April 2016

We were very privileged to have Aziz present to us and many have said that this was one of the most relevant and passionate presentations they had attended.
Aziz Hashim spoke to us sharing insights from the three different hats he wears.

Hat One IFA Chairman.

The USA  Franchise network has an economic output of $1.5trillion US dollars, employing  11 million people, 950,000 outlets and the IFA has 39 Board Members, so an immense machine.
Aziz cautioned us not to be complacent with the place of franchising in the economy as in the US the IFA have had to fight huge legal battles as in the City of Seattle legislation was brought in to discriminate against franchises. The objective of the union was to break the Franchise model.
Aziz said they had been complacent in the US and advised  us to stay close to government and policy advisors to ensure that they are aware of the contribution Franchising makes to the economy.
Aziz shared some great insights and asked us to reflect if this could be true here:

90% of the 11 million employees in Franchising do not have a college education, so franchising provides a huge pathway for the average person to become and entrepreneur and upper middle class citizen.
The public do not understand what franchising is.
Franchising has an image problem in the US the public experience is so seamless that public and employees only see the brand and do not identify with the owner.
General ignorance of Franchising! What it is, how it works, who the owners are and how it contributes to society and the economy had become an enemy to the Franchising Business model.
The goal for the IFA is to turn this around through education. 
Education of the Government
Education of the public
Education of their own employees (they found that an employee say at a McDonalds Franchise thought he worked for McDonalds and didn't realise that he actually worked for Fred Smith!)
Educate Academia
After considerable market testing a slogan was developed to define Franchising.
"Franchising is a way to get into business for yourself but not by yourself"

Hat 2- Managing Partner NRD Capital

NRD Capital is an equity funding company which Aziz created in order to recognize the power of franchisees.  His goal was to create a fund to find brands with compelling unit economics for franchisees.
In 12 months Aziz and his team interviewed 150 brands and rejected 148!
Why? Because the key element Aziz looks for in a Franchise system is that the franchisee must make money.  If that happens then  franchisor cannot fail to make money.  He saw too many brands where the unit economics didn't stack up.  Overselling of brands is a big issue in the US, and he found many instances of deals being done with no follow through to help the store get open..
NRD Capital Fund is leading the way by showing brands how to do it well.  He focuses on the discipline of growth and says that regionalization is perfectly acceptable. You don't have to go nationwide, you just need to get established and prove the model.
While Aziz was in NZ he several very good meetings with a number of NZ Franchisors.  All parties have commented that there was great value to be had from the meetings.

Hat 3 - Franchisee

Aziz has wanted to stay true to Franchising and in touch with the real world so still maintains ownership of several franchises.
A key issue for Franchisors in the US is the cost of labour, so Aziz aims to be generous with incentives and equity interests in the brand.  His goal is to retain talented staff.  He found that when he took this stance, he had a 50% increase in top line sales.  Employess who have a piece of the action will go the extra mile.
His message to the franchisee community:  "Incentivize your manager, lock people in and watch the profits grow!"
When looking at Franchises Aziz uses two criteria to assess unit economics.
How fast does a unit break even? It  should be 12 months
How fast does cash investment get returned ?  It should be no more than 30 months.
Aziz believes and has the data to show that Franchising is a huge contributor to the ecomonic and social fabric of society and that the franchise community must drive this message home to the different sectors.
Franchising is the best opportunity for the common man and therefore we should
embrace it
shout about it
educate people on it
be proud of the contribution franchising makes
Explain our position and preserve it.
The message Aziz left with us was both passionate and thought provoking .

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