Bank of Queensland refers to its franchised branches as Owner Managed Branches
(OMBs). These branches offer all of the products and services offered by company
owned Bank of Queensland branches and to the customer look no different from
company owned branches.
Owner managers of Bank of Queensland are responsible for meeting the costs of
branch establishment and fit out, and must also employ the staff required to operate
the branch. In return they can manage the branch as they see fit and can make
decisions based on their knowledge of the local market.
In the ‘owner managed’ model Bank of Queensland retains control of the brand,
products and service levels and manages back office functions such as credit control
and processing. Bank of Queensland shares revenues from the branch with the
owner manager.
In recruiting individuals to run its Owner Managed Branches, Bank of Queensland
has focused on employing individuals with existing banking experience, commonly
former employees of the big four banks. These individuals do not need to be currently
working for one of the major banks but must have done so at some point during their
working life.
Bank of Queensland also places strong importance on existing links between the
individual and the community to be served. As such an individual may be a strong
candidate for an Owner Manager position if they already work or reside in the
community that they wish to serve. Existing links to a community may foster business
leads but just as importantly they indicate that an individual is knowledgeable of the
characteristics of a locality.
It is the Bank of Queensland’s goal that customers should feel a strong affiliation to
the branch owner rather than merely the bank brand. As Bank of Queensland
expands outside of Queensland and into other states, the perception of the manager
will become increasingly important as the bank will no longer be able to rely on its
regional identity. Indeed, in some cases parochialism at a state level may actually
ensure that the bank’s connections to Queensland count against it.
Due to the value placed on existing banking experience and links to the local
community, Bank of Queensland rejects the majority of the applications it receives
from individuals wanting to become Owner Managers. Indeed, the bank claims that
only one in every 15 applicants is successful.
A new idea but based on an old fashioned concept
Although distribution based on Owner Managed Branches is a relatively new strategy
in retail banking, Bank of Queensland is quick to point out that the underlying themes
are actually those abandoned by banks some time ago. Bank of Queensland believes
that its Owner Managed Branches are successful because they are based on high
service levels and long term relationships between bank managers and customers.
The bank has drawn attention to the fact that small business customers in particular
are often frustrated when a relationship with a bank manager ends because that
manager is moved to another area of the bank or because they seek employment
elsewhere. To counter this, Bank of Queensland focuses on potential Owner
Managers willing to make a long term commitment to their branch. Those managers
are easily accessible to customers and make a particular effort to ensure that they
are known within the local community. The manager’s name and contact details will
be listed in the local telephone directory and the Owner Manager is encouraged to
involve themselves in community events.
Franchising is not entirely new to Bank of Queensland
Although Bank of Queensland began operating Owner Managed Branches in 2001, it
had previously operated other outlets not directly managed by the bank. In 2001 Bank
of Queensland operated 93 outlets but fewer than 60 of these were ‘corporate
branches’ directly managed by the bank. The remainder were agencies, outlets
providing all of the products and services provided by regular branches and with the
same look and feel as regular branches but run based on an agency agreement.
Agents were therefore remunerated based on performance metrics, in this case the
number of transactions the branch undertook.
Significantly, Bank of Queensland no longer remunerates Owner Managers based on
the quantity of transactions that their branches undertake, but rather on the quality of
transactions. Owner Managers are therefore rewarded for attracting business,
maintaining business and increasing product holding among existing customers.
Bank of Queensland has used Owner Managed Branches to
aggressively expand its branch network
Since 2002 Bank of Queensland has been focused on aggressively expanding its
branch network both within Queensland and interstate, particularly in New South
Wales and Victoria. As indicated in the figure below, while Bank of Queensland
operated 98 branches in 2002, by the end of August 2004 it was operating 142
branches, 84 of which were Owner Managed Branches. Bank of Queensland is
clearly reliant on Owner Managed Branches for its branch expansion as during the
period August 2001 – August 2004 the number of corporate branches operated by
Bank of Queensland remained unchanged at 58.
Such is Bank of Queensland’s focus on its branches that in June 2004 it announced
that it was no longer to use mortgage brokers. The bank argued that its branches
could generate better quality mortgage business at a similar cost. Bank of
Queensland’s move away from the broker channel is particularly interesting given the
considerable importance of mortgage brokers in Australia and the significant volume
of business that brokers can generate.
At the time of writing, Bank of Queensland does not seem to have suffered unduly as
a result of its withdrawal from the broker channel. Since announcing that it was no
longer to use brokers, Bank of Queensland has continued to grow its mortgage loan
book and at the end of H1 2005 the bank had AUS$7.2 billion in housing loans
outstanding, up from AUS$6.2 billion at the end of H1 2004. During the first half of
2004, brokers accounted for around 22% of Bank of Queensland’s mortgage volumes.
Bank of Queensland is also growing its national footprint by
increasing its ATM network
Bank of Queensland has not only sought to increase its national footprint using its
Owner Managed Branches. The second component of its expansion strategy is the
addition of extra ATMs particularly outside of Queensland. Having acquired the ATM
deployment company ATM Solutions in 2003 Bank of Queensland now has almost
2,300 ATMs across Australia, more than 1,400 of which are Bank of Queensland
branded. Bank of Queensland now operates more ATMs than all Australian banks
with the exception of Commonwealth Bank and operates almost 1,000 ATMs on the
eastern seaboard – New South Wales hosts more than 450 Bank of Queensland
ATMs and Victoria hosts more than 500.
Expansion outside of a core market is aided by exploiting the
local knowledge of Owner Managers
Bank of Queensland’s Owner Managed Branches must be positioned within its
strategy of national expansion. Owner Managed Branches have helped the bank to
expand its network at a lower cost than would otherwise be the case and have also
allowed the bank to exploit the local knowledge of Owner Managers in areas of the
country where the bank has no existing presence or specific knowledge. Interestingly,
while Bank of Queensland has chosen to expand beyond its regional base using
Owner Managed Branches, other aggressive regional banks have used alternative
strategies. In an attempt to grow its mortgage business outside of South Australia,
Adelaide Bank for example, has increased its reliance on mortgage brokers while
maintaining a branch footprint only within its home state.