Why the right banking partner can help build a successful franchise network

NAB banking partner Quest
Despina Kathestides, NAB, and David Mansfield, Quest. (Source: Supplied)

A successful franchise system needs a banking partner that can support both its growth aspirations and individual franchisees. 

That’s definitely the experience of apartment hotel operator Quest. Since it began a business transformation prior to Covid-19, the company has delivered an annual turnover of $500 million. 

David Mansfield, managing director of Quest’s parent Ascott Australia, explains that previously one-third of its franchisees were making money, another third were just scraping by and the final third were losing money.

“There were areas where there wasn’t perhaps enough alignment to our model or enough discipline. It had an impact on our stakeholder engagement and so we set out a pathway to rectify it – a process that was simply fast-forwarded by the pandemic,” Mansfield says.

This journey included making a number of significant changes to Quest’s operations to restore confidence among its franchisees and business partners. The ultimate aim was to put in place a very firm mission and revised set of values – including an additional value of “mutual respect”.

“We’ve have the highest engagement rate from our franchisees in the 35-year history of Quest. We also have the highest level of profit and performance against all our KPIs in the company’s history,” Mansfield says.

Trusted partners

Quest’s transformation also included laying the foundations for the open and transparent relationship with NAB’s franchise banking team that exists today.

NAB’s support for the business extends from lending to transactional banking, corporate credit cards and merchant terminals. The efficiencies created by providing services across the group means that it’s possible to provide preferential rates, giving small business franchisees access to pricing that typically applies to corporate and institutional customers.

The fact NAB offers real relationship banking is key to the partnership as it has allowed the bank to develop a deep understanding of Quest’s structure, business model and its franchise system.

“Quest supports its franchisees really well and that’s one of the big things we consider when partnering with a brand. Our close relationship with stakeholders across the business – from the managing director to chief financial officer and franchise team – gives us the confidence to provide banking solutions to both the franchisor and its franchisees,” says NAB’s head of franchise banking, Despina Kathestides.

Other considerations for NAB when partnering with Quest were the significant strength and potential of its business model, systems and people.

“Our bankers are experts in franchising who understand the Quest proposition and can help each individual franchisee with their journey. For example, we can help them when they first set up an operation – we know what they need when they buy into the system, and can help educate them about the necessary legal and financial advice,” Kathestides says.

Mansfield concurs this ability to provide counsel in addition to financing solutions is critical to the partnership: “NAB’s ability to provide broad advice to current and future business owners is crucial in maintaining the values which underpin our business as it ensures people make sound financial decisions,” he says.

“They know what Quest needs and what our franchisees need – that’s important because without the backing of a credible financier, you have very little to offer as a business.”

Funding growth

This vital support plays out in a number of ways across Quest’s operations. For example, developers who build its apartment hotels to Quest’s specifications can borrow money to do so – and Quest itself takes risk until a building is complete and earning rent.

“You can’t do that unless you have the confidence of your bank. That is the difference between the other banks and our relationship with NAB. It was the first bank to provide some certainty and confidence to our model,” Mansfield says.

Renovation of brownfield properties to meet Quest’s revised brand specifications is another activity that NAB can fund. Such renovations have the twin outcome of improving customer experience and protecting the overall health of the asset.

Mansfield identifies tripartite agreements between Quest, its franchisees and NAB as fundamental to its banking arrangements. In essence, these agreements between the three key parties – the franchisor, franchisees and NAB – allow them to discuss confidential matters about each other without breaching privacy laws.

“It holds us all accountable to each other and allows the transparent dialogue that makes our partnership work,” Kathestides explains.

Quest’s aim is to offer the right people an opportunity to become a local business owner backed by a strong Australian brand. With the support of NAB, it appears to be delivering on that goal.