The Leading Edge Group has swooped on a number of disenchanted Woolworths franchisees, announcing it has signed up 30 former Dick Smith Electronics (DSE) and Tandy stores to form its own Electronics Group.
Leading Edge was capitalising on Woolworth's decision to wind down its franchise agreements with a number of DSE stores.
DSE had targeted 27 franchisees with wind-down contracts which would end their franchise agreements over an 18 month period, said Craig Smith, whose DSE store in Bowral, NSW has joined LEG.
The former DSE franchisee claimed Woolworths intended to replace the franchises with company owned stores.
Leading Edge claims to have signed up former Dick Smith and Tandy store owners in NSW, Queensland, Victoria and Tasmania. CEO Keith Lane said the buying group, which represents independent retailers across a number of divisions including Computing, would target up to 100 Electronics stores to join its new Electronics Group.
"We aim to rapidly expand the Leading Edge enhanced buying group model to support the many small business retailers struggling to survive because of the strong-arm tactics of the major retail chains," said Lane.
"We do not understand the motivation behind Woolworth's action but it appears to be a classic case where a major retail chain wants to boost its sales revenue at any cost," said Lane.
According to former franchisee Smith, DSE was attempting to cherry pick the most successful of its franchisees and replace them with company owned stores. "Four of these 20 stores have repeatedly been stockists of the year voted by Dick Smith," he said.
Smith claimed he'd successfully operated a DSE store in Batemans Bay which he'd sold to open up the Bowral store - at the invitation of Dick Smith management - in December 2001. "We spent $220,000 opening that store," he said. But two and a half years later, DSE sent him a letter informing him of its intention to take back his franchise.
"We built the area up to the point where it was now feasible for them to open a company store," said Smith, who claimed his store had been exceeding $1million in turnover.
Smith had opted to leave DSE outright rather than take the 18 month wind down option. "I rejected the Woolworths offer because I believe the Leading Edge model of independent retailing offers significant advantages to small operators who typically have their life savings invested in these stores," he said.
The changes being put in place by Dick Smith - and its treatment of franchisees - would result in other franchisees opting to leave even if they weren't targeted by the "wind down" policy, Smith predicted.
"I expect more stores to joined Leading Edge because I don't believe the latest actions by Woolworths will be tolerated by many small retailers," said Smith.
Woolworths was not available for comment at press time.