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Published 09 August 2012 03:50, Updated 09 August 2012 07:43
Locked in: Jim Penman, now 60, is still expanding the business Luis Ascui
Jim Penman is to lawnmowing what Willy Wonka is to chocolate – innovative, entrepreneurial and wealthy on the back of it.
Like Roald Dahl’s fictitious sweet-maker, Penman is also known for a beard and hat, although Penman’s brand – stamped over franchises across Australia and overseas – is bucket hat and full beard rather than top hat and neat goatee. Both men run a business that is a household name in their local markets.
Jim’s empire started life as a full-time mowing business run by him in 1982. The first mowing franchises were sold in 1989. There are now about 250 franchisors managing more than 3200 franchisees in Australia, New Zealand, Canada and the UK with Penman’s bearded logo on the side of their vehicle or trailer.
With an average annual revenue of $100,000 per franchise, that means a total revenue of about $320 million.
The business name has grown since then to span 33 divisions across a range of services, such as dog-washing, antenna installation and carpet-cleaning, although the biggest is still lawnmowing, with 1876 franchises at last count.
Penman remains the owner of this mowing business, which in the 2011 financial year had a net income of $1.7 million, documents in BRW’s possession show.
Jim’s Group, the parent company that Penman also owns, declines to confirm the figures. The group itself, these figures show, made net income of $3.1 million from franchise fees and sales as well as the provision of services to franchisees such as insurance and call centres.
A visit to Jim’s world – a sprawling campus in Mooroolbark, a stone’s throw from Victoria’s Dandenong Ranges National Park – actually feels a bit like entering Willy Wonka’s famous chocolate factory, where the secrets of his success are to be revealed. Indeed, when BRW arrives, Penman is lecturing a group of 55 new franchisees. But unlike the image most Australians have of him, he is clean shaven nowadays.
Penman has built from standing one of Australia’s best-known franchise operations but cracks in the organisation are now showing.
Critics say the business is in desperate need of an overhaul. Willy Wonka’s colleagues never questioned his management style but Penman’s do.
“It’s outgrown running it out of his shed, or whatever,” the Sunshine Coast-based divisional franchisor of Jim’s Professional Painting and Decorating, Chris Munday, says. “You can’t run a business of this size in that manner.”
Penman says there is no problem with the structure.
“If we had 3200 employees, it would be impossible,” he says. “But what they’ve got to recognise is that so much of management is delegated to our partners. All we run is the mowing division.”
To understand Jim’s empire, picture a pyramid. Jim’s Group, the head office, sits at the top. Directly below is the layer of divisional franchisors, who are the owners of a division, be it car cleaning, pool care or in Munday’s case, painting and decorating.
They are responsible for matters such as division branding, logos, online quotation systems and marketing material. Below the divisional franchisors are the franchisors. These franchisors have the closest relationship with, and are responsible for managing and supporting, the franchisees who form the bottom layer – the Oompa Loompas, in Willy Wonka-speak.
The structure of any franchise business needs to be reviewed every three years to make sure it is appropriate for the economic conditions, the managing director franchise consultancy DC Strategy, Rod Young, says.
“What we often find is that the master franchisee is very good at selling franchises but not good at the ongoing maintenance and training and development of an individual franchisee,” he says.
Some of the tension becomes apparent in this structure. Penman’s passion for his franchisees is well-known. Penman boasts that he gives each franchisee his mobile number and is open to their call at any time. While thrilling for a franchisee to have a direct line to the company’s eponymous founder, this grates against the formal channels through which the organisation is structured.
“We’re not accorded natural justice,” a Sydney-based mowing franchisor with 280 franchisees under him, Peter Hansen, says. “In the event a franchisee has a problem, if we don’t fix it and provide some remedy, then it’s understandable they want to go to the next level. But if they bypass you and you don’t get that opportunity, then you’re told by the MD – namely Jim – who says: ‘I’ve got so and so and he’s got a problem’ without giving us an opportunity to present our side of the issue.”
Penman says the relationship a franchisee has is actually with two parties – both the franchisor and Jim’s Group.
“The relationship between a franchisee and a franchisor is terribly unequal,” he says. “Our contract is designed, in effect, to reverse that.”
Penman rejects the notion that he favours one constituency – his franchisees – over another – the franchisors. He mostly tells franchisees who call that they should go along with their franchisor, he says. “It’s only a minority where the franchisor is possibly doing something they shouldn’t,” he says.
The sour relationship boiled over into public view in 2009 when a group of disaffected franchisors, unhappy with what they said was the way he arbitrarily wanted to change their contracts, sought his removal as head of the group. Penman says the tension arose because the franchisors weren’t serving their franchisees well enough and he was on their case to do so.
“I was pushing it very hard – probably more than I needed to,” he says.
Munday counters: “That’s selective memory. There’s the world according to Jim.”
He claims franchisors were angry because changes had been made to the franchisors’ manual – “the bible of our activity” – without proper consultation.
Penman agreed to reverse changes he had made to operating procedures. Since then, things have run more smoothly, Munday says.
There is something black-and-white in the way Penman views the world. He comes across as a literal person, with few social graces. He does not do small talk. He does not try to lighten an interview with laughter. People around him say Penman has Asperger’s syndrome, a mild version of autism that limits the ability to communicate.
Penman does not deny the assertion but questions it. “People like to put a psychological label on something or other,” he tells BRW.
“A more accurate way of saying it is: ‘I’m an extreme introvert.’ I hate crowds. I’m not good in any mixed gathering. I can talk in front of 1000 people OK but put me into a place like a party and I freeze up. I hate it.
“I’m not very socially involved. I spend all my time with my kids, with chess. I don’t know what you call that. Is that Asperger’s?”
None of this detracts from a success record that is undeniably impressive. “People say, ‘You’re different’,” Penman says. “You often find that highly creative people – which is what I am – are very intensely introverted.”
The next move for Jim’s empire is into insurance. From September, a division owned by head office will sell insurance products. The brokerage already exists – since April last year Jim’s Group has been selling all franchisees compulsory public-liability insurance, with optional add-ons.
It hasn’t been an easy process, however. The division is already into its fourth head – one of whom was Penman’s son, who had no previous experience in insurance.
“It was bad in the first year,” Penman says. “I got the wrong people involved. I should have got a search firm. I didn’t understand the industry well enough. To a large extent the problem was with billing. We didn’t bill properly. When we did, we didn’t collect all the money.”
This year, he says, things are much smoother.
There are still many other service niches Jim’s can move into. While 90 per cent of revenue comes from franchised sales at present, that will shift over time to such a point where it no longer even makes up the majority, he says.
“I’m not really locked into franchises,” the 60 year old says.
Insurance will be a company-owned operation. Jim’s Plumbing is also a name licensed to an Adelaide-based company that offers plumbing services across the country. Penman is looking to tie up with other established businesses and license the Jim’s brand to them.
Penman talked earlier this year of a public listing but he says that is no longer on the cards. He also considered a sale to franchisors and franchisees in 2003 but that didn’t go anywhere.
“It wasn’t well-subscribed, so we just dropped it,” he says. “There wasn’t the demand there.”
The man who is now in his fourth marriage – and has 10 children ranging in age from 27 to three – muses that succession might be a reason to consider an initial public offering as there is no guarantee any of them would want to take over from him.
And this leads to one final point. Penman and Willy Wonka are two entrepreneurs to have built up fantastic empires on their own terms. There is an obvious contrast between both characters – Penman is real and Wonka is fiction. But there is something else, too.
At the end of Charlie and the Chocolate Factory, Mr Wonka names a young Charlie Bucket as his successor. Penman, however, has no intention of going anywhere.
“I’ll retire when I’m dead,” he says.