Staying connected

For a lot of companies, the decision to adopt a franchise model is a no-brainer. For Telcoinabox, however, it was a decision that presented almost as many challenges as opportunities. By Andrea O’Driscoll.

TELCOINABOX WAS formed in 2002, five years after the Australian telecommunications market was deregulated. Its founders recognised a gap in the market for telco services designed specifically for small and medium businesses, a sector that has traditionally been neglected by the larger players.

Rather than delivering these services directly to end users, the company opted for a franchise model that would enable individual franchisees to operate as telecommunications companies with the full backing of Telcoinabox’s expertise and systems.

From left to right: Damian Kay (Managing Director), Claire Smith (National
Operations Manager), Paul Line (General Manager), John Jacob (Business
Development Manager), Angela Huggins (Finance).

Unlike a lot of franchises, the model wasn’t a perfect fit for Telcoinabox. But according to one of its three founders and current managing director, Damian Kay, overcoming the challenges involved in establishing the company as a successful franchise and meeting the demands of the franchise code have given the company a considerable competitive advantage both overseas and in the wholesale space.

“We’re very different to a typical franchisor,” explains Damian Kay. “The main difference is that we chose to be a franchise, rather than had to be one. Originally, we chose it as a model because we liked how regulated it is. If you obey all the rules it gives you a really good framework for your business. The success of this business is due in no small part to the fact that we are fully compliant with the franchise code. We’ve made sure that we have the people, the processes and the infrastructure necessary to become a successful franchise and then we’ve used that as a basis to move beyond franchising as well.”

Franchise model

Telcoinabox’s franchise model is untypical in a number of key areas, which have presented the company with a series of challenges. Its franchisees retain their individual company names and their own branding, which makes marketing the group as a whole a tricky proposition. “We took a very hands-off approach initially,” explains general manager Paul Line. “We explained that this was essentially a sales and marketing franchise and that our franchisees are given total freedom and flexibility. They build their brand, they choose their business model and they decide how to market themselves. That’s actually something we’ve revisited in the last three to six months.”

Instead of assisting in the marketing of all 60 brands in the franchise group, Telcoinabox has opted to enable its franchisees through training. The company has added a Local Heroes marketing course to its induction program, enlisted the help of a third-party branding specialist and developed a new central website.

“We’ve realised that there is a role for us to play, and that role involves enabling our franchisees with the tools they need,” explains Line. “We’ve also partnered with a branding consultancy called Brand Kits. They will provide the tools and systems to facilitate our franchisees in creating their own brands on a pay-per-use basis. New franchisees will now receive assistance with logo creation, brand creation, stationery and the development of their website. It’s very early days – we’re literally about to launch the website at our franchise conference – but so far all the feedback has been good. Unlike with a marketing levy, people still have complete flexibility. With this system they can opt in or out.”

Another unusual aspect of the franchise is that there are no fixed territories. In Melbourne the company has three or four franchisees within a 5km radius of each other and every franchisee is encouraged to approach the whole of Australia as their territory. This is largely made possible by the sheer size of the telecommunications industry. “A one per cent market share in this industry represents a $400 million business,” explains Line. “Our retail turnover is expected to reach close to $80 million this year and we barely show up on the radar. There could be 300 of our franchisees out there and they wouldn’t even touch the sides of the current market. I think a lot of people like that about our offering – it’s wholly transportable and they have limitless revenue potential.”

The two major players, Optus and Telstra, have around 75 per cent of the $40 billion market at present, but where Telcoinabox’s franchisees have the opportunity to claim a sizeable market share is in the servicing of small to medium businesses. The majors typically undervalue clients that spend between $2000 and $3000 per month, and that is where franchisees with a commitment to customer service can make the biggest impact. “Our top franchisees are growing really steadily and most of that growth comes from referrals,” explains Kay. “That’s down to the level of service they provide. They remember their customers names, they know them, they talk to them. That’s the kind of service that a big telco provider will never, ever be able to provide.”

Support team

For its part, Telcoinabox provides the assurance of a 40-strong support team based in Sydney. That includes a dedicated account management team that provides each franchisee with an optional quarterly performance report, benchmarked against the rest of the business; access to its Utilibill billing and payment systems; customer service teams aimed at both franchisees and their end users; and a technical support team. That leaves its franchisees free to focus on following up sales leads and growing their businesses. Theoretically, a Telcoinabox franchisee needs no technical background whatsoever. Product training is included as part of the $55,000 franchise fee.

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