JB Hi-Fi puts the boot into franchise business models

By Patrick Avenell

MELBOURNE, VIC & SYDNEY, NSW: JB Hi-Fi CEO Richard Uechtritz has fired a broadside at retailers with franchise-based business models, saying that once you start franchising, you lose control of your own destiny. He made these comments when asked if he had ever considered alternate business models for the JB Hi-Fi brand.

Shortly after announcing a record profit and sales result, Current.com.au asked Uechtritz if franchising was a possibility going forward. He said that he had not at all considered selling franchises under the JB Hi-Fi name. When asked his view on franchising in general, Uechtritz said that the decision to move to franchising is often made because of cashflow problems, something he said JB Hi-Fi does not suffer from.

“You franchise for a number of reasons, one of which is because of lack of capital,” he said. “Our debts have come right down. If you look at our numbers, we’re lowly geared, we’ve got low debt levels and we don’t need to franchise, and we believe we can a run a more disciplined organisation the way we run it now.”

Uechtritz then revealed that he had studied the methods of his overseas peers, saying that the most effective way to run a retail organisation was to run it yourself.

“[It’s] the way Walmart run their business and the way Tesco run their business [and] Woolworths run their business. Good retailers, the outstanding retailers of the world, are all in control of their own destiny, not through franchises.”

Franchising is a key component of a number of Australian consumer electronics retail businesses, most notably Harvey Norman. In order to gauge a reaction to this criticism, Current.com.au contacted the Franchising Council of Australia (FCA) for comment on behalf of its members. No-one from this office was prepared to defend franchising, or to rebut Uechtritz’ comments, at this time.

What do you think of franchising? Is the JB Hi-Fi boss right or are franchises are good way to do business? Send me an email.

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