Business model

At the end of the 2008/2009 fiscal year, Hemtex operated 193 proprietary stores and had granted franchises to 30 stores. The Group’s primary revenue sources are sales to consumers in its proprietary stores, wholesale sales to franchise holders and franchise fees. During the 2008/2009 fiscal year, Hemtex’s proprietary stores had sales of
SEK 1,293 M (1,503). Sales at the consumer level in all Hemtex stores during the same period amounted to SEK 1,431 M (1,674), excluding value-added tax.

Contracts with franchise holders

The contracts with the franchise stores are negotiated with the Hemtex Franchise Holders’ Association. The contracts regulate the terms that apply within the Hemtex franchise system. They include a franchise fee that during the 2008/2009 fiscal year was 2.5% of sales. In addition, there is another fee linked to sales that is used entirely for marketing. This fee can be adjusted according to an established joint consultation procedure. The contract also includes a pledge on the part of the franchisee to purchase goods from Hemtex’s wholesale operations or to a limited extent from suppliers with which Hemtex has signed contracts centrally. The franchise stores are operated according to the same concept and guidelines as Hemtex’s proprietary stores.

Wholesale sales to franchise holders

Hemtex AB has a wholesaler role towards the franchise stores. In 2008/2009, sales at the consumer level for franchise holders amounted to SEK 138 M (171), excluding value-added tax.

Franchise fees

Franchise holders pay an affiliation fee when starting operations plus a continuous monthly franchise fee based on store sales. They also pay a certain amount to Hemtex AB for centrally produced or purchased marketing. During 2008/2009, franchise fees amounted to about SEK 3 M (4).

Hemtex also receives other revenues consisting of bonuses from suppliers and partners and non-margin based sales, such as store furnishings for franchise holders.