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The Finn Review - Issue 9

Interview with Muffin Break & Jamiaca Blue MD, James Fitzgerald

In the future, we will see many more situations where multiple franchise brands are managed under the umbrella of a parent company.

As Managing Director of the Foodco Group, James Fitzgerald has overseen the international expansion of Muffin Break and Jamaica Blue to more than 240 stores in 6 countries.

I spoke with James recently and he was happy to share his experiences of owning and expanding multiple franchise brands around Australia and Internationally.

SF: James, thanks for your time - Why would a company consider operating multiple franchise brands under the one umbrella?
JF: Well I guess there can be lots of reasons. I suppose in a country of 20 million people, growth of a single concept can be fairly limited. Then the options to be considered are off-shore expansion or growing another business that fits in well with what you're doing.

SF: The Foodco Group owns Muffin Break and Jamaica Blue - are you considering adding a third concept to your stable?
JF: We've always got our eyes open! In fact we've explored a number of options so far and we've yet to come across anything that makes sense for us. We looked at juice but we figure that's a niche that's dominated by a very competent operation in Boost. One thing I will point out is that you have to have a clear destinction between the multiple businesses you control. For example you just cannot make it work if you have the same operations and marketing people servicing different concepts. Administration and development is a little different - there can be some efficiencies in these areas.

SF: With your expansion internationally, you have avoided the temptation of a going with a Master Franchisee in markets such as the UK and USA- why is that?
JF: Our approach to foreign markets is that where there are cultural similarities we will proceed direct. For example in the UK we set up an office, relocated some of our key people, placed our New Zealand licensee there and gave him a stake in the business. We now have 14 sites up and running and we should open a further 8 to 10 this year. In the USA we've gone in ourselves with our first pilot store in San Jose and this will allow us to ascertain how we best fit into that market.
On the other hand, where the culture is vastly different to Australia, we've proceeded with licensed arrangements. We've done this in Kuwait where our licensee has more than a dozen shops. Our Dubai licensee has four Muffin Breaks.

SF: In hindsight, have you been happy with this approach to expanding your brands internationally?
JF: I'd say we'll probably stick to this approach and my experience has pretty much vindicated the original decision to tackle international expansion this way. It's working for us so I don't see any reason why we should change. In the UK we recently got a significant offer to take on a licence and purchase the existing business from us. They found it difficult to understand why we politely declined their offer - which was a very good offer considering the revenue we have there at the moment. However we looked at where we are headed in the UK and we feel we can build a business on a similar scale to what we operate here in Australasia so long-term it didn't stack up for us financially.

SF: Tell me more about your first store in the USA - that must be exciting?
JF: Absolutely - but we've got a long way to go there before we push the 'growth-button'. We're just playing around with the concept in terms of working out what the margins are, how we pitch it, how we approach it. It may well be that our focus is just regional - we might just focus on California? We've never tried to be the biggest - we're more interested in sustainable and quality growth.

SF: Can you give us an idea of the capital required to launch a brand in a foreign country?
JF: Look it's a really difficult one. It depends if you're going in direct, or licensing. It depends on your model - it it retail? Is it service? In the UK we had to open a few stores to prove the concept, then there's the legal costs and the admin. Plus you've got to keep feeding it. We funded it all from here of course and we've probably tipped in more than $1m. You hope to re-coup it all as time progresses.

SF: What has been the most surprising advantage to growing internationally?
JF: That's a good question and it's actually quite simple to answer. When you go into a new market it makes you think harder about some of the 'sacred cows' you've got back home. You're starting fresh in a new market and it makes you question some of the things that you take for granted in Australia. A good example is staff. In Australia, staff are better educated and have a higher aptitude compared to other countries. Overseas, this can force you to make your systems and even your product offering even more simplified.
The other great advantage is 'flow-back'. You come across great ideas when you expand overseas and you can implement these back home.

SF: What advice would you give the Franchisors that are planning to take their franchise model overseas?
JF: I think it's important that you partake in the people selection process. These key people will operate and grow the business day-to-day so they have to be a good fit. They also need to spend a significant amount of time in Australia coming up to speed with your concept. You'll also establish a fairly good bond with these people and this helps with the relationship down the track.

SF: Any other good little tips before we go?
JF: Well you've probably got to get your franchise documentation done by good local lawyers. In the UK for example, the typical Australian business will gravitate towards London and deal with a city firm. We approached it a little differently - based on our experiences I'd say look for a commercial firm outside London in say Liverpool or Manchester where you can get the same quality of legal advice for a third of the cost of the city.