Who has control of franchisees at Harvey Norman? The question is at the heart of a possible shareholder revolt over loans to franchisees worth $943m.
Proxy advisors have recommended a vote against the company’s accounts which show that Harvey Norman provided $594.9m to franchisees in the form of “financial accommodation”.
That figure includes working capital, stock payments and unpaid franchise fees, rent and interest, the AFR reports.
The remaining $348.5m relates to franchisees’ funding inventory orders.
According to the Financial Review the retailer has not pursued repayments, writing off $556m of loans since 2011 in what proxy advisory firm Ownership Matters describes as “loan forgiveness”.
Harvey Norman’s annual reports indicate the independence of franchisees and do not consolidate franchisees’ sales. In 2016 accounts, that amounted to $5.33bn while the franchisor drew $1bn from franchisee fees, rent and interest.
The franchising structure has been in place for 30 years but Ownership Matters suggests the retailer should consolidate franchisee accounts with the group's figures.
