Dirk Spence is co-founder and CEO of Howards Storage World, the burgeoning storage retail franchise. He talks about franchising in today’s climate.
When Les Howard opened up his storage shop in Northbridge, Sydney, he was on to a good thing; after all, we all need places to put things. Magazine pages of beautifully stored belongings in stylish homes and offices have only enhanced the appeal of well-ordered rooms and fed our appetite for achieving showroom decor. But we need the equipment to do it. Whether your CD collection needs to be housed in a more attractive unit or laundry aids need to be more accessible, there are storage solutions for every ‘where-do-I-put-this’ query available from all sorts of retail sources.
However there are no direct competitors to the franchise network that is Howard’s Storage World. “There is an overlap with other retailers but no competition,” says Dirk Spence. Think Ikea, independent storage outlets, other homeware stores but not one has the same offer he maintains. “We’re a storage shop that sells homewares and the products must be clever, unique and organisational. We’re forever sourcing ranges in addition to our core storage products. It is important to stay fresh and introduce new fashion storage.”
While furniture stores have been hit hard in the economic downturn Spence believes the current cocooning mood it has brought on encourages consumers to feel good at home, and that translates to good business for Howards Storage World.
“People say we’re a discretionary spend but we are a combination because there’s a need to much of our product line. A vase on a sideboard is discretionary and we aren’t selling $3000 plasmas. You can still spend $50 on our products; they are not too expensive. The truth of the situation is a lot of people can still go out and buy our products without a problem.”
Providing not just a dedicated range of storage and homeware products but knowledgeable service to back it up marks the difference between this network and other chains. This is where incentive programs for staff to help customers really pay off.
“We have to get stores increasing sales. We’re big on customer service and incentives. We’ve always focused on what you can do. Some things you can’t control so get your staff to get the full benefit of customer service.”
The Howards Storage World offer is built on four foundation blocks: price, quality, range and service. The store network has still done well he insists, particularly in comparison with other retailers. Managing the downturn has been a matter of adjustment. “There hasn’t been dramatic drop but we are more conservative in our budgetary expectations,” he explains. Last year’s predictions have been “softened”.
Getting the right franchisee
It is not uncommon for franchisees in the network to purchase their business with no retail background to draw on; many have middle management experience, generally are in their 50s, mostly couples and there are some father and son teams. Like master franchisees, who more often than not come to the franchise with retail or buying experience, they have passion, belief and attitude.
A Howards Storage World franchise is far from a cheap way to get into business; franchisees are investing more than $600,000 with shop fit out and stock the majority of the costs; the franchise fee is $35,000 and training $20,000.
And that could be more of an issue now when funding is harder to secure from the banks. But Spence has an adaptable approach. “If we’ve got someone who loves our system but may be a bit short, would we like to help? Of course. We want to be flexible. Franchisees can’t be undercapitalised but there are other ways to help.”
Varying forms of joint venture have been successful in overseas opportunities, most recently in the granting of the Benelux master franchise in northern Europe. The model employed in that agreement is for Howards Storage World to hold a share in the business.
“Usually we take six per cent from any franchise, the master arrangement is based on US dollars and the number of stores predicted for the territory,” outlines Spence. “The way we’ve done it is based on $US15,000 ($18,660) per store which has 150,000 people as catchment. A master franchisee sets up retail outlets as company stores, and we get six per cent; from the subsequent franchised stores we get one per cent.”
Singapore was first in the overseas market, then a retail group in the Middle East which has rights to 10 countries and is so far established in Saudi Arabia and the United Arab Emirates. This latter arrangement however means the Australian franchisor facing compliance issues around merchandise – the stock has to be right, says Spence, or the brand gets lost.
The network has marketing advisory and buyer advisory boards designed as a forum for franchisee feedback on products and promotions.
“We don’t think we’re sitting in ivory towers and franchisees are very much involved in the company. At the last conference franchisees requested a franchise advisory council which we are now implementing,” he reveals.
Of the current concern about collapsing franchises and the suspicion that the franchising model itself may be at fault, he is dismissive. “Franchises are no different. This is nothing to do with franchising, it’s to do with the offer. Have a look at the offers. People just miss the point. Franchising is a way of expanding business. When you’re buying a franchise it is easy enough to blame someone else.
“It is up to you to do a business plan, we don’t predict or project. We’ll show you but it’s not up to us if it works.”
Ultimately it’s a franchisee’s decision, he says, though they should consider what protection is provided in the event of the franchisor imploding. “It’s their decision to invest. When we grant a franchise to people it can provide a business platform. It’s all about attitude. It’s like a giant tool box here, we have great tools. Franchisees should tap into the knowledge, and the best franchisees embrace everything we do.”