Compaq Connects franchisees

Compaq is forging ahead with its controversial Compaq Connect retail store concept, announcing last week its search for "upwards of 100" franchisees in all metropolitan and major regional centres is well under way.

While Rob Balmer, Compaq's consumer division director, said last week the exact business model and locations for the franchises are yet to be decided, the commitment to "a full national rollout" is concrete and moving ahead at full speed.

According to Balmer, the eight existing Melbourne and Brisbane stores have been "very successful" and will remain in the hands of Compaq. The first independently owned franchise is set to open in the Sydney metropolitan "within two months".

The owner of the first store in Sydney is an existing Compaq reseller who wishes to remain nameless at this stage but who is committed to transferring the business to the Compaq Connect model, Ballmer said.

"Sydney is a very high priority," Balmer said. "There is no time limit to when we want to have all the stores in place - the number will grow incrementally - but we will have a national presence, including all states ands major regional centres, by the end of 2001."Though the financial costs and stock procurement commitments required by franchisees has not been finalised, Ballmer did claim there would be only one Compaq Connect business model on offer.

He added that franchisees will be able to hold multiple franchises and that franchise kit with all the details would be available soon.

Using the franchise king, McDonald's, as an analogy, Balmer claimed Compaq will have no input into the day-to-day running of the businesses "other than as a franchiser".

"We are still working on the details of the final franchise agreement, but I anticipate to have that within the next month," Balmer said. "Like McDonald's, in the end there will be only one formula and the stores will be independent channel organisations that will live and die on the success of that particular business.

Balmer said the only differences between the businesses will be in the way they are funded. Some franchisees who are transferring existing businesses might be cashed up, while others may be looking to take advantage of funding available through Compaq Financial Services.

"We will have some options there, but in terms of the actual operating model, I think the McDonald's analogy is a good one," he said. "We are looking for a very consistent, repeatable and duplicable model we can open from store to store."Balmer added that this is important to the overall strategy as "the stores will also play the role of being the manufacturing centres for our computers". A Compaq Connect Web site is planned to support the stores.

"There is already a Compaq Connect site and that will be expanded as stores are added," Balmer said.

"At this point the plan isn't to sell directly over the Web - we already have the Compaq Web site doing that - but there is a possibility that down the track Web sales will be expanded.

Big Mac consistency

"Because the stores are the supply chain, no matter how we take the orders they will be fulfilled through the stores anyway," he added. "From an operational point of view we need to make sure every computer sold from these stores has the consistency of a Big Mac," he said.

Balmer said the fundamental role of the Compaq Connect stores has remained the same from the beginning. They will perform three main functions; inbound consumer sales through presence and branding, an outbound sales function directed at small businesses in the area and the supply chain for the configuration of the computers.

Despite fears from existing resellers, Balmer also insists the target markets for the stores are areas where Compaq has not traditionally been well represented, such as in small business and experienced consumers.

"Those target markets are ones that no global brand vendor has so far been able to effectively penetrate," Balmer concluded.

"One of the objectives of the pilot was to specifically model the conditions of operating those businesses so that they would meet the expectations we would have for one of those businesses and it certainly has. That is why we are now rolling it out."

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