Yesterday, Friday 9 January 2009, was the last day for offers by potential buyers of the beleaguered EzyDVD Pty Ltd. As yet there seems to be no word out whether the receiver, Ferrier Hodgson, has had any offers or not. I would guess that the current franchisees will be waiting with baited breath for an announcement on Monday.

Even if a buyer has been found, this does not mean smooth sailing for those franchisees. As it seems that some of the losses incurred by EzyDVD were due to poorly performing Bricks and Mortar stores, it is possible that a buyer could buy the company just for the online arm of the business. If this is the case the buyer may not honour existing franchise agreements. So buyer or not - what now for the EzyDVD franchisees?

It is likely that the franchisees do not have the capacity to put together the type of back-end support system that is required to run a business of this nature. It is certainly unlikely that they have the capacity to go it alone as independent DVD retailers, particularly as they are all in major shopping centres. The overheads required to come to terms with up to 100 or more new releases per month, as well as scores of promotions across multiple suppliers would be crippling.

If the franchisees are left high and dry by these events their only real solution is to get on board with another franchisor. This presents a difficulty however, in that there is no other DVD only retail chain in Australia. Signing up with another franchisor may cause conflicts with their current lease terms. Our leases stated that the Use of the Store was for retail sales of DVDs. This would on face value exclude the inclusion of selling CDs, or changing the store to a sales and rental model.

Another issue with moving to a new franchisor is re-branding the stores. While they may be able to continue for a while with their current fit-out, in time complete a full refit to the new chains format wouild be required. This is a very expensive exercise. Not only would the franchisees have to cease trade for the refit time (or trade from a temporary location) they have to pay for the removal of the old fit-out, and design and installation of the new. This process would take two weeks or more and could easily cost in excess of $200,000.

This is certainly not a position I would like to be in, especially if I was one of the people who bought their franchises in the last 12 months or so.

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