The role franchisees play within big retail networks has come under review following reports Harvey Norman shareholders forked out nearly $8 million in “tactical support” last year for a struggling franchisee.

In its full-year results, Harvey Norman revealed it had spent $7.8 million in the June quarter to restructure one of its franchisees, a B2B business that sells computers and electronics to schools, corporates and government bodies.

The payment to the franchisee, identified as Apple reseller Mac1 marked the first time Harvey Norman had singled out help for an individual franchisee since the retailer started disclosing the value of tactical support in 2012.

In September, Inside Franchise Business reported a seven per cent fall in earnings for Harvey Norman’s Australian franchise operations to $292m, with the Mac1 payment accounting for the majority of the retailer’s $10.5m increase in tactical support.

Mac1, a former Dick Smith owned operation, has since been merged with another Harvey Norman franchisee called The School Locker, with both companies set to compete with JB Hi Fi’s commercial division.

The restructure of Mac1 highlights both the struggles Apple resellers have in the contemporary Australian market and the inconsistencies of Harvey Norman’s treatment of franchisees.

Apple’s rapid expansion of bricks-and-mortar stores across the country has seen several tech-resellers go out of business in the last few years.

Concerns were raised in 2016 over the emergence of tactical support on Harvey Norman’s books, leading to an investigation by the Australian Securities and Investment Commission (ASIC).

In the ensuing coverage, Harvey Norman confirmed that franchisees were responsible for paying suppliers and that the company would no longer guarantee their debts, however the Mac1 restructure suggests the company is reevaluating how debts are repaid.

Harvey Norman has paid tactical support for franchisees, which includes loan relief, rent relief, franchise fee relief and marketing support, of $706m since 2011.

Tactical support peaked at $128.5m in 2013 and rose from $64.5m in 2016 to $75m in 2018.

Author: Nick Hall

This story first appeared on sister site Inside Franchise Business

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