Franchise pitch

There are as many reasons for mortgage brokers to buy into a franchise as there are not to. MPA had a look at the leading franchisor business models in the Australian mortgage market, both well established and new, to determine how the support each offered makes them unique.

Franchise pitch

A regular category at the Australian Mortgage Awards is the franchise operation of the year category. Mortgage industry franchisors are graded on how effective they are in supporting their franchisees as well as how they have performed financially, on the proposals they submit.

Much of the information on the franchise models featured in this report has been gained from those submissions.

At the 2008 AMA awards ANZ Mobile Lending services was judged to be the Australian mortgage industry franchise of the year.

On accepting the award ANZ's Michael Trencher said: "I think the secret is teamwork between management and the franchisees - and four years of hard work and determination, and a belief that a franchise system can work within a major bank."

ANZ Mobile Lending

"Regular franchisor contact is the key," says ANZ Mobile Lending.

And by regular ANZ means a monthly one on one franchisee meeting, a quarterly group conference and an annual conference in January each year.

"These are opportunities for franchisees to talk to ANZ strategically, as well as for them to network with the ANZ Mobile Lending team and other franchisees," it adds.

The January conference is a big splash affair where two sought after awards are presented; Individual Sales Person of the Year, and the ANZ Mobile Lending Franchise of the Year.

But that's not all. In 2005 the ANZ Mobile Lending set up a Franchise Advisory Council (FAC) to have franchisees discuss matters of common interest with the franchisor management.

It's not a toothless dog. Among other initiatives the FAC has established a collaborative franchisee marketing fund to help franchisees get more bang for their promotional buck.

"It's quite an innovative idea," says ANZ, "that sees franchisees pooling their ideas and developing marketing strategies for their state as a group."

In addition all franchisees receive a steady flow of mortgage campaign information from ANZ so they are able to run their area marketing initiatives in parallel with those of the greater bank.

And besides having access to legislative guidance, franchisees get access to a range of ANZ systems, including customer information, through an online Seibel database.

In addition when ANZ launched their eDocuments project early in 2007 it gave franchisees the ability to access, sign and return mortgage documents via email. "A significant saving in time - and paper," it says. 

Also ANZ franchisees benefit from a wide scope of self development and business training. From simple induction to process knowledge programs to more comprehensive business and management training as well.

 "Our business training focuses on topics like financial viability, understanding financial statements and prospecting for leads," says ANZ.
Then at the end of each year an external research project determines how well, or poorly, the ANZ franchisor has performed. "We use an external company to maintain impartiality, and any issues that crop up are addressed immediately," it says.

The ANZ franchisor isn't always bound by what is offered in the franchise agreement. "Often, we exceed it," it adds.

And they do too; from Occupational, Health and Safety advice to laying on safe and defensive driving courses.

The ANZ Mobile Lending business unit was conceived in 2004 and has made a substantial contribution to ANZ Mortgages since those early days. "The idea was to leverage the corporate environment and entrepreneurial nature of small businesses to grow a franchise business," ANZ say.

Despite the harsh economic environment the ANZ franchise business has continued to grow in sales and in customer numbers.

In the year to April 2008 franchisees contributed $3bn in sales from nearly 25,000 customers. "Twice as many as they had a year earlier," it adds. 

In June 2008 they reached the milestone of having $5bn in funds under management. "This more than any other demonstrates how the franchise business has grown in the four years since inception," it says.

In fact, growing at over four times the growth in the overall mortgage market, ANZ Mobile Lending added in excess of $250m sales a month to the group portfolio in 2008.

"And individual franchisee contribution is around $2m each," ANZ adds. This is 34% up from March 2007.

ANZ Mobile Lending's goal for 2009 is to improve franchisee monthly productivity by an additional $500 000. It'll do so by setting new targets and by continuing to help franchisees develop their customer bases.


Smartline's marketing team acts as a virtual marketing department for franchisees. "It provides support in every aspect of marketing their businesses," Smartline says.

And through the virtual marketing department, franchisees get access to local advertising, office and shopfront signage and posters, a website which is hosted within the company web environment, as well as PR support in writing and submitting media releases, advertorials and client profiles.

But it doesn't end there. In addition franchisees get access to Homemover Smartline's magazine; a Client Kit, to welcome clients; a Consultant Profile, to establish initial credibility; Business Partners Kit, for additional marketing; and a Customer Charter, business cards and an assortment of direct mail brochures and stationery.

"All are professionally designed in full colour to reflect the Smartline brand," it says.

In addition Smartline's software enables franchisees to streamline their administrative business requirements. These include having access to an updated lending database which provides a comprehensive data store of lender products, and rate details.

There is a dedicated admin team to help with commission processing and other financial management matters for franchisees. And an online Operations Manual covers every aspect of operating a Smartline mortgage broking business.

"This acts as our resource library," it says.

Compliance records are also maintained by the admin team, since its franchise owners are expected to meet benchmarks beyond those of the regulators. Smartline franchisees are required to complete Cert IV, to hold accreditation with every lender on the panel and to maintain all industry accreditations.

Smartline believes its greatest strength is its culture. Franchise owners are encouraged to help each other by sharing information and assisting with industry best practice standards.

"We are proud of our culture and have a reputation that is the envy of the industry," it says.

And as is often the case, their greatest strength provides them also with their greatest challenge. "Growing our franchise team while protecting our unique culture is the key challenge going forward," Smartline says.

So far Smartline has 140 franchisees. But it feels it is not yet large enough to get the full benefits of scale.  So it's established a separate recruitment budget, hired a National Recruitment Manager, and engaged the services of an external media agency to help attract 'high quality' franchise owners.

Another matter it would like tidied up is to increase its brand awareness in the general community. "To mirror our already strong reputation within the industry," Smartline says.

Smartline was established in 1999, and currently operates nationally with 142 franchise owners. The five year objective is to build the franchise team to 300 owners. Its core business is mortgage broking, but also provides commercial finance, leasing, personal loans and mortgage protection insurance.

In 2008 Smartline settled $2bn in loans and grew its loan book to $5.7bn. On average each Smartline franchisee contributed $15m in new loans, per annum.

Lead referrals account for as much as 85% of Smartline's new business. And just under a quarter of it comes from existing clients either looking to top up, or to refinance their existing properties.

Smartline's business wraps around three objectives: correct advice for clients, business growth for franchisees, and quality business for lenders.

Smartline describe its franchise model as one built for the future.

"A future that is a regulated environment, a fulltime professional industry, where lenders reward brokers based on the quality of their loan applications and borrowers seek the most professional brokers," it says.

Wizard Home Loans (now part of Aussie Home Loans)

Wizard support focuses on making franchisees 'super productive'. Every activity at the Wizard head office is geared toward writing more business.

Its Lending Foundations course, accredited by the MFAA, equips business writers to work the Wizard way. The 'Branch Operating System and Support' - or The Boss - provides a best practice central knowledge base.

In addition The Boss holds, and makes available, all the information franchisees require to be competitive in the market place. 

"And we offer a Professional Development Program to develop franchisee business writing skills," Wizard says. 

To make sure no business falls between the cracks state development managers support franchisees with growth and business plans, while the branch advisory group acts as a line between the franchisee and Wizard management, almost like an advisory council.

In addition Wizard spends millions each year on advertising and sponsorship campaigns. Sports sponsorships include Collingwood Football Club, New South Wales State of Origin Team, the Queensland Wizard Cup and the Powerhouse Museum.

And Wizard works extensively with Australian women, supporting their home ownership aspirations. The Wizard Women website was launched in 2006 and since then it has continued to develop that platform.

In both 2007 and 2008 Wizard sponsored and hosted multiple Wizard Women events, including breakfasts and cocktail parties.

"Wizard Women has more than 30,000 members, and on International Woman Day in 2008 celebrated its second birthday," it says.

Tough economic times lie ahead. Wizard recognises it and has introduced a suite of commercial lending products targeted at the SME market to prepare for the challenge.

The new products; which include a business loan, equipment finance and fleet leasing solutions, are being marketed under the banner of Wizard Business Finance.

"This is a natural progression that will enable franchisees to better service the needs of the SME sector," it says.

The Wizard business model performs well. In spite of the difficult trading conditions in 2007 and 2008 it settled $4.06bn of the $6.6bn taken in new applications in 2007.

And this after a slow start too, since the current franchise model was only launched in March 2007.

However Wizard has converted every branch that intends to continue to operate in 2009, into a franchisee. Strategically, it says, this is an important milestone. 

"It highlights the determination and hard work of our branch network," Wizard says.
The plan is to get the branch network to 210 by the end of 2009, and 250 a year later.
Currently as much as 40% of all new business is generated through referral, and 25% from existing clients. The aim is to get referrals to 70%.

Wizard launched its franchise model in March 2007. In Australia Wizard has 170 branches on franchise agreements and partner with 3 major businesses: Fujitsu Consulting; to assist in combating mortgage stress, Referral Marketing Services; to encourage top end customer relationships using customer management tools, and Herron Todd White; an independent property advisory firm.

Mortgage Choice

At Mortgage Choice both group and state offices offer mentoring and training. They cover all aspects of the franchisees business; both during the initial set-up phase and in an ongoing capacity.

Kristy Sheppard, senior corporate affairs manager at Mortgage Choice, says that in addition to this, franchisees have opportunity to build and maintain a positive business profile through the head office franchisor marketing and corporate affairs division.

Also Mortgage Choice franchise development and field marketing managers provide ongoing field support, while its propriety software matches franchisee customers with the most appropriate products, and lenders. 

Predictably growth has been gradual in recent reporting periods, and Sheppard acknowledges that good franchisees are difficult to find at the moment.

"It is a general trend across the industry - not unique to Mortgage Choice," she says.

Sheppard says the franchisor focuses on improving productivity - or the loans written per broker - and lead conversion ability when recruiting new franchisees.

She expects the broader broker market will experience a period of consolidation in 2009, as more players leave it. "We are preparing our franchisees to take advantage of this," she says.

This year, Mortgage Choice did well at the MFAA awards. They picked up the Best In Mortgage and Finance Industry and the Retail Mortgage Broker of the Year awards.

They were also featured on the 10 Thousand Feet Top 10 Franchises list and BRW Magazine's Fast Franchises list.

Mortgage Choice continues to move forward steadily with minimal debt and no funding risk. In December 2008 it at a loan book of $34bn, 12.2% up on FY07. "This has been a constant trend since our listing in 2004," says Sheppard.

She adds that Mortgage Choice write more loans per broker than any other company in the industry. 

She attributes this upward trend to the experience Mortgage Choice has built up in the 14 years they have traded as a principle franchisor.

Mortgage Choice franchise owners have a variety of flexible business structures available to them. "We cater for just about any business style; from a single operator running a mobile home office to a multiple franchise owner in commercial branded offices," Sheppard says.

Mortgage Choice is preparing for a challenging 2009. To meet it, the company has launched a personal loan and equipment finance product, and has expanded its commercial lending focus and panel of lenders. "By diversifying our income streams we are prepared for future growth," Sheppard says. 

Mortgage Choice began trading in 1992 and with the aim of building a national franchise network, kicked off its franchising platform in 1994. It has a wide range of lenders on its panel; from the major banks to building societies and non-bank lenders.

"Mortgage Choice believes the success of each franchise holder is paramount to the success of the Mortgage Choice group as a whole, and this is the motivator to provide them with the tools necessary to make their own businesses successful, says Sheppard.

LJ Hooker Financial Services

LJ Hooker Financial Services assists its franchisees at just about every turn; with local initiatives to sponsorships and community events. "And we provide an extensive range of marketing collateral and design services," it says.

PR is also driven on a national, state and local level from the LJ Hooker operations team.

Because of its size LJ Hooker has a partnership with Reed and Cherry Solutions to recruit the best franchise talent. Then once recruited they lay on a broad array of training interventions. "From specific technical training to marketing and professional development courses," it says.

To maximize business growth and lead generation all franchisees get access to a dedicated business development manager and a range of reporting and tracking programs.

The LJ Hooker referrals system is an important part of the franchise business. It is supported by an internal lead generation program, known as the LJH Achievers.

The aim of the program is to incentivise repeat referrals behaviours via a points system. Points can be accrued for referrals and larger points amounts are awarded if these convert into a settled loan.

"These points can be redeemed for an extensive range of products, services and experiences," it says.

In just one 3 month period the program generated 568 new leads, which converted to nearly $16m in new loan value.

In addition as many as 73% of LJ Hooker offices are referring their customers to LJ Hooker Financial Services. "And this figure is increasing each month," it says. 

On the admin side the LJ Hooker Financial Services Operations team provide a variety of tasks for franchisees which cover elements like website development and maintenance, compliance, and many HR functions including career tracking.

LJ Hooker Financial Services is so pleased with its franchise model that it considers it to be a major strength of the LJ Hooker group. "As the business is a true franchise model, it has an entrepreneurial culture with no boundaries for growth," it says.
Franchisees are able to build a trail with an extended range of products. "It allows business owners to share in the risks and rewards of running a small business," the franchisor adds.

However, its top end brand may also prove to be its top end challenge. "Exactly where LJ Hooker Financial Services sits within the greater LJ Hooker business may be unclear to some potential customers," it acknowledges.

And adds that it needs to overcome the perception of the LJ Hooker group being exclusively associated with the real estate franchise.

At the end of the 2008 financial year LJ Hooker Financial Services had lodged $2.4bn and settled $1.5bn, which brought in over $7.3m in additional income to the real estate network.  

The LJ Hooker franchise business grew at a time when the industry was in decline. Management attribute this to the internal promotional and referral campaigns.

LJ Hooker is pleased with its new brand roll out which it completed in 2008. "This updated image is in line with the overall new look, feel and direction of the organisation," it says.

A fully owned subsidiary of LJ Hooker, LJ Hooker Financial Services was established in its current structure in October 2004. It is a full finance brokerage with access to more than 500 products and about 28 lenders.

"Ours is a unique franchise model because we work so closely with the LJ Hooker network of real estate offices," it says.

And with more than 650 of them, you're bound to notice them on more than a few street corners.


Zobel provides sales and development training for their franchisees and a dedicated business development arm for them to lean on. In addition Zobel offers franchisees software support and a commission tracking system.

Once on board an outside marketing and public relations company will assist franchisees with brand awareness and marketing.

"We have also created a group information sharing system within the network to ensure experienced and consistent advice is being provided to our clients," Zobel says.

In addition to quarterly managers meetings, it holds a bi-monthly 'tradies day' for admin staff to network and share ideas.

Zobel is a full financial services provider. In addition to offering home and personal loans it has dedicated business lending, financial planning, conveyancing and insurance arms. "This ensures that client referral business within the network is maximised," it says.

In 2005 Satisfac Credit Union purchased a 50% equity stake in Andrew Zobel Home Loans, and today provides corporate backing to the franchisee network.

Zobel believe its strength is in its diversified product offering. "Zobel is unique in that we offer full financial services under one brand," it says.

Establishing the Zobel brand is its priority challenge. "We are still an emerging brand in metropolitan Adelaide," the young franchisor says.

Zobel makes it onto the MPA franchise list as one of the newbies. Although its business commenced in 1999, the franchised operation was launched only in 2007.

Yet at the end of FY08 it had 9 franchisees and had written $250m in new loans.

CENTURY 21 Home Loans

CENTURY 21 Home Loans has a franchise development manager in each state that connects franchisees with the CENTURY 21 management team in their area.

"They also assist franchisees to use the various tools and templates available to drive lead generation," chief executive Warren Stapleton says.

Stapleton also works with the CENTURY 21 real estate senior management team to ensure that the CENTURY 21 Home Loans brand properly positioned.

"This means our brand is integrated into their special events calendar, group training programs and IT systems," he says.

It aggregates through AFG.  Stapleton believed it was important for Century 21 to build a franchise structure and partner with a large well capitalised group.

"One that was able to withstand volatility without compromising service standards or pricing," he says.

Stapleton was appointed CEO in August, 2007 and tasked with establishing the franchise business. "Our first franchisee commenced operations in Queensland on the 21st January 2008," he says.

At this stage the business has 16 franchise areas. Stapleton says he is pleased with the level of interest for the CENTURY 21 Home Loan franchise and is confident of achieving national distribution by mid 2009.

Stapleton says a CENTURY 21 Home Loans franchisee has the benefit of operating under the name and reputation of the franchisor, which is already a well established brand and distribution channel.

"But like other groups we will need to assist and develop our franchisees to diversify their core product offering," he adds.

Club Financial Services

Club assists franchisees with the establishment of their business premises by helping with site selection and coordinating the design layout.

In addition it provides centralised administration and accounting functions, comprehensive operations and procedures and marketing manuals.

Club franchisees also have access to automated performance reporting and back up from professional mentors.

And Club provides national and local marketing. "This includes the development of a launch campaign and ongoing access to the Club franchisor marketing tool box, which gives franchisees the freedom to efficiently create localised marketing material," marketing co-ordinator at Club Financial Services, Bec Waters, says.

The club team will also assist with marketing advice to develop local marketing activity.

Training, both upfront for new franchisees as well as ongoing, is provided through the Club Academy. In addition each franchisee is allocated a Club Coach. "This is a support person who will assist them to meet their business goals," she says. 
Club has 25 franchisees. Waters says the strength of the company lies in the planning that went into setting up the franchisee business model. "We have placed significant efforts in recruiting, training and developing high calibre specialists in fields such as financial planning, insurance and accounting," she adds.

What's more, franchisees get access to both bank and non-bank products.  "Club franchisees have an excellent portfolio of competitive products available, with the ability to sell both bank and Club's exclusive range of branded products," she says.

While the Club Financial Services Business was established in 2002, it only converted to a franchise model in 2008. Waters says making sure its franchisees make the most of the product diversifications Club has in place is a key challenge in 2009.

"The idea is that franchisees can refer clients to in-house specialists, creating multiple income streams," she says.

So far the business has done well, even earning a few awards. Club Financial Services Gippsland won the franchise brokerage of the Year for 2-5 loan writers, and Josh Egan picked up the broker of the year award at the 2008 AMA awards.

"In today's market it is important for franchisees to continue to grow their businesses by concentrating on core business while at the same time expanding their product ranges through the development of new and effective income streams," says Waters.

A final word from the Franchise Council

The Franchise Council of Australia singles franchising in Australia out as being amongst the most dynamic and progressive business sectors in the economy. 

"Most industries are represented by a franchise system and its impact is growing," it says.

In fact they point to the franchising business model as having revolutionised doing business in Australia. And it adds that while franchising may initially have been a good way for Aussies to benefit from off shore products and systems, now it is often the chosen format for many entrepreneurs to expand and develop their businesses.

"Today the great majority of franchise systems operating in Australia are home grown, and increasing numbers of Australian franchise systems are successfully taking their systems overseas," it says.

Franchising in Australia commenced in a significant way in the early 1970's under the influence of the franchised US fast food systems. And, according to the council, over the last 20 years it has developed into a significant and dynamic business activity.
"As in the US the growth and popularity of business format franchising has transformed it from a specialised marketing technique into a competitive vehicle for expansion of service and retail product industries," it says.

Franchising: Advantages
1. Trade under a well established brand image.
2. Usually less capital required than when setting up a business independently.
3. Advice on suitable trading locations or operating territories.
4. Assistance on occupation rights, compliance, layouts, shopfitting and refurbishment.
5. Access often to better rates of finance, or more favourable conditions with financial institutions.
6. National scale advertising and promotional activities at lower costs.
7. Access to specialised knowledge and experience.
8. Access to franchisor patents, trade marks, copyrights and trade secrets where appropriate.
9. Benefit from continuous research and development.
10. Defined territories often protect against competition.

Franchising: disadvantages
1. The imposition of controls.
2. Access to the franchise model and systems requires the payment of initial and on going franchise fees.
3. Prospective franchisees may find it difficult to assess the quality of the franchisor.
4. The may be restrictions against the sale or transfer of the franchised business.
5. Franchisees may become too dependent on the franchisor.
6. Franchisees may expect a flow of customers from the franchisor.
7. The franchisor's policies may affect the franchisee's profitability.
8. The franchisor may require higher turnovers for its continuing franchise fee.
9. The franchisor may make mistakes in their policies.
10. The good name of the franchisor may become less reputable.