Harvey Norman Franchisee Model Branded ‘Unsustainable’ By Investment Bank

Current.com.au:

Macquarie Securities has declared Harvey Norman’s franchisee fee structure as “unsustainable” given the current retail market’s propensity towards discounting in low margin categories.

In an overview of the 2011 Christmas trading period entitled “Who will be the last man standing?”, Macquarie Securities analysts estimated that Harvey Norman franchisees’ cost of doing business (CODB) has risen to be more than the gross margins charged at rival publicly listed retailer JB Hi-Fi.

“Traditionally, Harvey Norman has required 25 per cent gross margins off the floor to fund the Harvey Norman head entity plus franchisees,” the report says.