By keeping an eye open to developments overseas, Clark Rubber chief Chris Malcolm was able to take early remedial action to better position the business to weather the downturn. Well before the effects of the global financial crisis were being felt in Australia, Chris Malcolm, the managing director of swimming pool, rubber and furniture retailer Clark Rubber, had a strong sense of what was coming.
A trip to England and France over the summer of 2007-08 convinced him it was time to take action at his chain to prepare for a recession in Australia.
There were two major things he saw – sales were dropping off and at the same time costs were going up.
“When I got back,” he says, “the first thing I did was look at what was facing our franchise owners. And from February last year I could see that sales were declining, and the rate of the decline was accelerating.”
He took what some said at the time was drastic action. But his strategies have saved his Clark Rubber from being another struggling company. While revenue in 2008-09 will be $93 million, down from $101 million in 2007-08, the chain beat its sales budget in December and saw 14% sales growth in January compared to a year ago.
And the growth follows tough times. In the past 18 months Malcolm has lost eight stores, reducing the chain to 79 outlets. He says several franchisees went into receivership because they were undercapitalised. Three of these were sold and are trading well today for owners who are less highly geared.
Malcolm is confident he is now well prepared to keep all his franchise owners in business through these hard times. His strategy provides lessons for all franchise owners and franchisees.
No more new stores. It was decided that the chain would not actively increase store numbers and the resources usually devoted to new store openings would be moved to support existing stores.
Cut out non-essential services to franchise owners and systems. He looked at the services provided to franchise owners and consumers and went back to basics. For instance, he dropped training courses on marketing to the ageing population and how to process a lay-by, and instead concentrated on customer service and financial management.
Let go nine staff from head office. “It was the second toughest thing I’ve ever done, because every year over the past 14 years we’ve increased staff,” Malcolm says. While he initially he got a lot of negative responses from suppliers and media, a few months later some of those people were saying they wished they’d done it sooner.
Sacrificed one of the two retail business managers working in each state and introduced a new role in each state to assist franchise owners with book work and financial management. “It was a gutsy move,” Malcolm says, “People told us not to get involved in franchise owners’ financial management because if things go wrong we would be blamed by franchise owners. But we think it’s worth it.”
Consolidate suppliers. Where three or four suppliers were supplying goods, he has trimmed the number back and been able to negotiate better prices for franchise owners by saving suppliers some freight costs.
Renegotiate with landlords. “Thank God we are not in big shopping centres,” Malcolm says. He has sat down with landlords of some stores that have struggled to take costs out, put the profit and loss sheet on the table and asked for help. He says the better landlords have acknowledged the problem and been flexible.
Malcolm says 2009 will be tough, but the chain will be opening four stores in Western Australia and he is working on increasing sales across the board through working with suppliers to broaden the product range.
“Our priority is to help franchise owners get through the tough times. Every franchise owners have different needs, some are more highly geared than others. We need to move quickly when the pressure is on.”
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
