Jim Faces a Revolt by Franchisees

Today, The Sydney Morning Herald reported that Jim’s Group is facing a revolt by Franchisees.

For those who reside in Sydney, you would be all too familiar with Jim’s mowing. “Jim Penman, the founder of Jim’s Group – which spans 28 different franchises including mowing, plumbing and electrical with 2700 franchisees in Australia alone – faces being forced out of the company, and a class action, after a referendum held at the weekend”. (Source: Chalpat Sonti, Sydney Morning Herald, 20 October 2009)

The article goes on to say “Jim’s Group allows franchisors to be voted out by franchisees – or Mr Penman to be voted out by franchisors – if three people call for a referendum. A similar vote in 2005 found in Mr Penman’s favour.”

This article brings to light the need for founders to protect themselves. It’s often the case that founders find themselves loving life as they see their business flourish, so much so that they don’t take care of shareholders agreements, company by-laws and in this situation franchise agreements.

There have been countless records of company founders being outed of their company. An example that comes to mind is Walter Anderson, co-founder of Esprit, the high-flying, Reading- based telecoms group, lost his influence at the company as shareholders voted him out.

In my opinion, Jim Penman should have ensured his retention in the company. He established the business, he should anchor himself to the business as long as he is physically and mentally sound. Walter Anderson had little choice, he was on the board of a publicly listed company.

A good idea is like an open caucus to vulcher’s; you’ll see attacks from all directions, some of which you least expect. The keys to protecting yourself from internal attacks are forming a strong company structure, establishing a water-tight yet fair sharesholder’s agreement, practicing good corporate governance within the board room and maintaining good board dynamics.

I’ll be sure to go through each of these four points in greater detail throughout future posts.