Mortgage Choice Limited

MOC Details

Franchisees Remuneration Model Review: Mortgage Choice Limited’s (ASX: MOC) stock tumbled 21.693 per cent on June 05, 2018 following the eruption of negative market sentiments as the group is facing allegations by franchisees to mistreating its remuneration packages. According to the media report, there are around 173 franchisees which are close to half of its total franchisees’ number (i.e., 490 franchisees across Australia) which are heading towards to take legal action against the firm, if the group’s remuneration packages are not made appropriate. In response to this, the company informed to the market that it has been consulting its franchisees on having a more competitive remuneration model to strengthen the long-term sustainable growth of the company. The objective of an updated remuneration model is to increase franchisee remuneration and reduce franchisee income volatility to allow them to grow their businesses and assist more customers with their home loan needs. Further, the group will continue to provide support services to its network including technology, marketing, compliance, and training. The group will also continue to invest in new technology which will improve franchisee productivity and customer experience. These changes are designed to support the long-term sustainable growth of Mortgage Choice, increase franchisee remuneration and attract new high-quality franchisees to its network. Though the final terms of new remuneration model are not yet finalized, it is expected to be introduced in July 2018 and implemented on an opt-in basis across the network in August 2018. However, the change in the remuneration model will not affect the FY2018 cash result. Based on the foregoing, we believe it is best to avoid the stock at the current market price. 

This development seems to be emphasising on how the businesses that are built on franchisee model are succumbing to various types of challenges - one recent case being that of Retail Food Group Ltd. 
 

Growing Franchisees Numbers (Source: Company Reports)

 
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