Feature: Through Franchise Eyes

The popularity of retail franchises – specialist, licensed outlets overseen by professionals in the field – raises a fundamental question about the way hardware store function: Are hardware store ranges too diverse, too expansive? Are store owners becoming “Jacks of all trades and masters of none?” Is generalisation still appropriate in a world of increasingly narrow focuses of expertise?

These issues have been forefront in the minds of many hardware retailers in recent years, particularly as managers have expanded non-traditional departments like Garden or Home Décor – “Nuts and bolts are OK; what on earth do we know about bathroom liquid soap holders or potting mixes for native plants?” It’s easy to get swept away by the temptation to range more, always more products.

An interesting alternative is tenant franchising. Consider the example of a large store that has enjoyed good building/trade business, but missed out on Garden-related sales because the staff know little about the topic. Valuable floor space may have been going to waste while inappropriate garden products have gathered dust. And think of the add-on sales (saws, secateurs, paving goods, etc) that may have been sacrificed along the way.

In such circumstances a franchised tenant may be the answer. A familiar, well-branded sub-business, run privately or in partnership with the master retailer, could introduce richness, talent and novelty to a large hardware store. Already a number of hardware retailers have adopted specialist paint and garden franchises into their broader complexes.

There are several advantages to the system: not only does the master retailer become a “landlord” of sorts, thereby supplementing retail income with secure and predictable returns, but the tenant franchisee’s expertise might bring new business to the master outlet’s complementary departments. There are, of course, a wide range of partnership styles: the tenant might be a fully self-contained business, or profits might be divided between the tenant and the master retailer, depending on personal arrangements and the tenant’s up-front capital investment. There might be numerous other negotiations to be finalised, such as staff interchange arrangements, respective obligations regarding host store refurbishment costs, advertising expenditures, etc.

Whatever the case, larger stores – particularly those in regional areas – might benefit from the introduction of some fresh franchise blood.

By John Power