Supanews dumps franchise fee, chases existing newsagents

Further to my blog entry three days ago about the takeover/merger of the Supanews newsagent group by Pacific Equity Partners’ Angus & Robertson group, I note with interest the opening paragraphs of their press release:

In a move that will change the face of the Australian newsagency industry forever, newsagency chain Supanews has announced a joint venture with Pacific Equity Partners-owned A&R Whitcoulls Group Holdings Pty Limited (ARW Group).

“We understand that this may ruffle a few feathers with the 5,000 independent operators in Australia,” says Adrian Gaskin, General Manager of Supanews.

The release, as is usual with such things, is full of spin. What they don’t say is that immediately upon the takeover / merger, the Supanews model was turned on its ear. Whereas in the past they only operated as a company store / franchise group, from yesterday they started pursuing existing newsagents to join by offering “NO ROYALTY”. That is, no franchise fee. This is an odd move for the group. If the Supanews model was so great, why take such a dramatic departure from that model the same day you announce the takeover / merger?

Go to the Supanews website and see how they try and attract newsagents to join Supanews:

…by becoming part of Supanews you eliminate the risk of us opening a store in direct competition to you.

Yeah, fear is a good motivator. Sure their website promotes other benefits but this one? Why?

A stronger Supanews will be good for newsagents. It will galvanise newsagents to be more competitive. The involvement of A&R Whitcoulls demonstrates that the channel is no longer a cottage industry. It also provides evidence that suppliers will treat newsagents differently. – something the newsXpress group has been demonstrating for the last two years as it has grown from 31 stores in February 2005 to 95 stores in September 2006. It forces suppliers to look at the channel in a different light – to take newsagents more seriously. It will also force newsXpress and Nextra to become even tougher competitors – I’m not sure about Newspower since it does not have the same commercial structure as newsXpress and Nextra.

If the new Supanews takes off it could also spell problems for independent newsagents. Magazine distributors, for example, will still have the same volume of rats and mice titles to distribute – titles outside the top, say, 200 – a strong disciplined Supanews will demand that their stores not be overloaded, meaning that independents will receive more of these titles.

I expect newsagents to be skeptical about the U-turn announced by Supanews yesterday in their invitation to join the group. It will take more than some text on a website to erase memory of Supanews.

Disclosure: I am a shareholder in and Director of newsXpress, a competitor of Supanews.