Strathfield Group jumps into the world of franchising

Following board approval for a franchise model, car audio retailer Strathfield Group franchise announced plans to start franchising up to 62 of 87 company-owned retail stores. Strathfield, who will be retaining the head leases on all franchised stores, are holding on to new, underperforming and a number of flagship stores for training purposes, and to stay in touch with marketplace trends.

The retail franchise restructure is a bid to raise funds following a disastrous year in which the company came close to collapse. Depending on size and location, franchises are selling for between $95,000 and $670,000 each, which means that Strathfield could raise $17 million in upfront fees and generate annual cash profits of more than $10 million if all 62 franchises sold without finance. However, as the group is also offering vendor financing at 12 per cent interest, the exact amount of cash raised can’t be confirmed until the sales are complete, though Strathfield chief executive Gerard Frack anticipates that the finance/no finance split is likely to be around 50-50.

Strathfield claims that most outlets are profitable at store level and that franchisees can capitalise on improved sales, systems and local area product knowledge. Potential franchisees seem to be hearing the message. So far, deposits have been taken for 12 stores, 16 franchises are being negotiated and others are under consideration.