Nicola Mills

Nicola Mills, chief executive of franchise brand manager Pacific Retail Management, has just returned from France, where she has been helping launch the first French store of her company’s Go Sushi chain. Pacific Retail, which has turnover of more than $9 million, supports four franchise chains in total, including Kick Juice Bars, Love Coffee & Crepes and Beard Papa.

Today Nicola talks to us about expanding overseas, being caught out in a takeover deal, and how franchisors can do a better job of supporting their franchisees.

Tell us about expanding into France. Are the French big fans of sushi?

Well, two French guys Arnaud and Remi approached us. Sushi is a few years behind in Australia. Australians are adopting sushi; it’s almost becoming a part of our everyday food. But the French, it’s fairly new.

So they saw an opportunity and came and saw us and said ‘can we get involved and can we start it over here’? So we actually own 15% of the company as well as being a master franchisee which is good. They’ve done a deal with Kinepolis Cinemas over there, which are throughout Europe so it’s France and Belgium and so on, so they’ve got the rights to having sites in all the cinemas throughout Europe and exclusively France.

The first one’s been open five weeks and it’s doing really well. We sell smaller samples because a lot of people are coming up and saying ‘I haven’t tried it before and can I try little bits and pieces’. Then they’ll come back and say ‘that’s my favourite and now can I buy the full roll’. And so it’s been good, it’s been really good. The next step is to open up some more and start rolling them out through Europe.

So how did two guys from France come across this brand?

That’s a good question. Our website – how everybody finds everything these days. They liked the look of Go Sushi, they travelled over to Australia, they looked at a number of different outlets, made a few phone calls and we were able to do the deal with them. I mean it took probably about 18 months to do the final deal with them and we could work together. They came to Australia a couple of times and I met them in Hong Kong and it all worked out in the end.

And is this your first sort of foray overseas?

No, we actually have a master franchise agreement with Kick into India, which is obviously a very different market. We did a master franchisee agreement with an Indian partner about three years ago. He’s bought five sites in India, but the GFC hit and he stopped building anything. So the site’s are actually sitting there at the moment and he’s kind of starting to recover, so the sites will now start getting fitted out and start opening.

We don’t actually focus on the international business. While it’s very nice for the ego to say that we’re in France or we’ve got an international agreement into India, I’m very much into looking after our own backyard first, let’s become a success in Australia and then see what we can do internationally. Because you can spend a lot of money on international and you don’t have a lot of control and you’re so far away.

So can you just give us an idea of the size of Pacific Retail Management now, particularly in Australia?

Well we’re actually quite small – we’ve got 30 outlets. We own three brands and we manage another brand for someone else which is Beard Papa Sweets, but we own Love Coffee & Crepes, Kick Juice and Go Sushi.

We’ve just taken Go Sushi through a rebranding process, so we’ve spent quite a lot of money just doing a whole lot of consumer research, doing interviews with our franchisees, doing interviews with our suppliers, with my team, with head office. Go Sushi was a company I bought back in 2008 and it doesn’t really have a story or a heartbeat. It has good products and it’s fast and quick, but we’re not really making enough of an impact.

So the new brand that we’ve created is very exciting. We launch that to the franchisees next week and I think that will make quite a big impact in the market and it’s based on what consumers are telling us they want from sushi and what they want to see and where we think there’s a bit of a hole in the market.

Go Sushi will be our champion brand essentially. We’ve only got three stores of Love Coffee & Crepes and there is an interesting story there. When we bought Go Sushi back in 2008, we thought we bought Go Sushi and a brand called The Crepe Cafe and that was a master franchise. Again we didn’t buy the trademark for The Crepe Cafe, it was a master franchise agreement but as it turned out the master franchise agreement had been terminated about three months before we bought the company, but they didn’t mention that. So they showed us all the paperwork, did all the due diligence and had all the signed agreements and all the proper documents and so on and so forth and we bought the company, we thought, and two weeks later we got a letter saying who are you and why are you using our logo?

So Love Coffee & Crepes was created as a bandaid at that time and we kind of worked through all the legal implications of that. But we’re actually now getting a lot of enquiries for Love Coffee & Crepes and a lot of people are interested in it. So we need to start doing a bit of work on that and developing that as a full blown brand. The guy that we bought it off I found out later he’d been in jail for two years for fraud.

Did the episode teach you a bit about due diligence?

Well you can imagine every lawyer I speak to and accountant, I get that tsk, tsk, tsk, you clearly didn’t do your due diligence properly. You can imagine what I get. We’re about to make another acquisition and that hopefully will go through in the next four weeks. And I’ve checked that the owner has been in jail for fraud and are we checking all the documents!

But there’s just a point that if people lie, they lie. Sometimes you can do lots of due diligence but people lie or they do fraudulent things. So I think it’s more about the contracts that you enter into. The next acquisition has a lot more targets built into it and little bit less money up front. A lot more money is based on what you’re telling me the stores are doing is actually what happens. If they do, we’ll give you more money and if they don’t, we won’t. So it’s just building it into the contract I suppose.

You mentioned the GFC before and how it hit India. What was the effect in Australia on your business? The franchise sector seems to have come through it pretty well.

Sushi was great. Because we were a lower priced product, our sales went up. So the GFC hit and more people were buying sushi, it was good value, it’s healthy, you still buy your lunch. So people stopped buying at the higher end, so it actually had a very positive effect on us. So no complaints from me about the GFC.