Part 9: The Franchise Guru.

During 1978 as the trading at Matthew James became increasing difficult, I had developed a strong interest in USA Retail Franchising. I could see that (as a wholesaler) having “captive customers” was obviously beneficial and to grow such a chain without using your own capital, doubly so!

Then there was the self motivation of “owners” rather than employees, - I wanted to know more. However in the UK it was not at all obvious where to go. Based on what I could glean from articles in US houseware trade magazines, I fashioned a draft “prospectus” for how an electrical / houseware franchise chain would function. This was part of the preparations for the trip to the USA mentioned in Part 8.

All my research pointed me in the direction of one man, Raye Elliott.

So in the final months of 1978, I wrote to Raye enclosing my document, a letter explaining I would like to get into franchising, and my CV - such as it was.

I was delighted when I was invited to visit Raye at his office - an unassuming detached house on Tattenham Corner, Epsom.

Raye had only set up “REA” Raye Elliott Associates in 1975, but had a wealth of experience behind him. During the previous 10 years, he had developed the Ziebart vehicle rustproofing franchise in the UK with over 115 franchisees appointed.

To help understand Raye, I should note that whilst this article only concerns franchising, Raye also wore “another hat” enthusiastically motivating and controlling a direct sales team for Kirby Vacuum Cleaners.

So, early in 1979 Raye “took me in” as a - self employed executive - paying me a basic fee for the days I worked, and (very soon), a commission on franchisee recruitment - once approved by the franchisor.

My initiation was to sit-in with Raye on several “presentation meetings” with “prospective licensees” of different franchisors that Raye acted for.

Wow, on every occasion I felt that Raye knew the business involved inside out. The prospect would get a feel for the history of the business, the franchisor’s role, the franchisee’s role, the costs of establishment, the details of how territories were allocated, an overview of the key points in the licence, and how the process would proceed if the person was interest in doing so. There was no question he could not or would not answer, no aspect he was not happy to explore.

He could do 3 meetings (or more) in one day, regarding completely different businesses - but each one would be totally focused, fresh, and exciting.

As spontaneous as these meeting seemed, I quickly learnt they were in fact the result of endless hours of research and practice. Raye left nothing to chance, behind the scenes, he was obsessive about “details” even tiny ones.

I remember on one occasion his PA Janet Cartledge came to him with the “final” prepared papers for CITY-LINK parcel deliveries. These papers were all typed individually - no word processors. Raye insisted every sheet be retyped as he perceived a slight misalignment of the text on the page. The second attempt was also rejected. Janet was a very patient person.

Raye was very much in demand. His diary was full with companies looking to franchise from small start-ups to major public companies. His ability to segment his time between activities was amazing, and he would start every new meeting (no matter what stress the last one involved) as if it was the first and most important thing in his diary that day.

Shortly after I joined, he was approached by the Cookmate Reject Shop. This proved to be an amazing opportunity. The company was owned by Brian Howlett and Ron Faulkner and based in Aylesbury Buckinghamshire. I will feature this and some other clients in the next issue, but this contact with Cookmate would ultimately lead me back into wholesale / retail. More regarding that in later issues.

I was soon allowed to start initial presentations and second meetings with potential franchisees. The first meeting would either be at an existing licensed site, or the home of the applicant.

It was the second and subsequent meetings that were most important. These were meetings where we went in great detail (line by line) through the legal licence agreement and the set-up costs & first year cashflow of the new business.

I think the reason Raye felt I would be a worthy “right hand man” (there were no other “associates”), was my previous business experience of being “self employed”. I could relate to the “adventure” the applicant was considering. It also meant I felt comfortable covering this spread of documents. Raye thought it important that the person who “first” represented the company to the potential licensee / franchisee (and had established a relationship) should be the one to help in the understanding of the key areas (finance & legal), rather than introducing a separate person to go into the accounts side, and yet another for the legal.

The “would be” licensee was then encouraged to seek independent professional advice before committing to proceeding, and we were confident that by then we had clarified any concerns and knew enough about the applicant to decide if they should be put forward to the Franchisor. The Franchisor always had the final say as to whether the applicant was suitable, and of course the licensee could change his mind at any stage.

This “complete integration” of the negotiating process was key to Raye’s approach and also his approach to the preparation of the franchisor’s offer.

A first meeting with a “would be” franchisor was always interesting and Raye allowed me to participate quite soon after I joined him.

Normally the owner (or two or three executives) of the company would attend and Raye would invite them to explain their business, why they wanted to franchise and what preparation steps they had taken so far. Once this was covered, the company representatives would invariably have a long list of questions about what they should do.

How much should we charge?, how long should the licence be for?, how much training will be required?, what royalty should we charge? and on and on.

Raye politely declined to answer any of these questions. His position was that until he had conducted a complete audit of the business, he could not judge any of these matters - and it was because of that thoroughness that companies came to him for assistance.

At this time the fledgling British Franchise Association - BFA (founded in 1977) had around 25 members, and perhaps the majority had at some stage sought assistance from Raye.

Raye Elliott Associates was never a member of the BFA as Raye had already joined the International Franchise Association - IFA founded in the USA.

The IFA started in 1960 as a meeting between a small group of entrepreneurs to discuss the state of franchising. During that time, the world was changing at a rapid pace, and the group was worried this would affect their businesses. Dunkin’ Donuts Founder Bill Rosenberg cut through the meandering discussions by slamming a $100 note on the table and demanded they needed to start an association to deal with relevant political and legislative matters. It was that day the IFA and its annual convention was born. In late September 1980, the IFA three day convention was held at The Hilton Hotel in London. Raye and I attended throughout.

The UK Franchise Scene

In the UK, Raye, a charismatic and sometimes controversial?person, was known and respected by all the key players and influencers at the time. This landscape included:

Consultants: Andrew James - Edinburgh, John Gooderham - Dyno-Rod, (part of Jim Zockoll’s group - Surrey, David Acheson - Kentucky Fried Chicken, Spud-U-Like, & British School of Motoring, London, Richard (Dick) Crook, - Kall-Kwik - Feltham ,and slightly later, Roy Seaman - Norwich.

Franchise Departments in Banks: John Perkins - Barclays, Peter Stern & Tim Knowles - NatWest,

Solicitor: Martin Mendelsohn - Eversheds (author on many books on Franchising), Martin probably created the definitive franchise licence agreement that was much “borrowed from” by most of us in the industry at that time.

Doctor John Stanworth - academic - published many research papers while affiliated with University of Westminster.

Other Notable individuals: Tony Jacobsen - served as consultant and first lead director at The British Franchise Association (BFA) for 6 years, Tony Dutfield, Wimpy (succeeded as second lead director at the BFA) - Brian Duckett, SafeClean, Alpine Double Glazing, The Franchise Centre

The BFA

The market was well served (and is still today) by: Franchise World Magazine first published in July 1978 by Bob Riding.

Franchise World Magazine is still published by the same family, now with Nick Riding) Bob’s son, at the helm. Bob also pioneered franchise conferences where franchisors could present their business opportunity to potential franchisees. For the publication, he was never taken in by the Franchisor’s hype. He would always try to help the franchisor present itself positively, but he wanted “facts” not theories, what has been “achieved” rather than a list of 200 target towns. Bob could certainly see through the waffle.

Many of the personalities listed above would assemble at REA’s office on the first Saturday in June - Derby Race Day - at Epsom Race Course (just a short walk away from the office) for Raye’s lavish open house reception for clients and friends.

Paying the bills

REA had a quite a complex fee structure which included (after the initial free meeting): (These are 1980 prices)

First Phase:

A) For preparation of overview of the companies suitability for franchising say: ￡2,000

B) The preparation of the Licence Agreement draft, Prospectus, and demonstration cashflow say: ￡10,000

C) A fee for preparation of the operating manual - ￡ - no limit.

Second Phase:

D) Retainer Fee between ￡2,000 - ￡5,000 p/a

E) fee for holding negotiations with potential licensees (only payable if the franchisee completed say: ￡2,000 each

F) a royalty on all sales of the new franchisee network: say 1%

This was NOT “pick and mix”, Raye would only take on the franchie “sales role” IF HE had prepared all the relevant documents.

Raye had found out the hard way that when he had tried to negotiate on behalf of franchisors who had gone to a PR company for the prospectus, their accountant for draft franchisee cashflow & setting up costs, and their solicitors for a licence agreement, the 3 documents would never tie up, and these inconsistencies could lead to a breakdown in trust with the potential franchisee. Worse, the resolving of these problems would result in inconsistent licences with some franchisees having “special” terms.

Raye was not providing a “document service” as many of his later competitors did. He really wanted to see the success of the franchisor and its franchisees, so the above situation was intolerable. Raye really did want to “Build Empires”

In the main, the businesses Raye politely declined to take on, failed the test of having a unit / branch operating at “arms length”. Some were substantial and successful companies, but they had not yet worked with a “remote” entity. They had not demonstrated they could divide the “essential skills, knowledge and ingredients” that the licensee needed (via training from the licensor), from the “secret magical business / product formula ” that made the licensor really special, and would be retained solely in the possession of the franchisor.

A few companies took this advice on board and later came back to Raye.

Raye was a workaholic and could often be found in the office over the weekend in his jogging suit, the only time he was not immaculately dressed!

His wife June Elliott took care of the accounts, and (very bright) daughter Kim Elliott was drafted in on occasions to support Janet Cartledge in document preparation. I only occasionally met Ray’s other older daughter Sheree Elliott.

During his career, he personally become a franchisee (at least 5 times over) with different franchises including Vinyl Master (for whom he appointed 20 franchisees in the first year 1977), Power Rod, & Seekers Estate Agents. He also adopted and developed several franchises in his own right including: Great Red Rooster Egg Company, Area Tent Hire, Breath of Spring, and others. You may spot all the above include “REA” in their names.

Soon after joining Raye, I was very much in a full time job, and more!

In the office meeting with franchisors, in the evening, calling franchisee prospects to fix appointments, but mainly “on the road” visiting prospects for meetings. I was driving over a 1000 miles a week, and thought nothing of setting off from home at 5am to have a meeting in Liverpool, or Exeter, the next day in Doncaster, or Norwich. For Scotland, I would fly up to say Aberdeen (hire a car) and try to string some appointments together down towards Glasgow, but there was little opportunity to “plan routes” we reacted to where keen interest was shown.

With this amount of driving it was perhaps inevitable that a few “incidents” would occur. There was the motorcyclist overtaking me on the left - at the same time I was turning left, we had a brief “ride” together. There was the spinning sheet of metal flung up from the tarmac by the truck in front (on the M1 motorway) that aimed right for me, cut a “slice” completely through the bonnet and then whipped along the side of the car hitting (and cutting through) every panel on its way. If it had hit the windscreen I would not be writing any of this!

One day my car was in for service, so June Elliott lent me her sporty dark green Triumph car. Again on the M1 (and again very early in the morning) the Front nearside wheel CAME OFF. It is quite alarming to be overtaken by parts of your own car - it shot ahead of me and fortunately bounced into the hard-shoulder. When I eventually called the office and explained what had happened, I was told by June this was “impossible”, I think Raye’s reaction was the same. I assured them the impossible had indeed happened.

The most serious accident was on a return journey from Chester in the north of England. This is recorded indelibly in ”slow motion” in my mind.

On the outskirts of the city (near Tarvin) I was on a long stretch of the A54 road - so traffic travelling in both directions. Good visibility, very light traffic. There were not many people around - I noticed in the distance three adults and a child (of about Ten) walking on the pavement on the other side of the road with their backs to me. Suddenly the child ran out into the road and crossed diagonally with her back to me. If the rest of the family had stayed on the pavement I could have easily steered around the girl - but they all charged after her - so spread out that the entire road now had pedestrians on it!

I stood on the brakes, and had probably reduced speed to 10 miles an hour or so, but the girl was hit - she came up on the bonnet - and then off - and landed at the foot of a tree. I was out of the car in a flash and saw a door open in a nearby house. I was in - grabbed the phone and dialed 999 - as soon as I finished I was out again and at once (and coincidentally) a police car arrived.

Fortunately for me the father of the girl immediately explained to the police that his daughter was totally deaf, that they were on holiday from Ontario, Canada and she was not used to looking in both directions for traffic. In fact there had been a similar incident a few days before. The girl was crossing the road because she knew she was opposite her grandmother’s house - the very house I had run into to use the phone.

I heard later that she had made a full recovery. I also got an invoice from the Ambulance Service - I had no idea such a “charge” existed - I think today it is about ￡250.

We Build Empires

The REA “We Build Empires” 8 page brochure, in a black and gold cover was prepared by Stuart McCrudden Associates of Great Braxted, Essex. This company also worked with Highway Windscreens who will be featured in a future issue.

I only worked under the REA banner for about 2 years. During 1980 I had several discussions with Raye about “franchising the consultancy” itself. We had had a worrying number of enquiries from individuals who “presented” as potential franchisors - but really were fishing for knowledge. Some would go on to set up rival consultancies. Raye was reluctant (I never really understood his reasons) but eventually I floated another Idea. I would set up a company under a new name and Raye would be a shareholder. I know Raye was disappointed that I was going to “fly the nest” but amazingly we came to an arrangement and I left REA at the end of 1980.

Before leaving REA I had introduced my replacement - a certain Jeff Frankling - see previous issues. Jeff remains in franchising to this day! (Dor2Dor) Jeff has made his mark with the website Franchise Local, now under the care of his son Will Frankling who as MD has made it an essential resource - see link below.

In a future issue I will look at Franchise Concepts Ltd (in which Raye initially held 25% of the shares), but before that, in the next issue, I review a few of the REA clients active during my period with the company.

Raye died aged 60 of leukemia in 1996. He worked with cancer charities raising funds right up until his death.

Note: Tattenham Corner was the site of the death of Emily Wilding Davison in June 1913. Emily was a Suffragette, she ducked under the guard rail of the track and was hit by the king’s horse.

It was also Emily who hid herself in a broom cupboard in the Palace of Westminster on census night 1911 so she could record her address as being the House of Commons.