Jim Penman explains his franchisees-first model: he gives franchisees governance rights like veto power over manual changes and automatic renewal after 10 years. A customer survey program cut complaints and boosted leads so much he returned unspent ad budgets, sometimes $60,000 per region, to franchisees. Across nearly 4,000 franchisees over 30 years, he's had minimal litigation.
Jim, this is why I wanted to have you on because you take a holistic approach to the human being. And I love the fact that you're so successful in business and yet you see, you know, the humanity of it. You've built this giant family. I'm wondering what is next for you. Do other franchise systems around the world look to you and how you've done it and take your approach? Are you going to do some training colleges or something? I don't know. You've got something very unique here.
Well, they should, but they don't want to. The absolute extreme opposite case is something like Retail Food group where they basically just exploit the franchisees, rip everything off than they can overcharge them, they charge them doubled. You got to buy from us and pay double what you pay from Coles. It's the opposite extreme because it's all driven by short term thinking. But of course it's been utterly disastrous because they basically crushed and destroyed the businesses they took over. All of them are going down like, whereas we're obviously rising. People should listen. But you know, what we do at gyms is incredibly radical. No franchise system in the world does this. I mean, just to give you an example, our franchisees can move to a different franchisor if they want to, no questions asked. It's up to the franchisor accepts them. Their own franchisor has no sense. So a franchisor has to look after them because they're clients. Yes, they can vote out their franchisor.
That's unheard of.
Unheard of. And they do. It does happen. It happened actually last week. We had one group of franchisees vote at the franchise. The franchise was going to sell at a fair price. They're not confiscation. But who else can do that? Our franchisees and our franchisors can veto changes to their own manual. So we can't impose things on them unless they agree to it. Now if the majority agree, the minority is bound. But they've automatic right of renewal after 10 years unless they're non compliant. We cannot, we cannot fail to. I mean all this stuff, some of it was in the contract in the beginning, a lot of it's been coming since then as we've given franchisees more power.
So you've effectively turned the pyramid of authority on its head. You know, in MBAs now they've moved from transactional leadership to transformational leadership. They're talking a lot now about servant leadership. And you know, I've been saying this a lot, that the political office is really an office of servanthood. And the greatest political office should be the greatest servant of all. You're really following that principle of serving your staff, your franchise, and importantly, the customer is at the top of your hierarchy.
No, no, no, sorry. My franchisees are my top.
They're your top. Okay.
Our first priority is welfare of franchisees. We're also passionate about customer service. Now, I don't see any contradiction. In fact, franchisees get very upset at me because I'm so tough on customer service. But as I say to them, it's not because customers are more important to you than you, it's because my priority is you. And if we give great service to customers, then you're going to get all the work you want at the best price you want. So I'm doing it for your sake. Okay? Now, what we've done, for example, three years ago, we bought in a system of surveys where we actually survey customers and about 30% of our customers are good enough to reply. And we use that to feedback. We feed into complaints, we feed back into awards and so forth. That's had a transformational effect. Our level of actual complaints has gone down dramatically since we've been doing that. But the interesting thing that's happened is that actual leads have gone through the roof. In fact, our leads now are running at far. About 30% of our leads are unserviced normally, which is extraordinary. And you might think that's because of extra advertising, but no. In fact, in a lot of situations, we have to give back chunks of advertising to the franchisees because we can't spend it. I've got a region and fencing region. I'm going to give back about $60,000 to my franchisees of unspent advertising. I say, guys, I can't spend it. It's your money, take it back.
Yeah, okay.
We've given hundreds of thousands of dollars back because we can't spend the advertising because our guys are busy year round and yet we're 30% on service. Now, what that means is that our franchisees. Because one thing I tell my franchisees too, if you're talking about customers versus franchisees, I tell my franchisees really strongly because I'm always the first speaker in the franchisee training course. I said, you give great service. I tell you why. Be more successful. You have to do it. You have to do this. Ring them back promptly, send the text if you can't get through all the stuff that you're supposed to do makes you delight and amaze the customer. But then I Say one thing is, don't be cheap. Look, whatever. Anybody's charging at at least 10%.
A lot of people say this. Why do you say that?
Because my franchise is number one. Because my franchisee, ultimately my franchisee's welfare is what's going to determine everything. And that's morally speaking and financially speaking, because our growth is not limited by clients, it's limited by franchisees. We could have double as many fencing franchisees as we have and we could still, we still wouldn't be able to cope with the demand for our services.
This is surprising because you're not taking a strong capitalist bent on the customer is king. You're actually taking more of a, I don't know if you could say socialist approach, but you've got this big family thing going on. How would you advise other businesses to take some of that into their. What can they do to copy that?
Who's the one that says it's only the stakeholders account is. The only stakeholders account are the. The people, the shareholders. I just fundamentally disagree with that. I think it's not only immoral not to look at your other stakeholders like your employees or your clients or in our case, franchisees, it's also stupid that the best companies are actually those that look after their stakeholders too. And having the frame of mind that says only the owners matter is immoral, but it's dumb. I don't like upset customers, but getting a franchisee who's been badly treated is the thing that gets me really, really upset. And you know, I'm not a nice person. Always franchisors concerns get very irate at me because I will, I really will take the franchisees part if I see them as being badly treated. But it benefits in so many ways too. I mean, one of the things I'm very proud of, we've got nearly 4,000 franchisees over 30 years. You know how many times I've actually been to court with any of my franchisees?
Three or four times, isn't it? Three times, that's ridiculously low.
Once with the franchisee in the early stages and, and we want a total refund for some insane reason. Another two times with franchisors, both of whom I actually gave. Settled by giving them exactly what I'd offered them in the first place.
That's unheard of.
We virtually never go to court. Well, you see, we just. You treat people decently and you treat them fairly and you don't get, you don't tend to get legal problems, in my view.
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