According to records from the corporate regulator, Mac1 Corporate has not gone into external administration and there is no evidence of capital raisings or restructuring.

Rather, Harvey Norman is understood to have quietly paid debts owed to suppliers and merged Mac1 with another Harvey Norman franchisee, The School Locker, which sells IT products, musical instruments, toys and footwear to schools. A Mac1 outlet in Harvey Norman's flagship at Auburn closed two weeks ago.

Inconsistencies in treatment

The restructuring highlights the challenges facing Apple resellers as the global technology company opens bricks and mortar stores around Australia and expands its direct-to-customer operations. Several Apple resellers have gone out of business in recent years.

It also highlights inconsistencies in Harvey Norman's treatment of franchisees.

Mac1 has been merged with another Harvey Norman franchisee, The School Locker, which sells IT products, musical instruments, toys and footwear to schools. Tammy Law

In 2017, after pressure from ASIC, which looked into whether franchisees should be consolidated, Harvey Norman "reiterated" that franchisees were responsible for paying suppliers and the company would no longer guarantee their debts.

Harvey Norman changed the way it treated loans to franchisees and as a result receivables from franchisees fell from $943 million in 2017 to $535 million.


"[The Mac1 restructure] is a great example of [Harvey Norman] guaranteeing the debts of franchisees," said one critic of the company's business model, who declined to be named.

"It's a big amount – $7.8 million – forgiven and it is clear that all employees and suppliers have been paid as no external creditors have wound up any of these entities," he said.

"The Harvey Norman auditor has no idea how many other Mac1s are out there because all the franchisee liabilities are off balance sheet."

One-stop shops

Harvey Norman acquired the assets of Mac1 from Dick Smith's administrators, McGrathNicol, in 2016, taking over the intellectual property and employees including Mac1's founder, Kenneth Hogg, who started Mac1 in 1990.

Dick Smith had bought Mac1 two years earlier, in 2014, for a reported price of $1, but struggled to turn it around.

In the first half of 2016, before Dick Smith collapsed, Mac1 lost $163,000 on revenues of $25.4 million after losing $114,000 on sales of $41.8 million in 2015.

Within months of Harvey Norman's acquisition of Mac1's assets, the business was merged with Harvey Norman's business and education operations, creating one-stop shops where schools, government departments and companies could buy computers and accessories, office furniture, whitegoods and AV equipment.


According to Mac1's website, which is still operating, the business is owned not by Harvey Norman but by Mac1 Corporate Pty Ltd. ASIC records show Mac1 Corporate is owned by two former Harvey Norman executives, Daniel Wilson and Nicholas Ebbeck.

Mr Wilson was Harvey Norman's franchise director for 10 years until 2013 and describes himself on LinkedIn as the managing director of Mac1 Corporate and managing director of Harvey Norman Business and Education.

However, Mr Wilson could not be contacted and Mac1 said he no longer worked for the company.

Name changes

Mr Ebbeck was a director of Harvey Norman Business and Education and a director of Mac1 Corporate from March 2016 to April 2017, but now lists his job as chief operating officer of arena technology management company Techfront ANZ. He is still listed on ASIC records as Mac1 Corporate's secretary.

Mr Hogg is still Mac1's general manager, according to the company's website, and owns the Mac1 domain name. However, his private companies have undergone several name changes in recent months.

Mr Hogg's Educom IT Pty Ltd changed its name to Hogg Pty Ltd on June 26, 2018. It was known as Mac1 Group Pty Ltd from January 2016 to May 2018, Malay Vale from March 2010 to January 2016, and Mac1 Pty Ltd from July 2007 to March 2010.

Mr Hogg's other private company, Ken Hogg Holding Company Pty Ltd, changed its name to Educom IT Pty Ltd on June 26, 2018. Mr Hogg did not respond to the Financial Review's phone calls and emails.


ASIC started reviewing Harvey Norman's accounts in 2016 after concerns were raised by governance group Ownership Matters over the level of disclosure about the group's relationships with franchisees.

Key issues

ASIC completed its review of Harvey Norman accounts in November 2017, after the change in the treatment of loans to franchisees, but did not rule out raising further concerns.

Harvey Norman chairman Gerry Harvey, who declined to comment on the restructure of Mac1, has repeatedly rejected calls for franchisee earnings to be consolidated. However, he says the retailer will continue to pay the debts of failed franchisees.

Consolidation of franchisees and recoverability of franchisee receivables, which represent 12 per cent of Harvey Norman's total assets, remain key issues for auditor Renay Robinson from EY.

Harvey Norman has paid tactical support for franchisees, which includes loan relief, rent relief, franchise fee relief and marketing support, of $706 million since 2011. Tactical support peaked at $128.5 million in 2013 and rose from $64.5 million in 2016 to $75 million in 2018.

Harvey Norman shares have fallen more than 30 per cent in two years due to investor concerns about the potential impact of Amazon and, more recently, the downturn in the housing market.