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Published 17 August 2011 14:05, Updated 18 August 2011 05:01
Pool services and spa-care outfit PoolWerx is battling weak consumer confidence and a lack of potential franchisees.
“Consumer confidence is the quietest that it has been in the 20 years that we’ve been in business,” says chief executive John O’Brien.
“People were a little bit lucky in the swimming pool and spa industry, in that a lot of our purchases and consumption is necessary.
“You need to buy chemicals for your pool, you need to buy equipment for your pool.
“But it’s the unnecessary purchases that have dried up on us . . . we’ve had to work a lot harder for those,” says O’Brien.
It’s harder to sell products such as solar heating, pool blankets and pool furniture in the present environment, with customers less willing to buy things they don’t need immediately.
The tough conditions come as potential franchisees, and capital, become more difficult to find.
“We have virtually full employment, so people aren’t necessarily looking to buy a franchise or buy a job,” he says.
“But we also don’t have banks lending at the moment, which is quite scary.”
Amid these conditions, PoolWerx’s growth target for revenue is $73 million for the year ended June 30, 2012.
In the year ended June 30, 2011, the company recorded revenue of just over $65 million.
“We’re not used to sub-10 [per cent] growth,” says O’Brien. “Our business is built on being fast-growing.”
To hit next year’s target, PoolWerx has a number of strategies focused on retailing and franchising.
In retail, the company has introduced finance purchase options for clients. It has also changed its store locations to neighbourhood shopping centres to make it easier for customers to visit stores while doing their weekly shop.
The company has embraced ecommerce, using it as a way of
creating a continuing relationship with customers.
Pool equipment ordered online needs to be installed.
PoolWerx has built its network to more than 330 vans and 65 stores since it started franchising in 1995 and has serviced more than 350,000 pools nationally.
That means, as well as offering products online, PoolWerx can deliver and install products, provide a warranty and give continuing care.
“By offering the after-care, we convert the consumer from a one-off online purchase to becoming a regular service client,” he says.
In franchising, the company works to help promising managers become owners.
“A lot of our good 20 and 30-year-old store managers would love to own their franchise, own the store. But they don’t have the equity or the borrowing capacity yet,” he says.
“With a program of bonuses and targets, they can own 40 per cent of the store and borrow to buy the rest.
“Within three years they can own the franchise.
“It’s stopped the leakage of our good young people to our competitors or to outside the industry.”
Poolwerx also encourages its best franchises to take on more stores.
“Many of our franchisees have used up their equity in their home by the time they want to open their second or more stores . . . they can’t open more but they’re good operators,” he says.
The company has set up a program with Westpac and ANZ where the banks are lending more than 50 per cent of the purchase price on the cost of a new store against the equity of the brand.
PoolWerx will also buy stores and put in a manager while a franchisee is found to take it over.
So when competitor “ma and pa” retailers want to sell, PoolWerx will buy them.
“We’ve developed over the last year our own company managers and we now grab good stores as company-owned stores and put them under management, and then look for franchisees over time to buy them,” he says.
And while times are tough, PoolWerx still has an average gross profit margin of more than 60 per cent.
“Our margins have remained very healthy, our suppliers have managed to continue to buy very well and they’ve managed to hold our pricing, and we’ve managed to not succumb to the discount trend that’s out there in the major retail world,” he says.