The Controversial Chapter | What Really Happened in 2013? | The Real Franchise – Ep 58

Rhiannon Hello and welcome back to another episode of The Real Franchise, a podcast that goes where others simply won’t, and unfiltered view of franchising, business mindset and everything that we stand for when it comes to supporting a community of small business owners. Join me, Rhiannon, the CEO for James Home Services, and Justin, one of our owners, as we unpack it all with no topics off limits.

Today that is more true than it has ever been before. No topic’s off limits. I would be lying to say I wasn’t nervous about what we’re going to talk about today. Justin. It’s probably potentially one of the most controversial topics that we have chosen to discuss yet. And this is what it is. In 2013, the James Home Services franchise network didn’t look like what it looks like today.

There were an awful lot of franchisees feeling very discouraged and very unsupported in the network, and as a result, a significant number exited very quickly. Now, if you’ve been doing your homework on James Home services, and if you if you’ve been really deep diving, like, you know, ten pages deep on Google deep diving, then this will be no surprise to you.

And today we’re going to talk about it. So Justin, let’s go for a pretty obvious question. First, why. Now, this was 13 years ago. This is history. We’ve had multiple different new ownerships since then. You and your business partner have owned now consistently for six years. Why are we talking about history now?

Justin I think it’s part of our ethos that we’re all about transparency, being open. I think it’s important that if people have concerns like, as you know, in my role, I’m talking to people looking every day, and I actually just had a great guy this week, who has done so much right. He’s watched all these episodes, but he and he hit me with this.

And I think the concern to anyone who finds stuff like this is, can it happen again if so, I think it’s really important to go there and explain exactly what. Well, for my opinion, what happened, because I was a franchisee and then look forward to, well, what did we learn? You know, having been involved in the company at a grassroots level, what have we learned from there?

What’s changed and why has it changed and where where is it going and could it happen again realistically? Yeah. So hopefully we get into that sort of stuff today.

Rhiannon That’s exactly what I think we should dive into. Yeah. Look, you know, every now and then when you take leave, I step in and manage those initial calls and chatting to people who have made an inquiry and, you know, I’ve only really, on balance over the last couple of years, done that for a few weeks. And I have had that question, hey, I’ve been googling and I’ve read some stuff that isn’t so great, like, tell me what happened.

I need to know. You guys need to be honest with me. So if I’ve had that question, I think maybe once or twice in probably done your calls, maybe 4 to 5 weeks over the last three years, then it’s something that people do find and they do think about. So what happened acknowledging that at the time you were a franchisee, you weren’t part of the leadership team.

The decision making, the ownership of the company, what from where you sat at the time, what happened?

Justin Yeah, yeah. So I joined James in February 2010. We bought our first franchise. We were a regional franchisee. I’ve also had, a number of cleaning franchises and a carpet cleaning franchise with James over the years. So yeah, I’ve been very intimately involved first point. I think that’s really important. I understand this is ancient history. You know, we’re going back a long time.

And this is, from my opinion, as being in the organization, being intimately involved at the grassroots level. But like you said, not any not in the management team at all. So the the owner, the guy that started James Home Services was called Robert James, and he was my business mentor, money coach, actually, when I was a regional franchisee, and obviously, you know, to go into insolvency, he had some significant financial exposure, you know, loans etc., was into all sorts of things.

But I think more fundamentally, there was this very different focus.

for my opinion, I felt that that the model was flawed. In that the, the upper level, you know, just financially or. I didn’t say enough to sustain the sort of support that a business owner deserves. A franchisee deserves a certain level of support. The model wasn’t delivering that to to the head office. And I think that over time compounded and created issues where you know, the owner at that point in time, the head office at that point in time couldn’t provide the support that business owners around the country needed.

And so there was this, this under swell of not being happy. And then when the, Robert James went into insolvency, those people that weren’t happy were able to exercise their right to exit the franchise if they chose. Okay. So that’s sort of on a bigger scale. What happened in our region, you know, the real fundamental, you know, as a say, owner of a cleaning business or a lawn and garden business in the James Network, it had a grassroots level that didn’t impact the business owners as such because, well, in our region, you know, we continue to support we continue to market for the services for our franchisees.

We didn’t lose a single franchisee in our region through all of that, right? Our business continued to grow through that period. And I think that’s a really key message. If people continue to focus on their business delivering a quality service in whatever business you’re in, if you’ve got a regular customer base, those customers are going to stick with you through.

If they continue, so long as you’re delivering a good service and you know we’re not big enough company to be headline news or anything like that. So the customers who give you the revenue as a business owner, it’s life is normal. And that’s what we saw. I’ll be honest, it was very stressful for us as a regional franchisee because all of a sudden, what’s going to happen to the network, you know, the structures we spent, we put all of our finances into this when we bought our business.

So it was an extremely stressful period. And I’ll be honest, we ended up being the only regional franchisee left in the company at that point. So it was a very nerve wracking time. But what happened was, a group of us regional franchise owners got together. We went out actively and found someone to buy the company, a guy called Mike Dowling.

So he was the next owner he bought in 2015, and he injected a lot of capital into this business and got it back on the right track. And five years later, well, four years later, Mike Dowling started, talking to me about buying the company, which was not on my radar at all. But, with the help, you know, I met Darren Halpin through that process, and we decided to buy the company together.

And, and then Covid hit in, And what, you were part of this? Well, he. Darren had employed you to head up the team to do the due diligence on looking at this James franchise. Should we buy it or not? And then Covid hit. So it was a very interesting period to be looking at buying a national business.

And then in June of 2020, we took over the company and we came in, the three of us, yourself, myself and Darren, with a very clear focus on, you know, things that you would identify through the due diligence you and your team and also things that I’d carried, lessons, things that I’d seen through that period. And so if, if just turning our gaze now from that to forward the lessons, I think we learned, if you’re happy for me to dive into that part of the discussion.

Rhiannon Yeah. I think just to quickly summarize for anybody listening and sort of trying to piece together, if you’re not familiar with corporate structures and how things can happen just to piece together, essentially what we’ve spoken about is that back in 2013, 13 years ago, the then owner of the network, was overextended financially, i.e. was spending more than they were making and as a result, found themselves, insolvent and needing to declare as such.

And resultant of that, a number of business owners and a significant number of business owners in the network chose to exit because they weren’t feeling supported. They weren’t feeling like this was a place that was enabling their business to grow. So that’s in a nutshell what happened all those years ago. But I think I do absolutely now want to run straight into 2026.

And we have absolutely transformed this whole network, even from what, you know, you bought back in 2020.

Justin Oh, absolutely.

Rhiannon Why do we now do what we do? How has those lessons of that early 2013 period shaped who we are today?

Justin Well, I think firstly, for anyone that’s watched any of these episodes, I hope we have picked up transparency. You know, we have right from the start being focused on being transparent. We’re open. I mean, look what we’re talking about today. Yeah, I know there is literally you can’t get any more open than that. So we’re all about transparency and the whole business model.

The reason I joined James in 2010, I saw I love the business model because when you look at the fee structures and stuff like that, it’s a win win model fundamentally. So if James Home services kind of do well, we have to make sure that our business owners do well. And as a leadership team, that has been our focus from day one is what have we got to do to empower our businesses.

You know, you and I were just talking before this that I think part of the focus of a lot of franchises is, oh, I’ve got to sell franchises, got to sell franchises because we make a big chunk of money when we sell the franchise. And I’ll actually just this morning got a lady that I was speaking to that’s so keen to join us because she’s been looking all sorts of different companies.

And her words to me was just, everyone just seems interested in getting this chunk of money off me.

Rhiannon Oh, wow. Stuart. Woman.

Justin Yeah, yeah. And and this is, you know, the concept of this subscription model that we invented for franchising. One of the things that I love about it is it just so clearly illustrates that, hey, where we don’t where we only take $1,000 upfront and we go and spend something like $15,000 setting you up. Right? We’re investing into you, which says right from day one, we want to make sure you’re successful.

So our focus, particularly as most people join us, are on a subscription. Our focus then is totally on helping make sure our business owners are successful. And that then changes the entire groundswell feeling, I think, of of our business owners and our network. I would, yeah, it’s it’s that. So that’s been our focus from day one. I think the other focus, that I have really appreciated is, is the governance, the corporate governance stuff, the the financial, you know, Darren Halpin is an extremely successful businessman in all sorts of different industries.

He’s starting business or foundational business is a large accounting firm. So, you know, Darren, you know, for those of you listening, he’s not involved day to day in our business. But man, when he when we have our leadership meetings he is really like he just has an extremely astute guidance.

Rhiannon Yes, yes.

Justin Correct.

Rhiannon So much value at that strategic level, making sure that we’re heading in the right direction and we’re doing it right, because if there’s one person who has seen everything and seen all the bad things.

Justin Yes, it’s.

Rhiannon Him. You know, his level of exposure to different businesses and how to operate them. And when it’s successful and when it’s not. When you get yourself into hot water far surpasses your experience and mine combined just purely by as a result of what he spent the last, you know, 30 years of his career doing so, he adds so much value and I think resultant of his guidance.

But as well, you know, your appetite through those lessons learned, the boring stuff like risk and, governance and making sure that all the I’s, the dotted and the taser crossed and we understand our obligations fully under the franchising code of conduct in Australia, things like that. Just making sure that we genuinely are doing the right things all of the time, and not just for the sake of ticking the box to say we’re doing it, but because that has very much become who we are as a company, too, in a sense.

I don’t know if this is how you feel, but I kind of feel like that history of James, you know, it’s it’s very long ago. But I also think like it’s one of my strongest motivators to get it right now. You know, it just drives me so hard I don’t want to ever have a Google search history that talks about, you know, under my leadership as CEO, that was the kind of thing happening.

You know, it’s such a strong motivator for me.

Justin Absolutely. Yeah. One of the other things we’ve done that we don’t have to discuss, but I think it’s important to put out there is yes, we have totally changed everything in this company. We have invested, you know, just a computer system alone. You know, it’s the Salesforce thing. We have spent hundreds and hundreds of thousands of dollars on that over the last two years.

None of that was from borrowings. You know, we have use cash flow any any projects. And you have been so tight, not tight. That’s probably the wrong word, but just very wise, and.

Rhiannon being strict on you.

Justin Yes you have I want to go off and do all these great strict.

Rhiannon On our.

Justin Budgets and I don’t want that. But you go know, this is about everything we have done on these projects has come from cash flow. So, you know, we’re not going and borrowing big chunks of money and have, you know, we don’t have these massive debt loads and you know, people, you know, all that gearing that they talk about as a company, we don’t have that.

You know, we have very, very. I think very well managed. And the governance on finance is great. So, you know, the question I get asked is could it happen again? Well, look anyone can go broke. You know personally anybody listening to this you could go broke right. So what do you do to minimize that. We will first not going to borrow heaps of money.

Second you you make wise decisions right. And you minimize risk. And that’s what we’ve been doing because we’ve observed this. You know, I would lived in walked that I had sleepless nights in 2012 and 13 as we were going through this, and yeah, like you, I never want to be, going through that myself. And, and and then the positive note is because of the subscription model.

I mean, we’ve just had our strongest six months in history since we’ve owned it. Like, the company is going fantastic. We just have so many success stories. I just recorded an episode of the Meet the Team. You know, where each week we’re meeting different franchisees. And yesterday I did Danny. So that’ll be posted if you’re listening to this that will be posted alongside this.

Then he’s been with this much. Yeah he’s been with this one week. He just finished his first week. So I thought what a great time to interview somebody. And and you know that’s what gets you and I up every morning on you know is saying people families get that work life balance being able to really do well and and have their own business.

Rhiannon Yeah. We are we are growing and we are growing really strongly. We have just had the strongest six months of new business owners coming on board that we’ve seen. And at the same time, what’s equally important to both of us is that the pace of growth of those new businesses is faster than it’s ever been before.

And our existing businesses. So over 12, 12 months and older, even six months and older, turning over more revenue, it like double on average, our businesses are turning over double the amount of revenue that they were back in 2020 when you and Darren bought. So, you know, there are three key metrics for me in terms of growth.

And I think that be wary of a franchise network that does feel like the only important growth to them is new businesses. Yeah, because most franchise networks, they, you know, making a sort of a chunk of money on the way in, it’s a significant make up of their profit. And the risk is that then they don’t care about the pace at which you start and the overall, turnover potential in those businesses.

My three growth metrics, business, new businesses, of course, but also pace of growth for those new businesses in the first 12 weeks. I, we want every business in our network to be at their specific personalized break even point by the end of 12 weeks. And I also want to be measuring and seeing that our existing businesses are growing year on year in terms of their turnover as well.

All of those things are currently happening for us, which is exciting and all of which is happening within our own cash flow. And the way that we can do that within our own cash flow is that our owners have not drawn a cent out of this business to date. Yeah. And I think that I don’t think that you would feel, you know, that I’ve stepped out of line in saying that.

I know that you didn’t say that before, but I think that is equally important to note is that to date, six years, six years, in a few weeks, our owners have not drawn anything out of this business, and we have piled it all straight back into making sure that our support is there, making sure that we’re marketing really strongly to grow our network as well as for our business owners so that they can grow their businesses.

There’s a million things we do with that money, but it isn’t going out of the network. It’s staying right here so that we can continue to build a really strong foundation for our network.

Justin Yep, yep. It’s true. Yes, I must admit, one of the franchisees jokingly with me the other day on the phone said, oh, you must be just rolling in it now, Justin. And and I was like, and I said, well, I haven’t taken a cent out of this, you know. Yeah. Yeah. So now and it’s, but it’s just so good to see the growth.

You know, we just started our first reentry back into South Australia. And I’ve got people in Perth that I’m talking to and yeah, we’re we’re growing. We’re in a very healthy. So if you’re watching this and it’s got your attention because I know I saw I saw that on the internet. They were insolvent. Yeah. That’s ancient history.

Rhiannon Yeah. We were and we learned they were. They were. Yeah, they were not. You and I know they were. But we are what we are today because of the lessons.

Justin Yes. Correct.

Rhiannon That were afforded to us out of that period of history in the network.

Justin Yeah.

Rhiannon Perfect. I think we wrap this episode right there. If you do have concerns, please just reach out to us. I mean, we have now talked about this topic on a very public platform. And so I hope you’ll also feel that, that it will be exactly the same. You know, one on one conversation. We are happy to answer any questions that you have about what happened, about our current business model, about how we get how we’re working really hard to make sure we know we don’t ever end up in that situation that those previous owners did.

We are so open, probably more open than any other network on this kind of stuff. So please reach out if you have questions. So let’s wrap here and I hope that you will join us very soon for another episode of The Real Franchise.