Growth by franchise requires ‘extreme care’ – Mapic Italy
- In News
- 16:01, 17 May 2017
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Franchising may be the path to rapid international growth for brands, but is an approach which requires extreme care, delegates have heard at Mapic Italy.
'I'm still amazed when creators of brands hand their babies over to other people,’ said Domenico Guttadauro Mancinelli, chief commercial officer of Al Hokair Fashion Retail, one of the largest franchise retailers in the Middle East and North Africa, which opens stores on behalf of hundreds of international brands.
Mancinelli: ‘Successful franchising is a partnership - the brand owner relinquishes control only to the right operator, with the correct due diligence carried out on both sides. Otherwise it's an extremely risky business.’
Mancinelli added: ‘Nowadays, we take a scientific approach. First, we totally map a brand, try to understand the basics of how a brand works. Then we set some benchmarks, and do due diligence on the financial solidity of the group. How are you going to finance expansion or deliver the product on time unless you have sound financial fundamentals?’
Christopher Jones, director of international franchising for Germany-headquartered food chain Vapiano, said that a mixed approach to expansion worked better for their brand.
‘We had to tackle this issue of handing our ‘baby’ over to strangers very early in our growth story,’ Jones explained. ‘Since 2002, we established ourselves on all continents, in 32 countries – there are now over 180 Vapiano outlets worldwide.
‘Economically, the returns are better if you can directly grow yourself, rather than handing out franchise opportunities. That way you only pick up franchise fees. So we always enter countries 100% Vapiano, and after we are established, and start to understand the market, only then do we explore working with franchisees,’ Jones said.
Lorenzo Formoso, chairman of the Federation of Asia Pacific Retailers Association, underlined that brands needed to be introspective before seeking international growth.
‘The challenge facing a lot of brands and concepts is their level of flexibility entering different countries,’ Formoso said.’If you can’t adapt to a different culture, without selling out your core values, you won’t survive.’
‘You actually need to keep the partner who is farthest away from you geographically and culturally the closest connected,’ Jones concluded.