Franchise setup disrupts annual earnings result

Franchise setup disrupts annual earnings result

ASX-listed integrator, Commander, has lowered its earning forecasts for the current financial year by up to $21 million due to disruptions caused by its franchise business. In a statement, Commander said its EBITDA would be revised from $95 million - $101 million for the full-year to June 30, to $80-$90 million. The figures include $16 million in restructuring costs.

The revision follows an interim statement issued in February, which reported its franchise initiative was causing significant disruptions to its direct sales model. Managing director, Adrian Coote, said its initial strategy had been to roll out franchise operations over 24 months, starting in regional areas where it had no sales presence.

"Internally, we were surprised by the number of people wanting to participate in the franchise model," Coote said. "That surge in interest caused disruptions, as staff were trying to bid on franchise opportunities. Our way of dealing with that was to have this completed in 12 months."

In its most recent ASX statement, Commander said it had also taken longer for franchise operators to achieve anticipated increased sales and service productivity. However, those that had been operating for over six months were now delivering average sales benefits of 131 per cent. The pilot Commander franchise operation launched in Launceston, Tasmania, in 2005.

Coote said it had almost reached its optimum number of 40-50 franchisees nationally. Most were now operational. "There will be other regions that become viable for a franchise as the product range expands," he said.

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