Jim's Group CEO, Jim Penman's talk at the Franchising Expo 2023 - DAY 2

It's exciting, actually. It's a funny thing, you know, I remember the first one of these expos I ever came to, which was in the old exhibition building and that was in 1988. And at that stage I was not a franchisor. I actually had a business that you're building up and selling lawn mowing rounds.

I had a few subbies and stuff. And we had no uniforms and no signage and no logos and everything. And this company, this franchising giant came in the scene.

This was VIP.

They have 250 franchisees.

And these guys terrified me. I thought they'd crush my little business.

I actually tried to join them. I tried to sort of become part of them, to help them to build.

And they didn't want that. So I actually crashed the expo, which was that year 1998. Went up to the stand, said to the, said to the guy behind the.

Stand, hey, I'm interested in your franchise. Tell me about it. Didn't ask me why I wanted to know, which was fortunate because I would have told him.

And then he told me 15 minutes.

Or so and I. And then the state manager came in and he said, that's Jim Penman. Don't tell him anything else.

So they kicked me off the stand.

But it was good.

I could see there was benefits to the franchising system. I can understand what the benefit of it was and I could see real benefits in what VIP was offering. But I felt I could offer something.

That was better for my franchisees.

That was my idea at the time. Now, I didn't intend ever to be.

A franchisor in business.

I intended to be an academic. I spent 10 years at university doing a PhD in history, of all things. And what do you do with a PhD in history? Well, everybody knows you mow lawns for a living, that's obvious. So that's what I did. And I knew nothing about business at all when I started. You know, I was actually made the most stupid mistakes you can imagine. Anybody likes to come up to the standard. There's a copy of my book, there's every customer a fan, which talks about all the things I've done wrong and all the dumb things and the mistakes I've made and all the reasons why I shouldn't be able to be successful. But there was reasons why I was, which I've come to understand any later. One of them was that I had a really big obsession with customer service. Not from rational business sense, it's just I hate letting customers down. I was one of the first contractors in Australia to have a brush cutter when they first came out, because it used to frustrate me. I couldn't do the edges right. And I saw this machine, this little long thing with a pole and stuff, one of the first ones out in Japan, I got one so I could do the job perfectly. And I just had to have every edge done, every bit of grass picked up, every. There's even a video on our website which shows how you can mow grass that's, you know, a meter high and cut it clean as a way of doing it. So I used to do all this and I really hated letting customers down. So I had this obsession with doing things well. But I wanted to grow my business and I wanted to make it bigger.

So I started putting on subcontractors and I had a lot of problem with that because even though the service I gave was great, my subcontractors just couldn't do the same job. Some of them were good, but most of them just weren't. So the service wasn't good. So I had this little business, really.

Didn'T think was going to go anywhere.

And then I got hit with this competitor that I thought would really crush me. So I decided to go into franchising in self defence.

And somebody asked me at that stage.

When I just launched that franchise, said, how many do you think you might have one day?

And I said, one day, if it really works well, I might have 100. Well, it's worked out somewhat better than I expected.

But I decided the focus that I had from the beginning was there's two things that really, really obsess me and they're both about service. And the first one is service to customers. And it frustrated me with my subcontractors that I couldn't give that. And I wanted my franchisees to give great service. So I set up a system from the beginning that was really oriented towards it and over time we actually got.

It tougher and tougher and tougher.

So, for example, we realized that we used to give out a lot of.

Leads in the early days, but a lot of the French weren't following up the lead.

So we changed the fee system so that we have you have a base fee, then you have a full small fee for every lead provider. And when we did that, even though they were charged the same amount, instead of high base fee, lower base fee, lead fee, we found the franchise were.

Far more likely not to take work.

They didn't want and to take the work they did want.

And we have a system which allows our franchise to choose exactly what they want, what kinds of services they want.

What suburbs, what areas which can be different for different services, what times of.

Day, what days of the week do previous clients not do. All kinds of things. They can specify what they want.

So with the lead fee system, we.

Found that really gave the incentive to only take the jobs you want. And if a franchise doesn't have the time to do a lead, take a lead, follow it up, then let it go and somebody else can pick it up.

With time, we also gradually put a lot more systems in place to drive customer service providers. For example, we started to monitor complaints fairly carefully. And we have a very tough system in gyms. That's one thing I warn everybody about before they join in during training. It's a very tough system. We make it so that we measure.

Complaints now, occasionally one or two a year, no problem at all.

But franchises get too many complaints about.

Four complaints within the six month period. Then they'll get a warning letter.

If that continues, they'll get a breach notice. And if that continues, they'll eventually be terminated. So there's a lot of pressure to.

Do the right thing. Now with time, we actually put other.

One of the things we started to.

Do was to do surveys of clients. So after 10 days, after a lead.

Goes out, we send a text survey.

To the client asking about the service. And that comes back in a form.

That gives labels to give every franchisee a rating. And that also measures complaints as well.

And that put more and more pressure on franchisees that are good work. So this sounds pretty uncomfortable. I know you come into a system and I'm telling you if you ever part of gyms, you're going to be a lot of pressure to do good work. And some franchises get very upset about that. I've actually had people accuse me of they lose sleep or it's causing mental.

Health problems and stuff.

But we really cramped down hard. But there's a very simple reason for this. Over the years, what we've seen, seen and we measure everything in gyms, what we've seen is a decline in the level of complaint. It's gone down and down and down. Our level of complaints that we have now per lead taken is less than 1% of what it used to be in pre franchise days. And even since the early days of the franchise, it's gone down by about 80%. So there's a dramatic and continuing drop in levels of complaints over the years. And something really striking has happened though in that time, in the early Days of gyms, we actually often used to struggle to find work. We had problems when there was droughts.

We actually had one stage. We had teams of canvases knocking on doors to try and find work for our franchisees. That's how hard it was. Each contract has, in modern terms, about 150 bucks per month per franchisee, which goes into advertising.

But in the early days, it wasn't enough.

We often had to pump that up, put more work in. But as our system of customer service.

Came into play and started to take.

To bite and the level of complaints.

Started to drop, something really striking happened. The level of leads started to rise. Now, in the early days, that biggest.

Problem is finding enough work.

In recent times, we've got the opposite problem. Last year, I just checked this last night, we knocked back 287,000 leads. That means 287,000 times we tell clients, sorry, we can't provide your service. And to put that in proportion, that's 32% of all leads received during 2022. We actually said, no, we can't handle you. Now, you might think that's because you're putting more advertising, but it's not. In fact, for quite a number of divisions, especially fencing and mowing, we've actually had to give back. We've given back more than a million dollars to the franchisees in unspendable advertising because they're busy year round, they don't need any more work, there's no need to advertise more. So we have to give the money back because we can't keep it. It's part of the contract. We have to get their agreement as to what to do with it. As we've done that too. The level of portion of franchise reported in good income has risen dramatically. It's now, based on anonymous survey, more than half the number of franchisees who actually report poor income has dropped. It's not zero. I'd love to say it's zero, but it's 8%, which is a lot less than it used to be. Mostly because most of our franchisees are very, very busy. We have a system called pay for work guarantee, which means we set up.

An amount, usually it's about $2,000 per week. These days, if a franchisee doesn't achieve that, then we actually allow them to go and do free services for anybody they like and we'll pay them the normal value. And we can do that because, in fact, work tends to come in so rapidly and so fast that anybody who goes out and does any kind of marketing which free services are in effect, tends to get incredibly busy very, very quickly. So that's, that's what customer service is about. Now, you might think from that that's our number one priority, but actually it isn't. There's only one priority for us that's more than our customer service and that's our franchisees. Because in my view, as a franchisor, franchisees are our number one priority. The fact of the matter is, I'll be pretty blunt about it, Our limits on our growth are not for lack of clients. If a lack of franchisees, we sign typically we have about 80 people every three weeks in franchise training. We could, we could have 50% or we could double that. We had a fantastic year. In the past year, we've grown from about 3,800 before COVID to nearly 5,000 now. We're growing quite fast, but the actual level of work out there is rising even faster. You know, one of the striking things we can do too about this, it's not just the fact that we are.

Getting more leads, but we're able to.

Charge more by having a reputation for service. We can actually charge more. In fact, we tell our franchisees frequently, don't compete on price, charge at least 10% more than the opposition. We are not cheap as chips.

We have a quality service. Because one of my most fundamental ways.

Understanding business, the best way to see business is not to compete on price, rush for the job, but do a fantastic job, fantastic service, do everything right by the customer and then charge more.

Because the service industry is a fantastic.

Industry to be involved with. We actually have a system that's unique in the world of franchising. In terms of franchisee empowerment too. Our franchise system gives franchisees an absolute.

Right of first refusal to any lead that comes into their territory. But we allow our franchises to work wherever they want to and the only thing they can't do is door knock somebody else's territory. That's what the franchise they can have a business that has as many employees they like. The base fee doesn't change. We've got franchisees turning over more than a million dollars a year. They pay the same base fee as somebody turning over $3,000 a week, which is more typical.

Our franchisees have extraordinary rights. We cannot by contract take their customers often unless the customer complains. If they want to sell the right to customers, they can. Which a business like mowing and cleaning and dog wash and so forth is very important. Right. But we cannot take them off them. Our franchisees have the right to veto changes to their own manual. You might have heard of some of the scandals that go on in franchising. Doesn't happen with us. If franchisees don't like a change to the contract we propose, they can knock you back.

And they have done that in the past too.

Our franchisees can move to a different franchisor. If I don't think they're getting good so service from a particular franchisor, they go to the neighbouring franchisor, say, I want to come to you. Franchise has to accept them, which they normally would. Their own franchisor has no say. So basically, they become clients of the franchisor most powerful of all. Our franchisees can vote out their own franchisor. Now we have regional franchisors for the most part, but to the extent that I'm a franchisor, direct franchisor, they can vote me out as well.

There's a power there that no other.

Franchise system in the house.

Plus, of course, our franchisees have an absolute right of renewal of their contract without any further cost.

All these are built in a system that we've developed is there. It's very tough. It puts a lot of pressure on franchisees for the right thing. And we want to explain that people up front, we do not gild the lily. We say, look, if you come to us, we have very high standards. Sometimes you will find a lot of pressure to perform. You're not going to like getting complaints because we respond very forcefully and strongly to them. We have all sorts of coaching systems and everything else to make sure we do. At the same time, what we can offer you, a system with ongoing mentoring and support, a very powerful system and the one system that has a very powerful track record of helping to be successful. If I want to give you one statistic to say why franchising is a good idea in general, I can't speak for the industry in a whole, but I certainly speak for what we do. If you were to go into a cleaning or a gardening business, similar to what we do as an independent, does anybody have any idea what your chances of success would be as an independent? You can look it up online if you like, but if you go into business as an independent, my own business, your chance of success, success of being there after the first 12 months are between 5 and 10%. So it'd be 90 and 95% of people who start independent businesses in our kind of area are going to be.

Gone within 12 months.

With us, we've got figures going back several years and the actual Average failure rate is 12%. Now it's not zero, but it's 12% of which there are 88% of the franchisees that come with us going to.

Be still in business in 12 months time.

That's one of the major differences. And having systems of customer service and support, even though they're uncomfortable, has a dramatic effect on whether people succeed.

Now, not everybody who fails in the first year actually fails or who leaves. Sometimes they go independent, which they're allowed to do in our system.

We don't make it difficult. Sometimes they'll go back to another job.

Some will have a health problem, sometimes there'll be a family issue. They have to go somewhere.

There's all kinds of reasons.

But there is a very interesting pattern too.

Each of our franchisees has a star.

Rating based on their customer service.

The average rating in gyms At a.

Possible 5 is about 4.7 these days. But the people who leave in the first year, the average rating is 4.2. We've also found that people with poor customer service are far, far more likely to report poor income, like eight times more likely to report poor income than those who offer good customer service. So great customer service is key to us, even though it presses hard on.

Franchisees, even though it's uncomfortable, even though not. Franchises don't always like lead fees because sometimes the leads don't turn out, even though they don't like the complaints. What we have is a system that's tough enough to be very, very effective at making franchisees successful. Now, I talked a lot about money, but I want to actually mention something.

Else too, and it might sound strange.

Because, I mean, you presumably listen to me because I have probably been successful, but I don't think financial success is what matters. Some time ago I had a chat.

To a guy and what I do.

I actually give my phone number and my email address to every one of my franchises of training and I tell them to contact me whenever they want to. Daytime, evenings, weekends, Christmas day, doesn't matter.

You can contact me, I'll answer you. I'm always there.

And one of the things I do.

It'S part of what I do to.

Try and keep in touch with my franchisees. One of the things I do is I ring franchisees on major anniversary of.

Like 10, 15, 20 years. Not one particular franchisee. I rang up and I asked him.

How his business was going.

He said it's good. Then I asked him what he used to do before he got into franchising and he said, well, I used to work for like an iga, I was a manager for a supermarket. But he said I didn't like it. And I said why not? He said because I worked long hours, morning, evenings, weekends and I wasn't getting to see my children growing up. And he said there was one morning that he'll never forget when his son, who was 4 years old at the time, he was just about to leave and this little boy, this four year old said to him, daddy, I wish you could have breakfast with us. That's the one thing he asked. And this guy said he drove to work and the tears were streaming down his face because he knew he wasn't seeing his son, he wasn't being a proper father to his son.

Son and he got to work and he actually down there, very shortly after he resigned his job, he bought a Jim's franchise, actually a knowing one. And he said from then onwards I'll always be able to have breakfast with my children. And I said, do you ever, you ever thank your son for that comment? This is now a 14 year old. And he said every day I thank him for that comment. Because the thing about being in business is this. Some people like Dan Carl back there, who's become in the short time with us, effectively a multi millionaire, he's done incredibly well. But that's still actually the aim for most people going into business themselves.

This guy wasn't actually making any more.

Money as a franchisee. It was very equivalent to what he.

Was making as a manager for iga. But what he said, what he got was a lifestyle.

He got to have time with his children.

And I would say this to every.

One of you here, making money is.

Good, but there's things that are a lot more important than that. And one of my most favourite saying is this.

No other success can compensate for failure in the home. And to the extent that we make an environment where people can have a great home life, they can spend time with the people they love, they can see their children growing up. That is the greatest single measure of success. And it's going to sound strange when I say this, but I also think that the search for money isn't always, always the best motivator. There's in fact a lot of research and I'm very interested in this kind of subject. Making more money has only a very marginal relationship to how happy people are. The worst way to spend money in terms of happiness. This is, scientists discovered this, it's on display, it's on having a bigger house, better car, fancier clothes, more expensive, whatever jewelry Whatever, which is all about comparison. There's a wonderful saying that goes social comparison, the thief of joy. That kind of spending does not bring happiness.

What is more likely to bring happiness.

Is experience events, things that you do, especially with friends, those you love, with your family. That's actually far more likely to bring happiness. But you know, the number one thing they've discovered makes people happy about money. You know, the one thing you can do with money that's most likely to make you happy? You give it away to a cause that you are actually involved in. And watch what I do with my money. You know, last year, I'm 70, about to turn 71 years old. Last year, late last year, for the first time, I bought myself a new car. My first time ever, because I want electric vehicle.

And if you can look at what.

I wear, my clothes are basically from Kmart. I don't dress up and so forth. But I have a research program and.

Something like 80 plus percent of my.

Personal drawings for the business goes into funding a research program into how we can cure ills like addiction and alcoholism and child abuse and those kinds of things using. It's a research into epigenetics.

That's basically what life is about.

So come and listen to me, because I've got money and I've been successful. And yeah, you can look at this. But at the same time, let me.

Tell you, it's not number one. And it shouldn't be in your lives either. You're in business for the sake of.

Looking after your family, achieving great things.

In the world, something that you can have time for.

And that's why having your own bed is such a great idea. The most challenging problem is finding good people. I honestly tell you I have made. If you read my book and you're going to come and grab a copy, I have made the worst, worst mistakes that you could possibly make. I had basically an account. The general manager who got together and defrauded me, actually put me in a tax file for him for $3 million penalty. I've made so many mistakes. I had the wrong person running it for many years. Cost me millions of dollars in wasted resources. Sometimes you put the wrong person in his franchisor, sort of start new divisions and that causes problems. If I had it, if I had one wish for business, it would be like a magnifying glass or a looking glass that would look at something and.

Say, that person is good. It's never an exact science.

It just isn't. You simply got to use your judgment.

Lose what you've learned, I would say at the age of 70, I'm a lot more capable than I was 20, 30 years ago. I had no idea what I was doing. But look, there is one simple principle to being in business that matters more than everything else put together. In fact, I'm just about to rewrite my book into a new title. I'm thinking something like, we are never good enough. Because the great principle behind business is that you are never satisfied with anything. Nothing is good enough. Our complaints, like I said, there are 1% less than 1% of what they used to be as a pure measure, but they're still too high. We've got new IT systems coming on later this year, I hope, which should drop complaints by at least 50%. By engineering all the different ways complaints happen and working out ways to prevent that, ways to keep on iron things, all sorts of stuff. Every day of my life. And I include Christmas Day, Easters, Sundays, Saturdays, doesn't matter. Every day in my life, I'm looking, asking myself one question. How can I do better? There is no level of service that is good enough for my customers. And there's particularly no level of service that's good enough for my franchisees. That's why I like that. Franchises ringing me. In fact, you know the hardest thing about getting franchisees? They think, I'm so busy. You've got nearly 5,000 franchisees. I'm so busy I won't be bothered. No, I like to be bothered because so often franchisees will contact me, they'll ring me, they'll email me and they'll come up with a problem.

And it's something that I need to change in the system. Even in the past week. I can give you an example. One of my franchisees was complaining because he wasn't getting jobs leads from his tip from his home suburb. And I realized that his territory was set too small. So I changed it and I changed it for the whole division, which is fencing to make it better for him so he could get more work close to home and travel less. Just a little thing that happened about three days ago. But every day of my life I'm saying, how can I improve?

I love what I do. I would say there wouldn't be a person on the face of the earth who is a happier man than me.

But having a sense of mission and.

A purpose in your life is part of happiness, isn't it? And they've discovered that too. But if you just sit back and all yourself, I'm just going to have a good time. It doesn't create happiness. I have a very strong sense of purpose. I have a purpose in my franchisees, first of all, making them successful. One reason I would never want Jim's to be a public company in because I think that will compromise that with chasing the short term. So that's a mission in my life and that gives me greatest satisfaction. And I get tremendous pride when I see franchises. Do I like the story I was telling you, but I've heard hundreds of those. I hear them all the time. People say this is the greatest thing that ever happened. I see my family growing up. I see my kids. I've got a real life now. I've got myself financially secure. I hear these lessons all the time. It's painful when somebody fails. I'll never get used to it. I'll never stop it. But there is enormous satisfaction in seeing that I can do something to help people to succeed, but also my sense.

Of purpose with my research program as well. To me, happiness is not.

It's not a destination, it's a progress.

If you're moving towards something that's meaningful.

In your life, then you'll tend to.

Be a happy person. But it's a great question. Thank you for that.

I wish we had an opportunity set to give you because I like that one. I am not. I look it up in good Google.

And I reckon I've got 20, 25.

Years to go and I have got so much to do in the next couple of decades. And I'll tell you what, I'm keeping an eye on the medical literature. If it's possible to live forever, I will certainly be part of that. I enjoy life enormously. Luck is fun.

And I've got.

I'm a very blessed man. But you know what the. The single biggest blessing in my life is?

It's not having a lot of money.

It's having a wonderful wife. I'm absolutely. I've been married to my wife for 22 years. We have four beautiful children together. I absolutely crazily adore and love my wife. We have a stormy relationship. We fight a lot, but I love her. There is nothing more important than your home. People don't let anybody tell you the difference. And chasing money for its own sake is not what life is about. Love is what it's about.

Relationship.

And that's what creates happiness. That's what creates meaning. Doing something that you have a passion for and that you love. So I'd love to see all of you signing up as franchisees, but.

Probably won't happen.

But come across to the stand and they'd love to show you book and sign it for you. God bless you all.