Larissa Ham
March 23, 2012
The Age
Franz Madlener’s career has been one white-knuckle ride.
He started as a rock ‘n’ roll roadie, owned his own surf store at 18, had skyrocketing success with homewares brand Villa & Hut, sold it for more than $4 million, then watched as it self-combusted.
Stepping in at the last hour to save his former company, Madlener, now 44, narrowly dodged personal bankruptcy in the process.
“At the time I was considered a complete hippy. That was only 12, 13, 14 years ago that it was an absolute fringe business” … Franz Madlener.
The beginning
Madlener left school in Year 10 and become a roadie. Perhaps ironically, this life was the very thing that got his business brain ticking.
“Quite simply I was driving a rock ‘n’ roll truck from Sydney back to Melbourne and I fell fast asleep at Kalkallo, about 60 kilometres out of Melbourne. Everything was destroyed bar me,” he says.
“I just thought it’s time to do something else.”
Barely an adult, the keen surfer decided to buy a surf shop franchise in the south-eastern Melbourne suburb of Keysborough. Madlener eventually converted the outlet into his own brand, Ocean Blue, which he expanded to eight stores.
“It never occurred to me at the time that I was too young. I look back now, I was too young,” he says.
“I didn’t take the opportunity to go and learn and absorb information from people who had done it before. I lost as much money as I made. Although I had built a really good brand, it wasn’t a profitable brand.”
Learning from mistakes
After selling his surf and denim business, Madlener wound up working as a retail manager for Westfield in the late 1990s, in their retailer relations division. This stint was to prove one of his most important learning experiences.
“I spent two to three years working with retailers having trouble paying their rent,” he says.
“I learnt the successful retail businesses there all had a couple of things in common. They all had a very strong brand, they were vertically integrated – so they controlled the supply chain – they had a high margin and there were considerable barriers to entry.”
‘Complete hippy’
It was during a holiday to Indonesia that Madlener formed the idea for his future homewares business Villa & Hut.
It was the late 1990s and eco-friendly, fair trade and organic goods were radical. Madlener heard about an Indonesian community providing recycled timbers, and spotted an opportunity for homewares with an eco-friendly theme.
The idea had high barriers to entry for potential competitors because it wouldn’t be easy for someone else to jump on board with his contacts, from that location. And he had the feeling this type of product was set to boom.
“In music, anything that was fringe eventually became mainstream and something else would become fringe,” he says.
“In the late ’80s Mambo was hardcore fringe. You can now buy Mambo in Big W. So the same was going to happen with homewares, it was inevitable.”
Madlener invested $12,000 in handcrafted furniture, and Villa & Hut was under way.
“At the time I was considered a complete hippy. That was only 12, 13, 14 years ago that it was an absolute fringe business,” says Madlener.
Heady times
At its peak, from around 2004-06, Villa & Hut was blitzing it with more than 30 shops around the world, and 1000 staff.
Turnover was about $30 million a year, and Westpac “couldn’t give enough money to small business, I was their golden boy”.
Then, the crunch
If what goes up, must come down, Villa & Hut was set for a fall during the GFC.
“The bank realised – all banks realised – they were far too exposed to commercial lending. They basically came in one day and said ‘that $2.8 million we lent you, we want it back again,’ ” Madlener says.
He had 90 days to find the money, and admits he did himself no favours by bagging the banks in the media, saying: “when the sun’s shining they give you an umbrella and when it’s raining they want it back again.”
With 72 hours, Madlener’s accountant had found a potential buyer, publicly listed company Allied Brands.
“With less than 24 hours, to go the chairman of Allied Brands sent through an email to the head of credit at Westpac saying don’t release the hounds, we will be making an offer. That offer came in at 4pm on the Friday with the deadline being 5pm. As a matter of fact it was 4.11pm.”
Second coming
That was all well and good, until Allied Brands went into receivership.
Fearing for the franchisees, and wanting to protect the Villa & Hut brand, Madlener eventually bought the chain back from the receivers in January last year with a private equity family, who continue to run the franchise chain.
But there was a massive glitch still to be faced – Madlener failed to have a series of personal guarantees he made for Villa & Hut debts unwound when he sold the business to Allied Brands back in 2009.
Madlener had to sell everything he owned to clear the debts in his name, after coming to an arrangement with creditors last year. Still, he remains circumspect about the loss.
“It’s only money. I never did it for the money in the first place,” he said.
“If I only did it for the money and I lost all that money, I would have been heartbroken.”
Entrepreneurial spirit
Madlener, a health nut, says high-pressure situations are just part and parcel of being an entrepreneur.
In fact, working hard has become second nature; “it all morphs.”
Madlener only sleeps three or four hours a night. “I actually think we’ve convinced ourselves we need too much sleep,” he says.
It’s one way to stay ahead of the competition.
“If they are working 50 hours a week on their businesses then I need to be working 100 hours a week on mine to stay in front,” he says.
What now?
Madlener is hardly bored these days. He has two young children, and among other things, is writing a book, guest speaking, competing in ironman events, investing in cafes, chairing several companies and acting as an ambassador for the Hilton. But his main focus is Tier Park, a retail and commercial consultancy group based in Melbourne.
He says he doesn’t regret one day of business life so far.
“Through everything I’ve gone through I don’t regret one day of it, I don’t ever beat myself up about it, because at the time I backed my own judgment,” he says.
“It’s a journey. It’s like putting a backpack on and just setting off hiking and seeing where time and travel will take you.”
Franz Madlener’s five secret tips
1. To be an entrepreneur, you also need to be a leader. Inspire people to believe in a vision and differentiate your idea from the crowd.
2. Be committed. There is no such thing as luck. Commitment comes from being able to manage and accept failure, then finding a path back to success.
3. Never, ever, ever, ever, ever give up, no matter what the obstacle, the odds, or what people tell you.
4. Build the vision and build the relationships. Products will change, so lasting success will always build from one thing: relationships.
5. Embrace change. Have a definite plan…that can change any time.
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