Building portfolios of International Master Franchise brands
Master Franchise licences are attracting increased interest from corporate investors seeking to build multi-brand groups with proven business formats
The recent news that Saudi retail group Master Franchisers FZCO has bought up two Master Franchise licenses for Middle Eastern markets (Australian wrap franchise Trios and, most recently, Italian fashion bags, leather goods and luggage retailer Carpisa, see page 9 for details) is illustrative of a spate of similar investments by Middle East-based trading groups who are increasingly making targets of international franchise licenses. These multi-brand groups seek to add new brands to their portfolios and open branded stores in the many new-development super shopping malls being opened in Dubai, Kuwait, and other areas in the region.
Owned by a group of Saudi companies and with a regional hub office based in Dubai, Master Franchisers FZCO employs its own marketing and communications expertise and adds the product-specific knowledge of the franchisor, plus the local retailing skills of sub-franchisee partners, to build retail chains under big name brands. Its portfolio of brands includes Master Franchise licenses awarded by Danish furnishing, fabric and furniture retailer JYSK, Malaysian fashion retailer SEED, Malaysian casual wear brand Padini Authentics, French women's knitwear retailer Lulu Castagnette and Belgian body-fashion retail brand Hunkemoller, plus two concepts created by Master Franchisers FZCO in bedroom and bathroom accessory brand Bed&Bath and design jewellery retailer Zerga.
"Master Franchisers FZCO have a clear and concise picture of retail potential in the region, experience across many categories coupled with sound financials," said Trios Managing Director David Elia. "We strongly believe they deliver every opportunity to surpass the growth expectations for our franchise."
Meanwhile Maurizio Carlino, Chief Executive of Kuvera (the parent company of Carpisa) has reflected: "The only way for us to proceed is to work with a strong, local partner like Master Franchisers FZCO, whereby we join our new concept with their know how of the local market and the Arabic customer."
Another high profile Middle Eastern Master Franchise buy over the summer was made by the Al Tayer Group, which will open 12 nursery goods stores under the UK's Mamas & Papas brand by the end of 2009, including three this year. The group was founded in the UAE in 1979 and owns a number of fashion licenses such as Dolce & Gabbana, Giorgio Armani, Jimmy Choo and Yves Saint Laurent, plus Master Franchises in other industries such as National Car Rental, Belgian chocolate retailer Galler and British department store Harvey Nichols.
Meanwhile, UK clothing retailer Hennes & Mauritz has granted a franchise to Kuwaiti retail group M.H. Alshaya which will open a store in Kuwait, plus three in Dubai this year (see page 8 for more on this story). The group was founded in 1890 and has built up a huge portfolio of franchise licenses, including UK fashion retailers Debenhams, Mothercare, Next, BHS, River Island, Topshop, Dorothy Perkins and Wallis, plus The Body Shop, Clinique, Estee Lauder, Pearle Opticians, Boots, Starbucks, Pizza Express and Foot Locker.
H&M CEO Rolf Eriksen said of the deal: "Considering M.H. Alshaya's strategic retail presence in the region, we are confident that this partnership will provide a much-needed impetus to our growth plans in the Middle East," while M.H. Alshaya CEO Mohamed Alshaya added that the group would commit its "regional knowledge and retailing expertise" to the success of the endeavour.
Groups such as Master Franchisers FZCO, the Al Tayer Group, M.H. Alshaya and IIC Group, which recently signed a 10-year franchise agreement to develop Australian brand Brumby's Bakeries in Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, the UAE and Iran, are combining highly valuable knowledge of local consumer tastes, regional site location opportunities in the array of retail developments underway and significant capital funding to take a highly professional approach to Master Franchise ownership.
Similarly, multi-brand focused groups are operating in Central and South East Asia, where an increased focus from international brands on developing networks is encouraging Master Franchising activity. In June US brand Krispy Kreme Doughnuts signed a franchise agreement with Krispy Kreme Hong Kong Ltd to open up to 20 stores in Hong Kong and Macau, China, while in August it awarded a 20-unit Master Franchise for Indonesia to PT Premier Doughnut Indonesia, which is principally owned by department and specialty retail store group PT MAP Premier Indonesia. Australian cookie store brand Cookie Man will see 14 outlets and 40 express counters opened in India under a Master Franchise with Australian Foods India, while US restaurant brand Church's Chicken recently opened its first South East Asian location after granting a Philippine Master Franchise to Wow Foods Corporation.
The governments in these regions are recognising the value of encouraging Master Franchising in order to improve their economies. Regular franchise conferences and exhibitions take place in Dubai, Doha, Seoul, Beijing, Kuala Lumpur, Singapore and Jakarta, with growing attendances from, among others, government ministers keen to promote the influx of international business concepts and know how. The Malaysian government is going further with the announcement in July of its Ninth Malaysia Plan, which aims to encourage the creation of 50 franchisors and 100 franchisees, with deputy minister of entrepreneur development and co-operatives Datuk Khamsiyah Yeop explaining that it is an aim of the government to further develop the country's franchising industry.
With the business concept of a Master Franchise already proven in its domestic market, investor corporations and governments recognise an opportunity to bypass much of the research and development stages of launching a new brand in their own country, limiting it to simply altering elements to fit in with their local culture, economy and legislation. This is perhaps even more vital for individuals looking at becoming a Master Franchisee who may not have access to the level of funds needed to drive the development of a new idea from scratch. With the additional elements of a training and support package, an international brand and established marketing strategies, Master Franchising offers international markets an excellent formula for combining foreign know how with domestic endeavour.
Franchise Development Services has developed an International Franchise Acquisitions Programme to assist individual and corporate investors in examining the international markets for Master Franchise opportunities. With 25 years of experience of assisting franchise investors, FDS can assess a portfolio of brands in order to advise on the most suitable for further investigation.
Text: Stuart Anderson