The Realities of Outsourcing

        

Changes to Australian Franchise Laws

The Australian Federal Minister for Tourism and Small Business has announced significant amendments would be made to the Federal Franchising Code of Conduct, which is the law that regulates the selling and operating of franchised businesses in Australia (“the Code”). The Code has the full weight of the Trade Practices Act (CTH) 1974 (“Trade Practices Act”), which is Australia’s federal law for regulating commerce, including the franchising industry.

These amendments will come into effect on 1 March 2008 (“effective date”).

The amendments are considerable in nature and thus it is important for franchisors to consider what implications these amendments will have for their existing and prospective business in Australia.

The amended Code has significant implications for franchisors, including:

1. The removal of the exemption for ‘foreign’ franchisors to comply with the onerous disclosure requirements of the Code, which will add significant initial and ongoing compliance costs to franchising in Australia;

2. More scrutiny and continuous disclosure requirements in relation to marketing funds, rebates and pricing strategies; and

3. Provisions that facilitate the ongoing communication between franchisees, ex-franchisees and prospective franchisees.

Key Amendments & Issues

International Franchisors

Once the amendments come into effect, franchisors that are resident, domiciled or incorporated outside of Australia will no longer be exempt from the disclosure document and ongoing disclosure requirements set out in the Code.

International franchisors already operating in Australia or new to the Australian market are currently exempt from these disclosure requirements, but, must meet the newly revised disclosure requirements (including the provision of a detailed disclosure document to franchisees) and ensure that they amend existing franchise agreements to comply with the amendments to the Code by the effective date.

This will mean that an international franchisor will have significant disclosure compliance costs (which to date has not existed under the Code for international franchisors that have granted either a master franchise or appointed one franchise in Australia) leading up to the effective date, and beyond. A international franchisor will need to provide its franchisees with a disclosure document and franchise agreement that comply with the amended Code on the effective date, and will then have to supply a revised disclosure document within 4 months of the end of the 2007/2008 financial year as required by the Code.

International franchisors will also have to implement processes by the effective date for marketing funds, continuous disclosure of materially relevant facts, franchise transfer, franchise termination and dispute resolution that are compliant with the Code.

Prospective international franchisors must also ensure that any franchise agreements and ancillary agreements, such as licensing agreements, supply agreements, services agreements, lease agreements and insurance requirements related to the franchise all properly reflect and comply with the amendments to the Code by the effective date, and from thereon.

Disclosure

The nature and frequency of disclosure for franchisors in Australia has been altered by the amendments.

Key changes include:

1. Current disclosure document must be provided on renewal and on extension of the term of the franchise agreement and also extension of the scope of the franchise agreement;

2. The disclosure document must be updated and provided to franchisees in Australia within 4 months after the end of each financial year;

3. Franchisors must provide prospective franchisee’s with a copy of the proposed franchise agreement in the form in which it is to be executed. Franchisors must provide this at the same time as they provide the disclosure document. The terminology will be changed from ‘intended’ to ‘to be executed’. This raises significant problems regarding contract negotiations and franchisors will have to ensure that the franchise agreement and all ancillary agreements are as conclusive as possible before presenting them to the anticipated franchisee; and

4. Franchisors are required to provide all related agreements at least 14 days prior to the signing of the franchise agreement or at the earliest opportunity if not available.

Conduct

After the effective date, potential franchisees will as be permitted to freely associate with existing franchisees whereas they are not under current law.

Restrictions on franchisees being asked to sign a general release from liability has been extended to prohibit the waiver of any verbal or written representation made by the franchisor.

Significant changes have been made to the reporting requirement for franchise marketing funds. A franchisor is entitled to a 4 month period to prepare the financial statement detailing the marketing fund’s receipts and expenses and to finalise any audit, and the itemisation requirement has been removed. The financial statement must be provided to the franchisee within 30 days of its preparation. The 75% majority vote of franchisees contributing to the marketing fund has to be taken either within 5 months of the end of the financial year or within 2 years of a previous vote.

Disclosure of materially relevant facts

Section 18 of the Code sets out prescribed matters that the franchisor must disclose to the franchisee. The time frame for disclosure has changed from 60 days to 14 days.

The franchisor will be obliged to provide details of all s87B of the Trade Practices Act undertakings within 14 days of the franchisor giving that undertaking and this information must also be included within the disclosure document.

Franchisors will also be required to disclose serious offences as well as any confirmed contraventions of the Corporations Act 2001, the Australian corporate law governing all companies operating in Australia.

Disclosure Document content

Disclosure will be required regarding any legal proceedings etc against any franchisor or franchisor director. Furthermore, the content of any order or undertaking must now be disclosed also. For international franchisors this would include in formal legal proceedings and undertakings in other parts of the world.

The disclosure document require franchisors to disclose all rebates and other financial benefit schemes that are given in connection with the supply of goods or services to the franchisor or an associate. After the effective date the disclosure document must include the names of all parties who provide rebates and financial benefits. This requirement is likely to impact on an international franchisor’s ability to keep its trade secrets, business partnering approach and know how confidential both in Australia and their home country, including pricing strategies and supply arrangements, as such information will now be required to be disclosed to franchisees. It is not however, necessary to disclose the amounts or method of calculation of rebates or other financial benefits.

Disclosure of name, location and contact details of past franchisees that have been terminated, transferred the franchise or otherwise exited the system over the past three years will be required.

Franchisors will have to provide potential franchisees with the disclosure documents as well as the details and the history of the site that is to be franchised.

Relevant conditions of franchise agreements will no longer be able to be summarized; they will need to be set out in detail.

Some other important considerations

The Australian Federal Government has also indicated that it is considering amending s51AC of the Trade Practices Act that would prohibit franchisors from making unilateral changes to and/or unilateral termination of a franchise agreement once it is in place with a franchisee. This amendment is not part of the amendments to the Code taking effect on 1 March 2008, but, they are likely to be made law in the near future given the present climate for regulation of the franchise industry in Australia.

Conclusion

Given the significant changes to the Code that will take effect on 1 March 2008, it is critical that franchisors are aware of these requirements, understand what is required operationally, and are fully compliant by the effective date.

It is also important that franchisors understand that the Code is construed quite widely in Australia to include: traditional food and beverage franchises, but, also automobile dealerships, extensive product distribution systems, professional services networks structured as franchise networks and certain commercial licensing arrangements between companies.

As such, it is important that franchisors prepare to either comply with the Code or consider alternative models to franchising such as accreditation schemes and joint venture/subsidiary company equity strategies for expanding their business in Australia.

        

Web 2.0 is More than Bells and Whistles.

Web 2.0 is more than bells and whistles.

• What’s the big deal about Web 2.0?
• Why does the world need Web 2.0?

Web 2.0 is the current flavour of the month in the online world. Businesses, start-ups and established corporations are embracing this new trend like, well, Web 1.0 circa 1999. What can Web 2.0 offer your business? We will explore three somewhat overlapping aspects of Web 2.0 and discuss its impact on organisations.

There are three “spheres” of Web 2.0:

• Technology Architecture;
• Business Models;
• Aesthetics.

What drives the business model for a company to establish a Web 2.0 project? It’s about communication. The simpler the communication method, the greater the capacity to communicate more effectively, which inevitably leads to more people sharing knowledge. We have seen the explosion of user generated content, such as You Tube, MySpace and Flickr. Companies are now moving towards “employee generated” and “customer generated” content. Instead of managers and the executive writing “top-down” directives, we may see the emergence of “bottom-up” policies and ideas emerge and discussed from staff and “lateral” policies introduced from the macro data of customer experiences. Of course, the cultural aspects of the organization needs to support such open discussions and this level of workplace democracy for this to work. This also includes engaging with your customers in an open dialogue and be prepared to hear their opinions: good and bad.

But haven’t we heard this all before? Didn’t IT knowledge platforms of the past from Lotus, Microsoft and the myriad of other software providers going to help knowledge sharing and customer satisfaction? Yes, they did help. But as employees become increasingly comfortable with consumer oriented Web 2.0 websites the more they become familiar with both the culture and technology tools that aid knowledge sharing. Similarly, customers now expect companies to have online forums and blogs and be intimately involved with the brand and product experience- thereby increasing their loyalty.

So what is the software platform that enables Web 2.0? In simple terms, the software architecture of a website consists of a database (where raw data is stored in logical groups, eg. user login details), the code (which communicates with the database and decides what is displayed on a particular page) and the presentation (or the “look and feel” of the website). These are separate modules that communicate with each other. For example, if we change the presentation or “look and feel” of a website we don’t have to worry about changing the structure of the database. This means we can have database designers working on the database structure, the coders working on the programming and the graphic designers working on the presentation of the site. Of course, there will be interface points that need to be managed but by separating these three basic layers allows innovation to prosper in each layer as a specialist can develop solely for a particular layer and not have to worry about the other. For example, it is unlikely that a database programmer will have the artistic flair of a graphic artist designing a website’s “look and feel.”

You have probably noticed that new Web 2.0 websites like, YouTube, Flickr and the myriad of blogs out there, somehow look different. Bolder, cleaner, gradients, bigger text and less cluttered. Screen elements can be resized and buttons fade. The technology fuelling this innovation is AJAX (Asynchronous JavaScript). We won’t be going into its details, but the key message is that AJAX is helping improve the look and feel and more importantly the usability of the web. By usability we mean that the web user experience is moving towards what we expect of PC software (eg. Word, Outlook etc.). Think of it as having the best of both worlds – the user experience we expect from PC software coupled with the power of being online via your web browser.

The other important technology, XML (Extensibile Markup Language) is a common language that allows software (be it on the web, PC or mobile) to communicate with each other. So by having that common format, data can be exchanged and presented in unique ways.

So how can Web 2.0 “aesthetics” help corporations? One of the key problems facing executives is the real time reporting of what state their organization is in. Revenue, expenses, customer satisfaction, burning issues, media and PR “buzz.” In most cases, the information is there; in fact one can argue that there may too much information. The trick is to turn information into knowledge (and hopefully knowledge into wisdom!). Web 2.0 technologies can be used to distill information into dashboard objects – charts, dials, bar charts etc. For example, below is a snapshot from Salesforce.com’s analytical dashboard:

Note the wonderful, colourful snapshot of the organization an executive can get and cut through the information “clutter.”

Concluding remarks

As with all new corporate technology, it’s important to have realistic expectations about what it can achieve. If you want a knowledge sharing blog make sure you have a knowledge sharing culture first with your customers. Want a great executive dashboard? Make sure you have a visually creative development team that can transform your old boring spreadsheet data into an imaginative array of dashboard indicators to help you, at a glance, get a hold on how your organisation is performing.

        

New Zealand’s Top 2 Trading Partners

Did you know that New Zealand’s Top 2 trading partners are Australia (NZ$14.6 Billion) and the US (NZ$9.3 Billion) Here is a breakdown of other major trading partners:

TRADE BETWEEN NEW ZEALAND AND AUSTRALIA

• The Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) is built on a series of earlier preferential trade agreements between Australia and New Zealand, including the 1966 New Zealand and Australia Free Trade Agreement (NAFTA)
• Total value of Imports and Exports from New Zealand – NZD$14.6b
• Australia is New Zealand’s principal export market, worth NZD$6.4b
• Australia is New Zealand’s largest source of merchandise imports, worth NZD$8b, accounting for 20.1% of total imports

Major Australian exports to New Zealand (2005-06):

• Refined petroleum - A$504 million
• Passenger motor vehicles - A$439 million
• Medicaments (including veterinary) - A$424 million
• Computers - A$383 million
• Major Australian imports from New Zealand (2005-06):
• Crude petroleum - A$348 million
• Paper and paperboard - A$282 million
• Non-monetary gold - A$244 million
• Food products, sauces, soups, etc - A$217 million

TRADE BETWEEN NEW ZEALAND AND THE US

• The United States is one of New Zealand’s three most important export markets and a major source of New Zealand imports and investment.
• Two-way trade amounts to NZ$6 billion.

New Zealand Imports from the United States. - Product Value (US $ million)
TOTAL: US$2,321.1m
TOP 10

• Machinery US$543.4
• Aircraft and parts US$224.7
• Computers and parts US$209.4
• Electrical appliances and equipment US$187.7
• Motor vehicles US$127.6
• Food US$111.0
• Medical and vet instruments US$95.3
• Multimedia recording and transmission apparatus US$81.1
• Medicaments and pharmaceuticals US$48.7
• Fertilizers and insecticides US$47.8

New Zealand Exports to the United States - Product Value (US $ million)
TOTAL: US$2,492.3m
TOP 10

• Beef US$545.1
• Dairy products US$423.7
• Wood US$222.1
• Sheepmeat US$145.5
• Machinery and parts US$141.6
• Fish US$128.5
• Fruit and vegetables US$76.9
• Yachts and other boats US$68.8
• Prepared food US$67.8
• Motor vehicle parts US$64.6

        

jdrlegal Moves into New Zealand

jdrlegal signs strategic alliance with A.J. Pietras & Co. of New Zealand.

It is with great pleasure that we inform you of our new strategic alliance with A.J. Pietras & Co. of New Zealand.

Working with A.J. Pietras & Co. we are now able to assist you with cross border trade between Australia and New Zealand and between the US and New Zealand.

Mr. Tony Pietras will be the lead contact for work related to New Zealand. Tony’s expertise ranges from patent, trade mark, design, copyright, breach of confidence and IP licensing. He has instructed counsel for cases at the High Court, Court of Appeal and Supreme Court level. His contact details are:

A.J. Pietras & Co. - jdrlegal
Level 2, 1 Margaret Street,
Lower Hutt, Wellington
New Zealand
Tel: +64 4 566 1024
Fax: +64 4 566 1028
Email: tony@jdrlegal.com.au

        

Podcast: Managing Commercial Disputes

This podcast gives some tips when a deal “goes south.”

Download the MP3 here. (Duration: 2:57)

        

Podcast: Protecting your IP

This podcast gives strategies on how to protect your IP, such as your trademark, if commericial deals are broken.

Download the MP3 here. (Duration: 8:04)

        

Podcast: Digital Rights Online

This podcast discusses the future of digital art, music and video publishing from a legal perspective.

Download the MP3 here. (Duration: 9:26)

        

What’s Your Brand Personality?

Introducing Branding Part One

One of the hardest realities of being a parent is the realisation that our children may hold different opinions than us. Why are you wearing that? How can you go there? I don’t like who you’re seeing! How can you waste your money on that!? Once you can accept that what’s right for them is not necessarily what’s right for you, your relationship will step to a new level of maturity, your advice and guidance will become more meaningful, less destructive and better followed.

So too with our corporate children – our brands. What should they wear, how should they speak, where should they hang out? Determining brand personality is one of the hardest decisions to make, especially if until now, the brand has really been you. It’s time to let our brands stand alone and make their way in the world without us, but like any good parent we want them to be as well prepared as possible and confident enough to stand out from the crowd.

Let’s first consider some fundamentals: why do we need brands? Are brands just for the Cokes and Levis of the world? The sizzle is great when we can get around to it, but first I want to concentrate on the steak!

Most successful companies have a Business Plan. We know to the dollar what it costs to satisfy client need and what product or service we need to supply. What a brand does is give personality to that offer, and personality is all-important. From all of humanity we choose our circle of friends, from them we know who will be best man at our wedding and who we’d want at our back when the going gets tough. For our great friends we forgive them their sins, overlook their faults and support them through their tough times. This is the essence of Brand Loyalty. To achieve this we need a Brand Plan to sit along side our Business Plan.

Your brand is one of the most valuable assets to your business. It is only the Brand that raises products from me-too status. Branding transcends logic, overlooks features and speaks to consumers at an emotional level. Marketers speak of tribal branding, brand identification and virtual brand communities. In essence all good brands do the same thing, they clearly communicate to their customers how to experience the product and the emotional relationship that is expected.

When constructing the Brand Plan you will have to make difficult choices. How do I appeal to my core audience without alienating everyone else? What does my product stand for and what sets it apart from the rest. A carefully conducted Brand Audit will establish what is best for the product and the company. It will plan the steps to achieving a brand position that will encapsulate your corporate beliefs and heritage, speak to your target market and most especially raise your product from the herd.

In my next article we discuss how to use the Brand Plan to focus all customer communication, and get your clients calling their children after your products.

Andrew Wylie
Pandemonium Creative
www.pandemoniumcreative.com.au
andrew@pandemoniumcreative.com.au

        

Don’t Forget to Pack Your Sales Strategy When Heading Offshore

Acquiring new customers overseas is actually easier than you think, however, it does take planning and some effort. Foreign and domestic markets have one thing in common; you don’t sell to companies, you sell and do business with individuals. Focus on building and establishing solid relationships.
So, before you jump on that plane and head oversees, here are five strategic issues you should bed down:

1. Identify your ideal customer
Who would you like as a customer? Selecting and developing opportunities in foreign markets requires direction and purpose.

There are three techniques to finding your ideal customer:
1. Demographics – This refers to location, sales, number of employees, and types of industry
2. Psychographics – What is their attitude, culture and beliefs, and do they match your company’s own views?
3. Triggering factors – Are they doing well, satisfied with their current suppliers etc.
The good news is that this information is readily available in the public domain, publications such as Dun & Bradstreet, Hoovers and Infotrac are good places to start, and these publications are readily available at any good library. You should be able to create a solid list of names in about an hour.

2. Learn how to sell well
It may not be your primary role but it is something that you must learn how to do. Don’t let the word sell scare you, it’s simply about building relationships with individuals by helping people with a need or problem that your product or service can solve.

This skill is often neglected; with many potential exporters having to relying on others this can be very costly. The basic skills needed in this area are:

• The ability to build rapport
• Listening
• Asking insightful questions
• Presenting your story
• Presenting to groups
• Negotiation ( very valuable)
• Relationship management

Bill Gates - Microsoft, Geoff Dixon-Qantas, Richard Branson – Virgin are examples of successful global business executives who are good salespeople. Don’t let the size of these companies scare you as each of these organizations started as a small businesses.

3. Branding and positioning (what makes you different from everyone else?)
What is your unique selling proposition? You must be able to stand out in a crowded market place and offer something different from your competitors, if not then they have no reason to do business with you.

Here are some examples of excellent branding:
MYOB – “The easy business software”
Total Self Storage – “One call for a worry free move”
Lube Mobile “Honest Friendly Reliable”

Start by asking your customers why they use you, what was life like before your came along? There words will often provide the key phrases for your branding statement.

4. Knowing where to fish
Who are the main players and competitors for your products or services? It does not matter what country you decide to investigate the good news is that there are probably only a handful of main players and several smaller ones. Know the lay of the land and seek them out.

Example: in the Australian market:
There are 3 big auto manufactures, 3 airlines, 2 daily newspapers in each major capital city, 2 local papers in each city, 2 telecommunications company, 4 mobile phone companies and 3 commercial television stations.

It’s very easy to obtain the names of these players and with a little more work you can identify the industry association or body they belong to. This applies to all markets around the world and industry sectors; break it down and determine who the main players are. This is where you start fishing.

5. Develop your strategy by asking the right questions.
When you’re entering a new market it can often be a case of “you don’t know what you don’t know.” One way to overcome is to call upon a researcher’s six best friends:
“Who, what, where, when, how and why”

They will not let you down. Hear are a few examples of the type of questions to ask when conducting your initial research:
o What services do they expect?
o What are the important buying criteria?
o How do customers buy?
o How do customers use the product?
o Where do they seek information about the product?
o Where do they buy the product?
o When do they buy?
o Who buys from our competition?
The key to finding opportunities overseas is to turn on your radar, by asking insightful questions.

There are wonderful opportunities available for anyone wanting to acquire new business overseas. The ideas that I have outlined are low cost and easy to implement. Don’t engage in extensive research until you have done the basics which you can do from your office. It’s a big world out there! Pick your targets and have some fun!

Clifton Warren
Peformance Improvement International
Email: Clifton@pii1.com
Web: www.pii1.com