Land Of Milk And Honey

The Aussie Farmers Direct Story

Former dairy industry executive Graham Adams was working with National Foods when he decided to bring the milkman back. But the home delivery idea did not sit so well with National Foods' major clients - the supermarkets - so Adams decided to strike out on his own.

In 2005, Adams launched Aussie Farmers Direct (AFD) together with a young entrepreneur - William Scott from the SMART Group. SMART Group specialises in building business through door-to-door sales. Adams and Scott began AFD's first milk and bread delivery round in Narre Warren in outer suburban Melbourne. AFD's chief executive officer, Braeden Lord, says: "For a delivery round to work you need the customers to begin with and the most successful way to attract people is to knock on their doors."

As a 12-year-old Lord says he fibbed about his age to get his first job as an assistant at the local Bakers Delight in Hawthorn. By the time he was 19, he was running the business as one of the first Bakers Delight franchisees. Lord says: "I'd got dough under my fingernails and took a gap year between school and university to learn about running the business."

After more than ten years as a director with Bakers Delight and three years as the president of its North American office, Lord decided to return home to Melbourne and look for new opportunities. He joined AFD as chief executive officer in 2007 and says: "I'm a strong believer in franchising; Aussie Farmers was a good fit for me."

The Challenge

Refining the franchise model.

The Solution

When Adams started AFD he planned to build the business up to six local rounds and focus on providing 100% Australian-made and owned produce. He never imagined the business would become so successful, so quickly. Within six months, AFD had 20 rounds in Melbourne and it was clear that the market was even bigger. Lord says: "There was an opportunity to start franchising and then the business started to grow even more rapidly."

In 2006, 12 months into the life of the company, AFD began franchising its existing corporate rounds. Lord says: "It's a different franchise model because we're not selling a brand; we're selling an established business."

An AFD franchise costs about $100,000 for the round and an extra $35,000 for the refrigerated van. Lord says: "Our franchises aren't expensive; as a benchmark an average Bakers Delight franchise is $450,000." Each round comes with a guarantee of 450 customers. Lord says: "It's a simple business model for a franchisee: all the billing, order management, new product development and procurement are handled by the holding company."

When AFD began franchising the key role of the franchisee was to be a delivery person but when Lord came onboard he knew that had to change. He says: "There was a slowly declining customer base within the rounds. We had to stop relying just on door-knocking and ensure our franchisees were the face of the community."

Some early franchises had been sold to investors and there was concern within AFD that those rounds did not present the image of "the local milkman" that it wanted. One of Lord's first tasks was to refine the franchise model. He says: "We needed a culture in which the wholehearted, personally involved franchisee becomes the hero of the business."

Lord says that AFD looks for specific characteristics in potential franchisees. "They need to be personable, hard working and fiscally astute. Franchisees need to be self-starters but should be able to function well in a systemised environment."

Lord started working on defining the roles of the head office and the franchisees. He says: "One big challenge is getting the franchisee network to understand the mutual dependence between franchises and head offices and to clarify the blurred line about us dealing with customers."

Lord's experience at Bakers Delight was valuable here. He tapped into the strengths within AFD's head office: administration, sales, drumming up new customers, managing customer details and orders. Then, working with the franchisees, AFD established some agreed expectations. Lord says: "We started by setting some benchmarks, for example, no more than four errors in a round each week. What gets measured gets done."

An error may be an incorrect or late delivery. At the end of each delivery run the driver sends an SMS to head office to identify any discrepancies on the day's route.

AFD communicates with the franchisees via monthly e-newsletters, six-weekly franchisee forums and full-time franchisee managers who are available 24/7 to support the team. It offers a range of business development tools to help franchisees build multi-round businesses. Lord says: "We encourage franchisees to build the business; the tools are really checklists so that by the time they expand to more than one round everyone is confident that it will be successful."

Lord recognises the potential for occasional glitches, given that each franchisee makes more than 800 deliveries a week. He says: "We are tolerant but we also help with defining reasons behind errors. Sometimes the route might need a bit of tweaking and our driver manager can bring fresh eyes to the problem and help reroute it."

Lord believes the right franchise model enables the business to grow with ease. He says: "With the right systems, processes and opportunities for the franchisees to expand and develop you have the model that attracts the right franchisees in the first place."

Lord's tips for running a successful franchise business are:

• Be the community face of the local milkman
  
• Accurate deliveries are just the beginning
  
• Have fun and be whole-hearted

The Result

In 2005 AFD started with a single round in Narre Warren. Now the business has 100 rounds including 55 in Melbourne, 20 in Sydney and 14 in Brisbane. AFD has franchised most rounds apart from two in Melbourne, two in Sydney and six in Brisbane. Lord says: "We used the same franchise model in Sydney and Brisbane where we establish corporate rounds and then sell them."

AFD plans to expand to regional Victoria, Adelaide and Perth by mid 2009. Lord says: "We are still only servicing 60% of the Melbourne population so there is definitely room to grow." Turnover is on track to more than triple this financial year.

Business looks promising but Lord says there are still concerns surrounding the global financial crisis. "It's important that we keep up with demand and that we continue to support local farmers."

In 2006 AFD introduced weekly deliveries of local seasonal fruit and vegetables and in late 2008 introduced meat deliveries to 30 selected rounds. Lord says: "We could expand in other ways but we know our strengths and we're sticking to what we know."

In 2008 AFD won the ActionCOACH My Business Award for outstanding excellence and the St George My Business Award for best start-up business. The company also received the 2008 Australian Business Enterprise Award and the 2008 Australian Business Best Value Award.

Retention of franchises has been strong. Lord says: "We have only on-sold about six rounds. Some investors have sold and we imagine most of them will sell. We don't need to tell a lot of people that they are not right for the business."

On a fortnightly basis AFD measures income, customers, and the dollar value of errors then ranks and publicly provides the information to the network. Lord says: "We want strong active participants and we promote the heroes within the business." AFD's benchmark of less than four errors a month has been achievable.

William Scott, Jordan Muir and Paul Tobin are joint directors of AFD. Graham Adams remains a shareholder and general manager of the business.

Lord is glad he made the move to AFD. He says: "The business is simple for people to understand; it captures our imagination from the days of the milkman and caters to busy people. It's also 100% Australian produce so it takes the guesswork out of buying Australian."

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