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Are business migrants the new hope
for Australian franchising?
By Jason Gehrke, Director, Franchise Advisory Centre - #67
Jason Gehrke
With many
Australian franchise
systems
commenting on a
lack of suitable
franchise applicants
domestically, and
the economy still
growing strongly,
business migrants
are attracted to Australia and buying
franchises to meet their visa
requirements. This article takes a look at
this trend and offers some insights for
franchisors and prospective business
migrant franchisees.
One of the appeals of franchising is that
it gives people the opportunity to be
their own boss, but now it is also giving a
new wave of franchisees the opportunity
to become Australian.
Migrants from around the world are
increasingly attracted to franchising as a
way of qualifying for an Australian
business visa and are prepared to turn
their lives upside down to settle Down
Under.
At the same time, strong economic
growth and boom times for Australian
franchisors mean that business migrants
are helping maintain the sector’s strong
14% annual growth rate (Source: 2006
Franchising Australia Survey) despite the
fierce competition among systems for
new franchisees.
State governments are also
acknowledging that franchising is an
attractive proposition for business
migrants compared to the purchase of
stand-alone businesses, and are keen to
attract business migrants and their
contribution to the state economy.
However the overall number of migrants
coming to Australia on business visas is
low according to Agnes Kemenes,
director of No Borders Migration
Advocates, accounting for less than 20%
of visa applications. Of these,
approximately half are buying
franchises, but migrants entering the
country under other categories of visa
could also be buying franchises after
their arrival.
Statistics about the uptake of franchises
by business migrants are sketchy, but
anecdotally the trend continues to rise in
parallel with the overall growth of
franchising in Australia.
The 7-Eleven experience
Warren Wilmot, chief executive officer of
convenience store chain 7-Eleven which
is acknowledged as Australia’s most
multicultural franchise, says that
business migrants account for as much
as five percent of the system’s population
of 360-plus franchisees even though the
system is not actively targeting overseas
prospects.
“We tend to advertise in ethnic
newspapers here (in Australia)”, says
Wilmot, adding that Chinese and Indian
newspapers in particular have been
effective.
While 7-Eleven has conducted franchise
presentations previously in New Zealand
and South Africa, it has no current plans
to target potential franchisees offshore,
citing the organic growth of the network
and multiple-unit franchising by existing
franchisees as sufficient to meet its
requirements.
“Our overseas presentations came about
through changes in the New Zealand
market,” says Wilmot.
“We got a sudden influx of franchisees
seven to eight years ago due to a change
in the fuel market there.”
Wilmot explains that many of these
candidates had already been operating
retail convenience and fuel businesses in
New Zealand, and with the changes to
their industry locally, saw the
opportunity to relocate to Australia and
continue with a business they already
understood with the support of a major
brand. Similar to New Zealand, South
Africa also has a highly developed
convenience sector, and their South
African franchisee who joined as a result
of the 7-Eleven presentation, had prior
experience in a similar business.
He has noticed waves of interest from
other groups as well.
“Four years ago we had a wave of
Egyptians coming through, who all knew
each other and referred each other to the
business,” says Wilmot.
"There was also a big exodus out of Asia
prior to Hong Kong being handed over.”
Political, economic or social
environments in foreign countries can
stimulate migration to Australia.
“We joke about the coups in Fiji being
good for us,” says Wilmot, as 7-Eleven
has a significant number of ex-Fijian’s in
the group.
Cultural considerations
The system is a real melting pot of
cultures, with franchisees coming from a
wide variety of ethnic groups including
mainland and Hong Kong Chinese,
Pakistanis, Fijian Indians, Egyptians,
New Zealanders and English migrants.
The interest in 7-Eleven, particularly
among Asian cultures, is partly due to
the opportunity for an entire family to
work together, according to business
broker and National Business Sales
managing director Patrick Lui.
“From an Asian point of view, the longer
the hours the business is open, the more
options for the extended family,” he says,
adding that newsagencies have also
become very popular with Indian
migrants. Lui is himself a business
migrant from Hong Kong who settled in
Australia in 1992, and is finely attuned to
the business nuances of different Asian
communities.
“Mainland Chinese are extremely
aggressive at buying into restaurants and
cafes, while Hong Kong Chinese are very
conservative and are focused on the real
estate attached to the business,” he says.
“Koreans are a unique group. Many
come from professional backgrounds
and have had dealings with
multinationals in Korea. They are not
scared of challenges and take bigger
risks than the Chinese.”
“The advantage of Asians is that they
work very hard, and like to work together
as a family,” he says.
This characteristic is not limited only to
Asian cultures, but according to 7-
Eleven’s Warren Wilmot, is an important
consideration in choosing a business.
“A lot of the people who buy our stores
are where the families can work the
business together and that appeals to a
wide range of people who want to work
in a family and wide social
environment,” he says.
Case Study: Alan Parkinson, Clark
Rubber Morayfield (Queensland)
New Clark Rubber franchisee Alan
Parkinson, who arrived in Australia in
December 2006 with his wife Jacqueline
and two children Gemma, 14, and Ryan,
10, says his family plan to work in the
business with him.
“My son wants to be acting managing
director at 10 years old,” says the former
British auto industry executive who will
open his Clark Rubber franchise at
Morayfield, Queensland, in May.
For Alan and his family, the prospect of
adjusting to life in Australia – despite
some good-natured ribbing over
Australia’s supremacy over England on
the cricket field - will not be the culture
shock it might be for Asian business
migrants. While Asia remains a large
source of migration, England is the
number one source of new Australians,
and Australia is England’s preferred
migration destination.
“For people aged between 25 and 55, it’s
estimated that as much as 30% of the
population in that age range are
considering leaving England,” says Alan.
Regular migration expos, plus a generic
migration magazine and a special
newspaper for people interested in
migrating to Australia highlight the
apparent enthusiasm of the English to
seek further opportunities in warmer
climates.
“Most people leaving England are
heading to Australia, Spain or France,”
says Parkinson, who cites climate,
crowding and ironically, migration, as
the reasons for leaving England.
“We want to live in an English-speaking
country with a better climate and liked
the way of life here (in Australia),” he
says.
“I worked in London for 10 years and
went to work on the Tube every day. I
woke up one day and realized it wasn’t a
life, it was an existence.”
“The outdoor lifestyle in Australia is
really great,” he adds.
“I run every day, the kids are sports mad
and my wife’s health would be better
here.”
The irony of Alan coming to Australia is
that a huge influx of migrants into
England from newly-admitted member
states of the European Union has
contributed to his decision to move.
“I wished that in the UK they go to the
same lengths as here to ensure people
are able to contribute to society,” he
says.
“In England they just let anybody in,
including those who intend to live on
welfare and it’s the UK taxpayer paying
for it.”
To underscore his point, Parkinson says
that when Rumania and Lithuania joined
the European Union, an estimated
13,000 skilled migrants from each
country were expected to migrate to
England. However that number swelled
to nearly 600,000 he says.
Applying for a Business visa
Irrespective of where they come from, all
business migrants to Australia must
meet the same selection criteria. While
the federal government’s Department of
Immigration and Multicultural Affairs
remains the final decision-maker and
issuer of migration visas, state
governments have recognized that
migration can provide economic benefits
to state economies and vie with one
another to attract migrants.
Whereas business migrants are required
to invest a minimum $500,000 or more
in an Australian business under federal
requirements, this threshold is
effectively halved under sponsored visa
programs offered by the state
governments, with the proviso that the
applicant must settle and operate a
business in the sponsoring state.
The state sponsorship of business visas
is ideally suited to prospective
franchisees particularly of retail systems
whose entry costs typically start at
$250,000, and which provide the
required investment level for the visa
criteria.
But meeting the investment level is just
one of many criteria required to satisfy
state authorities to recommend to the
Department of Immigration and
Multicultural Affairs that an applicant
should be accepted for a business visa.
For people considering a franchise, the
prior approval of the franchisor is
essential to gaining state sponsorship.
For these applicants, they must first
identify a franchise system of interest, go
through the franchisor’s selection and
approval process (which usually involves
identifying a location and developing a
business plan) before submitting their
visa application to the state authorities.
For Clark Rubber’s Alan Parkinson, this
involved extensive phone, email and
postal contact with the franchisor in
Australia, countless hours of research
and preparation of a business plan, and
two special-purpose trips to Australia. At
the same time he was also preparing his
wife and children for the possibility of
selling their home and moving away
from family and friends.
The business plan forms part of the
state-sponsored visa application, and
must include market research, a
competitor analysis and financial
projections (shown in Australian
dollars), as well as the number of jobs to
be created by the business and details of
the applicant’s skills and business
experience.
(Under the business migration visa,
applicants are expected to have operated
a business in their home country, or
worked at senior manager level).
This business plan, plus a supporting
letter from the franchisor and the formal
application documents must then be
submitted, and where possible,
applicants are encouraged to sit an
interview with state migration officials to
support their application.
The approval of state-sponsored visas is
handled through the Department of
State Development (or equivalent) in
each state. Applicants must verify that
they intend to settle and operate their
business in the sponsoring state, and
although the location in the state must
be specified, it is not a determining
factor. However one government insider
has not ruled out future emphasis being
placed on applicants starting businesses
in regional locations to partially offset
the population drift to metropolitan
centres.
The interview with state migration
officials, while not obligatory, is highly
recommended to demonstrate that the
applicant is serious, according to No
Borders’ Agnes Kemenes, and can help
facilitate the approval process.
For example, Alan Parkinson’s state
sponsorship was approved less than a
week after meeting with the Queensland
Department of State Development,
meaning that he was quickly
recommended to the Department of
Immigration and Multicultural Affairs for
a business visa.
In most cases, the recommendation is
accepted, but can be declined in some
instances. Active involvement in the
business is essential and Kemenes cites
the example of a Korean whose
application was declined because he
planned to invest in a business but not
take an active role in its operation.
Business migrants are encouraged to use
the services of a registered migration
agent. Some government agencies have
internal processes that can fast-track
applications from migration agents over
those lodged directly by applicants.
English literacy requirements
High levels of English language skills are
not a strong requirement for statesponsored
visas, and in conjunction with
the lower investment threshold,
potentially allow entry to applicants who
would not otherwise qualify for a visa
from the federal government.
For many 7-Eleven franchisees, English
is a second language but the nature and
systems of the business provides
opportunities for migrants with low
English skills to still operate a successful
business.
“We are definitely a “buy from” rather
than “sell to”’ business,” says Wilmot,
explaining that the language skills
required for a convenience transaction
are far less rigorous than for example, a
sales or servicing business.
“We also provide full support, right up to
doing the BAS, which is ideal for
someone owning their first business in
Australia.”
While not essential in convenience
retailing, higher levels of fluency can
have a strong positive impact on the
business.
“Convenience stores are seen as
expensive, but as soon as a service
element is introduced, the customer’s
perception of value for money goes up
substantially,” says Wilmot.
“For example, we had a great nightshifter
(nightshift operator) who could manage
every transaction, but the minute
someone asked him for directions, he
was not able to interact.”
Anecdotally, Wilmot and Lui agree that
many business migrants from
non-English backgrounds will use their
first business as an opportunity to
familiarize themselves with the
language, culture and business
environment in Australia, and often go
on to other businesses afterwards.
Lui says that in some instances, migrants
choose businesses that are convenient
for the purpose of obtaining the
migration visa, and then after running
them for two to three years, sell and buy
another business.
Wilmot agrees that many 7-Eleven
franchisees who sell their convenience
stores have the confidence to progress
on to buy larger businesses, or
businesses that do not have the same
high level of support provided by 7-
Eleven.
The idea of selling hasn’t even entered
the mind of Clark Rubber’s new
franchisee Alan Parkinson, who is too
busy getting his new business off the
ground, plus settling his family into a
new environment and children into new
schools.
“The grass is very dull in England,” he
says. “It’s much greener here.”
10 Business Migration tips for
Franchisors:
1. Have a procedure in place for
handling domestic franchise enquiries
from outside Australia. Now that most
franchisors have information about their
franchises online, they can expect to
receive franchise enquiries from
anywhere in the world. Be responsive
and professional in dealing with
questions you might not otherwise get
from Australian-based prospects.
2. Recommend that potential
franchisees deal with a migration agent
registered with the Migration Agents
Registration Authority (MARA). Don’t
provide visa or migration advice
yourself. See www.immi.gov.au for more
information about immigration
guidelines and migration agents, as well
as the Department of State Development
(or equivalent) website in the
franchisee’s destination state for details
of state-sponsored visas.
3. Be prepared to say no, even if the
candidate is a good fit for your business.
Some prospects who might make
suitable franchisees could require higher
levels of field support than your system
is able to provide. It is better to say no
up-front until your field support levels
are higher.
4. For candidates who meet your
selection criteria, be prepared to provide
a written offer of a franchise (subject to
visa approval) which can be used for
their visa application. If contacted by
state or federal immigration officials,
answer all questions promptly and
thoroughly.
5. Allow for longer planning timeframes
when dealing with business migrant
candidates as their migration
applications may take some time to
process.
6. Bear in mind that over time, business
migrant franchisees can provide you with
an insight into your franchise’s suitability
for export into their home country, and
can be a valuable future resource as your
business expands internationally.
7. Develop your own awareness and
respect of the cultural and religious
norms of the countries of origin of your
migrant franchisees. Train your staff
accordingly to avoid the potential for
embarrassment and conflict.
8. Do not develop non-English
promotional materials. This will act as an
early filter to determine English language
proficiency. If successful candidates from
a LOTE (Language Other Than English)
background are appointed, be prepared
to make a translator available during
training to ensure that detailed concepts
and questions are handled correctly.
9. Comply with the Code. As long as
someone is buying a franchise in
Australia, the Franchising Code of
Conduct still applies regardless of where
they come from. Ensure all
documentation is provided in
accordance with the Code, and strongly
encourage applicants to seek
independent legal, accounting and
business advice.
10. Be prepared for referrals. If you grant
a franchise to a business migrant, it is
possible that their friends, family or
colleagues from their home country may
also enquire about a franchise with you.
Ensure that your existing migrant
franchisee is aware that referrals are
welcome, but in itself is not enough to
grant a franchise as each applicant must
be treated on their own merits.
Advice for Business Migrants
1. Review the Australian Government’s
Department of Immigration and
Multicultural Affairs website at
www.immi.gov.au.
2. Make contact with a migration agent
in Australia registered with the Migration
Agents Registration Authority (MARA).
See www.immi.gov.au for details
3. Enquire through your migration agent
about state-sponsored visas and visit the
relevant state government websites.
4. Look at Australian websites of brands
that would otherwise interest you in your
home market, and research online
directories for franchises in Australia. A
Google or Yahoo search using the
keywords “franchise directory Australia”
will provide many options for further
research. Look mainly for retail
businesses as most service franchises
won’t meet the required investment level
for a business visa application, and
shortlist two or three different franchises.
5. Develop your knowledge of franchising
by attending any seminars available in
your home country.
6. Be prepared to make several trips to
Australia to research the market, the
franchise, etc, and meet with the
franchisor, your migration agent,
immigration officials and advisors.
7. Be aware that franchising in Australia
is governed by a national set of
regulations, the Franchising Code of
Conduct. The Code requires franchisors
to provide essential information about
themselves in a disclosure document,
along with a copy of the franchise
contract (agreement) and a copy of the
Code itself at least 14 days before you can
sign a franchise agreement. Use this time
to get advice on the agreement and the
business proposition from your advisors.
8. Be wary of the temptation to buy an
established business, franchised or not.
The extra price you pay for an existing
business compared to a start-up
franchise can quickly be lost if you are
not able to immediately operate at the
same or higher level of performance as
the previous operator. As most business
migrants do not have the same social and
cultural frames of reference (and often do
not have the same language skills) as the
previous owner, there is a real risk that
their business’ performance will decline
rapidly. This can lead to a serious loss of
value in the business and consequently, a
loss of faith by the new owner in their
decision to relocate to Australia.
9. Avoid rushing into any decision you
may later regret. Take time at each step in
the process to ensure you are
comfortable with the choices you are
making for yourself and your family.
10. Use Australian advisors. Use
Australian accountants, lawyers and
business advisors to assist you in
assessing the franchise and preparing
yourself for business. The Franchise
Advisory Centre provides business advice
to prospective franchisees and can refer
you to legal and accounting professionals
who specialize in franchising. (See www.franchiseadvice.com.au or phone
+61 (0) 7 3716 0400.)
Jason Gehrke is Director of the Franchise
Advisory Centre and has 17 years
experience in franchising and is a past
Franchisor of the Year winner. He is a
member of the ACCC’s Franchise
Consultative Panel and a committee
member of the Franchise Council of
Australia. Jason can be contacted on (07)
3716 0400 or email
jason@franchiseadvice.com.au .
For more information about the Franchise
Advisory Centre’s consulting and
franchise training services, visit
www.franchiseadvice.com.au |
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