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Tuesday / March 5.
HomemifeatureBusiness of Independent Optometry

Business of Independent Optometry

The franchise models introduced by Specsavers and Luxottica have changed the face of optometry, yet despite this there are still plenty of exciting opportunities for independent operators to prosper in the competitive business of optometry.

A week, and often a day, will not go by without an optometrist either emailing or phoning me about how the optical market seems to have changed.

The quote: “Changing the face of optometry” seems to be coming to fruition. There is no doubt that Specsavers, who came up with this slogan, has done a great job of marketing itself. The scale of the company’s advertising campaign has never been seen before in the Australian optical market.
Making an entry into the Australian market in the lead up to the Global Financial Crisis (GFC) has arguably been a double whammy for this franchise model.

The whole retail environment has been depressed and one doesn’t have to be too observant to notice that all of retail is continually on sale – as reflected by the two-for-one and three-for-one deals in optics. But as the retail market regains confidence, that won’t always be the case.

There is evidence from the UK that the corporates’ share of the market has reached a plateau and independents are making a comeback

Independent Business Options

Historically Luxottica (or OPSM) has been the main corporate player for many years. Now through its various brands, it is also offering franchise options for the more business orientated employees, who are reluctant to make an attempt by themselves in a tough market.

Other options exist, of course, and a host of optical wholesalers have responded to help independents market their business very successfully in this tough retail environment.

The reality is that even though glasses are advertised by a large optical chain for as low as AUD$59 for a complete pair, the average selling price will be at least quadruple this.

By using package deals put together by independent suppliers, it is quite easy for an independent business owner to offer the same package deals to their patients as are promoted by the franchises. In the end, in my experience, I’ve found that by far the majority of patients will end up choosing the product that works best for them. And that product is certainly not the bargain basement prices or three-for-one deals.

The CEO of the Optometry Association of Australia (OAA) Mr. Joe Chakman stated a little while ago in mivision (Issue 58, Jun 11) that he believes “only about 30 to 35 per cent of all registered optometrists work with corporate optical chains”. From that estimate he’s suggesting that about 65 to 70 per cent of the optical market is made up of independents. This figure seems a little high but is also hard to quantify as surveys published on the amount of optical ‘doors’ in Australia don’t appear to be accurate either.

Whatever the figure is, there is a concern from some quarters that the number of independent practices will quickly reduce. Some believe that as more marketing forces take hold, there will be significantly less independent optometrists operating in the market. However, if we look at the example of optometry in the UK, where corporate optometry has been very strong for the past 25 years, there seems to be a shift back to an independent model. There is evidence from the UK that the corporates’ share of the market has reached a plateau and independents are making a comeback.

Specsavers’ growth was very rapid when it first came into the Australian market, but that growth has slowed significantly over the past year or so. While the partnership/franchise model works for some, it appears that the corporates haven’t so much been signing up independents as they have been eating up the ground from employees of other corporates.

Premium v Budget

The face of optometry will change not only because of the corporate franchise model, but also with ocular therapeutics becoming a bigger portion of independents’ practices. It is difficult to imagine that the corporate entities will be interested in promoting this aspect of eye care, as it involves a significant investment in technology and often does not end up in an optical appliance sale.

Again using the UK experience as a guide, it is likely that independent optometrists will respond to price-driven competition by offering customers comprehensive eye care that makes use of the latest technology. Futurologist Ian Pearson calls it the ‘care economy’. His premise is that as manufacturing is increasingly outsourced, the ‘care economy’ – which includes professions such as teachers, nurses, police and, of course, health professionals such as optometrists – will grow in relevance. It’s the one thing we can’t import, Dr. Pearson says.

Under this model, independent optometrists would be more likely to deliver a holistic package – focusing on eye health and building a positive and ongoing relationship with patients, as well as selling a product that looks good and suits a person’s needs – rather than simply offering cheap frames.

It is hard to imagine that the face of optometry will not become “two-faced” – premium versus budget. In the end, the patient or the customer will make up their minds about which camp will provide what they are after and attend accordingly.

Independent v Franchise

With all the enquiries I have had from colleagues I had a look to see what is possible for an independent and a franchise in a best case scenario.

I’ve looked at two weekly revenue figures of AUD$20,000 and AUD$40,000. The figures in each table (scenario 1 and 2) are only approximations and depending on the demographics there can be variations.

It can be argued that the average independent does not turn over the figures in Scenario 1, but the flip side
is there are many independents that do these best case franchise numbers.

It is pretty clear that if an independent operator can function in this tough optical environment, the rewards far exceed the franchise model. Just as importantly, the operator can be in total control of their destiny without the umpteen provisos imposed by franchisors.

I know that there are many people who would prefer not to have the perceived uncertainty of this retail market. In this case the franchise model will offer some level of security but, for that perceived security, be prepared to work twice as hard!

What is also clear in my mind is that with all things being equal the independent will end up with twice as much take home pay, or alternatively, will work half as hard to end up with the same pay.

Dr. Jim Kokkinakis is a Fellow of American Academy of Optometry and partner in The Eye Practice, a Sydney-based optometry practice that specialises in using cutting-edge diagnostic technology including Retinal Digital Photography, Optical Coherence Tomography and Corneal Topography.

 

Independent with Support: The Cooperative Model

For optometrists who don’t like the idea of franchising, but feel they need some business support, the co-operative approach provided by groups like ProVision, Eyecare Plus or Optipro could be the answer.

After a stint travelling around rural Australia in the ‘Vision Van’ – a mobile screening unit to providing macula
checks to regional Australians – Li Chen and her fiancĂ© and business partner Paul Cha (pictured) decided to opened a practice on the New South Wales Central Coast in May this year.

She set her practice up under the Eyecare Plus badge which has 185 member practices around Australia.

“I wanted more control over my business. I know how I like things to be done so I decided not to go with a franchise model.

I didn’t want any restrictions on what frames I stocked, how much to charge or how much time I should spend with each of my patients. I’ve done a lot of locum work and I’ve had quite a lot of exposure to working for a franchise business. It was definitely not the way I wanted to go,” Ms. Chen said.

Business Support

She said they opted to join Eyecare Plus because she wanted full independence, but wanted to be part of a bigger group when it came to issues such as marketing, accreditation and background support.

Ms. Chen said opening a new business was extremely stressful but Eyecare Plus assisted with a pre-opening newsletter marketing campaign, targeting 26,000 residents in the local area.

“Since day one, we’ve seen about eight to 12 patients a day. It’s too early to tell what our annual turnover will be, but we’re much busier than we imagined and we’re looking to hire additional staff, well before we imagined we would need to.”

Ms. Chen said in formulating their business plan, they had budgeted a start-up cost that included renovations and fit-out of their premises, rent, and their wages for the first few months of the business.

She said she expects to pay between AUD$2,000-$3,000 per year to Eyecare Plus for group membership
and will participate in collective advertising campaigns, as well as some individual promotions.

Member Options

“We give members the option to be a branded or unbranded member,” said Philip Rose, Eyecare Plus National Business Development Manager.

He said members must be a full service independent optometry practice and pay a licence fee of 0.5 per cent of gross practice turnover. In return, they benefit from supplier discounts, marketing subsidies and loyalty bonuses which “can together neutralise the cost of membership”.

Branded members are required to abide by guidelines on the use of the Eyecare Plus logo in their signage and marketing, and participate in collective advertising, as determined by a members vote within their region.

“For branded practices in the footprint of a radio station, television station or newspaper, there’s the possibility of common advertising which significantly reduces shared marketing costs,” he said.

Mr. Rose said marketing campaigns can be initiated by our suppliers or a member business. Practice staff and owner training sessions are also provided on a user-pays system, for a “nominal fee,” he said.