Matchbox turning to franchising

Matchbox franchise owner David Cohen was running out of family members to operate the family retail chain, so now he is turning to franchising.

In the middle of last year, the Cohen family's business was at a crossroad. Matchbox, a chain of 10 kitchen and homeware accessories stores in Melbourne, had grown to the limit of its people and its systems. But three of the four children of founders Ross Cohen, 65, and Fran Cohen, 61, wanted a future in the business. To keep them all employed, the Cohens believed the company needed to get bigger. They sought advice and have decided to change to a retail franchise operation.

Ross and Fran Cohen, experienced retailers, had bought Matchbox in 1996. The giftware franchise was under administration at the time and the Cohens picked up the stock, the brand and the two best sites, in Armadale and Chadstone, for an undisclosed sum. They believed the Matchbox brand had lost its position in Melbourne but retained strong potential. In the following nine years Ross and Fran Cohen capitalised on the booming homewares market to establish their chain of 10 stores. They concentrated on big brands and kept their prices competitive. The stores now turn over more than $7 million a year. One is in Melbourne's central business district and the others are in large suburban shopping centres, including Southland on the Nepean Highway and the DFO complex near Moorabbin airport.

The couple's children, David, 32, Charlie, 30, and Annabel, 28, became involved in the daily running of the Matchbox franchise, doing everything from unpacking boxes to organising information technology systems. When they opened their 10th store, the one in the city, they realised there was a limit to their capabilities. David Cohen says: "We found that without putting more people on the ground it was quite difficult, all day, every day, to control what was happening. We ran out of family members - I didn't have enough brothers and sisters to run every shop."

But the retail franchise, at 10 stores, was still not big enough to provide careers for all three Cohen children. "It was very much still mum and dad's business and we were looking for ways that we could become more in control of our destiny, create roles and responsibilities and run certain aspects of the business."

When they sought advice they were told their giftware franchise had all the weaknesses and strengths of a well-run family business, but needed to change its structure to grow. Cohen says the attraction of franchising is that franchisees are more motivated than employees to control costs and provide service. "If you put a manager in a store, it doesn't matter how much you pay or how much you emphasise that every sale is important, bits and pieces fall through the cracks."

He is enthusiastic as he continues his planning for franchising, which he believes will establish the Matchbox franchise as a brand. "It is a method of putting the brand out in the marketplace and being competitive without the huge investment."

The retail franchise chain is already competing successfully with department stores, which regularly offer heavy discounts on stock. It is also competing with the 100-store franchised House chain, owned by API, as well as with thousands of independents. Cohen says the reported downturn in retail trading is probably discouraging some potential franchisees, but he believes there is still growth in the market. "There may be some smaller retailers that won't be around in the medium term, so we are hoping to gain that market share," he says.

Cohen is already in discussions with two couples who are interested in taking up the giftware franchise, and he hopes to grant the first franchise in a matter of weeks and a second by the end of the year. The initial franchise fee is $20,000, and ongoing fees are a 4% royalty and a 2% marketing levy. Set-up costs, including store fitouts, will range from $300,000 to $500,000.

He believes that in five years it should be possible to have up to 40 Matchbox outlets, some franchised and some still owned by the family company. "We are going to keep a spread of company stores to keep our finger on the retail market, what's going on and the trends, and obviously we think we are pretty good at what we do. We think we can be a dominant player."