Business bounce

Founder of jumping castle franchise Jumping J-Jays, John Newton, talks to AMANDA GOME about how he started the business, and how the jump into the US came about.

Ten years ago, John Newton was a salesman looking for ways to make extra income. He saw an inflatable jumping castle while driving around in Sydney, studied the market, and decided that because children’s parties are on weekends it was a perfect part-time business.

But Jumping J-Jays is not a part-time business now. Newton’s business now has revenue of nearly $9 million and he has just expanded into the US.

 To listen to the lunch with John Newton, click here. To download this mp3 file and listen to it later, right-click this link and “Save target as…” to your computer (Macs; option-click).

Amanda Gome: Now you’re 35 and you started Jumping J-Jays, which is providing castles and water slides to kids parties.

John Newton: That’s right, inflatable amusements, the majority for the backyard party industry.

It was dead industry wasn’t it, with bad castles? Tell us how you innovated.

That’s been the success of our company, bringing innovation into inflatable amusement. We do everything from providing a slide inside a jumping castle, all the way through to providing water on inflatables. Three of our patents that we currently hold in Australia and New Zealand are for castles that move and interact with the children. We also provide an air-conditioning system now in the castles to provide cooler temperatures in there.

So you’ve actually spent quite a lot of money on research and development. How did you find out what the children wanted?

We listen to what’s out there. We’re not a follower. We’ve never had a jumping castle from anyone else except manufactured our own for the last nine years. R&D is very expensive but we’ve always seen what’s out there and manufactured something better.

The backyard party industry has grown enormously and competitors have lived off the marketing we have done in the past 10 years.

How have you grown? What’s been your strategy with your franchising? When did you start franchising? How long after you started and how has that gone?

We started business in October 1997 and we started franchising in 2000. The first two or three franchises, like any franchise, was the hardest to put on. We had to get people who believed in the business rather than just buying themselves a fully established business.

When we started selling interstate we had no sales. But in the last three years we’ve consistently sold somewhere between 15 and 25 franchises or [re-sales] every year.

Your revenue for your business is about $8.4 million with about $4.6 million coming from the franchisees. What are three key tips to selling to franchisees?

To recruit new franchisees, our tip is to tell them they don’t have to give up their day job. This is a weekend business only. The second one is they have no rent. They run it all from home, which is very very important. The third is they need no staff: they can do it all themselves.

This allows them to grow their business at a pace and keep their day job as well.

There’s a big problem at the moment getting franchisees. Are you finding that easy?

Franchises have set territories and we’re nearly 50% sold out now in Australia. We don’t have territories available for most people and we want them to live in their area or in a neighbouring territory, so they have to live very close to the franchise they get as well. So our entry level is at the smaller end of most franchising, so there’s a lot of people looking around that $100,000 mark for franchises.

How much are yours?

They are $99,000, and with that comes $60,000 worth of equipment and that equipment does last five years. If you take that investment out and pro-rata all that, it’s actually quite a good little money earner, so with most of our franchisees we have a guarantee in Australia that they will turn over $85,000.

And what percentage of your franchisees are profitable?

Everyone is profitable in budgets they send back to us, but everyone has all those extra expenses they seem to put in when they run their own business. Because they run it from home and because they use their existing vehicle and because we supply everything from day one, including the insurance and the equipment, there’s not too many overheads once they start with us.

Now I suppose one of the advantages of having franchisees living near the community is that they can market themselves to the community. How have you gone about marketing and what percentage of revenue do you spend on marketing?

Local area marketing programs became the major focal point of our business. It’s our LAMP program and a lot of people in our franchise are called LAMPers.

They’re our franchisees and husbands and wives are out there. It’s in the franchise agreement that they spend one midweek day a week doing their local area marketing.

We provide every piece of marketing material with that. Eight programs, which is 75 different pieces of marketing material and training on how to use those 75 pieces of marketing materials…

Give us three that worked really well?

Our most popular here is our Jump Free program, which is where we set up a jumping castle in a shopping centre for five days. Let kids jump on it for free as a local marketing tool and as a database collection point. Our second most popular is our Healthy Kids activity program, which we give to pre-schools, which is where they get the free jumping castle or bouncy castle once a year.

Then they get it absolutely free during normal working hours, where the kids can test jump and we also collect some databases there as well.

And our third most popular at the moment would be the program that we have for the junior schools or the primary schools, called Jump One. That program is a fundraiser for the schools where the school gets a fully operated and supervised jumping castle from our company. We supervise and operate at that school for free during school and the same thing again. It’s all about the test jumping. The more people that test jump our product the better we’re going to get in sales later.

So you do a lot of community work?

We do. It’s very much a focus of our business and our franchisees all understand the commitment they must do before they buy the franchise.

You’re running a fast growing business and been very successful. What leadership issues have come up?

Those for us have been budgetary. We’re a franchise receiving an 8% royalty off a franchisee that might turn over $85,000 to $100,000. Our revenue is quite small. I do a lot of it mostly for the passion and the drive and we need a great multiple factor for that to come through.

So it’s important to make sure we don’t overstaff and overspend, and the way that we’ve done that is to bring in very good systems. Our compliance systems, which we are heavily into here, making sure everyone’s complaint, and our systems that we have in the back end have all been developed in-house. We’re really quite proud of what we do in the background to reduce staff and also to making sure that we are still providing everything that we need to and also multi-tasking.

All of our staff have multiples of jobs. There is no one person in our company that just does one role. Our general manager at the moment, our sales manager, all go outside and unload a container if they need to, and I think franchisees appreciate that. There is not one person out there that can’t take a call from a franchisee with an issue on a job site on the weekend.

Now you’ve expanded overseas. When did you move overseas and why did you?

We choose the US because we say that America is the land of opportunity. We have the opportunity to place 2500 franchises in the US whereas in Australia and New Zealand combined there are only 120 possibilities based on the demographics.

We’ve moved into Texas, because it has five of the fastest growing cities in America and we’ve gone into an area where it has three of the fastest growing number of families. Texas is still very affordable in housing. You can buy a house and land here in some areas of Dallas for less than $US50,000. You can’t get that anywhere in Australia, no matter where you look, so it’s quite amazing and a lot of families are moving into Texas which is great. I moved here in May for at least four years.

Why did you move to Texas?

I wanted to make sure that every opportunity was given to the business here by having me, the founder from Australia, hands on completely from delivering jumping castles last weekend through to training and franchise sales. I’m a very hands-on founder and franchisor.

What is the market like? What are your competitors like over there?

It’s an exact situation as what it was in 1997 in Australia. It still amazes me. You look from the outside and you say America has lots of jumping castles in the marketplace, and yes they do, but they also have so much more people than us as well, so the market isn’t penetrated with jumping castles.

A lot of the regions don’t even really associate a birthday party with a jumping castle, so we’re penetrating the marketplace – and making those phone calls, ringing, making those franchise enquiries and making those people come to our website. The amount of business that gets turned away on our website. Our web portals obviously get hammered with all these different people wanting it from all different states, which we just can’t service at the moment. But that’s why we franchise because franchising allows us to get to every state and every region a lot quicker.

So you are sitting over in Texas incredibly impatient and all the opportunities over there.

Yes. We want it to grow fast and we need to make sure that we have the model still working right.

How long did it take you to prepare for America?

Before I came here we spent a year to develop the American model and I spent six months of that based in China developing the plan. I did that to try and get away from running my company day to day, which was always a big problem, and so I lived in China for a while.

We lived in a small town in one of the major ports there and I really did the planning from my home there. We globalised all our marketing material, all our operations manuals, all our sales kits, all our compliance sheets and all our systems while I was there.

If you had your time again and you were planning eventually to go to America, how would you change what you’d done at the start?

I probably wouldn’t have come over at the time of the year we did. I suppose we had a tough run at the start. It actually rained for 42 days straight from the day I got off the plane. And then we moved into three months of summer holidays here in the US. We may have started after the summer holidays next time.

It’s been like a new franchisee. When a new franchisee buys any business there’s that time lag that they have of everyone understanding what they do and getting that to parties.

You’ve got to have enough backing and financial support because a lot of franchises fail in other countries because they don’t have that.

So you’ve got your family over there, and how many staff?

I brought one staff member from Australia, who is here. My sales manager got trained in Australia for three months prior to him moving back here (US) as well, so we’ve spent a lot of money on training and bringing people over. We’ve got a couple of other staff here but because we’re all multi-task here our premises is two times as big as we need at the moment because we just don’t need the team here at the moment.

This is an edited version of the interview.