RadioShack Franchisees Don’t Want Surprises In Corporate Bankruptcy

Image courtesy of (Phillip Pessar)

RadioShack has declared bankruptcy and plans to liquidate, closing or maybe continuing to exist in a co-branded venture with Sprint. However, there are about 700 RadioShack stores that are doing okay. These stores are dealers and franchisees, stores that carry RadioShack merchandise and perhaps their brand, but might sell other merchandise too. The bankruptcy of RadioShack has some terrible effects on these merchants, and they’re working together to make sure that they aren’t hurt as parts of RadioShack are sold off.

If you don’t happen to live in or visit one of the towns where these stores exist, you may have never heard of these franchise and dealer stores before. The Consumerist staff hadn’t. They were part of a strategy RadioShack had at its peak of using existing retailers to get their merchandise into towns that were too small to support a full RadioShack store by making franchise or dealer agreements with existing retail businesses. A general store could have a corner of gadgets, and everyone benefited. This has worked pretty well until now, with the number of dealer and franchise stores falling mostly because the small merchants who ran them are closing their stores.

RadioShack franchisees’ most pressing problem is that the chain is no longer allowing them to buy their inventory of RadioShack products on credit. Normally this wouldn’t be a problem, but on a monthly basis, the franchisees accept returns from corporate-owned stores, chargebacks, gift cards, service plan claims, and other credits. Now RadioShack wants payment before shipping merchandise to franchisees. That wouldn’t be a problem if they could guarantee that the money that RadioShack owes them won’t become debts that are part of the bankruptcy.

In a motion they filed in RadioShack’s bankruptcy case, the Boston-based bankruptcy attorney representing the dealers explains the problems that they’re dealing with:

Even though RadioShack has been financially deteriorating for a long time now, many of the [dealer and franchise stores] have had RadioShack stores for decades and have done their best to enhance RadioShack’s reputation, For at least the past year, however, availability of product to the [dealer and franchise stores] has not been balanced or plentiful and relatively few goods have been delivered to the [dealer and franchise stores] after RadioShack filed for bankruptcy.

“We, as independent businessowners, can’t just wait for the final shoe to drop and then scramble like crazy to figure out what to do next,” one store owner told the Boston Globe earlier this month.

Could some franchise stores take this opportunity to find other electronics suppliers and cut ties with the RadioShack brand? They might.

RadioShack franchisees band together amid bankruptcy [Boston Globe]