Godfreys to franchise 18 stores in 2017

By Sarah Stowe | 26 Oct 2016 View comments

Godfreys will convert some company stores to franchised outlets. Image: viewpoints.comVaccuum cleaner retail chain Godfreys is selling off up to 60 corporate stores to franchise buyers with 18 outlets up for grabs next year.

The plan is to have 140 franchised stores in its 244 network within three years.

Godfreys operates in a highly competitive marketplace with players such as JB Hi-FI, Harvey Norman and The Good Guys and will retain its top sites as corporate stores.

In a statement to the Australian Stock Exchange, chairman Rod Walker said “Following an internal strategic review to address continued weak performance in the business, the Board has concluded that re-balancing the store portfolio with a bias to franchise stores is the best option to place the business on a solid footing for long term growth.

“Over the next three years the majority of our stores by number will become franchise stores with a particular focus on smaller and regional locations.

“This streamlining of our store portfolio will enable greater management focus on our more profitable larger format stores. It will also deliver medium and long term improvements to both profitability and the balance sheet,” he said.

Financial year 2016 results showed a drop in sales of 0.9 percent, even though 10 stores were added to the portfolio.

John Hardy, who was responsible for setting up the original franchise network, is the interim managing director following the departure of former CEO Kathy Cocovski in July.

“Our franchise stores have a track record of outperformance, underpinned by the fundamental driver of small business ownership., particularly in regional areas where local knowledge and relationships are a major element of success," said Hardy.

“Refocusing the business on a franchise concept will enable Godfreys to accelerate the current business improvement program."

The business is expecting to get plenty of interest in owning a retail store from the existing team.

As part of the restructure there will be a focus on improving the franchisee induction processes and boosting support functions, including a dedicated customer service lines for franchisees.

The business has changed tack over its franchise components over the last few years. The chain was bought and sold by private equity firms, and struggled with heavy debts and franchisee disputes over support and operational changes, reports Inside Retail Weekly.

Four years ago the original owners took on the business again in a debt for equity restructure. The business listed on the ASX in 2014 and adopted a policy to develop more company-owned sites before back-tracking and opting for a hybrid model with franchised outlets operating in regional areas.