Once in a while you can score. I went to OSH one time and there was a bunch of power tools on sale marked clearance 50% off regular price. One of the items was a scroll saw that had a regular price of $120. When they scanned the price it came up on the computer as $99 and they gave me 50% of that and they had counter coupons for $10 off so I ended up with a new scroll saw for $49.
Ba r r y wrote in news: snipped-for-privacy@4ax.com:
I'd be surprised if they weren't taking a markup of some kind at the franchisor level.
Patriarch
But do the stores buy directly or from the franchise, where they split advertising, etc?
I'll also bet that Woodcraft isn't the preferred customer that a BORG is....
Answers my question. Just like McStores everywhere, they are exploited by their franchiser.
George notes:
Woodcraft and Rockler and Woodworker's Supply may not be as "preferred" as a borg in some areas, but sit back and think about how many Unisaws, PM66s and JTAS10s the borgs sell, as compared to those sold by the above three. The same holds true for ALL the upper end woodworking tools, not just the big power tools.
Most large items are bought through the franchisor: the individual store wouldn't be able to swing the weight that, for example, WSC can with 60+ stores to supply. Even with the contracted franchise percentage, the store normally does better to buy through its franchisor. And in many instances, it is contractually obligated to do so. And on smaller items, the company may do its own importing, locating and importing tools and accessories that the individual store cannot even afford to look for. When I left Woodcraft, they had four of the best product managers you're ever likely to find, and these guys spent a lot of time overseas, searching through old contacts and making new ones. Most U.S. stuff was handled by phone,but for first time buys in Germany, or England, or Taiwan, or mainland China, or elsewhere, face-to-face often works better. Not all of those great router bit deals come in over the transom.
Charlie Self "A politician is an animal which can sit on a fence and yet keep both ears to the ground." H. L. Mencken
OTOH, a franchise owner with his own dough invested in a store may take a little keener interest in how the store is run than a company employee with no monetary investment. AFAIK, most franchises survive. I worked in one that failed but another was opened in the same city by a guy that already owned a franchise in another city, so it can't be all bad.
- Doug
...and just like McStores everywhere if it weren't for the franchiser they wouldn't be in business, have any business or have a clue how to profitably run their business. That is why people buy franchises instead of just starting their own hamburger store or woodworking supply store. Nobody twisted their arms ya know.
Dave Hall
Dave Hall responds:
Add to the other benefits the reputation of the franchisor, something that takes time and care to develop. Too, not all the outfits I mentioned are franchise arrangements--I'm pretty sure all the WWS stores are owned by the corporation.
A lot of buyers might ask themselves if they'd patronize store called Joe Nobody's Wood Tools & Supplies with the same confidence they have buying at WCS, for example. Franchisees are seldom exploited: it takes big bucks to get into the bigger franchises, including gaining the abiity to sell Big Macs, but the returns are often fabulous. If the franchise buyers feel so exploited, one has to wonder why so may buy multiple franchises. All five Texas Woodcraft franchises were owned by one guy a few years ago. Probably still are.
Charlie Self "A politician is an animal which can sit on a fence and yet keep both ears to the ground." H. L. Mencken
exploited
franchiser
exploited, one
In talking to our local woodcraft dealer about tools, he is very concerned about Amazon. He told me that his markup is 10% or less on power tools. The specials are financed by the manufacturers (in coordination with corporate). The fact that you could get a dewalt belt sander for a lower everyday price, 20% off, $25 off ($125 purchase or more they ran for a while), free shipping, and no sales tax caused him to scale back on stock levels of these types of tools. Final price turned out to be approx 50% of list, and this is just one example.
Sometimes I go for the price, sometimes I pay $25-$35 more because we are paying for the knowledge of the store personnel which have really come in handy. Also of note is their 1 year guarantee versus 30 days at amazon.
Joe
router (just an example) is making somebody somewhere plenty of money or making plenty of people a little money.
If the margins are so thin, it's because the salaries are too high. Which brings us to outsourcing.....
I'd bet if all of us simply stopped buying routers for six months, we'd see some sales. We'd also see some industry consolidation. Why do we need Milwaulkee, Porter-Cable, Ryobi, Festool, DeWalt, Hitachi, Bosch, Makita, and others) when 3 or 4 would be plenty? Supply and demand would work.
Sorry, I wax political. My apologies.
BTW, I'm not so sure I'd beleive the 10% markup the Woodcraft guy is stating -- it's not wise for a retailer to be telling the world what he makes.....unless ... you can guess.
Problem develops when corporate's aims and estimation of what the franchise should be or do is at odds with local reality. Some chains take the advertising money, yet demand the individual store buy a minimum quantity if they want to qualify for the discount which will allow them a profit on what's going to be placed on national sale.
Neat deal. You put up the money and hire a boss....
Ok, lets start with your salary...
John Emmons
The folks running the register (computer terminal) can find out exactly what the franchisee cost is for the item as well as the listed price. The big ticket items are truly only marked up by a small margin. Not sure what the HQ cost is and how much the item is marked up there on the way to the franchisee.
- Doug
here's a note on franchises....from a small business website:
A lot of people in the franchising field will tell you that franchises have a failure rate of about 5 percent, compared to the 30 to 50 percent failure rate of independent entrepreneurs.
You should be aware, however, of recent studies that question the 5 percent rate. For example, a 1995 study by Dr. Timothy Bates, a professor at Wayne State University in Detroit, found that the franchise failure rate actually exceeded 30 percent and that franchises made lower profits than independent entrepreneurs. Dr. Bates' study also found that the average capital investment of franchisees was $500,000, compared to $100,000 for independent entrepreneurs.
Um salery affects "net profit" not gross profit. Typically margins are figuted on gross profit not net profit. Many more things can affect net profit that salary.
To see a sale you have to have a buyer..
We'd also see some industry consolidation.
Possibly.
Why do we need Milwaulkee, Porter-Cable, Ryobi, Festool, DeWalt, Hitachi, Bosch, Makita, and others) when 3 or 4 would be plenty?
Because none of them are exactly the same and not every one wants the same thing.
Supply and demand would work.
Yeah, the fewer choices the higher the prices. The higher the demand the higher the prices.
The 10% mark up is quite common for small power tools. Keep in mind that this 10% mark up affects gross profit and is indexed against the published dealer cost. If the dealer buys 10 at a time of an item he may also be eligable for a discout himself when he buys. Depending on which inventory accounting method the dealer uses, this profit may or may not factor into gross profit or the "marked up price". For the ease of accounting this discount in volume purchasing adds to the net proifit rather than the gross profit. As for it not being wise to tell the world, welcome to Capitolism. Some one always lets the "secret" out. Really not a secret.
Exploited? By that you must mean that the franchiser who fronts marketing money, who negotiates discounts with suppliers, who allows the profitable use of their corporate name, who manages inventory and product line issues, who provides training and product updates, who is the go to person for each of the franchises around the country. Yeah - they exploit the franchise all right. Doug's comments above, while inarguably based on some experience, lack the reality of the way franchises work. Words like "big fat profits" are dead give aways. In the world of retail there are not big fat profits as stated by Doug. There are profits to be sure, but what's wrong with that? You only hear phrases like "big fat profits" from folks who feel they have a rightful axe to grind. Maybe they do, maybe they don't. That's not for me to know, but it's a bit of the Peter and the big bad wolf syndrome to paint the picture of the big cigar smoking, gold ring wearing franchise owner counting the drops of sweat coming from the brows of each of his franchises. Remember, every one of those McStores that pop up in your neighborhood employs people. The more that pop up, the more the profit is for the franchiser. The thing is, that profit is based on volume more than big fat profits on any one product. Volume means that lots of people are making money along the way.
Ok - so old age and brain farts hit again. I read Doug's original comments again and realized he didn't say what I first thought I read. Sorry Doug. My bad.
independent
Undercapitalization is the single greatest cause of failure in small businesses, that's for sure.
I think the proper term for that practice is called FLEASING
Tillman
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