As part of Thomas Cremona’s interview series on joint ventures, he had the opportunity to meet with Franks director, Andrew Abela, for his insights.
Andrew Abela is part of the fifth generation in the Franks family business, having built on the Franks’ legacy offering with the launch of Franks Gentlemen’s Essentials and the expansion of the Group’s online store. Furthermore, Andrew also provides strategic oversight together with the other members of the board of directors.
What characteristics would you seek in a prospective joint venture partner?
The most important quality would be trust. At the end of the day, you can have star performers as partners but if you can’t trust them it’s useless.
Simon Sinek, the author and motivational speaker, referred to the importance of trust versus performance as observed within the context of America’s elite Navy Seals, and how they prefer having a trustworthy team member as opposed to a high-level performer.
How is the joint venture started and defined?
In a joint venture representing our brands, the introduction could be initiated through trade shows, third parties, developing your contacts, or by targeting a specific brand and begin networking to be able to represent the brand. Sometimes you get lucky.
How do you evaluate potential synergies when forming a joint venture?
The first starting point would be assessing economies of scale. We have also undertaken joint ventures where the parties have a similar client base. This scenario is played out in the initiative of Bortex & Friends at Bay Street.
In relation to brands, it could be that our organisation and another supplier of a similar brand can pool resources together, by, for example, utilising a similar logistics set-up to deliver the products to various stores. This can also be replicated for back-end functions, such as administration and accounting, or salespersons.
Another joint venture that we were involved in included the distribution of a unique beverage specifically catering to the local market. It involved parties with knowledge from distillery to branding. This allowed us to then launch an internationally award-winning beverage.
Do you actively pursue joint ventures?
Yes, we do.
Would you prefer an acquisition or a joint venture?
An acquisition is preferred as it provides more control, and is easier to take care of the day-to-day running. A joint venture tends to involve a lot of compromises, whilst with an acquisition it is yours to fully decide on every aspect of its operations.
How do you regularly monitor the joint venture results? What would you consider as best practice?
It depends on the potential of the project and the kind of joint venture we are speaking of, but typically there is more energy injected in the beginning. There isn’t really a set formula, each business has its own pace – some businesses are fast-flowing and you need to meet up on a regular basis.
In some joint ventures, there is enough trust between the joint venture parties to facilitate smooth administration. With other joint ventures, you may need to take the passenger seat and not the driving seat. Any specific role needs to be tailored to the respective parties of the joint venture. All businesses are essentially different.
Do you include exit clauses?
It is important. For all intents and purposes, all joint venture parties aim to make it work, but it does happen that the joint venture doesn’t succeed. It is best that everyone knows where they stand, the terms and conditions of working together, and the joint venture’s targets. If we deem it’s not a success, we then exit in an orderly manner. Pettiness can creep in and that is best avoided by clearly stating all relevant matters at the outset.
What has been your experience from joint ventures?
There have been quite a few lessons. Mutual respect has been one of the best lessons. One of the hardest pieces of a joint venture isn’t the day to day running of the business because that does come naturally.
There has to be trust and respect from both sides. You have to see, and understand, the other party’s point of view. You might get stuck on certain points, which might not be important to you, but seeing them from someone else’s point of view might shed light on particular issues. Thus, respect is the most valid lesson for me.
Do you have any other thoughts on joint ventures?
People get used to doing business their own way, but when you are going into business with someone else, essentially you are going to bed with them. You are showing the most intimate part of the business, you have to share it and agree with it.
Although it is a joint venture, you do need one person to lead the operation. Other persons in the joint venture need to be comfortable with not being in control, and you have to be ready to accept that situation. You can accept to be the leader, or not to be, and the other party then needs to play the corresponding role.
In my line of business, I have seen that starting a joint venture can be a complementary business to the current undertaking, especially when businesses are already fully occupied with managing their operations, thus allowing another party to undertake the day-to-day role of the joint venture.
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