By James Wells
BRISBANE: Leading Edge managing director, Keith Lane, made a 16-minute pitch to the franchisees of Betta Stores Limited (BSL) on Monday afternoon at the Brisbane office of PricewaterhouseCoopers, which focused on introducing himself and what his group could offer.
Lane explained that he is an Englishman who left school at 15 and, through a retail and business career that has included coming to Australia twice and returning to Great Britain once, he was in a position to empathise with franchisees of the BSL group. Lane said he understood the importance of paying banks, staff and creditors, the loneliness and the isolation of running a retail business and the difficulty of breaking even on a given week until usually some time on Saturday afternoon.
Lane also said he has been involved in helping to run co-operatives that have been previously managed by an unprofessional board who ran the company while it was insolvent.
When Lane joined Leading Edge, the business had 500 members, a $3 million turnover and $300,000 ebit. The business now has 1600 members, $250 million turnover and a $9 million ebit.
Within the group are 200 Leading Edge Music stores with 14% market share in the category, 380 Leading Edge video stores (including the brands Leading Edge Video, Home Video and Top Video), 155 Leading Edge Computer members, 160 Leading Edge Books members, 130 Leading Edge Telecommunications members as well as 40 independents in New Zealand.
According to Lane, Leading Edge overall generates sales of $1.5 billion with a clean debtor’s book and is valued at $40 million.
Lane said the proposition for BSL franchisees is simple – to join the group and enjoy increased sales through catalogue marketing, television and local newspaper advertising as well as an aggressive guerilla marketing campaign.
Lane is also offering benefits normally offered by buying groups including increased margin through group purchasing as well as strong communication through a shared intranet and friendly conference meetings.
Based on the franchise fees of other Leading Edge businesses, BSL franchisees would expect to pay between $250 and $600 per month as well as other items such as catalogues and conferences which are charged on a user-pays basis.
Current.com.au believes existing BSL franchisees pay a minimum of $20,000 per year in franchise fees and $30,000 for stores that turnover between $2 million and $3 million.
Lane plans to use the Betta Electrical brands to develop a business model which is expected to turn over $240 million in sales with between 125 and 150 members.
Lane admitted that he had not had a chance to talk with suppliers as extensively as the retailer consortium, but he said that the relationships with suppliers are likely to remain as the manufacturers and importers will still require distribution points for their products.
After both bidders provided an explanation as to why they should be the next owner of the brands and franchise business, the phone lines were opened up to provide existing franchisees participating in the teleconference with an opportunity to ask one-on-one questions.
Lane was asked by one franchisee if there was any guarantee that he would keep the BSL brands under the Leading Edge business and if he had any relationships with suppliers in the electrical industry.
Lane reassured the franchisees that if Leading Edge became the successful purchaser, there was no intention of changing the brands and he further expected the existing buying and merchandising team to remain in place.