Tom Potter

Today on Lunch with an Entrepreneur I’m talking to Tom Potter, the founder of Eagle Boys Pizza franchise chain. Tom started the chain in 1987, grew it to 200 stores with an annual turnover of more than $100 million, sold it and now he is up so something new.

Hi Tom. So what did you sell it for? Come on, tell us the figure.

I seriously, legally, can’t tell you. And the venture capitalist that I’ve sold to are quite litigious gentlemen who don’t like me saying anything I’m not supposed to say.

So what would you be worth now? I mean you’ve done other investments so what would you be worth financially now?

That is something I don’t like to talk about… BRW said I was worth about $17 million about four or five years ago.

You’d be worth a lot more than that now.

It depends on whether the global financial crisis ruined me or not.

If it ruined you?

Yes.

Well did it, did you invest in property and shares?

I didn’t have too much out there actually. I’d only just sold the company about six months before and it was pretty much sitting in the bank.

Okay, so you’ve still got it all?

I did okay. I packed up and took off overseas for nearly a year so I didn’t do any wild investing.

So you’d be worth around $20 million?

Probably, yes.

So you’ve had your year off, you’ve written a book. What did you want to write the book for?

If you were to go out to a bookstore tomorrow and say “give me a book on an Australian franchise company”, you wouldn’t find one. I mean they just barely exist. I wanted to put down on paper exactly what happened with Eagle Boys so that people really knew about when we went in and built New Zealand. Why we went into the drive throughs, how we invented the two minute pizza, all that kind of stuff.

Tell us about what you learnt from the drive throughs and how that’s being adapted to your latest venture which we’ll go into in a minute.

We pretty much found that about 70% of business in the major fast food operations goes drive through and for me that was just like a major indicator. If we’re not in drive through, we’re not in business. And as soon as we started building drive throughs at Eagle Boys, we had a massive response.

When you look back what can you really advise other franchises about?

If it was from a strategic point of view for the parent company, my advice would be to have a five year vision, a three year plan, a very clear and precise strategy and then a very good board of directors to help you achieve that.

Too many times smaller franchise companies are running out of cash, they haven’t got good advice, they don’t have a good site selection criteria, they don’t understand mass marketing and how important it is.

A good example is the sandwich chain that opened up in opposition with Subway a couple of years ago – Wendy’s brought them in from America – and they opened up a couple in Adelaide, a couple in the Gold Coast, a couple in Brisbane and they all went broke. And someone said to me “why?” and I said, well you just open them all up in one town so people know who you were. It’s just basic stuff.

Are you advising people on growing franchises at the moment, is that also what you’re doing?

Just bits and pieces, adhoc, but I’m not really putting myself out as a consultant.

But just on that. What are the other mistakes that you see the franchises making and how has the market changed for franchising in the last year?

Well, I don’t know if I could hone in on the mistakes but I just think that a very strict criteria for analysing and understanding the franchisee’s numbers, making sure they’re getting the right return on investment is something that probably falls by the wayside for a lot of franchising companies.

In our case, we really knew the numbers, knew what people were doing and if they weren’t doing it why. And I think a lot of franchise companies are in too much of a hurry to open up stores and build the group instead of being focused on making sure the ones that they’ve got are doing okay first.

Is the market for recruiting for franchises turning? I mean, it was bad and then it got a bit better through the recession. Is it starting to heat up again yet?

Look I haven’t been close enough to it for the last two years to really know. I’ve been through two previous recessions, ‘89 and ‘94. We’ve found that people were a lot more careful about what they were doing but on the other hand you had people wanting to buy themselves a job because they’d been made redundant and they were also usually not ideal franchisees either.

And so are we seeing more people doing the buying a themselves a job?

I don’t think so, I’m not hearing that yet. But I also said I have been out of the loop with Eagle Boys for over two years now.