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Why Specsavers is franchisor of the year

Written on the 3 February 2014

By Larissa Ham
The Age

When eyewear chain Specsavers brought its retail operation to Australia in 2008, it did so with a bang, opening 100 stores in 100 days.

The global chain took the conservative Australian market by storm, slashing prices, launching an aggressive marketing campaign and convincing dozens of independent operators to buy in.

Now, less than six years on, Specsavers has captured about 35 per cent of market share, with 290 stores around the country. And last year the chain won a swag of awards, including the Franchise Council of Australia's "Established franchisor of the year" and the Australian Retail Association's "Australian Retailer of the Year".

So what's the secret behind the success of the global operation, founded by Dame Mary Perkins – Britain's first self-made female billionaire – and husband Doug on a table tennis table in Guernsey in 1984?

Advertisement Derek Dyson, global retail director and general manager of the Australian operation, believes the bedrock of Specsavers' growth lies in its “unique” joint venture partnership system.

Under this system, each store is jointly owned by an optometrist and a retailer who each pay between $30,000 and $40,000 to join Specsavers. Set-up costs for a store are between $250,000 and $280,000, which the company funds through a business loan to the store partners.

Partners take a little over 80 per cent of turnover, with the remaining money going to Specsavers to cover costs including marketing, training, administration and other strategies.

Dyson says this type of partnership frees up their optometrists to focus on the customer and drive their business forward - and the financial investment proves a huge motivator.

“There's a massive mindset difference between a manager and a business owner,” he says.

Collaborating with fashion designers Alex Perry and Collette Dinnigan to create eyewear ranges has also proven lucrative here.

“We've created something new in Australia that we haven't done in other jurisdictions,” says Dyson.

The fact that Specsavers is a family-run business, where Doug and Mary Perkins are the stakeholders, also allows the chain to have more flexibility than a publicly listed company.

“We'll take a three-to-five year view of investment, rather than we have to get a return in 12 months,” says Dyson.

Melbourne optometrist Peter Larsen bought into Specsavers seven years ago, after realising his independent store in Little Collins Street – previously owned by his father – was becoming more costly and complex to operate.

“I certainly began to appreciate the need for scale, not just in buying power but in terms of training etcetera,” he says.

“I was successful but I could increasingly see it becoming more difficult.”

As wages, utility costs and rents continued to skyrocket, Larsen said he was also becoming uncomfortable with the amount of money his customers were paying for glasses.

So he made the decision to convert his store to the Specsavers model. He said the decision was “a really clear and obvious one” but admits he did initially fear losing a bit of control in the business.

Larsen says the cost of joining Specsavers has been far outweighed by increased volume in sales from day one.

“We've got substantial growth. Businesses these days have to grow to maintain the same profitability.”

He says the economies of scale involved in a global business mean that he can meet the increasing costs of business without passing it on to shoppers.

Larsen is a partner in his original Little Collins store and also has a stake in two others in Melbourne.

Specsavers has its own Australian glazing laboratory based in Port Melbourne, which runs 24/7, churning out about 25,000 pairs of glasses a week (although some of the more complex lenses are made in China).

Derek Dyson says while Australians used to pay $600 to $700 for a pair of glasses, Specsavers' integrated supply chain had enabled the business to substantially cut prices.

He says that means consumers can afford to buy new glasses more regularly, effectively creating a bigger market.

Dyson says Specsavers plans to relocate or expand at least 60 Australian stores this year, and repeat that effort in 2015, leading to an estimated market share of 40 per cent in the next five years.

Ironically, its rapid growth may yet provide one of Specsavers' biggest dilemmas.

“I think we've had no shortage of people wanting to join us. The challenge we do have is a shortage of opticians,” says Dyson.

While Specsavers continues to try to woo recent optometry graduates, it will also be keeping one eye firmly on growth. While the number of new stores will slow, expansions of some existing stores will aim to get more customers through the door.

“There's a sort of limit to how many stores you can have. How many people you can attract is probably a different proposition,” says Dyson.

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