the administration.
But 25 years of franchising has taught him a lot. Penman shares with Jacqui Walker some of his franchising secrets: How to recruit good franchisees, keep them happy, develop a strong brand, and what to focus on to expand the franchise network.
He is happy to answer your questions. Send them to feedback@smartcompany.com.au
Jacqui Walker: Which are the biggest divisions in the Jim’s group?
Jim Penman: Mowing is the biggest. That’s by far the biggest. That’s still more than half, about 1600 franchisees. The next would be cleaning, which has over 200, then fencing at about 150.
Which have been the fastest growing in the past year or so? And why?
Test and tag (electrical compliance service) is probably our fastest growing division. That’s about doubled in the last 18 months. That’s doing very very well.
The main thing that affects it, I mean certainly test and tag’s a good division, you can make very good money, but the main thing affecting it is you’ve just got fantastic leadership. You’ve got great master franchisees.
But that applies within any division. We survey our franchisees every year to find out how satisfied they are with the service they’re getting, how happy they are with their business.
What you find is that when the franchisees are very happy the region tends to be growing. And if they’re unhappy it will be flat or even declining.
And that depends on having a good franchisor who is supportive, that they like, and who can provide some tough leadership.
What do you mean by tough leadership?
Well they’ve got to be a leader in the way that they support people and answer their questions.
But they’ve also got to be the sort of person that says ‘you know, you didn’t bring that customer back. To be successful you need to do this’ or ‘OK, you’re running short of revenue and you’re claiming it’s the drought, so will you accept a challenge that you need to suggest extras to your client?’. Like say rubbish removal or whatever.
They’ve got to be supportive but they’ve got to be also prepared to be a leader. Take a tough line. The best franchisors combine those two.
And do you think that that’s a greater determinant of success than actual demand for the service?
Yes. Because demand for the service is almost a given. We had 67,000 unserviced leads last year. So far this year it’s about 25,000. It’s getting worse.
To give you an idea just how much work that is, when we spoke to service central towards the end of last year (we were doing a deal with them) they spent $4.5 million in advertising to pick up 60,000 leads. Our total advertising budget is about $3 million and we knock back more leads than they got.
And why is that?
Because the demand for services is fantastic. If you offer a half way decent service, then the world just comes rushing to you. The demand for good people in the present day economy is extraordinary. Generally most of our franchisees are completely flat out. Even through the drought most franchisees are completely flat out. They haven’t got time to scratch themselves.
That raises an interesting question. Why aren’t you growing even faster and why aren’t you recruiting more franchisees?
Well, just for that reason – there’s not enough of the right kind of people around. I mean the economy is too good. That’s our biggest problem.
There’s just a real problem. I mean we did far better during the 1990s in the Keating recession. That was our golden time, because if we weren’t as good at what we were doing, our support wasn’t as good, our customer service wasn’t as good.
I mean just as an example, we halved the level of complaints in the last two years just by putting better procedures into place, but there was more franchisees around.
The best franchisee is not going to be a gardener, it is a business person. The ideal franchisee is someone like a bank manager. A successful salesperson. Somebody who’s got the discipline, the administration, the salesmanship. Who wants to have a lifestyle as well, and doesn’t want to work 60/70 hours a week and go into the city every day. That’s the kind of person we want.
You’ve obviously recruited some people. How have you been doing that?
Oh there are people that want to do it.
Do they come to you or are you going out actively looking for people?
We advertise for them, we run expos and stuff like that. But I mean if it was something like mowing, that you were thinking of that kind of career, you’d probably think of us anyway.
We’re also working overseas actually. We’re recruiting in South Africa at the moment. There’s tremendous people from there who’ve got very good management business skills and that’s a very promising avenue.
So as the economy slows down this year is this good or bad for your business. Do you anticipate it will make it easier for you to recruit?
Yes of course. If the economy does slow down. I don’t want the economy to slow down, but from my own selfish point of view, with my business we’ll certainly do better if it does. No question at all.
Although there is a capital cost in getting involved in a franchise – although buying into a Jim’s franchise is relatively inexpensive because it’s a service business rather than retail.
It could be anything from $20 to $40,000. The kind of people that we want normally have far more equity in their house. It’s not usually the issue. We’re not talking about spending a quarter of a million dollars.
If we were it would be different, but at this level most people can have it. We can organise unsecured loans for people have got a decent credit history and so forth.
It’s just not difficult because the earnings potential of the business is so far above the cost. A normal business you pay what, like three year’s earnings or something like that. So if you’re making $50,000 you pay $150,000.
Well for a Jim’s business that’s making say $75,000 a year, you might pay $20,000. The size of the loan is tiny by comparison with the actual income that you can produce, or you should produce.
And what is the average earnings of a franchisee?
I don’t know actually. We’re going to do some surveys this year. But put it this way; most of our businesses have what we call a work availability guarantee of $1500 per week.
This means if they don’t make that much money then they can go and offer free services to whoever they like and get paid for it by the franchisor, which I might say hardly ever happens.
From my point of view, if you can’t make $1500 a week then you’re wasting your time. Having said that, I know people do make less than that but I find it hard to understand why.
Just as an example, I was making, in modern terms back in the 1980s, I was making well over $2000 a week and I was only working just during the day. I had another business in the evenings.
You attribute some of your success to careful selection of franchisees. How do you go about that?
Well first of all, interview. You look for a person who can communicate because it’s the same thing talking to you talking to a client – can they express themselves clearly? Do they sound intelligent? And competent?
You look at business background. The more responsible job they’ve had, the better. Obviously if you’ve got somebody who’s been working for the local council for 20 years as a gardener you might employ them, but you probably wouldn’t put them on as a franchisee. Unless you’re very careful about it because why aren’t they the head gardener, why aren’t they the supervisor.
On the road is a good thing. You put a person on the road and it tells you probably more than anything. For example how hard do they work? Do they take initiative? By the second or third time they should be getting out there and taking the stuff off the trailer.
If you tell them to mow straight lines they listen to you. If you tell them move the hose they listen to you and do it right next time without being reminded. They turn up on time. If they’re late they apologise. Just look at the way they perform. The selection is normally done by our current franchisees too, so we try to be as rigorous as possible.
One of the great successes for test and tag is they’re the most selective division. They knock back about half of their applicants. Now those people are willing to pay. So of people who come forward and they’re prepared to pay all the money, they take about half of them. That’s about the best, and they’re the fastest growing division.
Obviously people like Dominos and McDonald’s are highly selective. For the industry level we’re at, we’re actually extremely tough on the selection process. Always have been.
And can you spell out why that’s important.
Lots of reasons. If you take on poor franchisees it lowers your levels of customer service, which means it turns off clients, which means it’s harder to find work.
You tend to find that poor quality franchisees are high maintenance. They tend to infect other franchisees with negativity instead of focusing on how they can improve their business. Just takes all the emotional energy from the franchisor.
Good people want to be in a selective system, so it attracts the good people. We’ve always given a list of current franchisees, that’s how I used to sell franchises – ‘ring any of my current franchisees’.
So if you give them a list and people ring up and there’s people who are really unhappy and doing badly, it’s telling you’re not a very good system.
It’s harder to recruit more good people. There’s a whole stack of reasons. The long and short of it is within reason; the tougher you are in selection, the faster you tend to grow.
And you’ve also said that focusing on franchisee satisfaction and success has been critical to your business’s success. What does that mean in a practical sense?
What grows franchising systems is happy franchisees. It’s as simple as that. There’s no way around it and you can look at it very clearly. Just as an example of the [master] franchisees who had 100% franchisee satisfaction on average, last year they grew by 10%.
And the ones who scored below 60% on franchisee satisfaction on average, they declined by 10%. Fortunately we had more of the first than the second.
By franchisee satisfaction I mean agreeing with statements like the reality meets the promise. I’m positive about the future of my business. If you agree to that then you’re satisfied, so if you’ve got 100% of people, all your franchisees say yes, ‘whatever you sold me I got’.
How do you get that? How do you keep those franchisees satisfied?
It’s very much to do with the franchisor. I mean work is usually a given in Jim’s.
Some divisions are a little bit harder, like bookkeeping, and you’ve got to go out and get it. But work is usually a given so really the franchisors that are best are ones that have got the best personal relationship with their franchisees.
The franchisor’s always there to say ‘look do this. This is the way to do it’. And listen to what the franchisees want. They’re not autocratic. If the franchisee comes up and says look we think this kind of advertising… ‘yeah, OK, let’s give it a try’ or you know, ‘we’d like to do things this way’. They’d listen to them but they also exercise leadership.
And you’ve also mentioned heavy investment in IT has helped you and you spent $2 million on technology. What have you spent that on and how has that helped?
Everything in Jim’s is run by a computer program. Every time a job comes in there’s a very elaborate process to make sure it goes to exactly the right person. Franchisees can log in from home. They can actually book in how much work they want. How many jobs per day they want. What suburbs they want to work in. What particular service do they want to offer. And they can change that for different suburbs. We like to localise people so they have first right of refusal for their territory. They have also a priority in certain inner post codes which are close to home.
That sounds very targeted for your business. Have you developed that in house?
Yes of course.
How do you ensure high standards of customer service?
We monitor the complaints. We have done surveys in the past. We measure it as complaints per 100 leads. Before I was franchising I would get roughly one complaint for one lead, which was pretty shocking, you can imagine.
But still the business was doing OK. A few years back it was back down to about five complaints per 100 leads. Two years back it was 2.7. This year so far it is about 1.4.
We probably serve about 50,000 clients a week. We probably get about something like 3000 or 4000 complaints a year, so it’s about 60 a week.
And what do you do with those complaints?
Most of them are time related. Failure to call back. If a franchisee gets too many complaints and we do strict guidelines with that, then again a warning letter.
If they fail to fix their problem then they are told they need to come in and do a one day retraining course, which could be in any city in Australia or New Zealand so it’s fairly tough.
If they continue with that they get basically restricted. They wouldn’t be able to take any more work and they’d normally leave. We try and warn them first. Mostly it’s pretty effective.
The letter’s pretty frightening when it comes out. That letter and that process is what’s halved our complaint rate in the last two years.
We’re still looking at ways to improve on it. Better system. Induction training is a big thing with us. We’ve really increased all our induction training lately. Got a very intensive course. For example mowing has about a 60 hour induction course now, very heavily focused on things like customer service and business procedures. Also extras, how to do different kinds of jobs and how to do them safely.
If a client has a problem with a job not being done right, obviously the first thing they do is ring the admin centre which goes back to the franchisee. Also the franchisor is copied on complaints so they liaise with the franchisee and they’ll ring him up and say ‘what’s happened?’ ‘What went wrong? How can we fix it?’. But if that doesn’t work, the clients are invited to contact me personally.
You’ve got 20 divisions. Is there a risk that your business could get too diversified?
There’s no risk we could get too diversified because as Jim’s Group we don’t diversify. We only do one thing, which is service franchising.
And with servicing franchising, the issues that I deal with personally and my company, the legal, the administrative, IT, all that kind of stuff, it doesn’t matter whether it’s antennas, mowing or cleaning, they’re all the same.
When it comes to the specific needs of the division you have a divisional franchisor. And no division works without a dedicated experienced divisional franchisor. You’ve got to have somebody who understands antennas. They’ve got to be somebody who has it in their blood. So it won’t happen for that reason.
Are there areas where the Jim’s brand hasn’t worked?
Oh yes, yes. Well first of all we don’t do retail. We had a couple of goes at retail. It’s not a good thing for us. It’s a different kind of industry so we’re not keen on that.
We don’t franchise areas where you need a skilled trade. Like plumbing or electrical.
There’s probably some things, like for example hair dressing, that the brand wouldn’t fit. I’ve got to say, it tends to be extraordinarily extensive. I know when we did bookkeeping there was a feeling that Jim’s brand wasn’t good, but you know, people who’ve done it best seem to think that it does work.
So what is the plan for the future Jim?
My primary aim is just constantly improving the service. I just want to get better and better service.
A couple of years ago we had 12% of franchisees unhappy about their business. Last survey was 8%. I’d like to see it zero. That’s my main aim and I can say I’d rather have 100% happy franchisees and 2700 of them than a lot more unhappy ones and 27,000. So that’s my primary thing.
I aim to bring our complaint rate down below 1%.
Overseas expansion?
UK is going quite well. We do it because somebody comes to us. I don’t think I have a particular ambition to set the world on fire. I never expected Jim’s to do this well. I thought when we started we might get 100 franchisees.
But I think actually focusing on growth is the wrong focus. The franchisors who focus on growth are not the ones who do best. The ones who focus on service tend to do the best so we just tend to try and be exceptional. Just try and make sure that every franchisee is happy and if they’re not why not.
Every client is happy and if they’re not, why not. I feel I’m just starting to learn how to run a business actually.
It’s kind of ironic after 25 years. And when people talk about retirement and stuff, and I’m 55, I say you’ve got to be kidding, I’m just starting to learn what to do with business. The next 25 years I hope to make some real progress.
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