Mark Rusbatch, CEO of Mister Minit Australia, reveals how a business dependent on foot traffic is embracing technology to overcome the general retail malaise and how turning franchisee is unlocking profitability for independent operators.
“One of the things we’re very conscious of is that the market is changing at a faster rate. It’s not only enough to change and modify our offer and ensure that we’re relevant, but we have to do it faster,” he says.
Mister Minit is one of the most successful franchises in the country, solving in excess of 10 million problems a year with its extensive service offering – from key cutting, to watch repairs, to battery replacements and more.
Speaking on the My Business Podcast, Mark dispels the common misconception that practical services are unaffected by marketplace disruptors and explains how the business is diversifying its offering to keep up with its customers’ changing needs.
Tune in to hear how Mark is investing in complementary distribution channels to improve the running of Mister Minit, why you could soon see a higher representation of female franchisees working within the business, and hear his tips for business owners looking to take their established businesses to a franchise model.
Enjoy the show!
Adam Zuchetti: Welcome to the My Business Podcast, everyone. It's Adam Zuchetti, the editor of My Business here. I've got my regular co-host, Andy Scott. I was going to call you Stuart for some reason, but Andy is here.
Andy Scott: I don't know why you'd do that.
Adam Zuchetti: I don't know either. I've got Stuart on the brain at the moment. Today's guest in our studio is quite an interesting one. He's the head of the Australian arm of a global business that has operated here in Australia since 1967. It has nearly 300 stores across Australia and New Zealand and Southeast Asia. It has been recognised as one of the country's top franchises. It's with great pleasure that I welcome Mark Rusbatch from Mister Minit Australia. Mark, thanks so much for coming in.
Mark Rusbatch: Thank you for the invitation.
Adam Zuchetti: Now I suppose there's two key things that we really want to discuss with you today. One is franchising. You're a major franchise business. As I just said, you have been recognised as a very successful one in this country. Another one, and I think we'll kick off the discussion with this, is about disruption and about technological change. Now as a business, you do things like key cutting, watch repairs, shoe repairs, all that kind of thing. A lot of people would say that's a very traditional business and it's very dependent on foot traffic. Therefore you wouldn't be exposed to digital disruption at all, but we were having a really interesting chat just before we came on air and you were saying that that's not quite the case. Can you take us through how that's not the case?
Mark Rusbatch: Sure. Thank you, Adam. Look, ultimately we have to be where our customers are. If our customers are online or our customers are looking to engage with us in different ways, we have to be there. I think to say that because shoe repairs can't be done online, at least at this point, is very naïve from our point of view. I think the other thing that I'd say in terms of practical reality is that if the online story is affecting the foot traffic in the shopping centres, then potentially it also affects us. What we have to do is ultimately ensure that we are where our customers are.
Adam Zuchetti: How do you actually go about doing that? Being shopping center-based, you're quite largely dependent on other larger retailers ... The shopping centres, supermarkets, things like that to attract people into the centre. Then you benefit off that foot traffic. How do you really ensure that you're bringing in customers to your business if those other retailers are struggling to get the foot traffic themselves?
Mark Rusbatch: Sure. I mean ultimately, the single most important thing we do in terms of building our brand and our reputation is ensuring every single customer that comes to our counter has their problem fixed. This year we'll do something like probably close to ... We will fix close to 10 million problems. The reputation and the trust that builds off that, especially with a brand that's just about 60 years old, is inherent in that. I think then complementing that are the other forms of communication. I mean we've invested quite heavily, as most business have these days, in the whole social media story and looked to provide advice. Certainly look to answer questions. The sort of things that would support or even encourage our customers in terms of visiting our shops.
Equally, we are also investing in developing complementary distribution channels. For example, mobile in terms of again there are some customers who don't come to shopping centres and some of those services where we've got a number of pilots out on that where we provide a mobile service. Again, it's the customers that ultimately determine where we are.
Andy Scott: Mark, we were talking beforehand and we were talking about the genesis of Mister Minit. Remind me, it was you who fixed ladies' heel bars in Brussels in 1957?
Mark Rusbatch: Yeah, great story. 1957 was the launch of Mister Minit. It was actually originally While You Wait Heel Bars. It was for the ladies in Brussels who would break their heels on the cobblestones. The traditional shoe repair was at that time, you'd have to take them along and wait for them to be fixed and that sort of thing. The MINIT story was, "Come. We'll fix it now." That was the actual start of the whole While You Wait service, which operates even today.
Andy Scott: In terms of the total number of services I could get at a Mister Minit store now, do you know how many that is roughly?
Mark Rusbatch: Well we have what we would say were our four courses, which is shoe repairs, key duplication, engraving and watch servicing. Then within each of those, there are a number of subcategories. For example, in shoe repairs we'll do bag repairs. Within key, we'll do auto key or do remotes. Within watch servicing, we will do other things, such as battery replacement for handheld devices, those sort of things. We're also developing a number of other related household services. For example, in forty-odd of our shops, we provide mobile phone repairs.
Andy Scott: You've gone from one service to many, many services.
Mark Rusbatch: Very multifaceted. Yeah.
Andy Scott: What was the key driver for that for you to diversify?
Mark Rusbatch: In the end, we looked at it and we said, "Look. We're fixing problems." That's what we do. We always talk about fixing as many problems as we can. What we're also looking at is the fact that we're right in the middle of that whole "do it for me" trend, where people are increasingly outsourcing household and personal services. If they trust us, for example, to do their shoe repairs, as long as we develop the skills and the competency and so forth, they will also trust us to engrave their family heirlooms or to replace their watch batteries and so forth. The end objective is that we are in that whole household and personal services sector and we just want to make people's lives just that little bit easier.
Adam Zuchetti: It's interesting that you've had to develop over time. Coming back to the technology aspect, you were saying you do auto keys and things like that now.
Mark Rusbatch: Sure.
Adam Zuchetti: Which 20 years ago, they just didn't exist. It used to be the physical metal key and that was it. Has that been a really difficult thing to try and implement into your business? To take those really traditional things ... We've always cut keys this way. We've always done shoe repairs this way. Adapted as things like electronic keys and keyless FOBs now, as those things have come into the market. Has that been really difficult to try and get around?
Mark Rusbatch: Yeah, very good question. The starting point has been very clear what we stand for. Again, we go back and we want to fix people's problems. We want to, as I keep saying, make things a bit simpler. Make people's lives a bit simpler. What we really have to do is say if it relates to key duplication ... For example, if the technology is changing, if the market is changing, if the consumer need is changing, then we must change. If we don't change at least as fast as the market, then we get left behind. What I regularly talk to our own team about, and they probably get sick of hearing me say it, but I say, "If we're not careful, we can be very good at what we do, but essentially we're the equivalent of a chimney sweep: you can be a very good chimney sweep, but there's not much of a demand for chimney sweeps anymore." So we must move at least as fast as the market.
If I take the auto key story, we were very early adopters in that. We spent many millions of dollars certainly in terms of the research, in terms of the development, the technology and most importantly the training. Essentially we clone the computer chips or we duplicate the transponders in the key, which is the little chip that both opens your door and starts your engine. Yeah, it's been a big project. It never stops because of course car technology continues to evolve, but again, our job is to ensure that if a customer has a problem, we fix it.
Andy Scott: You mentioned the millions that you invested to develop the key FOB and the chip clone, the technology. Do you see investing into the business as vital for continued growth?
Mark Rusbatch: Absolutely. I mean again, one of the things we're very conscious of is that the market is changing at a faster rate. It's not only enough to change and modify our offer and ensure that we're relevant, but we have to do it faster. Whilst we're not quite like a pharmaceutical company in terms of the R&D and the products coming through, in many respects, there are parallels. At any given time, we would have maybe eight to 10 pilots in terms of additional or add-on or sub-services to what we currently do. We've got to not only look in terms of today, but have some sort of anticipation in terms of going forward as well.
Adam Zuchetti: I was going to ask about how proactive versus reactive you are in things like this. Are you finding that you're effectively chasing after consumer problems as they arrive or are you really forecasting, "This is a new product. This is going to present challenges to customers in the future. Let's start now with thinking about what problems that's going to present and how we can fix them"?
Mark Rusbatch: Sure. We tend to be very orthodox in terms of the whole strategic planning and review process. We do our annual business plans, all of those sort of things as any good business does, but periodically we will stop and we'll say, "Okay. What is the next five years going to look like?" We will really invest a lot in it. We commission a fair amount of research and at least we have a sense of the direction. That's both in terms of some of the technology and the service or product developments, but it's also the consumer changes. For example, it's the form of distribution of these services, which ties to the whole online thing. Then we have a very clearly defined strategy that provides the parameters and the direction for everything we do.
It is very much forward looking. We complement that with two further ways. We have a relatively small number of what we call supplier partners. For example, even in something as simple as shoe care, we work with a company, it's called Waproo. It's probably one of the last Australian companies that actually manufacture here in Australia. In fact, they've got a factory down in Dandenong, and we work with them in terms of the development of the products and the services that we can provide. For example, scratch repairs on your shoes, which people wouldn't typically think about. We work with those supplier partners. We have an Italian technology and manufacture provider that help us with the auto keys and so it goes on.
We have those supplier partners and then the third part of the equation is we tend to run a lot of pilots. We've got 300 odd shops. At any one time, we might have 15 or 20 of those shops doing test pilots. We'll look to validate a service. It might only be a very small service. If it works, we'll broaden. If it doesn't work, we'll just quietly close it down.
Andy Scott: Do these stores put their hand up to be part of this pilot?
Mark Rusbatch: The way we work is we have what we call the Minit Masters Club. Most franchise systems have what they call a franchise advisory council. Ours is based on the fact that we want our best franchisees to be part of that. They're required to meet the criteria. They've got to be in the top 20 against a whole bunch of customer service metrics and that. You've got the very best franchisees and many of them with a number of shops that are part of that group. By matter of definition, they're always very keen to be in there first. They like to feel that they've got a headstart on it, so they're enthusiastic. If you're going to do a pilot, you've got to have your best people doing it because you don't want it not to work because of lack of enthusiasm or lack of execution. If it doesn't work, it's because perhaps there wasn't a need for it in the first place.
Adam Zuchetti: Speaking of franchising, you were saying that you are quite a different model in terms of what is traditionally known as franchising. Can you talk us through exactly they operate?
Mark Rusbatch: Sure. It goes to the underlying principles of what drives our business. There are two things that drive our business. Firstly, we have to deliver a great customer offer. By great customer office, the customer has to be happy, but it's got to be relevant. That's the first part always. The second part, and we are a people-based service business, is that we have to have great people. We want the brightest and the best to work in our business. We want them to be motivated and enthused because that enthusiasm will directly relate to the type of service a customer gets. If we look at that, we say, "Well the thing that will drive that, especially in a service business, is having ownership or having a stake in the business."
Back from 2002, we started franchising. Most of our shops are franchised today. The difference between our system and many others out there, and it's a point of difference ... I'm not saying it's better or worse, but it's a point of difference is that we don't sell franchises. We will only franchise to people we know and we know well. Even if they've worked with us for in some cases 30 odd years, they are still required to go through the criteria. They need to meet base technical assessments. We pop them through a whole range of other processes. They go through their induction, that sort of thing because in the end, it is that person that is going to deliver the offer and their motivation levels.
We grab them them a franchise. It's a very small feat going in. Mister MINIT provides the capital for the fit out. We also maintain the head lease. We're prepared literally to put our money where our mouths are. Ultimately we will only make a return if the franchisee does. We get no upfront return at all. In fact in the short-term, it actually costs us to franchise. We're different to most other systems out there.
Adam Zuchetti: You're very heavily invested in each and every store then.
Mark Rusbatch: Absolutely.
Adam Zuchetti: How does that go in terms of I suppose lines of authority, for want of a better expression? Who is the ultimate decision maker about that business if corporate and the franchisee are both working alongside one another?
Mark Rusbatch: We're the franchisor, so we determine what the offer is. If you're part of a brand, there have to be rules. Our customers certainly would expect if they shop at a Mister MINIT shop that they can trust us, that we will honour and we'll do what we say we'll do. Therefore everyone working in the business, including our franchisees, will have to live by those rules. Now having said that, we're also about continuously improving our businesses and much of the best information comes directly from our front line certainly and from our franchisees. They're very enthusiastic.
I might just if I could perhaps tell a story. It's of a franchisee we have up on the Central Coast. His name is Rob Taylor. He had his own business for 23 years. He had five shops, 23 years. We bought that business off him I think about four years ago now. He said to me, "Mark, can I be a Mister Minit franchisee?" I said, "Rob," I said, "I'm not making that part of the sale or purchase agreement." I said, "We'll buy your business. We like your business. We'll give you a fair price." We did. We bought all his shops. "If you meet the criteria, then we will consider franchising." The two things were separate. I said, "Rob, you've been your own man for 23 years. Are you sure this is what you'd want to do?"
Andy Scott: Absolutely.
Mark Rusbatch: Anyway, to cut a long story short, he went through it all. After 23 years, he had to do our technical assessment. He had to come and do the induction, the whole thing. I talk to him from time to time and he said to me, "Best thing I've ever done." He said, "I make better returns than I ever did." He said, "I feel I'm playing in the Major League." I said, "What about the rules in it?" He says, "Nope." He says, "I wish I knew when I had my own business what I know now." Again, we've got to do things better. However, I think that's a good example. We have another successful franchise here. I won't mention his name, but he had his own business for 15 years and sadly actually went into administration. It was a pretty tough gig coming out. He worked for us many years and he's now a very successful franchisee. He says the same thing. A number of our franchisees had previously worked for themselves. If you're part of the brand, there's got to be rules.
Andy Scott: What is it specifically that these independent or formally independent operators find that they can make better margins under the franchise brand? What specifically is it, R&D, that you're doing to offer new services? Because they're so focused on working in the business? They're not on it. Is that it?
Mark Rusbatch: Yeah, there's a bit of that. Certainly we've got enough scale that we can invest in that sort of forward looking approach. It's not just about managing your business week to week or month to month. I think the other thing that I would say, and this is the very crude way I describe our systems in terms of the value that we provide, what we look to do as the franchisor is take away all the crappy stuff in terms of doing the leases, in terms of doing the fit outs. Even in terms of the supply, a lot of the administration stuff and just the things that are just a chore, but they can consume a lot of time. What we want our franchisees to do is really only do two things. That's what I say. "Do two things." I say, "Love your customers to death. Really look after them and grow your people. Train your team." If you do those two things and do them well, you've got a fair chance of being very successful and we'll do the crappy stuff.
Most small business people actually don't want to talk to the landlord too much. They don't actually want to have to go through the pain of doing lease renewals and having to do fit out things and so it goes on and on. We try to make it as simple as we can and do ... As I said, do the crappy stuff that you've got to do if you're in business, but it doesn't have a whole lot of value to it.
Andy Scott: You mentioned that the investment that you make hand in hand with potential franchisees, obviously the processes that they have to go through. It seems a long process. Are you an advocate of slow is strong in franchising?
Mark Rusbatch: Absolutely. What we look to do is do it for the right reasons. The fact that the Mister Minit brand has been around for sixty-odd years gives us a longer-term view. In the grand scheme of things, 12 months, 18 months, two years is not a long time. As I think I've said, we have franchisees that have been with us well in excess of 30 years. Behind every one, there is a fantastic story. Frankly, even the training. Just to get to what we would see base entry-level training qualifications takes 12 months. That's just base. Then the training never ends from there. Yeah, we're tough on it, but we're tough on behalf of our customers.
Every single person that works within the Mister Minit brand, and it doesn't matter whether they're a franchisee, whether they're employed by the company or whether they're employed by a franchisee, is required as part of their final assessment to come to our training centre in Sydney. They have to spend a week there and they are assessed. They've gone through 42 modules before that. If they don't pass the assessment, they don't work.
Adam Zuchetti: I understand that you've got quite a lot of women who come into the business as franchisees, but it's not a traditional business that you would associate a lot of women with. Why do you think that is?
Mark Rusbatch: Well the name Mister Minit I guess is a starting point, but the historical shoe repair industry has been very male-dominated, of course. Most people have this image of what a shoe repairer should look like. However, there is nothing inherently in the work that requires you to be a male. Nothing at all. There's a bit of physical work, but it's not particularly so. Probably no more so than someone that was working in a kitchen or that sort of thing. We've got a good sprinkling of female franchisees. We have strong representation in terms of the leadership team of females. You've got to be careful in terms of generalisations, but if I was to make one, you often see with the females probably even more attention to detail.
What we should also keep in mind is that 70 per cent of our customers are female. Sometimes, not always, I think female customers, especially if they've got a lovely pair of Luis Vuitton shoes or whatever quite appreciate the fact that there's a lady on the other side of the counter. We've got franchisees there again. I think of someone like Karen Shaw, who has got the franchise up in Garden City at Brisbane. They've been with us over 25 years. Just fantastic people. Then we've also got a good wave of young talent coming through, both female and male, that I think increasingly over time, we will see a higher representation of females in the business as it just becomes normal.
Adam Zuchetti: Just to finish up, you've been with the business about 17 years? You said the turn of the century.
Mark Rusbatch: Yeah.
Adam Zuchetti: You've transitioned the business from being company-owned stores to a franchise model. I assume that was to help scale the business.
Mark Rusbatch: Not particularly, no. We do it because ultimately, we think it provides a better offer to our customers. I think in very simple terms, and we try to keep things simple, if we perform well in the market and we build a reputation and trust with our customers, then we can build a good business. It's as simple as that. We did not and we do not need franchisees' capital to expand. I know under the traditional model, franchise systems will use franchising to access capital. We don't require that capital. We've been around a long time. We've got a good balance sheet. However what we do need are their hands and their hearts. That's the much bigger deal.
Adam Zuchetti: Having gone through that whole process and you've come to now 2017, what are the biggest pieces of advice you would give to anyone else who's looking to take their own business or established business into a franchise model?
Mark Rusbatch: I think I'd say two things. Firstly, sometimes I hear companies say, "We're a franchise business," as if franchising is a business in itself. Frankly, I take a different point of view. I think franchising is a means by which you deliver something. It's a little bit different how others see it, but I'm very clear that the first thing that you need is you need to have a product or a service that someone wants. There's got to be a sufficient demand that you can commercialise it. You've actually got to have a business model whereby you can actually make money out of it. I think that's the first thing. You've got to have something in the market there is a demand for and that's sustainable because if you don't have that, it doesn't matter. Be very clear on that.
The second part of it is you've got to be able to standardise it. You've got to have systems behind it because franchising ... People come to the franchisor and there's a good faith expectation that they are providing something that has proven that will add value. You've got to have the systems and processes behind it. The third part of it, and I personally feel very strongly on it, you've got to have an ethos of doing the right thing. Ultimately, you've got to act in good faith. Sometimes there can be that tension between the short-term and the long-term, but ultimately you've got to say, "What's the right thing to do?" I think if you focus on that, then you have a much higher chance that you will be successful. You'll just feel better about your life, anyway.
Adam Zuchetti: Yeah. Those are some great words of advice there. Thank you so much, Mark, for coming in and speaking with us.
Mark Rusbatch: Thank you for the invitation.
Andy Scott: Really appreciate you sharing your stories with us today.
Adam Zuchetti: Mark, if anyone has any questions about Mister Minit, where can they go?
Mark Rusbatch: Sure, we'd love to hear from them. We've got a toll-free number. 1800 086 786 or you can get us on Facebook or through our website, mrminit.com.au.
Andy Scott: See you guys.
Adam Zuchetti: Bye.