Franchising Aust Post Franchises

Discussion in 'Starting & Running a Business' started by TMNT, 29th Jul, 2015.

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  1. TMNT

    TMNT Well-Known Member

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    One in a local shopping centre has gone up for sale, asking 1.5m, current owners have had it for 5 years odd

    In moments of weakness/madness/desperation/boredom I ve consdering looking at one of these.

    Here are my thoughts

    Pros
    Very stable
    Increasing online package sending (offset the declning postal letters)
    No scope for improvement (for most this is a neg, but for me, I dont want to advertise or drum up new business=risk/gamble)
    no increase in competition
    5 days

    Cons
    High Multiples of earnings, often 4 times earnings
    Declinging postal letter numbers
    High entry price
    If its such a good business why are the owners selling (excluding personal/family/health/investment reasons)

    If I were to go down this route, I am looking for a good return, low risk, a set and forget business/investment, that I work 5 days , just not 14 hours per day


    im generally very anti franchise, but these ones im willing to consider
     
    TMNT, 29th Jul, 2015
    #1
  2. Biz

    Biz Well-Known Member

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    1.5 million for a post office? Is that just the business or the building too?
     
    Biz, 29th Jul, 2015
    #2
  3. TMNT

    TMNT Well-Known Member

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    business only !

    its always busy, has been and i think always will be

    there are PO boxes and I cant imagine more PO boxes opening up, in fact one a few km away closed down,
     
    TMNT, 29th Jul, 2015
    #3
  4. Biz

    Biz Well-Known Member

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    I didn't think they were anywhere close to that much. How much are the owners taking home?
     
    Biz, 29th Jul, 2015
    #4
  5. TMNT

    TMNT Well-Known Member

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    not sure, havent looked at their PL yet, however, if the asking price is reasonable, you could expect 375k minus loan costs, I assume royalties are taken out too

    I assume that there would be no cash side of the business
     
    TMNT, 29th Jul, 2015
    #5
  6. willair

    willair Well-Known Member Premium Member

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    I know a person that used to invest and manage post offices but they sold up 5 years ago,they may also go the way freehold country hotels have gone because after selling that business they went into freehold hotel-motel and the value and trading $$$ have been going down hill for the past 4 years and would only get 30% less then they paided 5 years ago,and both require high staff levels even when you only have one person sitting in the bar or drivein bottle shop..imho....
     
    willair, 29th Jul, 2015
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  7. Mombius Hibachi

    Mombius Hibachi Well-Known Member

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    I would strongly recommend you not make this assumption.

    Five years ago (or thereabouts), we didn't have Uber and AirBnB. AirBnB is already the biggest hotel 'chain' in the world (yes, I know it's not a hotel chain, but they provide a similar service - the point is that they grew at an astonishing rate). Now both of them (and related businesses) are making serious inroads into areas that were previously impenetrable. I just listened to a podcast the other day with an interview with a guy who started Chariot that is moving into public transport. You can read more about them here: https://www.ridechariot.com/ and here: https://en.wikipedia.org/wiki/Chariot_(company)

    I know for a fact that the hotel and taxi industries have kicked up an enormous stink, flexing their muscle to try and restrict, if not get rid of, these businesses and not just in Australia. One certainty in business is that there is no certainty. Young entrepreneurs are shaking up old industries and becoming serious players very quickly.
     
    Mombius Hibachi, 29th Jul, 2015
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  8. Ace in the Hole

    Ace in the Hole Well-Known Member

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    Risk vs Reward is negative for this one.
     
    Ace in the Hole, 29th Jul, 2015
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  9. Fielding

    Fielding Well-Known Member

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    I would be very careful with Australia Post they are not going well at all. Star Track was a very profitable business till Australia Post took ownership now currently running at a loss.

    Now Toll been bought out by Japan Post and TNT by FedEx. I think the industry is ready for a shake up.
     
    Fielding, 29th Jul, 2015
    #9
  10. Blacky

    Blacky Well-Known Member

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    If it was me I would want to look at about 5-7years financials. My guess is that they would be reluctant to do so.
    The business will have been 'stripping' stock for the last year or maybe two, plus running a very lean operation to improve the books ready for sale.

    Add to that I would want to see the overall trend of revenue/profit. Im guessing it is on the decline. The post office may seem busy, but a lot of those folk are likely to be paying bills or submitting forms for govt - which I doubt are high money spinners. Plus the ability to do all this online will see a further decline of business.

    Not a business I would be happy about spending $1.5mil on.

    Blacky
     
    Blacky, 29th Jul, 2015
    #10
  11. Aaron Sice

    Aaron Sice Well-Known Member

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    Aaron Sice, 29th Jul, 2015
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  12. Singo

    Singo Well-Known Member

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    I know (the numbers as well) two post office owners who have sold recently. They are getting out as profits are declining.
     
    Singo, 29th Jul, 2015
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  13. Samten

    Samten Well-Known Member

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    Our local agency sold for just on a million a year ago, if it is an agency you might find it is 5 1/2 days as most of them are open Sat morning. This place is tiny and is run by a husband and wife team. Re competition, we send out heaps of parcels all over Australia (and the world) and Auspost is sooooo expensive compared to all other postal services around the world. Recently Officeworks (Coles) have started Mailman which offers parcel delivery up to 10kg (by vol) anywhere in Australia for $20, if I were to send same parcel to customer in WA by Auspost cost is around $50. The service is operated by Fastway couriers which we also use and if we sent parcel thru them then it would be about $40. I think Auspost are ripe for picking on their parcel side of the biz which is there only profitable side of the business.
     
    Samten, 29th Jul, 2015
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  14. Fielding

    Fielding Well-Known Member

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    Yeah office work is meant to be expanding one is being built currently next door to bunnings at Mt Druitt.
     
    Fielding, 29th Jul, 2015
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  15. Ace in the Hole

    Ace in the Hole Well-Known Member

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    There's probably a few other options you could invest 1.5 mil on.
     
    Ace in the Hole, 29th Jul, 2015
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  16. wylie

    wylie Moderator Staff Member

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    About six months ago we sat and watched the a-pac telecast of the enquiry by senators where there were three post office owners being questioned and telling their stories. It was sobering.

    My memory of it was that they were not given any more funds by Aust Post to process the huge increase in parcels in and out. That meant extra staff, but no extra money to pay the staff. These people were working full time jobs plus their post offices just to keep afloat and they couldn't sell either because they would not make anything. They had to stock stationery, games, toys etc to make some profits because they were not making it from the core business.

    My memory of this show is slightly hazy, so it would be worth trying to track it down or find a transcript of it. I just googled but couldn't find anything. What I took from watching was that I used to think these businesses would be a nice little earner, but after hearing the numbers and stories I wouldn't touch one with a barge pole.
     
    wylie, 29th Jul, 2015
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  17. TMNT

    TMNT Well-Known Member

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    thatsa great point!! couldnt agree with you more

    Dont the franchises get paid per parcel????? if the increase was large, thentheir profits would go up

    thats true, im not too sure how much profit they make on a a person coming into pay a gas or electric bill. does the franchise even get a %?


    thanks for your feedback everyone, its been very informative
     
    TMNT, 29th Jul, 2015
    #17
  18. wylie

    wylie Moderator Staff Member

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    All I can say is that I don't recall the details except that these people were in huge financial strife, and I recall something like parcels deliveries have increased by (making this up) say 400% but Aust Post is making the money, and not the franchisees.

    I recall being gobsmacked whilst watching this show and thinking these poor people have gone into this business and are now stuck, cannot sell, cannot make any money.
     
    wylie, 29th Jul, 2015
    #18
  19. Big Daddy

    Big Daddy Well-Known Member

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    I work for th department of transport. Aust Post get a commission for every driver and vehicle transaction conducted in store. I guess we would make up a decent chunk of their revenue. We are moving all our services online and the numbers are drying up fast
     
    Big Daddy, 29th Jul, 2015
    #19
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  20. MRO

    MRO Well-Known Member

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    I think the rate for parcels is low and the profit was factored into the letters. The pricing hasnt changed yet the spread of product has. As mentioned above, a lot more less profitable parcels that take up space and require handling. I think the enquiry directly related to the price paid to franchisees for parcels, and how the change in market was having such an impact.

    Proceed with caution IMO
     
    MRO, 29th Jul, 2015
    #20
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