EzyDVD Goes into Receivership

ADELAIDE-based DVD retailer EzyDVD has been placed in receivership, throwing the company's future into question. Franchise owners are wondering what's next?

Franchise owner and blogger Stuart Leetham observes of the bankruptcy:

It was with mixed emotions that I read that EzyDVD Pty Ltd went into Receivership today.

I feel a sense of loss for the many good franchisees who put their trust and money on the line to work within the EzyDVD franchise model and I hope that they can recover from what ever happens over the next few weeks. As for the company as a whole, I have far less compulsion to feel any sorrow at all.

The EzyDVD system was a good experiment that should have ended several years ago. Far too many hard working people have put their savings into the business and then been left by the wayside having lost most, if not all, their assets when their store failed to perform as expected.

Some friends of mine bought two stores on the Central Coast in 2005. The stores did so poorly that they walked away at around 12 months.

EzyDVD started out as an online only DVD retailer, but in 2002 they opened their first "Bricks and Mortar" stores. Back then, as it was when we opened our first two stores in 2003, new release DVDs sold for $35 or more and if you picked up a DVD on sale for $15 it was a bargain. The rapid growth in competition quickly pushed the price of DVDs down to crazy levels. I would always cringe when I read in trade catalogues that a new release DVDs RRP was $39.95 but we had to sell under $30 to compete with the likes of Big W and Kmart.

Making $1 or sometimes less on a new release DVD was very hard to deal with.

Now, just 6 years on, there is some doubt as to the future of the chain. It is interesting to note that several of the stores have had 3 or possibly more Franchisees since opening. The Store that was located at Westfield Woden, in Canberra, was opened by a franchisee in 2003 who went into receivership in 2005; operated by us for 6 months until mid 2006 (in which time we lost over $30,000); operated by the company for a while, operated by another Franchisee who operated it for several months before handing it back to the company, and then final closing down at the end of its 5 year lease in November this year.

In November 2007, EzyDVD had 32 stores available to franchise. Four of those have since been Franchised, six closed, 12 reverted to "Company Owned" and the other 10 still listed as available for franchise.

The franchised EzyDVD store in Mount Druitt, NSW, is listed on the EzyDVD website as being for sale. I would suspect that the franchisee there is already hurting, and that today's announcement will make it difficult for them to find a buyer.

The article referenced above states that EzyDVD Pty Ltd lost more than $3 million over that last two years. What is really wrong with all this is that Australian Law does not require Private companies to disclose their financial statements to prospective franchisees. The information in a Franchise Disclosure Document may not reveal all you need to know to make a valid decision on any particular business. In some cases as a prospective Franchisee, you don't know what you don't know until it is much too late.

I think it would be a no brainer to not enter a franchise agreement with a company that was losing money.

What next for EzyDVD? Only time will tell.

Writer's note: Read this blog and more on the EzyDVD franchise experience at StuartLeetham.com

EzyDVD is in the hands of Ferrier Hodgson who now have Midas Australia in Adminstration.  Once again the Australian government failed to notice warning signs and complaints.