Struggling Uchumi set to franchise Lang'ata outlet

Uchumi Supermarkets store in Nairobi.
An Uchumi Supermarkets store in Nairobi. FILE PHOTO | NMG 

Uchumi Supermarkets has picked the Lang’ata Hyper branch to kick-start a new franchise model proposed two years ago.

The struggling retailer Wednesday called on investors with financial muscle to bid for the franchise licence of its Lang’ata Hyper Branch.

Uchumi #ticker:UCHM first contemplated the model in 2016 during its 35th Annual General Meeting (AGM) when shareholders were briefed on the retailer’s expansion plan.

The retailer then termed it a cost-effective model that would return the retailer to profit.

During the meeting, Uchumi said that it targeted 200 franchise mini shops across the country as part of its turnaround strategy.

The strategy as announced did not however include giving up its stores.

“Uchumi has been reviewing its store strategy with a view of optimising operations and deriving maximum value from the stores.

Extensive discussions

The franchising model has been discussed extensively in previous AGMs as a viable means to revive Uchumi given its strong brand value.

We can unlock our super brand value using franchising to the benefit of all our stakeholders and franchisee,” said Uchumi Chief Executive Officer Mohamed Mohamed in a statement.

In the franchise model, big brands allow other operators to use its name in a certain market in return for royalties.

This model has been tested in a number of sectors locally such as manufacturing, hospitality and transport with mixed results but is yet to be tried in the mainstream retail industry.

Franchising agreement

“We shall enter into a “Franchising Agreement” that shall lay out various technical and financial obligations that the Franchisee shall meet in order to successfully operate the Franchise,” said Mr Mohamed.

“By achieving these pre-agreed key performance indicators on an annual basis for successive number of years, we will be able to receive multimillion shilling Franchisee Royalties.

Most of the obligations of the agreement shall be agreed upon during the final stages of negotiations with the selected franchisee,” he said.