​Sam White: A Franchise With a Difference

by Adam Smith24 Sep 2014
Sam WhiteLoan Market chairman Sam White says the company’s move to a franchise model was about empowering brokers, not restricting them

After establishing itself in the market as a branded brokerage, Loan Market recently made the move to a full franchise model. While the company’s branding had always been a key part of its overall strategy, the decision to jump fully into the franchise model wasn’t taken lightly, according to executive chairman Sam White. And now that the move has been made, White has said the company wants to be an atypical franchise.

Operating atypically in the franchise space means that Loan Market doesn’t want to restrict its brokers, White said. He said this was one of the reasons the company had shied away from the model in the past.

“We didn’t go with a franchise structure earlier on because we felt that our brokers didn’t want the restrictions that can come along with a franchise, and that they didn’t want to be told what they could and couldn’t do too much,” he said.

White said the company wanted to ensure the move into a franchise model wasn’t a disruptive one. He argued that the company’s ethos remained essentially the same, despite the shift in business model.

“Our DNA really hasn’t changed from a broking group. Beforehand, everyone pretty much traded under our brand. They still do that now. They had a certain operating model, which we have now. So most things haven’t changed,” White said.

But after 20 years in business – years in which White said the company had been through many market cycles, both good and bad – White believes that branding is becoming increasingly important. While branding has long been an integral part of the company’s strategy, he said the move to a full franchise model would enable its brokers to gain even greater leverage from the brand.

“As we continued we realised how important brand was going to be, and how important its capital value to a broker’s business was going to be. This is no longer just a profession; it’s an industry that brokers create goodwill and value in. As more and more brokers start to exit, they say, ‘Hang on. We want to sell a business, not just a trail book’. We see the franchise being better for getting value out of a business on exit, but we also try to do it without the restraints that come from that,” he said.

Restraints are often part and parcel of the franchise experience, White suggested, but he said this was an area in which Loan Market had sought to differentiate its offering.

“Often brand implies to a broker that you’re obligated to comply with rules that are set in place to prevent people from doing something. We really wanted to make sure we got a brand structure that worked for our individuals, but at the same time they weren’t told what they couldn’t do – that the franchise structure really enabled them to reach their potential rather than restrain and restrict them. That’s what we set out to do.”

From a practical standpoint, White said this meant the Loan Market offering would have some key points of difference from other franchise models.

“We don’t have any restraints on trade areas, so we don’t say you can’t do this or market that. If someone leaves us, they can keep their trail and their database. They don’t have to sell us back their business,” he said.

This means people can join the network with the assurance that there is flexibility, and they won’t remain locked in should they decide to leave, White said.

“Sometimes a franchisee joins us and we may not be the right option for them for the rest of their career. They may decide that for a big part of their career we’re the right choice, and then after that they want to make a change, or they want to sell or go somewhere else. We really wanted to be the group that gave people the flexibility and the certainty that they can grow their business with us without sacrificing too much of the autonomy that they have that makes this business a really good one,” he said.

Another area White said would set the business apart was its pricing structure.

“Typically with a franchise structure one of the problems is that the commission payments to the franchisees can be quite low. That can mean it’s hard to recruit and retain loan writers underneath that. With our model we pay out between 80% and 92% of the commission that we receive from the lenders – and that’s on upfront and trail – depending upon the volume. We want to be able to pay commissions well for good performance, and that enables our team to be able to grow and develop their people underneath them,” he said.

While White said Loan Market wanted to break free of some of the negative traits associated with franchise systems, he pointed out that there were several positive aspects of the model. First and foremost, he argued that it put consumers’ minds at ease.

“Consumers want to know that there’s something more than just the individual they’re dealing with, so if they’ve got a problem there’s a body they can go to to get it resolved. We survey all of our customers. If there’s a problem with a customer we can go and help get it solved. I think customers want to know there’s another point other than the individual, and we want to be that point,” he said. The longevity and continuity of the brand is also a strength, he said.

“This is our 20th year in business, and we want to be able for our brokers to show that we’re not a fly-by-night company.”

And the franchise structure also provides a clear path for new entrants, as well as making it easier for brokers to grow their business, White argued.

“The third thing that’s important for brokers growing their businesses is that loan writers want to know they’re part of something bigger. When they’re joining a business they want to know that there are systems and infrastructure in place for them to be able to grow within the business. What we’ve seen is it’s been easier for people with a brand to recruit than it is outside of that,” he said.

But ultimately the decision comes back to the customer, White said. The brand behind the franchise fosters a sense of trust, and this is an invaluable part of the broker proposition.

“The broker proposition of choice is also combined with trust. Going forward, I think brand will be an element customers will identify with, and it will be an element that helps convey trust more broadly to the people under it. We think brand is critical.”

This article is from Australian Broker Issue #11.16. Download the issue to read more!