A Darwinist look at the future of franchising


A Darwinist look at the future of franchising - Bay of Plenty Business News

The world has changed. In fact, we have witnessed the impact on human health, we have not even glimpsed the tip of the economic iceberg.

The world has changed. We are not talking summer to winter, we are talking ice age. In fact, I would suggest that while we have witnessed the impact on human health, we have not even glimpsed the tip of the economic and social iceberg that is coming over the horizon.

I have previously discussed the counter-cyclical relationship between the economy and franchising and why the unique traits of this economic iceberg will lead to a new growth of franchising. It should be noted, not all are going to benefit, and we are already seeing glimpses of what successful will look like as we move into this new economic and social environment.

As always, those that change and adapt will prosper, those that do not, will not survive.

Franchise models that were able to continue to trade online during shut-down or by being an essential service benefitted from the initial environmental change, but moving forward, genetic sequencing of the successful franchise species will have similar characteristics.

Best systems likely to be more successful

Having the best burgers, coffee or retail offering will not equate to survival or dominance of the species.

Unquestionably, as unemployment increases, an increased number of people will look towards franchising as their Plan B.

Many would have spent considerable time as employees learning fantastic skill sets, suited to performing a role or job function. They will not be looking at a franchise to learn a task, they'll be looking at a franchise to buy and develop a business. However, their ability to run or manage a business may be non-existent.

Over time, the truly successful franchise brands will be those that have the best systems. Everything from how they manage a recruitment process, how they take someone with no business experience and train, to how they support and develop franchisees to grow their businesses. Better systems also include protecting the brand, and looking forward at the challenges and opportunities.

Capital is a critical component and generally, the more capital intensive a franchise model, the more challenging it is to grow that system. We are seeing a rise in interest in lower investment level franchising. But it is not only the absolute numbers involved, it is the ability to borrow, fund and produce a return on investment.

Franchise systems that can accommodate different funding and capital arrangements and/or produce super returns on investment levels will be more successful.

These could involve any combination of mixed capital models, the rise of the traditional co-operative structure, preferred funding arrangements with banks, through to crowd funding and social capital investment schemes.

New rental and property models

We have seen an immediate swing away from bricks and mortar businesses towards mobile and work from home. Suddenly having premises and a lease has become a potential and significant burden. Conversely, those without premises, and associated cost, have fared reasonably well.

Capital is a critical component and generally, the more capital intensive a franchise model, the more challenging it is to grow that system.

However, there will always be businesses that require a physical presence. Models that do not tie a franchisee to a traditional extended period lease, and or models that are able to provide a flexible rental or property model for franchisees, will unquestionably be favoured in the short-term and benefit from growth. And these will potentially be more robust and successful over time.

Hamburger chains selling bread and milk and high-end restaurants delivering cook your own food boxes are perhaps extreme examples of the now almost cliched "pivot" approach to diversifying income streams and even the concept of the business.

I would suggest the need for franchisors to protect income will encompass both the aforementioned change in product or delivery model at a unit level and perhaps more importantly, their need to insulate and diversify income. This will often be intrinsically linked to the franchisees income. This may involve multi-brand and multi-concept ownership, or vertical integration including distribution outside the franchise system.

It might be cold outside. But do not worry, the franchise business model won't just survive the cold, some will adapt and thrive in it.

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Franchising can help entrepreneurship renewal


Franchising can help entrepreneurship renewal - Bay of Plenty Business News

Growth of entrepreneurship through franchising will go hand in hand, and I suggest that franchising will both accelerate and take a starring role.

New Zealand, at heart, is a nation of entrepreneurs. The tyranny of distance, added with the old number 8 wire mentality has created many a commercial endeavour. The economic and social conditions post COVID-19 will stimulate and feed this national inclination. For many the inclination will morph into franchising.

Why we will see a growth in entrepreneurship

Entrepreneurship – the propensity for people to go into or create a business for themselves – tends to be anti-cyclical to the economy.

This sounds counter-intuitive, but good times and full employment, coupled with a comfort level in the status quo, means fewer people are inclined to take the jump to business ownership.

At the other extreme end, which unfortunately we are now facing, with a recession and significant growth in unemployment as well as under-employment, many will have that push. The post COVID-19 recession will be very different to previous downturns.

Interest rates are low, many would-be entrepreneurs have created equity in property and at this stage they have access to capital.

Also, importantly, the world has suddenly got a lot smaller. Globalisation of the labour market has suddenly ceased.

We are looking at a potentially massive social shift. Few people knew what WFH stood for, or even considered this an option a few months ago. As the workforce has had to come to terms with this new way of working, a great number of people will be reluctant to return to the daily commute, the stipulated hours and work environment. Many have tasted having a greater control over one's day, work and ultimately their own destiny, and will look at exiting the corporate world.

Why franchising will champion entrepreneurship

Growth of entrepreneurship and the growth of franchising will go hand in hand, and I suggest that franchising will both accelerate and take a starring role. Franchising provides opportunities to use almost any existing skill set. From cleaning to home loan brokerage, to building and hair styling, there is a franchise system that provides a traditional employee the opportunity to go into business for themselves applying their existing skill set. If the decision to go into their own business has been one of necessity, this will be highly desirable for many of them.

A franchise system or framework provides the business tools, systems and support around a skill set, turning it from a job function to a business.

The business in a box approach means the incubation period for a start-up franchise business is likely to be shorter than a stand-alone and an established brand and marketing machine is likely to lead to a shorter period to break-even and beyond. Faster will translate to more growth.

The old franchise saying of being in business "for yourself, not by yourself", has never rung truer.

The safety net and support of being in a franchise is no doubt being felt by many at the moment.

Not only have franchisors sought to support their franchisees, New Zealand's franchise community has collaborated to seek out cross-industry solutions.

Moving forward, franchise systems will have the skill set and resources required to pivot and capitalize on the changing environment, outpacing the individual or corporate business.

The post COVID-19 New Zealand economic and social environment has created ripe grounds for entrepreneurship and the growth of the traditional New Zealand owned and operated business.

That could be the perfect environment for planting the seedlings provided by franchising.

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3 Areas where Franchisors can make positive steps to deal with COVID-19's impact

It is fair to say, it is this week that COVID-19 really hit home in New Zealand. The franchise sector is no different, and covering so many, mainly small businesses, employing over 124,000 people, collectively there is a lot of concern.I do not think that anyone has seen or has foreseen disruption to the level that many are envisaging.

We should all follow the guidelines on how to slow the spread of the virus but we should also be looking at how we can flatten the franchise sector's "impact curve", limit the damage and speed the recovery.

If there are positives out of any of this, they are that we can look towards, learn and share what is happening in the franchise sector and what franchisors are and should be doing.

1. Communicate

Now is certainly no time for franchisors and franchise leaders to be quiet. Make some calls, risk sending one too many emails and or Facebook / LinkedIn posts to your customers and stakeholders.

Most franchisors would have correctly started by communicating with their head office teams.They themselves need to feel secure not only in the face of the virus but also the potential impact that it will have on the business and their livelihoods.Franchise support teams need to feel they have support from the top down, they are likely to be the facing franchisees and even the well experienced ones will now be dealing with new challenges.It goes beyond the initial email or discussion and should be every day, if you have teams working remotely, start the day with a 5 minute virtual huddle via zoom or skype meeting.Think about how you can safely maintain contact with franchisees and continue visits.Some systems are splitting teams and keeping remote teams away from head office.

Franchisees will be looking towards their franchisors for support, guidance and re-assurance. Good franchisors are not only in constant communication with their franchisees, but ensuring that they are providing updated information that can be distributed to franchisees' teams, and most importantly customers. Brands need to be owning and taking the lead of communications with customers as much as possible.Now is also the time for franchise advisory councils to be stepping up and assisting with communications with-in the system.High up the list of things to communicate should be the Government Business Support Package, every franchisee should be looking at this now.

Pro-active franchisors are engaging with their larger stakeholder groups. Depending on the industry this will include, banks, landlords, and most importantly and not to be forgotten, industry or trade associations and colleagues. The Franchise Association of New Zealand is looking at avenues to maintain interaction with members including virtual sessions and workshops on topics of interest and assistance to members. And yes, colleagues include your brand competitors, right now they are facing the same issues and are most similar to yourself.

Lastly, there is a huge amount of press and industry information, do not get media overload, but work on keeping abreast of what information is available, scan it, share it. 

2. Keep business open!

To be clear I am not advocating that anyone risks making others sick and or disregards any official advice but, we need to keep doing business!

However, franchisors should be looking at every opportunity to keep "the doors open" on their franchisees businesses.Iridium Partners works closely with a number of food and beverage brands, an industry that is already facing a plethora of changes. For them it is being proactive in communicating with customers that they are open and taking steps to protect public health, expanding pick up and delivery services and focusing on digital platforms.Even for non food and beverage it's about moving as much as possible to digital and online. Get "business" to where customers are, if they are going to be home, work on getting it there. If your current format does not fit this model, change it.

I am aware of a number of conversations that franchisors are already having on behalf of franchisees, whether affected now or potentially in the future. As a sector and economy, we have never been more in this together. There needs to be dialogue on everything from franchise fees, rental holidays, bank loan repayment scheduling and just about anything else that keeps money moving.

3. Stay calm.

As I said at the beginning, franchisees will be looking for leadership from franchisors perhaps like never before. Remember that it won't last forever, but there is no doubt that it will change the economic and franchise landscape.Stay Calm, make and communicate your plans and look after your people. Looking after starts with checking in and making sure that they are ok, there is so much disruption and concern already. Let's flatten that "impact curve".

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The importance of walking the talk

I am continually amazed at what appears to me to be a growing gap between what people say and what they actually do.

In the business world one would expect it to be relativity simple, be clear on what you are offering, and deliver on that. Walk the talk – or just do what you say you are going to do. In other words, deliver.

These gaping holes appear everywhere. From how long it takes to get a cup of coffee and the quality or lack of said coffee, through to having supposedly customer-centric large companies address customers' issues.

What's this got to do with franchising? I believe the franchise business model can address the delivery of walk the talk in a number of unique ways.

Franchise systems provide frameworks

Franchising involves the systemisation and documentation of a business process, service or product.

To be successful as a brand, a franchise system needs to be not only be good at, but able to reproduce the process, and train others to do it. Reproduce, refine, develop.

A franchise is also more likely to monitor feedback and use it as a proxy measure of customer delivery versus solely revenue. Whatever it is, chances are that it will evolve over time and benefit from group learnings.

The franchise mind set

As a business model, franchising is not for everyone, but a successful franchisee will be one that is able to follow a model or process.

This starts at the beginning when they apply for or examine a franchise business. The franchisor is able to see quickly whether or not the franchisee can follow an application process. If they can follow the systems here they are more likely to follow the systems that are designed to walk the talk in the business itself. The franchisee picks up the system, and one supports the other.

Human nature helps. As competitive individuals, franchisees often share and compare information on performance, which leads, no great surprise, to improved performance. Corporates may have similar benchmarking, but for franchisees it's far more personal, which leads us to the last area where they have a great incentive to walk the talk.

Everyone has skin in the game

Here's the big kicker and it's a factor that is very difficult for a corporate model to emulate. A franchisee has a personal and vested interest to deliver.

Incentive programs, KPI's and the like cannot reproduce for an employee what the personal skin in the game provides for a franchisee. It's personal – their livelihoods depend on it. They are closer to the customer interaction and as such more motivated to walk the talk.

Add the next layer to this. A good franchisor will ensure that the franchisee is walking the talk. They will receive coaching, training and if ultimately, they are unable to walk the talk, the franchisor will assist them in walking along.

I am not saying that a franchise business is going to deliver the goods each and every time, because obviously there are multiple factors involved.

However, starting with a systemised approach for a business that has already proven that it works, delivered by an individual that has a personal interest in delivering well on the business offering, sounds promising to me.

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Bring in the Coaches

As we start a New Year and new decade there is no shortage of articles and trending social media posts on advice. High amongst them is the rise of executive or business coaching.

The analogies are that becoming a high performing professional in business is no different to a top athlete's need to perfect their golf swing, swimming stroke or basketball lay-up shot.

The Cambridge definition of a coach is "someone whose job is to teach people to improve at a sport, skill, or school". Makes sense, but how does their role relate to the franchise world and particularly the franchisor? They themselves are often seen as the coach.

So how does their role intersect with the often heard comment, "shouldn't the franchisor provide or have that knowledge"?

Well, I would suggest franchisors would benefit from having coaches as much as any professional, the hint is in the dictionary definition – to improve. So in what areas should they seek and take some advice?

Many franchisors grow from being good at the doing of something – the classic economics example, say, of "building widgets". First they build widgets, then a system around the widget building. This is the essence of franchising. The professional and commercial backgrounds of franchise builders can vary significantly. And not surprisingly, their skill set may also vary significantly. But there are three common areas in which they could likely benefit from coaching. People management, leadership, and the traditional human resources management skill set are becoming increasingly valued and are all important for commercial success. 

In other words, the franchisor's core skills may be widget building when the business needs soft skills. The often unrecognised point, however, is that a franchisor's business is actually not based around the widget building, it is around engaging their franchisees to widget build. It is also about managing a franchise support team, a group of people with a hard job who need coaching and support themselves.

Many franchisors simply do not have the support skill set required. It doesn't matter how good their process for making widgets is, if they are unbearable to work with, do not develop their teams and cannot relate to their franchisees, they are going to have a lousy franchise business.

Don't just wing it

At the risk of alienating some franchisors, I am going to say that many are winging their way through a marketing programme. There are some franchisors who are savvy marketers and have well executed marketing and advertising programmes, but both groups could still benefit from a marketing coach.

Often franchisors – particularly founders – are either too close and protective of their own brand and or do not have the time and capacity to see a bigger picture. Marketing is also often a point of contention between franchisors and franchisees, so bringing in an experienced, neutral external view can be highly beneficial. Many franchisors develop relatively good skills in reading and understanding legal documents including their own franchise agreement, leases and supply contracts. However, again they risk viewing these in isolation and without a broader context. Every franchisor should have a trusted legal advisor that they regularly review and discuss all things legal with. The law changes, as does the business climate and what was a good approach five years ago may not cut it today.

In 2020 it appears we all need coaches, not because we don't have skills, but to hone the ones we have and deliver our best selves. Franchisors owe it to themselves, and their franchisees, to seek out the coaches they need, or they may end up with 2020 hindsight.

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Important Notice For Franchisors

How many franchise enquiries did you receive over the Christmas break?

How many did you miss, and are you getting back to those enquiries just now?

The bad news for you is that you may have left it too late.

Common knowledge amongst franchisors would have you believe that you have 24 hours to respond to an enquiry. From there the potential franchisee will rightly or wrongly create their initial assumptions on the brand, it's franchise support and even the likelihood of them being successful in the brand.

But it gets worse, we know it is no longer 24 hours. It can be hours or minutes which is why we have a 24-hour response promise and can usually respond in person within minutes.

We were busy whilst our clients relaxed over Christmas with the knowledge that their enquiries were answered, promptly and professionally allowing them to enjoy time with family and friends. They are now starting the year by doing their due diligence with potential franchisees.

We also had a great number of buyer advocacy enquiries with people looking to find out more about franchising and what their options are. Would you like to be on that list?

Now, let's talk about you, how are you going?

If you would like to understand how we can tailor a franchise recruitment support model that works for you, get in contact.

This email address is being protected from spambots. You need JavaScript enabled to view it.


0275 393 022

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What's in view for 2020?

Franchising Trends
The end of a year and the start of a new one is always a great time to contemplate and plan for what's coming.

It is also a great opportunity for us to review the crystal ball gazing we did earlier in 2019 with what's trending in franchising.

Time to polish the crystal ball for the coming year. So how did our trend predictions play out this year, and what's going to trend and where are the opportunities in 2020?

Multi-brand franchisors
Big tick here, in the food category alone, with BurgerFuel World Wide re-focusing on the New Zealand market and introducing two new brands.

Columbus Coffee owners Café Brands purchased the Mexico group, Coffee Club has started to expand Bird on a Wire and perennial creators and owners of Mexicali and Burger Wisconsin expanding the Ha Poke brand and working on future brands. A focus on product diversification and market segmentation will see other mature franchisors develop and introduce additional brands to their portfolios and existing franchise base.

Multi-site and multi-brand franchisees
We may have been a bit ahead of ourselves here, so this is still a watch this space as the sector matures, but it's happening.

Again, innovation is emerging with multi-brand single location franchisees increasing their offerings and market appeal and combating ever rising operating costs.

Health and well-being
Goes from strength to strength, multiple and new fitness brands continue to expand, often in places that you would not expect. Workouts are getting shorter and somewhat more interesting.

Based on the US and Australian markets, we will continue to see change and innovation in this consumer – and in turn franchise – market space.

Commercialising and eventual franchising in the mental health space is an area to keep an eye on.

An environmental focus
I predicted disappearing plastic bags were just the beginning – and was this an underestimate.

Consumers drive the future of brands and if worldwide student protests are an insight into the future of consumption, then it's green. Overseas markets have seen massive growth in bulk retailing, which is emerging in New Zealand.

A couple of areas to also watch will be systems focused on recycling and resource use reduction, whether conversion of existing processes such as making your house more eco-friendly or incorporated into delivery of their core service or product.

Plant-based food
My prediction for 2019 was this "will be a category to watch as it becomes mainstream".

Almost all the major food franchise brands are now chasing a segment of the plant-based food market.

New Zealand's only 100 percent plant-based branded offering – Lord of the Fries – is looking to expand through franchising and a major crowdfunding exercise.

We identified disruption and technology as the macro-trend of our times.

Disruption will continue in large, noticeable ways as well as the insidious creep of technology, hardwired into
processes such as AI.

Shared and gig economies
As predicted, there were big developments in this area also with the world's largest shared office space provider IWG introducing and rolling out a franchise model across New Zealand.

On a smaller scale, expect to see savvy franchisors explore ideas to pool capital and human resources in all sorts of franchises from social enterprise cafes to ride sharing.

Other factors that will influence New Zealand franchising in 2020
The economy. Local and international pessimism persists. This may drive an interest in franchising generally as people look to exit corporate life for a sense of control and relative stability.

However, a changing banking environment could potentially make funding harder.

Concerns over the introduction of legislation are re-emerging, which may be either tempered or could flare up with an election looming in the latter part of 2020.

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New Zealand Coffee V3.0

It has been over 5 years since I left the franchised coffee space, but I guess all that coffee consumed from over a decade in the industry and opening 70 cafes, somehow got in my bloodstream. I still keep an eye on what is happening from here in New Zealand to New York and in between and I have a view that we will see what I'm calling New Zealand Coffee Version 3.0 rise over the horizon in the near future.

What is V3.0?

V1.0 - Saw the emergence of local coffee roasters and the birth of a number of New Zealand coffee brands. It was cool, it was new and provided an alternate to the traditional New Zealand tea consuming behaviour. We saw the café scene grow which embodied Starbucks - The Third-Place concept.

V2.0 - Defined by the growth of the branded offering, whether through a roasting and distribution, company operated or franchise model. Local and a few international brands started to look dominant in the market and generally coffee was looking more and more like an ambiguous commodity. Cafes grew in size, fit out and operational costs grew, and the food offering became as or more important than the coffee itself.

V3.0 - Is on the way. What does it look like? There is a hint with a small number of New Zealand operators, but none have blended all the elements as yet.

A successful Coffee V3.0 operator will have all three distinct features

  1. A focus on coffee quality. A real focus, not just rhetoric and marketing
  2. Innovation hardwired. Utilising technology, which is not a gimmick, encompassing all aspects including the consumer interface, production processes and business management.
  3. A significant change in business format. It will be (or need to be to succeed), a low capital and low rental model which is capable of operating with a relatively low wage cost to revenue ratio.

And don't forget... the essential element to all successful businesses in the future, meeting social and environmental responsibility.   

Coffee V3.0 will deliver here too.

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Local entrepreneurship alive and well in 2020!

Here's a great little story to start 2020!

It's about local entrepreneurship, social media marketing, the importance of timing and critically how being purpose driven leads to success.


Let's start with purpose. It was pretty clear… need to make enough money to buy a new surfboard so three young grommets (that's a little surfer dude) decided to sell bacon butties next to the beach. I'm down for that and happy knowing where the proceeds are going.

Social Media Marketing

Connect with your market when they are ready to buy! We saw their post pop up on the local Facebook page so went to support them. The beachfront was strewn with numerous campervans and worse for wear Mount Maunganui party goers from the night before. Talk about right product, right place and right timing. And… possibly the best day of the year to be selling through social media.

Young and local entrepreneurs

We are always keen to promote and support local businesses. Doesn't get much local-er for us and love seeing some young guys learn customer service skills, basic business accounting, staff management and division of tasks. Really happy to buy from them, great butties too!

A few things that I really like:

  • Deliver on your promise. Post said "Bacon Butties $4", that's what we got and with a smile. Took all of about 2-3 mins!
  • Stick to your Knitting. No attempt to upsell to a sausage or add sauce, sides, drinks or subscribe to their customer loyalty program to be able to access the best price or latest product.
  • Be authentic to yourself and the brand. The three little dudes were fronting the business. Dad was in the back cooking the bacon but the boys were leading the charge and fronting the business.
  • Dealing with the third-party delivery challenge. Apparently, someone had made an enquiry if they were on Uber Eats. No… but no problem, they had the scooter there ready for deliveries!

Kia Kaha boys… have an awesome day and look forward to seeing the new board. I suspect we may be seeing these boys in some future business endeavours!

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The best time to buy a franchise


The best time to buy a franchise - Bay of Plenty Business News

A number of factors come into play, and like life in general, no two people's situations are identical. 

The decision to buy a franchise business will be one of the largest decisions in most people's lives. And like life's other big decisions, deciding on the right time can be challenging.

A number of factors come into play, and like life in general, no two people's situations are identical.

From working within the franchise sector for many years, it has become clear to me that there are certainly factors that influence and those that should be considered when thinking about when is the right time to buy a franchise.

One of the first things people tend to consider is the economic cycle. Business confidence, or the view of where the economy is or is heading is important. You may be more confident in investing in a franchise if the economy is looking good. And you would probably be right.

An economy in growth generally speaking is good for business and a good time for someone to invest and operate a franchise business. The old "a rising tide lifts all boats" analogy.

Assess the economic cycle
While a buoyant economy increases the likelihood of a new franchise business doing well, does a slowing economy or decaying business confidence environment make for poor timing? Not necessarily. In fact, there can be a number of reasons why it's actually a good time.

An upside is that weaker economies are often accompanied by lower interest rates, making borrowing less expensive and contributing towards improved profitability and return on investment. Coupled with the fact that most business owners will also have a mortgage, they create a double happy scenario. A franchise may also create stability if you are concerned about, or facing, redundancy.

What about business and consumer confidence and the rising tide analogy with an outgoing tide?

Well, some sectors, businesses and franchises actually do well and even relatively better during economic downturns and buying into these during that period could be beneficial. A couple of categories that surged during the GFC were casual dining and liquor retailing.

However, I would suggest the most important factors are based on your personal situation. Consideration needs to be given to your capital base, age and experience, energy levels, family commitments and support.

Age and experience will influence not only when and whether you have the work and life-experience skillset to successfully operate a franchise business. It may also influence how much capital you have and are willing to risk.

If you are older, you can perhaps not afford to risk as much, so while you have more capital, you may look towards established brands and businesses and a farmer versus hunter approach. What are your income and debt servicing requirements, do you need a certain income or are you after longer-term capital gains? And, how would the potential earnings and capital gains from a franchise compare against your current income over time?

How much energy do you have to commit to a new business venture and what sort of hours can you manage?

Any new business will require significant initial hard work, so there is a balance between youth and experience. How are your health and energy levels?

Lastly and most importantly for both the success of and satisfaction from your franchise is what are your family commitments and the family support structure you have in place? You need to be able to balance life commitments outside the franchise as well as having the full support of your family.

So while the economic conditions are important, the personal checklist of your personal position is the critical factor in determining when it's the right time for you to jump into a franchise. 

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In business you've got to be nimble

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How Franchising can help save the planet

Whether you choose to believe or debunk climate change, there is no question that collectively we need to take action to save the planet. From a perspective of a commercial structure, the franchise business structure has distinct advantages that could just help save the planet!

Size and ability to scale creates opportunity

Size really does matter; decisions and actions of large franchise systems can create significant impact. We know the removal of plastic straws from use by a few global franchises could eliminate many millions of straws from ending up in the oceans. What about the innocuous bar of soap?

Hilton Hotels claim their soap recycling program across their 5600 hotels has produced more than 9.6 million "new" soap bars and diverted more than a million tons from landfill.

Let's pursue the case study of a franchised hotel chain further.

Their ability to exert positive impact extends well beyond soap and straws. Environmental practices influence everything from food sourcing, their associated carbon miles and food wastage, through to where and how to build hotel properties. Usage policy influences water usage and recycling, through to energy including its production method.

Hilton's overall 2030 environmental targets are impressive and achievable because of their size, and importantly because the franchise structure allows them to develop and implement decisions at speed and scale. (1) And, in most cases it saves and therefore makes money.

Size also creates flow-on effects, competitors and associated supplier businesses will follow if for no other reason than to remain commercially competitive.

Thinking global and acting local

In the commercial world the definition and practice of think global and act local is embodied in a franchise, a locally owned and operated outlet of either a national or international brand. Acting local creates positive environmental results on a global scale. From reducing carbon miles by purchasing locally produced goods to re-investing and supporting local causes, often environmental. Strong local economics reduce the need for people to travel or relocate for employment.

The same could be argued of large corporate structures, but what creates authenticity in the franchise structure is the local franchise owner really is local and vested.

The Tauranga franchised fish and chip shop owner really does care that their system is sourcing fish sustainably – their livelihood depends on it as does the local fisherman's.

Franchising's ability to harness the powers of purpose and the market

Whether you like her or not, Greta Thunberg and her Gen Z, along with the millennials will change the world and hopefully save the planet, but it won't be through protest, it will be through consumption choices. Millennials make up approximately 30 percent of the world population and possess more buying power than any other generation. They are the generation most concerned with the environment and sustainability, deciding the fate of many products and companies not only by purchases, but through likes, followings and influencing on social media.

But where the franchise structure is uniquely placed to deliver the products or brands that best meet the millennials' environmental concerns is through its ability to harness the powers of both purpose and market forces.

Globalwebindex's Sandy Livingstone discusses the difference between CSR – Corporate Social Responsibility – and purpose. (2) CSR sits in the realm of corporate marketing, often used to offset a negative image, purpose is cultural and he stresses "when the intent is genuine, and the impact positive, commercial gain follows".

I believe millennials are able to spot the difference between the so called green-washing by corporates with an environmental CSR statement, versus a franchise developed by a cause- orientated founder. And perhaps more importantly, the latter is supported by vested franchisees that believe and act on the brand's purpose, versus shareholders or employees wanting solely a financial return.

Millennial consumers have created a market positioned to reward these purpose-driven franchise founders and their franchisees. And just maybe to help save the planet at the same time.

1) Hiltons Hotels 2018 Corporate Responsibility Report
2) Sandy Livingstone – Globalwebindex

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How to get the best deal when buying a franchise

The old saying with houses is that you make your money when you buy. The principle being, what you pay will influence your return when you sell. Pay too much on the way in and it will be difficult to obtain a gain on the way out.

Similar dynamics apply to buying a business. What you buy and for how much will definitely influence the future sale price and the return on investment when sold.

However, when buying a business there is much more to consider than just the price and location.

And with a franchised business, there are additional factors that will influence the future return on investment.

These factors create opportunities.What are the secrets and tricks and tips that nobody tells you?

Understand the market
Instead of questioning if there is a current market for the business – ask will there be one in the future?

To reference the all-time classic example: back in the day Blockbuster Video franchises were hot.

They made a lot of money and accordingly the entry and resale prices were significant.

Technology played its hand here, significantly changing the market and the value of the individual and overall franchise businesses.

We also need to consider other socioeconomic trends and where we are in the economic cycle and how it relates to the business.

There are always winners and losers at each stage of the cycle. Understanding the cycles and trends may help you pick what's trending up, or down and spot an opportunity.

A brand's position or its perception will influence sale and purchase pricing. What opportunities does this create?

The logic is that a category or brand leader may present the best opportunity to obtain a return on your investment through higher sales and market position.

You are likely to pay for this in goodwill if buying an existing business and potentially through a higher initial franchise fee than if it was a greenfield business.

However, challenger brands may represent a good opportunity for a higher return on investment.

A well-resourced and aggressive challenger has room in the market to grow and carry your business, and its value with it.

Look further than the Profit and Loss statement
Essentially, existing businesses are valued by a multiple of their earnings or profit.

I would suggest that to maximise your return on the investment opportunity when buying a franchised business, you need to look beyond the profit and loss statements.

In addition to the market and brand issues above, look at the sales trend line over the life of the business.

Have profitability changes been driven by management of the business or sales? Look at the performance of the business against the franchises' benchmarking information – are there opportunities to improve performance and ramp up the return?

Another property analogy: the best house in the worst street fixer upper approach also applies.

Look for underperforming franchises in good brands. Is it user error or market location? If the former, this may present potential to purchase an underperforming asset, and with it perhaps the largest opportunity make to money.

Negotiate the best deal
Finally, you need to understand what you can, and what you should not, try to negotiate with the franchisor.

There is a tendency for people to critically look at the franchise fees and attempt to negotiate these as a way of saving money.

The franchisor needs fees to run, develop and market the system. Assuming the business stacks up overall, they are a cost of doing business.

However, you may be able to negotiate your entry and exit costs, renewals and transfer obligations.

There is also significant potential in being able to negotiate territory expansion rights. Equally, be aware of refurbishment and re-development costs.

These are essential to ensuring brands remain fresh and current, so are required at some stage.

Again – as in selling a house – evaluate your potential return on investment and whether you will be reselling a fixer upper, or a fully renovated operation.

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For love and money


For love and money - Bay of Plenty Business News

Everyone will tell you that going into business by or for yourself is hard work.

Everyone will tell you that going into business by or for yourself is hard work. Many choose to do so with the support of a franchise system. What motivates people to go into a franchise business? Towards the top of every list or survey are three areas:

1.Financial independence – the desire to either make money, more money or to have control of one's income and financial

2.Freedom – we have all seen the adverts and had the dream – stop working for the man and work for yourself. Self-determination is a major driver, to follow an interest or do what you want to do.

3.Working with family or loved ones – this also rates high up the list of why people start or go into a business of their own.

Which of these motivators lead to or are related to success?

Let's start with the working with family or partners proposition.

In franchising, the statistics are overwhelming: a family structure that is supportive towards the business is a key success factor1However, the success statistics for actually working with family are definitely mixed. That leaves us with love – the desire to do your own thing, and money. Which do you pursue, for love or money?

Start with a simple question.

Can you see yourself in the business or franchise, will you be motivated to get out of bed every morning, will you actually enjoy the "doing"? If not, then move right along. Money alone is not going to work for you, otherwise you probably would have kept that steady income. If you can see yourself being happy "doing", then choose the brand that best represents the doing for you. You would have found your brand passion. Without it, success is highly unlikely.

I'm most certainly not a Millennial, but Simon Sinek's Start with Why2 resonates. Why, speaks to more than happiness, it speaks to purpose, to passion. The real reason behind the what and the how. I buy into the belief that this matters more than anything.

In the context of a burger franchise, Sinek's view would explain; the what is "we make hamburgers", the how would be "using the freshest and finest local ingredients we could source". But the why, to "lead the way for delicious healthy food in the burger market" will be the most engaging element, and the real driver for franchisee, employees, customers and ultimately success. No mention of money? Employees are unlikely to be motivated by your desire to make money, your customers most definitely will not. Why, is the universal reason to believe. So am I saying don't worry about the other elements, or that the money doesn't matter? Absolutely not, and again this is where franchising can play to its strong suite. Franchising can provide opportunities to match your passion, or why element, with a proven business and turn the passion into money.

How then do you prevent the pitfalls of love?

Do your research to find your brand passion. Do and check the numbers. Work out what you need to earn and ensure that the system can produce it. Seek and take professional advice.

It is possible to have the love and the money.

1 Franchise Relationships Institute. 2 Simon Sinek – Start with Why 2009

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Run Together

Last week I happened to be running through Christchurch, dwelling on my learnings from the recent Franchise Association of New Zealand Conference, and in particular what makes being part of a group valuable.

Against the Christchurch background I thought of the African proverb – If you want to run fast, run alone; if you want to run far, run together. Running together is running in association. Association has certainly helped Christchurch rebuild and move forward. However, we can all benefit by being associated with others with similar needs and interests.

Formal associations include franchises and cooperatives, industry and sector associations, chambers of commerce, and business networks.Informal associations are people bound by ideas or common goals. In all its guises, association generates collective wisdom and collective power.

Collective wisdom is knowledge created by and shared by individuals and groups. Association collects and distributes the information and knowledge related to that group's interest in a number of ways.

Best practice is a term used by many to define how they wish to operate. To define best practice for our business, we need to understand what that involves, and this requires data across a range of fields. Only through the collective wisdom generated in association with others are we able to define what is best practice.

Professional and industry experience is gathered over time in an ever-expanding pool.

Industry trends and developments can often be difficult to keep on top of when you are running your business day to day. Again, it requires shared and collated data. Legislation and regulation, like industry trends, can also be challenging to stay on top of and up to date about.

Perhaps most importantly, and the reason that many join a formal association, is that the speed of learning and growth is accelerated by accessing the collective learning and development experiences.

Collective power. The essence of collective power is that a group can assert greater influence than individuals. How can this power be flexed?

Creating and promoting a brand. Brand decisions influence almost every aspect of our lives. Franchises are brands, as are industry organisations, as it the local rugby or surf lifesaving club. They all have a group identity or a brand. This makes promotion, communication and marketing all that much easier as people relate to and identify with, and ultimately make decisions based on brands. By simply being part of the brand, a lot of that hard work is undertaken for you.

Almost every franchise system will tout their group purchasing power over individual businesses. Likewise, most chambers of commerce, industry groups and professional associations will have areas of purchasing power. In some instances, the benefits can be significant and provide a real competitive advantage.

In a world where legislation and regulation are increasingly prevalent, having a voice is vital and ensuring your voice is heard and protected is critical. Accordingly, advocacy and representation are high on the list of functions for many formal associations.

Whether formal or informal in structure, there's great benefit in being associated with others. So I encourage you to join, be active and take advantage of the association(s) available to you in your region, industry or sector. Let's run together.

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The career path less travelled

Everybody remembers their first job. And the learnings are hard-wired into our subconscious. Amazon's Jeff Bezos jokes that his first job taught him how to crack eggs one handed. More seriously, I suspect that his Saturday mornings actually taught him each of these top 10 basic job skills:

  1. The importance of time management and of sticking to a schedule.
  2. Attention to detail.
  3. Attitude is all important.
  4. The value of money and earning it.
  5. Communication skills.
  6. Customer service skills and how to keep a customer satisfied.
  7. How to deal with new problems and the unknown.
  8. Learning in new ways and the importance of continued learning.
  9. That work and business is complicated, and systems and processes are required to be successful.
  10. Hard work and going the extra mile trumps smarts nearly every time.

New Zealand franchised businesses directly employ more than 124,200 people. More than simply providing first time employment for many, franchising's contribution to training, education and career pathing for many New Zealanders is staggering. A first job clearing tables or selling shoes may well help tick off our skills checklist. Some employees then move onto other employment or education. But for others, franchised employment can and does provide a continued career path.

In addition to basic job skills, franchised employment often provides training opportunities from skill or brand specific to formal qualifications underpinned by NZQA (New Zealand Qualifications Authority). Unit standards and qualifications as diverse as a unit standard using a point of sale system, or a National Certificate in Hospitality if working for a café, restaurant or hotel brand, through to The New Zealand Diploma in Financial Services for financial advisers, are among just a few of the options. Training, experience and qualifications can open the doors to higher positions and a career path, all within franchised employment.

True, these skills and qualifications may be gained through corporate employment. However, there are two very specific reasons why following the path less travelled through franchised employment should be recognised and given greater consideration – the scale and nature of New Zealand business, and where you want to head on your career path.

Many franchise systems have developed their own training programmes across the skill and qualification spectrum offering opportunities to upskill and achieve national qualifications while working and earning money. A franchised business operating within one of these systems is able to offer and train staff and provide opportunities, whether they be in Greymouth or Grey Lynn, which as independents they would struggle to afford to or manage to deliver. Additionally, many of these industries simply do not have large or even corporate players, so that learning and development structure is provided by the franchise system.

The second reason is that New Zealand really is a country of small and medium-sized enterprises. We're a country of entrepreneurs and small businesses. Large corporations are different beasts and if your end goal is to successfully run your own SME, then learning the ropes in one is a far more appropriate grounding. As a franchised employee within a well-structured learning and development environment, you can learn the skills and obtain the qualifications. More importantly, you get to see SME business up close and personal, and can gain a better understanding of, and be better prepared for, your own business ownership.

Franchising in New Zealand is doing a fantastic job training and developing many Kiwis. That can range from the first "jobber" that funds their law degree flipping burgers during university holidays, to the one who stays and works their way up to one day open their own business. Franchised employment should be recognised and encouraged as a career path well suited to the New Zealand way of life. 

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Why some succeed and others fail

Why some succeed and others fail

Why some succeed and others fail - Bay of Plenty Business News

It has been seen many times. The latest franchised business opens its doors, only to close them within months.

 It has been seen many times. The latest franchised business opens its doors, only to close them within months.

Like all businesses, franchised businesses do fail – though at a statistically lower rate. But why do some franchised businesses fail when others succeed – what makes a franchised business successful?

We can explain this by adopting the analogy of a three-legged stool. We know if a leg is missing or dodgy, the stool falls over.

So let's look at the three legs that can help make a franchised business succeed.

The brand

When we think brand, we think product. However, when we are talking about a franchised business, there is a lot more than the consumer-facing offering that constitutes the brand.

It includes systems and processes, and supply agreements, through to the training of franchisees and staff.

Franchisee support and marketing are also critical success factor.

Finally, the softer elements – the company culture and psychology – matter more than you might think.

It would be easy to attribute success, or failure, solely to the brand. In other words to a poor offering that lacks significant market appeal.

Yes, this often can be the case, as evidenced by whole systems failing or disappearing from the commercial landscape.

The linkage to failure when a brand is not well-designed, or well-delivered is obvious.

However, this does not explain why we have individual site or franchise failures in very successful brands.

There are other key factors at play – the other two legs.

The market positioning

Well-established brands will have known success indicators, which can be matched against statistical socio-economic data when evaluating a market in which to establish.

Market positioning also includes the physical location. Some obvious positions work, such as cafes on the going to work side of the road, fuel and takeaways on the going home side.

The wrong side of the road can literally break many franchised businesses. Also obvious is the impact of timing and trends, including seasonality.

A retail surf shop that opens in April may not make it through winter, whereas the same business opened in October could be extremely successful.

There are also other less obvious market positioning factors, such as direct competition offering the same or similar product and services or perhaps alternatives.

Any of these factors can result in even the best of brands not surviving if they are in the wrong location, the wrong market or even if established within the wrong time frame or period.

But why do some franchised businesses work really well and then suddenly disappear?

Or perhaps harder to explain, why do some seem to initially struggle and then become extremely successful?

The franchisee factor

It's no surprise to learn that the third leg of the stool for a successful franchised business is the franchisee. What is surprising is the extent to which the franchisee influences success.

Research conducted by The Franchise Relationships Institute suggests that the success or failure of a franchised business can be influenced by the franchisee by as much as 40 percent.

This doesn't negate the value or importance of the brand or market positioning, but it does highlight the importance of a franchisee being aligned with the brand and their ability to use and implement the systems at their disposal.

The three legs supporting a successful franchised business may need to be equally strong, but do they carry the same load?

From time to time the weight may vary, but each leg is critical for an individual franchised business to be successful.

This needs to be remembered and considered by all stakeholders – franchisors, franchisees, landlords and all financially interested parties.

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Disruption – the innovator’s dilemma

Among the most used and coveted business buzz words are disruption and disruptors. Unlike my 3rd class report card, which stated "Nathan is a major disruptor to the class", being a disruptor in businesses is highly commended.

As a business term it is credited to Clayton Christensen's 1997 work The Innovator's Dilemma. Christensen defined the concept of "disruptive innovation" to describe how individuals or companies are able to succeed by foreseeing and satisfying future needs or unexpressed demands, effectively unbalancing the status quo along the way.

Companies such as Uber and Airbnb are classic recent examples.

However, some older brands were and continue to be major disruptors. Examples include McDonalds, the first to incorporate Ford production methods into retail food, and pizza chain Dominos, reportedly the first company in Australia to offer home delivery. Dominos today declare they are in the technology business not the pizza business. Their market share and parent companies' US stock value reflect this approach.

You may have noticed that many disruptive brands operate within a franchise business model. Is there a link and does one support the other? I believe there is and put it down to three factors: limited resources are not a limiter to success, the duality of the franchise business model, and finally the fact that franchisees are often early adopters.

Disrupters are not limited by resource constraints. Airbnb, the world's largest accommodation provider, does not own a single hotel room. Franchising is based on expanding a sound business concept using other people's resources. As such there is absolute synergy between having a disruptive business concept and franchising as a path to growth.

A successful disruptive business concept, which may already be largely free from capital constraints, can expand exponentially by taking advantage of a franchise growth model.

The nature of franchising, where the franchisor develops the system, and the franchisee runs their business within that system, is a fertile environment for disruption. Innovations can be visualised, created and tested by franchisors not constrained by day-to-day business.

Franchisees can be great disruptors, generating ideas that franchisors have the capacity to refine and roll out.

The Big Mac – created by a franchisee – is the classic example. Good franchisors recognise they not only operate in an environment ripe for innovation and disruption, but also know that their long-term success, and that of their franchisees, is driven by innovation and disruption. They need to think of new ways to do things, new products and services and to stay ahead of the curve.

The final component that demonstrates franchising and disruption go hand-in-hand is in the very nature of many franchisees. Most, even the ones that declare they are risk adverse, are early adopters, which is critical to the success of disruptive business. They pick up someone else's business concept, investing their time and money to expand it. They are the proponents and drivers of disruptive business concepts in whatever market or sector that they operate.

We need look no further than Beyond Meat to demonstrate the strong links between disruption and franchising. Beyond Meat produces plant-based protein targeting traditional meat not vegan markets. Recently listed, it has a US stock market capitalisation more than NZ$5 billion in spite of ongoing loses.

In the US, Beyond Meat is now destined for use in Burger King and Carl's Junior, and competitors are chasing similar plant-based protein for their burgers. These burger franchises built on the back of beef are disrupting their business while providing a significant distribution model for Beyond Meat.

In New Zealand, we have Burger Wisconsin introducing plant-based protein to their offering, and they are sure to be followed by mainstream brands. So be aware of the possibilities that disruption can open up for a franchise system.

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Trends to watch this year

New Zealand tends to follow macro trends happening overseas and the franchising sector is no different. However, our unique geographic location in the world, our outlook on life and the fact that we are a nation of SMEs produces some interesting local twists and focus. Here are what we see happening and some areas to watch on our near horizons.

Multi-brand franchisors
As the franchise sector matures, a number of franchisors and systems that have been around for upwards of 20 years have grown as large as the market can support.

Increasingly we are now seeing franchisors expand and develop systems that are distinctly different to the categories or businesses they operate in.

We expect to see this trend accelerate with established franchisors spreading into new categories and businesses where they can apply their capital, skill and network growth experience.

Multi-site and multi-brand franchisees
We expect to see growth in the number of franchisees that operate more than one location or franchise, called multi-site franchisees.

An increasing trend in the US, which we also expect to see here, is an increase in the number of multi-brand franchisees, or franchisees that operate businesses across brands.

In our regional economies – where geographic restrictions may prevent franchisees from expanding to become multi-site franchisees – the possibility of becoming a multi-brand franchisee allows them to utilize their local understanding, and perhaps gain economies of scale by sharing resources.

Health and well-being
Well-being is definitely not a new concept. It has been a hot franchising category for some time.

In the hospitality area we will see continued demand and development for food and beverage brands with a focus on freshness and health.

The fitness category will continue to expand from new types of workouts to offerings focused on the kids' market and mirco-franchising in the personal trainer and well-being spaces.

Demand is consumer driven and by potential franchisees that want to feel they are contributing to others well-being and develop a life style business.

The tide change on plastic bags is just the beginning, expect to see new categories, new services as part of a move away from packaging and a general environmental focus.

Consumer demand will also be coupled by savvy investors that spot opportunities.

Plant based food will be a category to watch as it becomes mainstream.

Disruption and technology is the macro-trend of our times.

Food delivery has disrupted the traditional bricks and mortar-based food and beverage model like nothing else.

We are already seeing the rise of the ghost kitchen.

Will we see the rise of ghost brands, where there is no physical contact with the market?

Combine this concept with multi-branding franchising and issues of margin, wage and rental pressures and there appears to be a massive opportunity. Watch this space.

Shared and gig economies
Trends will include micro or small investment franchising or systems that people are able to bolt onto either an existing business or their own skill sets.

These include personal and professional services.

Also expect to see some larger capital-based developments like the franchising of shared office space.

And don't forget traditional standbys
But while we are looking forward at the new, the disrupters and innovators, keep an eye on the established and traditional brands and categories.

There are often very good reasons for their longevity.

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Use the Force for good

Use the Force for good

Use the force for good - Bay of Plenty Business News

As in Star Wars, we are surrounded every day by the force - in this case, the force of franchising.

 As in Star Wars, we are surrounded every day by the force – in this case, the force of franchising.

Franchising is an impressive contributor to the New Zealand economy: 631 systems, 37,000 individual business units employing more than 124,000 people.

Growth of the sector over the past five years is equally impressive, with total sector turnover growing from $30.8 billion to an estimated $46.1 billion.*

But why is the force of franchising so strong and why should we consider it a force of good? Let's look at it through three distinct lenses, as consumers, investors and from a social perspective.

As a consumer, it is hard to think about an area of life that does not directly or indirectly involve franchising, from food to petrol, housing construction and real estate, even our mail delivery.

Franchising is usually associated with brands, which as consumers we love.

They provide an unwritten contract to meet our expectations, making for easier purchasing decisions, and in many instances providing us with better, less expensive and more consistent products and services.

These are, I would argue, all good things.

On an individual business unit level, franchising extends beyond the local branded café, or burgers to all sorts and sizes of businesses.

Compared with standalone businesses, franchises have a lower failure rate, often reach the breakeven point faster and benefit from a pool of experience.

The cliché of being in business for yourself, but not by yourself, holds true.

Moreover, franchising benefits a spectrum of investors across a broad range.

Large or small, investors know what the business is going to look like. Landlords know the individual local owner has skin in the game and will be supported and have the best chance of success.

And, if the unfortunate were to occur, often a franchisor will step in to operate the business, continue employment and pay the rent.

Banks may look more favourably on a franchise versus a stand-alone business.

It provides for more accurate business planning, and the banks are able to compare, benchmark and measure against other units.

Last but not least, franchising is a significant force of social good.

Contributing directly by generating employment, leading to growing strong economies, creating and supporting vibrant communities.

The statistics are evident.

Often under-acknowledged is the social contribution franchising makes via giving back to their communities to causes including children's welfare, medical research, and social services.

That can extend to local and school sporting sponsorship, in many cases supporting activities that otherwise would not be possible.

The indirect and unmeasured contributions are huge. Just look at the pride of a young player of the day enjoying their prize.

So, the next time you buy a burger, have your grass cut by someone with that branded van, deal with someone you know that owns, is employed or supplies a franchise business – or even attend a local rugby game – you should be able to feel that you are contributing to the force of good created by franchising.

*All statistics in this article are quoted from The Franchising New Zealand 2017 Survey.

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