Beyond Main Street: Franchising Strategies for Indigenous Business Development
Cary Di Lernia Lecturer The University of Sydney Business School The University of Sydney Sydney Australia [email protected]
Andrew Terry Professor of Business Regulation The University of Sydney Business School The University of Sydney Sydney Australia [email protected]
Presented at the Economics and Management of Networks Conference Agadir, Morocco 21-23 November 2013
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Abstract
Australia’s Indigenous population today faces disparities which tarnish Australia’s image as ‘the lucky country’: a life expectancy of 10 years less than non Indigenous Australians, lower education standards, poorer health, greater unemployment. The list goes on. Having developed a culture which enabled them to survive, and, indeed thrive, for over 60,000 years in all areas of Australia’s massive landmass and challenging climate and conditions, Indigenous culture has foundered upon the rock of european invasion and settlement just over two hundred years ago. Successive Australian governments from both sides of the political spectrum can claim precious little success in effectively dealing with the challenges faced by Indigenous Australians living within, and alongside, modern europeanised and increasing asianised Australia. With over $25bn in services being spent in 2010 – 2011 for Australia’s 575,000 reported indigenous people ($44,128, or about €30,000, per capita), yet without the attendant results one would expect of such expenditure, government indigenous policy cannot be regarded as a success.
There is increasing recognition from Indigenous leadership that there is a need to find a way out of welfare dependency and that economic empowerment is likely to be a more effective strategy: ‘We need to be participants, rather than bystanders… we need to develop Indigenous businesses and entrepreneurs’. While a multi-pronged strategy will need to be employed there are, given the significant disparities which exist, specific additional barriers which prevent Indigenous Australians from participating in the economy as any other Australian. In the face of the basic lack of conception of Western business concepts which many take for granted, a lack of basic educational skills and a dearth of indigenous business role models, targeted strategies will be required. This paper analyses the role of franchising, albeit not as practised in Main Street Australia, in addressing Indigenous business disenfranchisement.
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1. Introduction
Australia is by any measure a lucky country. It has bountiful natural resources, a high standard of living, and legal, economic and commercial systems which enable the realistic aspirations of the vast majority of its 23 million population to be realised. However, Australia’s Indigenous population – the world’s oldest surviving culture which dates back 60,000 years, some 59,760 years before white invasion and settlement – is largely disenfranchised. On any measure very significant disparities exist between Indigenous Australians and non-Indigenous Australia. This sad reality continues despite significant mining royalties which flow into remote communities by virtue of Native Title legislation granting land rights to Indigenous communities and a massive welfare budget.
There can be little argument with the proposition that ‘economic disadvantage leads to social dysfunction and has a dramatic negative impact on education, health and general well being’.1 The plight of Indigenous Australia is stark and compelling proof of this proposition. A massive welfare budget is recognition of the extent of Indigenous disadvantage but even the most generous government thinktank would question its effectiveness in lifting Indigenous Australia from its current predicament. New models need to be considered. In this context the words of Kirk Magleby resonate:
The development community should wean itself away from aid models in favor of genuine enterprise sustainability through pervasive local ownership.2
There can be little argument with the proposition that ‘increasing Indigenous participation in enterprise development activity would provide widespread economic and social benefits for Indigenous communities’.3 To this end, there is an extensive range of government, industry, and community organizations offering specific enterprise support programs and services to Indigenous people – so much so that the government itself has recognised that ‘the sheer number and complexity of programs and services [is] often
1 Gunya Australia, Indigenous Economic Development Scheme: A solution to create employment opportunities within Indigenous communities (Discussion Paper, 2007) 3. 2 Kirk Magleby, Microfranchises as a Solution to World Poverty (31 October 2013) Brigham Young University, Ballard Centre for Economic Self-Reliance
confusing and daunting to emerging Indigenous entrepreneurs’.4 What is clear is that despite the “smorgasbord”5 of support programs and services to encourage Indigenous business participation, successive governments, both State and Federal, have ‘failed to engage Indigenous Australians in sustainable economic development’.6 There is a need to consider new models. It is against this complex milieu that franchising – albeit not in its familiar downtown main street guise – is proposed as an Indigenous enterprise development strategy worthy of serious consideration. While governments in developing countries encourage franchising as a vehicle for stimulating economic growth there has been much less attention paid to franchising by governments in developed countries as a strategy which can be applied to foster business development in Indigenous communities.
This paper considers the role of franchising in Indigenous business development in Australia and suggests that while franchising in any iteration cannot solve the problem of Indigenous business disenfranchisement, it would be remarkable if it was not part of a solution.
2. The Indigenous Business Challenge
For too long Australia has held back remote Indigenous people on the fringes of the economy, trapping them in a hopeless circle of poverty, with governments adopting a socialistic and “noble savage” approach. We must have the courage to treat remote Indigenous populations like other human beings who can – indeed must – play a role in Australia’s economic future.7
Indigenous Australia Australia’s Indigenous nations – acknowledged as having developed the world’s oldest surviving culture8 – have lived across the full breadth of Australia’s massive interior and along endless stretches of its vast coastline and developed successful modes of existence which saw their culture survive and thrive over a period of 60,000 years. However, since
4 Department of Employment and Workplace Relations, The Resources Guide: A Guide to available resources and services to assist indigenous enterprise development (Australian Government, 2006) 3. 5 Ibid. 6 Gunya Australia, Indigenous Economic Development Scheme: A solution to create employment opportunities within Indigenous communities (Discussion Paper, Gunya Australia, 2007). 7 Warren Mundine, ‘Indigenous commerce must come next’, Australian Financial Review (Australia), 10 October 2012 available at
European invasion and settlement in 1788, Indigenous Australians have faced overwhelming difficulties which have impacted on their ability to flourish on land which has long played a definitive role in their existence. Successive Australian governments from both sides of the political spectrum can claim precious little success in effectively dealing with the challenges faced by Indigenous Australians living within, and alongside, modern Australia which is primarily westernised, but increasingly ‘asianised’.
Dealing with the challenging climatic conditions posed by Australia’s geographical location and landscape saw the development of a deep relationship between Indigenous peoples and the land which sustained them, with marked differences in cultural, and indeed survival, practices between coastal and desert areas. The interconnectedness between people and their land shaped what might be referred to in the singular as ‘Indigenous culture’ although it is inaccurate to assume a single defined, homogenous set of social practices across all Indigenous peoples. Indeed, indigenous Australia is characterised by massive diversity. At the time of the English invasion of Australia over 500 Indigenous nations existed across Australia. Each nation had different cultural practices and beliefs unique to the exigencies facing that particular group in their particular area.9 To give the reader a sense of the scale here: consider the cultural diversity across Europe, from Portugal in the west, up to the UK, and across to the Balkans and Romania in the east. To refer to each country’s cultural practices, norms and beliefs with the homogenous ‘European’ does a great disservice to these unique bodies of culture and their history. Likewise for Indigenous Australia, which covered an area larger than the body referred to as ‘Europe’ today. In that space, some 145 distinct languages (as distinct as Spanish and Italian and French) were spoken.
The variegated richness of Indigenous Australian cultures did not make much of an impression on early English colonisers and Australia was regarded as Terra Nullius – an ‘unsettled’ land belonging to no one. The playground adage describes the situation well: ‘finders keepers, losers weepers’. This perspective, dictated by western conceptions of property and cultural practices and modes of existence around it, ignored Indigenous interaction with country, and set about colonising what was seen as empty land waiting to
9 ‘Although Indigenous cultures around the Australia shared many values and has similar worldviews, great diversity was also present, explained to a large extent by the vastly different environments and climates across Australia’: Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 9. 5
be claimed.10 Indeed, because Indigenous peoples “built neither cities nor monuments, European cultures have tended to describe their societies as ‘primitive’”,11 a view that “fails to appreciate that, although many modern cultures are thousands of years old, Aboriginal cultures have been around for more than 60,000 years and, over that period of time, were able to manage all of the major issues that face a society – social cohesion, environmental destruction and degradation, sustainable population growth and renewable resources”.12
What is clear is that white settlement has had a negative impact to say the least on Indigenous Australians. Colonisation ‘devastated Indigenous people and cultures – populations were decimated, traditional lands and means of self sufficiency were taken, and government policies aimed at assimilation legitimised the taking of Indigenous children from their families so they could grow up as ‘white’ Australians’.13 Given the depth of Indigenous connections to traditional lands, invasion and colonisation marked the first step in the debasement of Indigenous culture. The ability to practice ceremonies, manage their land and feed and shelter their families was almost instantly taken from Indigenous peoples. Indeed, many Indigenous communities were ‘shifted off their traditional lands and eventually clustered on missions and reserves, the edges of larger towns and in communities within urban areas’.14
Indigenous disadvantage The brutal impact of the introduction of western diseases (not to mention practices around alcohol and tobacco) has seen swathes of the Indigenous population wiped out as they did not have immunity from such diseases. This had the resulting effect that ‘social structures of Indigenous communities were severely disrupted. Health was further impacted by the impact of European settlement, particularly farming practices that destroyed traditional food bases. So from the earliest days of the colony, a cycle of poor health began in Indigenous communities’.15
10 Land rights were not acknowledged until 1993 in the Native Title Act 1993 (Cth) following the High Court decision in Mabo and Others v Queensland (No. 2) (1992) 175 CLR 1 which rejected the fiction that inhabited land could be terra nullius. 11 Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 59. 12 Ibid. 13 Ibid, 7. 14 Ibid, 24. 15 Ibid, 361. 6
The Indigenous population of Australia at the time of invasion and settlement in 1788 has been estimated to have been approximately 1 million people. At the date of the 2011 census it was estimated that the resident Indigenous population was 575, 000, or 3 percent of the Australian population.16 Today, 32 percent of Australia’s Indigenous population live in cities, while 43 percent and 25 percent respectively live in regional communities and remote areas. Despite the fact that the majority of Indigenous people live within, or in close proximity to, modern westernised Australia, living standards of Indigenous Australians fall well below those of other Australians. Indigenous Australians exhibit the poorest levels of health of all Australians, with life expectancy rates between Indigenous and non-Indigenous males and females differing by as much as 11 years on average.17 Indigenous education is also in what might only be described as a woeful state, despite strong recent improvements, with completion rates for schooling nearly half that of non Indigenous students.18 Unemployment rates are higher amongst Indigenous than non-Indigenous Australians. They are much more likely to be employed in low-skilled occupations such as labouring and trades (78 precent vs 60 percent) and twice as likely to work part-time (75 percent vs 39 percent) than non-Indigenous Australians.19 This is also reflected in self-employment rates with only 6 percent, as compared with 17 percent of non-Indigenous Australians who are self-employed in their own businesses.20 The result is a vicious cycle:
All the socioeconomic factors that affect the lives of so many Indigenous people – poor health, literacy and numeracy, housing, education and income – create a cycle of poverty poor health, which can be exacerbated by poor-quality housing and overcrowding, affects the ability to engage in education and employment.21
The plight of indigenous peoples has not gone unnoticed and as public awareness of the scale of the crisis in Aboriginal Australia has escalated during the past decade so has the reach of government:
16 Australian Bureau of Statistics, Estimates of Aboriginal and Torres Strait Islander Australians (June 2011) Australian Bureau of Statistics
Under pressure to address the deepening levels of disadvantage, bureaucracies went into 22 overdrive, programs multiplied, money was spread over more and more policy platforms.
There is nevertheless wide agreement that the aid budget has, especially for remote communities, has yielded "dismally poor returns". Robinson has argued that:
Past approaches in Indigenous affairs had "clearly failed". Despite a plethora of "complex and confusing" Indigenous programs, many lacking evidence of performance and effectiveness, the health, housing and employment status of Aboriginal people had steadily worsened. Rationalisation in Indigenous programs was needed, and mainstream service providers must be held accountable to Indigenous people.23
It has even been argued that ‘benevolently intended, though theoretically flawed, economic welfare programmes have created havoc in Indigenous societies’.24 A new approach to the problem which has increasingly been gathering steam is the idea that many issues faced by Indigenous Australians could be and should be dealt with through their economic status – that rather than being placed on the drip feed of welfare, they should be assisted to start their own businesses. While expenditure on health and education programs is essential, it has been argued that ‘the vast majority should be going into lifting our economic status, getting us into enterprise development, getting us skin in the game’. 25 A former head of a government Indigenous agency eloquently explained almost four decades ago why economic empowerment is necessary:
[W]e need to find a way out of welfare dependency. We need to find replacements for the traditional economic activities of the past… our young people are growing in number and they will need something productive and meaningful… we need to be participants, rather than bystanders… we need to develop Indigenous businesses and entrepreneurs.26
22 Natasha Robinson, ‘Money that fails to serve change’, The Australian (Australia) 26 May 2012
26 Former ATSIC Chair, Mr Gatjil Djerrkura, cited in Craig Furneaux and Kerry Brown, ‘Australian Indigenous Entrepreurships: A Capital-based View’ (2008) 9(2) International Journal of Entrepreneurship and Innovation 133-144. 8
Indigenous business Given that the traditional Indigenous conception of business activity was and largely is completely different to that underpinning westernised modes – with the collectivist, cooperative nature of the former folding in the face of the dominant individualised latter – it is no real surprise that it has taken time for Indigenous peoples to respond to the change in circumstances confronting them and the cultural values they have held sacred for 60,000 years. Indigenous engagement with westernised business forms has produced poor role models. Having been pushed off their land and herded into missions, many Indigenous people began working on European pastoral stations set up on that very land. Schaper notes that
Most of this work was unpaid; remuneration was largely in kind. It was not until the 1940s that Aborigines began to receive monetary wages for this work, and such a practice did not become widespread for another twenty years. In contrast, Aborigines living in urban areas found themselves in a variety of poorly paid jobs, where work was usually marginal and uncertain. Participation in the white Australian economy almost exclusively took the form of providing labor for European businesses. There were few opportunities for Aborigines to establish their own independent enterprises. As a result, many became dependent on welfare programs provided by governments and charity organizations for their survival.27
When matched with the lack of basic factors including education and health which act as ‘pre-requisites’ for successful participation in the modern Australian economy, Indigenous entrepreneurship and business has not been able to break through social disadvantage as it may have been able to in indigenous cultures in other countries which have similar basis to Westernised modes.
When compared with non Indigenous entrepreneurs and business people, the latter face significant hurdles in any attempt to participate in the economy as anything other than a paid worker (which itself can be a struggle for reasons of entrenched disadvantages). Becoming an entrepreneur requires the surmounting of another set of factors, constituted by those usually faced by any entrepreneur as well as additional factors specific to Indigenous peoples. Factors critical to success in starting a business include education, financial literacy and access to finance. Due to the history of Indigenous peoples in this
27 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 88. 9
country these factors are in short supply.28 Relatively limited exposure to Western markets and business owners makes it difficult for many Indigenous peoples to begin to understand how such businesses work. The fact that very few Indigenous Australians have family members who have started their own businesses and therefore lack close networks of business role models29 prevents familiarity with, and no doubt interest in, starting one’s own business. Indeed traditional cultural practices around household capital management and obligatory sharing mean that what many might consider basic financial management skills are not so much non-existent but rather not applicable in many Indigenous communities. None of this bodes well for access to financial capital in modern markets, with low inter-generational transmission of wealth due to Native Title laws and cultural practices around them30 and potential prejudice or at the very least the perception of a lack of cultural sensitivity from financial institutions working against the ready availability of capital necessary to begin and continue operating a small business.31
A recent Report by the Australian Taxation Office on Indigenous business owners in Australia32 recognises that ‘unique’ challenges face traditional Australians considering opening a business including business relationship constraints, a lack of business networks and a culture of obligatory sharing. The former manifests itself in discrimination, whether intentional or as the result of ingrained prejudices arising from seemingly widely held cultural beliefs on the part of non-Indigenous Australians about Indigenous peoples to the point where ‘many Indigenous small business owners… felt that using non Indigenous accountants and business mentors provided greater credibility and internal security’.33 The report cites the words of an Indigenous interviewee:
28 Dennis Foley, ‘The function of Social (and Human) Capital as antecedents on Indigenous entrepreneurs networking (2010) 35(1) New Zealand Journal of Employment Relations 65-87, 66; Craig Furneaux and Kerry Brown, ‘Australian Indigenous Entrepreurships: A Capital-based View’ (2008) 9(2) International Journal of Entrepreneurship and Innovation 133-144, 133. 29 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 91; Don Fuller, Myles Howard and Eileen Cummings ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1-21, 4. 30 Craig Furneaux, Indigenous Entrepreneurship: An Analysis of Capital Constraints
31 Aboriginal people have historically had little opportunity to accumulate capital, and many were paid in kind rather than cash until thirty years ago. Furthermore, Australian banks have been slow to recognize Indigenous businesspeople as a specific market and to tailor their products accordingly. As a result, most capital must be obtained from government agencies or Aboriginal community organizations. Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 90. 32 Australian Taxation Office, Indigenous small business owners in Australia (Commonwealth of Australia, 2009) Available at http://www.ato.gov.au/Business/Starting-and-running-your-small-business/In-detail/Industry-specific/Indigenous-small-business- owners-in-Australia/. 33 Ibid, 10. 10
Indigenous business people walk into a world of prejudice and stereotypes which is so out of whack with the notion of Aboriginal people being successful entrepreneurs… They had to walk into a world which is replete with stereotypes that created all sorts of problems for the business itself: in terms of its relationship with suppliers… credibility within marketing and gaining a profile within their industry sector, it’s very difficult.34
This makes it harder to develop strong business networks which might provide basic financial, informational and advisory support to the business. While migrant communities are apparently able to provide such support to each other, Indigenous peoples with the education, skills sets and capital to assist others in their communities in a way useful for participating in a modern economy are in short supply. There is also a limited number of qualified Aboriginal accountants, lawyers, and other professional business advisers that managers rely on for ‘culturally-sensitive advice’.35
Instead, the networks that are available are premised on different cultural values – including obligatory sharing and gift giving. What would have been a rational economic practice for thousands of years might actually work against Indigenous entrepreneurs trying to make it in a westernised system operating on a differential basis. This has come to be referred to by Indigenous communities as ‘humbugging’ whereby those Indigenous peoples who have attempted to make it in western economic systems are continually harassed by members of the family and extended family for what they have made. This has given rise to the practice of Indigenous peoples opening multiple bank accounts, one with the majority of their earnings and another with a portion of it which they can direct humbuggers to.
Given the effect that social networks can have on the success of a small business, the impact of features of Indigenous culture noted above on the social capital of Indigenous business aspirants cannot be underestimated.36 Foley has suggested that:
34Ibid. 35 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 90. 36 Dennis Foley, ‘The function of Social (and Human) Capital as antecedents on Indigenous entrepreneurs networking’ (2010) 35(1) New Zealand Journal of Employment Relations 65-87, 67 comments that: “it is generally accepted that social networks can have a strong influence on entrepreneurial activity, influencing the decisions which entrepreneurs take and their chances of success …Entrepreneurs obtain resources from those in their social networks and it is the composition of an entrepreneur's network that determines available resources.” 11
For the Indigenous entrepreneur social capital is the sum of the actual and potential resources, both embedded within and available through their own sociocultural networks, that to a large degree is subject to colonisation and the contemporary socio-cultural environment within the dominant society. The dominant society determines the Indigenous entrepreneur's ability to function outside of or within structures of cultural oppression, often born of negative stereotypes. Social capital is also subject to both 'material' and 'relational' functions within a varying trust-intensive relationship between the subject parties.37
The problem arising from this more detailed conception is that on the one hand, the elements of Indigenous culture that might be of assistance to the Indigenous entrepreneur are fading due to the continuing effects of European invasion, and that as a result of the decaying or at the very least differential influence of same that elements which survive are a hindrance to westernised modes of business operation rather than a benefit. While myriad programs exist for Indigenous peoples, many of which are designed to facilitate business and entrepreneurial ventures, the level of Indigenous participation in the economy at this level raises serious questions as to their efficacy. Relatively little research has been conducted that addresses questions such as the appropriate scale and types of businesses most likely to have some chance of commercial success within Indigenous communities in Australia38 and there appears no real evidence that any change has occurred which might draw more Indigenous peoples into the economy.
3. A Franchising Strategy for Indigenous Business Development
Franchising is an ‘increasingly popular form of economic organisation providing an alternative means of expanding an existing business or an alternative means of entering an industry’.39 It is a method of business operation which has revolutionised the distribution of goods and services in virtually all industry sectors and has transformed the business landscape of most countries. Because a franchisor provides a franchisee with not only a proven business concept and system, but also with training, and ongoing support in relation to all operational and managerial aspects of the business it a particularly effective
37 Ibid, 70. 38 Don Fuller, Myles Howard and Eileen Cummings ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1-21, 2. 39 Commonwealth of Australia, Finding a balance: towards fair trading in Australia (May 1997) House of Representatives Standing Committee on Industry, Science and Technology, 3.4-5. 12
strategy in encouraging SME development in developing countries. The franchisee gains from access to ‘established business systems, developed products or services, training and business advice, group advertising and lower risk’40 The appeal of franchising for a franchisee lies, in the words of Australia’s recent Opportunity not Opportunism report, in ‘the potential benefits of being able to conduct the business under an established brand name using tested operational systems’41 and it is this characteristic that makes franchising an effective strategy for SME development. The advantages may be particularly significant for Indigenous business start ups in which role models and networking are sufficient considerations. Foley argues that
Networking is an almost essential attribute. It enables the participants to develop and make use of relationships and in so doing provide increased opportunities to build credibility, a positive image and customer access. Networking provides role models, industry advice, the sharing of experiences and access to suppliers and customers. Networking enhances the Indigenous entrepreneurs’ ability to succeed and survive.42
Franchising of course enshrines networking as a basic ingredient. But despite the proven credentials of franchising as a business development strategy it would be naïve to suggest that its success in empowering minority groups and disadvantaged sectors of developed countries, as well as in promoting SME development in developing countries, transfers seamlessly to Australia’s Indigenous peoples. The entrenched disadvantage of Indigenous communities including their extreme remoteness and massive cultural diversity requires solutions more creative than Main Street concepts. Franchising is, however, a very adaptive business strategy. Its capacity for reinventing itself is a matter of record. Indeed its continual adaptation to accommodate changing circumstances and market conditions is a major factor in its increasing influence throughout the world. The original model has been through many iterations. The franchising relationship is based on a prescribed business model developed by the franchisor and carried out under the franchisor’s guidance and oversight by franchisees who are granted the right to trade under the franchisor’s brand and using its system. But the manner in which the franchise model is implemented is nevertheless capable of infinite variation. Franchising is not a business in
40 ibid 41 Parliamentary Joint Committee on Corporations and Financial Services, Opportunity not opportunism: improving conduct in Australian franchising (Australian Government, 2008). 42 Dennis Foley, Understanding Indigenous Entrepreneurship: A Case Study Analysis (PhD Thesis, University of Queensland, 2005)
itself but is a method of doing business – an innovative and dynamic method of distributing goods and services. It encompasses a wide variety of different practices that are used in different ways, and with varying degrees of sophistication, in virtually all industry sectors. It is an essentially practical strategy which, in the words of Martin Mendelsohn, ‘did not derive from one moment of inventiveness by an imaginative individual [but from] the solutions developed by businessmen in response to the problems with which they were confronted in their business operations’.43 It is franchising’s capacity for adaptation and innovation which drives its relentless development and it is this quality which offers the opportunities for its role in contributing to Indigenous business development.
Franchising’s success as a business strategy is a result of the manner in which it harnesses the key business drivers – systems, management, technology, marketing, networks, brands – in combination with the franchisee’s proprietorship and the franchisor’s training and ongoing support. But, despite its impressive credentials, franchising is not a universal or inevitable solution to the challenge of small business empowerment. While franchising relationships can be built at different levels of sophistication to accommodate practical commercial and cultural realities, the challenges of Indigenous business development, particularly in remote communities, may require solutions that are far removed from a traditional franchise model. While social franchising, micro franchising, tandem franchising, community franchising and quasi-franchising models may be applied in the Indigenous space, the solutions are likely be variegated and owe more to practical demands than theoretical constraints. It may be that it will be franchising principles rather than franchising itself that will provide the most effective solutions at least in the short to medium term. What is surprising is that franchising and franchising principles have received so little attention in government policy surrounding the economic development of Indigenous Australia.
4. Facilitating Conventional Franchising
While conventional franchising may be a bridge too far for Indigenous business development in a remote community, in an urban environment conventional franchising
43 Martin Mendelsohn, The guide to franchising (Thomson Learning, 7th ed, 2004) 14
techniques may be more effectively employed. Public and private sector strategies to encourage Indigenous business participation through franchising can undoubtingly be better exploited.
At the private sector level a range of admirable and worthwhile initiatives are developing among socially aware franchisors. As social responsibility becomes more prominent, franchise systems –in common with the wider business community – are developing strategies to give back to the local community. Many franchise systems donate leftover product to the disadvantaged, including the Indigenous disadvantaged in local communities and the provision of services on a pro bono basis is not uncommon. However there are less known initiatives relating to the development of franchising programs specifically targeted at minorities. While individual systems may provide financial assistance to assist minorities acquire franchises, and or institute diversity awareness and training programs, and have a minority employee recruitment policy, the developments are ad hoc. A particularly interesting initiative is Australia’s peak franchising body, the Franchise Council of Australia, working with the Australian Football League to matchmake Indigenous football players at the end of their professional football careers with appropriate franchise systems to facilitate their post- football transition to business. Government support possibly through tax incentives to encourage Indigenous franchisees is a matter worth serious consideration.
At the public level, a “smorgasboard” of support programs and services to encourage business participation exists. It is nevertheless the unfortunate reality that the efforts of successive governments both State and Federal have “failed to engage Indigenous Australians in sustainable business development”.44While franchising does not appear to be a particular focus of such programs, it is among the mix. The Victorian Aboriginal Economic Development Group appears forward looking in its approach, stating that:
… there are also business models that offer a more supportive and accessible way to business ownership such as franchises and joint ventures. Employees working in a franchise have the opportunity to lease and/or purchase a business. Ongoing support is then provided to ensure long- term business success. Targeted promotion and support by Government and franchisors should be provided to enable more Aboriginal people to operate a franchised business… [and that ] tailored
44 Gunya Australia, Indigenous Economic Development Scheme: A solution to create employment opportunities within Indigenous communities (Discussion Paper, 2007). 15
support is needed to give more Aboriginal people access to commercial finance and business services, and to encourage more franchises and joint ventures involving Aboriginal Victorians.45
The report noted types of support of particular benefit to Indigenous groups: a finance broker to determine appropriate finance (including microfinance); business planning, accredited business training, and mentoring; a loan underwritten by the Government in conjunction with accredited business training if required; entry into a business incubator; social investment funds for community enterprises; accredited business training and planning; and ongoing business mentoring and post-establishment support. The report recommended that the government provide ‘targeted support to assist Aboriginal employees to lease and/or buy franchises including awareness raising, business preparation, an underwritten loan, accredited business training, and ongoing mentoring’.46
The most comprehensive example of a government using franchising as a deliberate policy for the economic employment of a disadvantaged sector is that of Malaysia where franchising is a key government economic strategy to increase indigenous Bumi Putra participation in business otherwise foreclosed by a combination of cultural and commercial factors. Opening the Franchise International Malaysia conference in August 2000 the Deputy Prime Minister commented that: Franchising is one mode of entrepreneurship that can help us achieve higher standards not only in the goods and services offered, but also in upgrading effective management systems and skills. This will enable organisations to respond to competitive pressures accordingly.
The level of bumiputra participation in the retail sector is still on the low side. The government intends to increase bumiputra participation in the retail sector through franchising.
Franchising ensures immediate entry, the learning period is shortened and the rate of success is enhanced. Franchising can also be used as an instrument to enable the transfer of technology from systems developed elsewhere. We will be able to benefit from such transfer.47
The lead agency in the franchise sector in Malaysia is Perbadanan Nasional Berhad (PNS), an agency of the Ministry of Domestic Trade, Cooperatives and Consumerism
45 Victorian Aboriginal Economic Development Group, Moonda Wurrin Gree – Pathways to a Better Economic Future (2010) 38. 46 Victorian Government, The Bridge to Work
which has the mandate to lead the development of Malaysia’s franchise industry. It provides financial support to the franchising sector through loans and investments in addition to providing a range of educational, consulting and entrepreneurial services. PNS is an active participant in the developing Malaysian franchising sector and offers lessons for government and other countries seeking to encourage the economic empowerment of disadvantaged communities.
5. Tandem Franchising
Tandem franchising is a strategy to facilitate franchised business operations by franchisees from disadvantaged backgrounds through funding and mentoring programs.48 Anita du Toit explains that its focus is on ‘creating an alternative funding mechanism that enables transfer of ownership over time in tandem with achieving skills transfer through a mentoring program’.49 Lack of funding and lack of business experience are particular problems for disadvantaged and minority groups. Tandem franchising overcomes these hurdles through empowering individuals. The franchisee acquires a minority stake in the business which increases over time while he or she works alongside, and is mentored by ‘an experienced person who knows the business and imports this knowledge to the franchisee’.50 The most prominent examples of tandem franchising are found in South Africa within a framework of the government’s Black Economic Empowerment policy. A range of alterative models exists for both the mentoring and the financing dimensions.51 Du Toit suggests that Tandem franchising could be an answer to some of the problems associated with the development of entrepreneurship in South Africa. The combination of skills transfer, positive role models and access to finance could provide a powerful mechanism to create jobs and stimulate economic growth. It offers similar possibilities in relation to Australia’s Indigenous communities.
48 Ibid. 49 Ibid. 50 Ibid. 51 Ibid. 17
6. Social Franchising
Social franchising entails the application of franchise mechanisms to achieve social rather than strict commercial goals. There are a variety of social franchise models. Under the socially-acquired franchise model a not-for-profit organisation acquires the right to operate a franchised outlet of an existing franchise system to provide employment opportunities for the minority or disadvantaged group it is seeking to benefit as well as to provide funds for other good causes. In the more holistic manifestation of the socially- developed franchise model a not-for-profit develops a franchise system to empower a disadvantaged constituency or to provide essential services. In the former iteration the beneficiary of the social franchising model is the franchisee who provides a service under the social franchise model. In the later iteration the intended beneficiary is the ultimate consumer who acquires the service from a franchisee under a social franchising model.
An example of the former iteration is Buffed – which claims to be Australia’s first social franchise business model. Its website52 explains that Buffed is an innovative social business comprising a network of shoe shine stands which assists individuals secure economic participation through business ownership of a shoe shine stand:
Buffed works with individuals who have been excluded from the mainstream workforce and who have a desire to work in their own business. Each franchise bsiness is owned and operated by an individual that receives extensive upfront training and ongoing development both personally and professionally. Our franchisees become integral components of the social business.
Individuals are able to ‘purchase’ Buffed shoe shine stands and operate them as their own franchise business. Buffed franchisees receive comprehensive training in the art of shoe shining, customer service skills and business training development. To ensure this opportunity is available to individuals who might not be adequately resourced to launch a new business, the Wise Foundation which established Buffed has developed tailored initiatives for this unique social franchise:
52 Buffed (1 June 2012)
Buffed provides high-level support for franchisees through no-interest loans, business mentorship and dynamic marketing to ensure franchisees have the best chance of creating successful businesses. While growing their own businesses, franchisees develop skills, experience and confidence that will greatly assist them for any future goals or aspirations.53
In another iteration social franchising is implemented as ‘a distribution model for social services or products and services that pursue social goals’.54 Interest in social franchising is gaining momentum around the world, as Non-Governmental Organisations, mostly operating as not-for-profit organisations and social aid programs consider franchising as a mechanism to deliver services and products with social goals particularly health services. Du Toit explains that the benefits of franchising, including expansion with reduced capital and the replication of a proven business system, are attractive to practitioners in the not-for-profit sector as ‘franchising, including training and ongoing support, contributes to the increased likelihood of survival and sustainability at the franchisee level’.55 Although there is a social purpose a social franchise is operated on commercial franchising principles. Du Toit explains that social franchises seek sustainability through operating on commercial principles, making enough profit to sustain operations and reinvesting surplus profits into the community it serves.56 It follows that franchisees, who may be fractional franchisees who incorporate the social franchise within a wider business, generally pay a franchise fee and are motivated by financial incentives to deliver services effectively and efficiently and that the consumers who are the intended beneficiaries of the product or service must be prepared to pay for the service.
Given the early developmental stage of social franchising it is not surprising that there is debate as to definition and models.57 It would nevertheless be unfortunate if definitional demarcation disputes deflected attention from the ultimate aim which is the achievement of social goals through commercial franchising mechanisms. The aim of a social franchising model may be to empower disadvantaged persons or to deliver necessary
53 Ibid. 54 Anita du Toit, ‘Social Franchising as Organisational Format – An Overview”, 18 in International Society of Franchising Conference, Las Vegas US. 6 March 2004. 55 Ibid. 56 Ibid. 57 Elizabeth Spencer, ‘Deriving Meaning for ‘Social Franchising’ from Commercial Franchising and Social Enterprise’ 27th Annual International Society of Franchising Conference, Zhuhai China, 13-16 March 2013. 19
goods or services to those in need of them. Social franchising simply exploits innovative and creative adaption of conventional franchises to achieve social goals. It is a strategy which demands consideration in relation to facilitating Indigenous business development.
7. Microfranchising
It has been uncontroversially suggested that:
The concept and theory of entrepreneurship through the development of micro and small enterprises is likely to be particularly relevant to the achievement of economic development of Indigenous communities.58
Micro franchising – franchising on a small scale – is an important strategy in this context. As with conventional franchising micro franchising is built on replicable business systems, but with scaled down business concepts and low entry costs. Although the full suite of franchise services are not offered Henrique and Herr note that, ‘the involved enterprises can gain very substantial advantages, which allow them to move towards higher levels of productivity and competitiveness, and ultimately formalization’.59 Given its small scale, micro franchising is invariably applied to produce business opportunities for the poor or the otherwise disadvantaged. In terms of the subtitle of Fairbourne, Gibson and Dyer’s book Microfranchising60 it is aimed at ‘creating wealth at the bottom of the pyramid’. Microfranchising is frequently associated with micro financing61 and usually, but not invariably, associated with social franchising in the context of those geographically or socially excluded from mainstream economic activity. Microfranchising is an important tool for small business in the developing world and is potentially a very effective strategy for indigenous business development by fostering economic self reliance.
58 Don Fuller, Myles Howard and Eileen Cummings, ‘Indigenous Micro-enterprise Development in Northern Australia - Implications for Economic and Social Policy’ (2002) 7(2) Journal of Economic and Social Policy 1. 59 Michael Henriques and Matthias Herr, ‘The informal economy and microfranchising’ in Jason Fairbourne, Stephen W Gibson and W Gibb Dyer(eds), Microfranchising: Creating Wealth at the Bottom of the Pyramid (Edward Elgar, 2007) 52. 60 Jason Fairbourne, Stephen W Gibson and W Gibb Dyer(eds), Microfranchising: Creating Wealth at the Bottom of the Pyramid (Edward Elgar, 2007). 61 Opportunity International Australia for example in 2012 provided two million families, primarily farmers of small scale crops or livestock in India, Indonesia, the Philippines China and Ghana, with loans averaging A$150. The vast majority (97 percent) of the loans were repaid on time. 20
8. Community Franchising
It is perhaps ironic that a franchising model developed in Australia in the context of the rarefied world of commercial banking may find effective expression in the very different context of Indigenous business development. In the mid to late 1990s there was a rash of bank branch closures in Australia, with about a third of bank branches, in both metropolitan and regional areas, closing. In 1998 Bendigo Bank – then a small Victorian based bank – launched its Community Bank concept on a very different model to the existing models of big banks. Bendigo Bank explains that its Community Bank model is ‘a private franchise branch of Bendigo Bank, but that private franchise is owned by literally hundreds of shareholders who have bought in a local level’.62 It is modelled on a conventional commercial franchise. The Community franchisee carries the cost of the infrastructure while Bendigo carries the credit risk through its statutory obligation to guarantee and underwrites all transactions. The Community Bank has access to all Bendigo’s products and full support and although it is bound by Bendigo’s lending policies it has autonomy on a range of operational issues. Community franchises are established as public companies with their own Board of Directors. There are provisions in the franchise agreements setting a limit on the amount that can be paid as dividends as the bulk of the profit, generally 80 percent, must be dedicated to community projects. Since 1998 when Bendigo Bank launched the Community Bank model it has grown from 74 branches to over 500 branches, over 300 of which are community branches many of which are serving regional and remote communities not serviced by competitors.
A form of franchising based on the Bendigo Community Bank model – where the community rather than an individual is the franchisee – may be particularly effective in the context of Indigenous communities. Fuller, Howard and Cummings suggest that, ‘Indigenous people living within [remote] communities prefer to deal with businesses owned and operated by Indigenous people from their communities’,63 and Furneaux notes that, ‘sharing resources within Indigenous communities is more than an economic
62 Craig Furneaux, Indigenous Entrepreneurship: An Analysis of Capital Constraints
investment – it is also a social investment [which] acts as a form of socialism through the redistribution of wealth throughout the community’.64 Fuller et al argue that:
Most successful local development initiatives are embedded in an economically based, broader setting of cooperation - particularly from within the surrounding region. Thus, the chances of development 'success' are not likely to be primarily determined by the degree of local enthusiasm for a particular project, but by the opportunity of integrating community assets within the regional economic, social and political structure.65
While other cooperative forms may provide this opportunity it is franchising, and particularly community franchising, which offers the most effective ‘opportunity of integrating community assets’.
9. Quasi Franchising
Quasi franchising refers to ‘back-of-house’ franchising arrangements under which back- of-house functions in the form of tried, tested and proven systems and procedures not directly visable to the consumer are replicated without front-of-house features represented by the brand and visible manifestations of brand architecture.66 The essence of ‘back-of-house franchising’ is simply franchising without the brand and associated trade dress, image and external indicia that symbolise membership of a standardised chain. It is a form of B2B franchising under which the business proprietor benefits from a range of back-of-house systems which remove many of the challenges in establishing a business and without which business entry is difficult if not impossible, while retaining discretion in relation to front-of-house features. The underlying arrangements are imperceptible to consumers.
While it is the combination of system and brand which drives conventional franchising, there may be niches in which front-of-house banding is not inevitable or compelling and may in fact be an actual disadvantage. In particular niche markets such as neighbourhood
64 Craig Furneaux, Indigenous Entrepreneurship: An Analysis of Capital Constraints
The concept of replicating back-of-house functions without brand identification is of course not uncommon in business. Systematising back-of-house functions is a key factor in successful business operation and a necessary pre-requisite for replication of the business. Systems are an inevitable ingredient not only of business format franchising but all viable business operations. The company owned and managed chain operating under a brand –in effect a company owed franchise network – will of course have developed and documented a range of system issues equivalent to that of a franchise chain, including technology, purchasing arrangements, training, bookkeeping, and a range of other management services. However, even a company owned group which operates as a series of individual businesses rather than under a network brand will improve profitability and management through applying back-of-house systems. Such arrangements are also common in various forms of groups of independent proprietors – from informal cooperative arrangements to more structured groups formed to obtain the benefits of proven systematised and efficient management systems.
The provision of back-of-house services through specialist providers is today not uncommon. Outsourcing arrangements and unbranded management contract arrangements operate in this space. Management contracts involve the service provider moving in-house to manage a particular asset and although an effective model for large scale assets such as full service hotels are unlikely to be a viable vehicle for business operation on a small scale. Outsourcing provides the mechanism for contracting out a business function to an external service provider. Business proprietors may utilise a range of outsourcers for the provision of a range of business services. Although back-of-house franchising may be thought of as a sophisticated form of outsourcing under which the back-of-house franchisor provides a complete range of business services, this analogy is limiting. A back-of-house franchisor provides not only the complete package of back-of- house services, but also an integrated back-of-house system which outsourcing does not
23 pretend to offer. The concept of B2B back-of-house services being provided in a systematised, structured and disciplined manner by a back-of-house service provider transcends traditional notions of outsourcing.
As with traditional franchising, back-of-house franchising is a practical strategy for which there is no one model. It is driven by a market for back-of-house services to enable an independent business entrepreneur to build a business free of the confines of brand and image but with the benefit of key back-of-house support services without which entirely independent business operation is difficult and risky. In some iterations an “umbrella” brand may be employed by the back-of-house franchisor. Outlets would be identified by a generic system name but back-of-house franchisees would retain discretion in relation to servicescape aspects. Other iterations owing more to traditional business format franchising than back-of-house franchising results in a more personalised form of business format franchising allowing, to some extent, franchisee flexibility in the provision of system services.
It is suggested that quasi-franchising concepts such as back-of-house franchising offer real opportunities for Indigenous business development. Particularly in regional and remote communities, brand, and brand architecture in the form of look and feel, are unrealistic and unnecessary expectations. The provision of comprehensive back-of-house systems will nevertheless be an inevitable and essential prerequisite for business operation and a form of quasi-franchising which accommodates such practical realities is a commercial strategy with real potential, not only in the franchising of essential services in Indigenous communities but also in the franchising of Indigenous businesses in areas such as ecotourism, bush tucker restaurants and bush holiday resorts to other Indigenous communities.
10. Management Contracts
Under a management contract the operational control of a business is vested in an enterprise which manages the business for a fee. Management contracts are particularly common in relation to hotel operation – the hotel’s owner contracts with an operator to run the hotel. They enable investors with ‘relatively little knowledge and experience in
24
the hotel industry, or who cannot directly manage hotels for a variety of reasons, to invest in hotels.67 The management company may be a branded operator which provides the hotel brand as well as the hotel management or it may be an independent operator simply providing management services. While franchising is common at the lower end of the accommodation hospitality sector, management contracts are more common at the upper end - a reality driven by the size of the property investment and the complexity of management.
Although high hotel operations are a world apart from Indigenous business opportunities, the management contract is potentially an effective strategy for Indigenous business development. An Indigenous community may have the resources, perhaps from mining royalties, to invest in a business which would bring benefits to the community but not the management knowledge and experience to actually operate the business. An Indigenous community may have the opportunity to establish an Indigenous business – ecotourism for example – but not the resources to manage it. In such circumstances, management contracts provide a viable strategy to exploit the opportunity
11. A Variegated Cooperative Model
Given the complex cultural constellations which surround Indigenous peoples’ thinking about starting a business, any business model or business support plan must take local conditions and cultural practices into account. Practical imperatives must trump distribution theory. While sophisticated business format franchising may prove too rigid to be viable at this point in time, especially in remote communities, there are interesting and important initiatives through which services are provided in remote communities, not through franchising as such but through a mixed model adaptation of the traditional model.
Indigenous people assert that ‘they themselves should be given the key role in finding solutions to the problems that affect their communities’.68 One unique example of Indigenous peoples doing so successfully, and in the absence of direct government
67 Hans Detlefsen and Matt Glodz, ‘Hotel Management Contracts: Historical Trends’, Hoteliers (7 March 2013) http://www.4hotelliers.com/features/article/7493. 68 Larissa Behrendt, Indigenous Australia for Dummies (Wiley Publishing, 2012) 356. 25
support, is the Arnhem Land Progress Aboriginal Corporation (ALPA). Headquartered in Darwin and established in 1972, ALPA is an Indigenous owned organisation which operates a number of owned as well as managed unbranded community retail stores. Originally established with help from the Methodist overseas Mission as a cooperative of community stores in seven remote Arnhem Land communities, ALPA currently exists as a corporation with its own board of directors. While the Indigenous peoples of North-East Arhnem Land, the Yolŋu, have been economically active traders for centuries, their community stores were originally owned and operated by the church.69 ALPA was incorporated with seven initial member stores - Ajurumu (Goulburn Island), Gapuwiyak (Lake Evella), Galiwin’ku (Elcho Island), Milingimbi, Minjilang (Croker Island), Ramingining and Yirrkala. Current member communities in which stores are located have two representatives on the ALPA board which governs and directs the business as any other board of directors would. These two representatives include a traditional landowner’s representative and a community representative (generally nominated by the local store committee).70
While the board is constituted by Indigenous peoples, senior management charged with responsibility for day to day management of the organization is predominantly constituted by Balanda, the Yolŋu word for non-Yolŋu people. Communication between balanda and Yolŋu is facilitated by an independent interpreter who provides explanations of issues of import facing the organization using relevant language and concepts from traditional Aboriginal economic and legal parallels:
ALPA has developed a unique method to give a visual hands on and readily understood explanation of profit and loss statements and budget planning sessions. This methodology, or 'money story,' is in demand at a number of other external Aboriginal client organisations.71
ALPA’s chairman has explained that senior management is predominantly balanda because ‘we need their skills and experience. They work for us. They answer to us. They share our commitment and our vision for a successful Yolŋu enterprise. We don't see this as a 'Yolŋu and Balanda' issue. Balanda are part of the ALPA family'.72 Store managers
69 Brief History, The Arnhem Land Progress Aboriginal Corporation
in remote areas themselves are also balanda. While this makes sense given the sheer numbers of balanda who have the necessary supermarket management experience compared with Yolŋu peoples, it might be asked why Yolŋu do not yet fulfil this role. Demonstrating its attunement to local needs (given its board of directors is representative of member communities this is not a surprise), ALPA has stated that although it is able to impart necessary skills through its training arm, that it is unable to provide the necessary cultural authority.
This, coupled with cultural and family obligations creates enormous pressure for our Indigenous managers making it difficult for them to choose store management as a career. The ALPA board has decided that until these cultural barriers can be overcome, ALPA would continue to seek managers from outside its cultural base when necessary. ALPA is committed to an evolving Indigenous management program.73
While ALPA runs a financially successful operation, with a turnover of approximately $75 million across the Group, it is engaged in much more than simply trying to make a profit. Income made from the operation of all stores is reinvested on a needs basis across all owned and managed stores. It is also used to support benevolent activities throughout its member communities including secondary and tertiary education costs, medical escort to and from remote areas, credit advisory programs, small business mentoring, and community events. Money for such purposes is managed by a member store committee. Volunteers to the committee support managers and workers to resolve local issues that arise in relation to the store.74 In this way local communities are the prime beneficiaries of ALPA’s activities.75
In understanding what a successful Indigenous business might look like it is important to appreciate that success ‘can mean something more than balancing the books and something less than continued expansion’.76 Indeed, as noted by Schaper, traditional
73 Ibid. 74 The store committee is responsible for managing the Molu Rrupiya Gungayunamirr (Special purpose money for the people) or Community Benefit Funds allocated to their community by the Board of Directors based on store performance. The use of these funds raises important issues of governance and the need to comply with taxation laws and the rules of the Corporation, including the Store Committee Guidelines. Store Committees, The Arnhem Land Progress Aboriginal Corporation
economic values of Indigenous cultures mean that success may just as much be measured by impact upon the community and one’s relations alongside the turning of a profit.77 Given its mission to – strive to enhance the social and economic development of its members, giving primacy to their cultural heritage, dignity and desire for equality with their fellow Australians78 – ALPA has branched out from its initial core business of supermarket ownership to offer additional services. Operating a registered training organisation, ALPA ‘standardised policies, systems and procedures to benefit Yolŋu staff, who [can] … [are] trained in all store operational duties’.79 ALPA was also instrumental in the provision of banking services in the region, initiating and providing initial financing for the establishment of the Traditional Credit Union80 which is Australia’s only Aboriginal credit union owned by Indigenous peoples and which provides financial products, services and ‘culturally appropriate employment as well as training for Aboriginal people… [to] assist Aboriginal people to overcome financial disadvantage’.81
Of particular interest in the consideration of appropriate business models for Indigenous communities, especially in remote settings, is ALPA’s ‘consultancy’ stores, which are operated on a management contract model. While starting out with seven member communities, two stores opted to leave the group in the 1980’s. These stores promptly returned as ALPA managed stores when they were unable to operate successfully and financial viability became a concern. These, and several other community stores – ALPA now runs 12 stores in addition to its five ALPA owned and branded stores – invite comparisons to the back-of-house and management contract options discussed above. Importantly, ALPA does not seek to become involved with any community unless that community wishes ALPA to do so, and even then ALPA, having acknowledged the need for local participation in the store, states ‘it is a prerequisite of ALPA managing a store that the community wants to have active participation in the operation of their store at all levels’.82 This includes training services, provided by a business incorporated in 2011
77 Michael Schaper, ‘Australia's Aboriginal small business owners: Challenges for the future’ (1999) 37(3) Journal of Small Business Management 88, 90. 78 Welcome to ALPA (1 November 2013) The Arnhem Land Progress Aboriginal Corporation
Australian Retail Training which offers training services and expertise to stores outside the group.
ALPA has also established Australian Retail Consultants (ARC) which provides ‘cost effective access to more than four decades of stable and continuous remote retail expertise [and] offers a flexible service model with experienced professional personnel in retail, finance, governance support and consulting services’.83 Spotting a need in the late 1990’s for expertise in the management of community owned stores across remote Indigenous communities, ARC was established to offer tailored business support. ARC’s website explains that:
While there were many "consultants" with financial or commerce backgrounds there were few consultants offering specific retail support particularly with any experience in the remote communities in Australia. There were many stores in financial difficulty and many communities lacked the retail expertise to identify and rectify operational and financial anomalies. Other communities were simply looking for independent advice on how their store could be improved. Communities, however, still wanted to retain ownership, run a sustainable and reliable store and have real input into their business.
Australian Retail Training and Australian Retail Technology were both formed in similar circumstances. There was, and still is, a need for remote store specific training and IT support. The environments we all operate in are so different to the rest of the country that many "experts" from the major cities just have no idea what they're getting themselves into. ALPA has developed contextualised resources and proven methods in training and through trial and error perfected the right POS systems and back office resources to run and improve your business84
In providing such services, ALPA does not seek to lock communities in for any specified period, and only works in communities it is invited to. Culturally and community sensitive, the retail consultancy business given birth by ALPA’s success in running its own stores provides ‘relief management, on-the-job training and a health and nutrition focus for community stores. When ARC assists a store, it liaises with the client representatives to ensure their input is valued, and that their requirements and expectations are met’.85 In addition to retail services, ARC also provides purely back office services necessary for the operation of community stores, including bookkeeping, payroll, stocktake, performance reviews, budgeting, accounting and finance service
83 Australian Retail Consultants, Australian Retail
provisions tailored to the literacy and numeracy competencies of its clientele. ARC can offer support behind the scenes in a way other providers either would or could not, because margins might be too slight for the investment involved, or because of the lack of local knowledge. Local knowledge and its own networks through the operations of ALPA also assist ARC to provide support around product range decisions, including nutritionally balanced product ranges, and the logistical realities of remote areas:
To guarantee a reliable supply of competitively priced quality products, Australian Retail Consultants have an extensive network of wholesalers, distributors and transport companies, both local and interstate, with a choice of suppliers available to meet the collective and specific needs of our clients. This has been a crucial element in the success of our organisation, with the majority of client enterprises servicing regions that are remote and at times inaccessible.86
There is very little left for the community organisation to do other than provide a store, and local community members interested in becoming employees.
The arrangement is a practical and innovative form of unbranded quasi-franchising drawing on both back-of-house franchising and management contracts. It differs from the former in that the back-of-house services provided by the ARC are implemented by ARC’s in-house team. It differs from the latter in that the ARC team operates as a management consultancy basis rather from assuming complete operational proprietorship. The next step in the evolution of the arrangement is likely to be a move away from management contract type arrangements to back-of-house franchising arrangements with the local community managing the store itself with back-of-house systems and consulting services provided by ARC.
ALPA’s expertise in this area was no doubt a factor in its CEO’s one year secondment to manage a government funded bush retail operation, Outback Stores. Outback Stores runs remote stores and to make them become commercially self sufficient, then works with the ‘store committee to decide how to spend the profits for the benefit of the community, in line with the rules of individual Store Corporations’.87 In 2007 the Federal Government extended funds to Outback Stores to support a number of community stores which were teetering on closure in the face of debt and management concerns. In 2009 Outback stores was provided with funding to support stores outside the Northern Territory. Similarly to
86 Ibid. 87 How we Operate, Outback Stores
ALPA, Outback Stores works with Indigenous communities for a fee and has a ‘strong policy that it can only help manage a store once it has been invited by the local community’.88 This involves an assessment of the store requesting management services and support, ‘talk[ing] to community leaders about its financial status, their expectations, and Outback Stores’ operational procedures.89 Importantly, ‘Outback Stores can provide management services to stores which are already commercially successful or those that require funding to continue to operate. If a store requires funding to continue operating, the government must agree to fund to the store before Outback Stores starts managing’. While contracts between Outback Stores and communities are tailored to meet the needs of local communities, there are three constants: Outback Stores is responsible for the day- to-day operations but ownership of the store remains with the store owners; Outback Stores employs the store managers; and no “book up” (short-term credit provided by a trader that allows goods to be purchased and paid for later) is allowed to be used in the store.90
Like ALPA, each store establishes a committee consisting of local residents. Outback Stores also provides other back of house support such as that offered by ALPA. In contrast to ALPA however, each store Outback Stores operates is branded an Outback Store. For ALPA, this is not a concern. Give the remote areas being serviced, it is unlikely branding will matter when this might be the only store in town, and then for many hundreds of kilometres.
As ALPA’s success demonstrates, the particular model which is chosen requires tight tailoring to local exigencies if is to work. ALPA appears to have borrowed elements from several of the options discussed earlier in this paper and stitched them into a coherent yet variegated model which is best suited to the circumstances it faces. Adaptation to local conditions, is the key. Given its self-sufficiency as compared with other providers such as Outback Stores, ALPA’s preference for real world as opposed to strictly textbook based solutions is both admirable and effective.
88 Ibid. 89 Ibid. 90 Ibid. 31
12. Conclusion
It may be thought ironic that, in the words of Kirk Magleby, ‘Fast food restaurant chains, icons of profligate Western consumer culture, epitomize a business model that may be a key solution to the daunting challenge of global poverty.’91 It is nevertheless not surprising that franchise models have a significant role to play in reducing global poverty through empowering minority business. While franchising developed to assist companies achieve economies of scale through the countering of management, commercial and financial limitations, there is nothing inherent in the model which prevents its application to different settings and to the achievement of different goals. In the real world, as Henriques and Herr observe, ‘each franchise system like every business enterprise is a unique response to the particular entrepreneurial opportunity it seeks to fill and to the particular environment in which it operates’.92 Franchising provides a supportive environment and an effective platform for social and economic development. It would be surprising if franchising – albeit in a different guise to that practised in Main Street Downtown – is not a significant force in the development of viable strategies for the economic empowerment of Indigenous peoples.
91 Kirk Magleby, Microfranchises as a Solution to World Poverty, Ballard Centre for Economic Self-Reliance, Brigham Young University