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Suppliers Urged To Check Their Exposure To Harvey Norman Franchisees

Suppliers to Harvey Norman franchisees are being urged to check their trade indemnity risks or get a “cast iron” contract “in writing” that Harvey Norman will pick up the losses if any of their franchisee’s fail.

Some observers have suggested that smaller suppliers may even have to move to 7 day terms to minimise their exposure if Harvey Norman does not accept all risks associated with their franchisee supply chain which in the past has had a failure rate of close to 25%.

Earlier this week we revealed that several major suppliers including both International and local distributors were up in arms over what they termed “horrendous” demands being placed on them by Derni Pty Ltd a Harvey Norman controlled Company.

See original story here.

Now suppliers are being urged to walk away from supplying “high risk” franchisees unless they have individual trade indemnity cover over the stock supplied to franchisees.

Contracts that suppliers are forced to accept if they want to sell to Harvey Norman franchisees, clearly state that “Harvey Norman”, “Domayne” or “Joyce Mayne”, and their subsidiaries do not control, or have any ownership interest in, any franchisee a move which ASIC is believed to have demanded of the mass retailer.

Each franchisee is now forced to separately contract with each supplier for the supply of goods and that Harvey Norman is now not responsible for the discharge of any obligations of a franchisee under any contract with a supplier nor do they provide any guarantees to any supplier of goods.

They claim that Derni is not the purchaser of any goods from the Supplier and is not a party to the Standard Trading Terms put into place for other Harvey Norman owned stores.

A supplier may provide credit to a franchisee on terms as agreed between a franchisee and that supplier (Credit). Any Credit is provided to that Franchisee, not to Derni.

Noel Condon CEO of AIG Australia the world’s leading insurance organisation, with more than 90 million customers around the globe told ChannelNews that suppliers should check with their broker and insurance Company on the risks associated with supplying more than 160 individual Harvey Norman franchisees Vs one retail entity.

“If Harvey Norman management claim that they will take up losses associated with their franchisee network there needs to be in place a separate contract that clearly explains this”.

Condon also urged franchisees to check their business cover claiming that they also could be exposed if Harvey Norman does not take up the risk.

AIG has warned that there are several areas where suppliers could be exposed, one area is product recalls.

The global insurer claims that the number and magnitude of product recalls in Australia has increased significantly in recent years. On average, nearly 10 product recalls occur every week in Australia. They said that there are several ways that a recall could be triggered including the wrong local information on a package or label.

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