INTERNATIONAL ROUND TABLE
decision on these things on a gut feeling. It has to be somebody who’s got a passion for the brand, who understands the brand, the luxury nature of it, it’s just of the utmost importance that that’s retained – no money in the world negates that, so we’re looking for people who are going to be, on their side, an extension of the family.
EF: look at what happened with Burberry. The check became what the kids in the street wore so they were running around devaluing the brand. What did Burberry do with that? They stopped selling entry-level products. They withdrew from that market segment, stopped making it available and made it aspirational again. It cost them a great deal of money – but that was a big decision that they had to take, strategically, to move away from devaluing their brand.
SB: that’s one of way of controlling it!
EF: Can we expand on what due diligence you can do?
LB: I heard a very interesting talk about due diligence from a market-leading brand, the public perception of which has switched round quite quickly to questioning its reputation. And so they are fi nding that they are under even more pressure in their partner selection. And what they talked about was that, yes, carry out due diligence, but for them it’s just a deeper kind of market research and there’s a limit to how far you can go. There are lots of people you can use to help you with background investigation – we have a standard that we use, some people use Red Flag, there’s different businesses that for you, , but again they can only do background checks on what’s available. I think all you can do is at least satisfy yourself that you’ve checked what you can. We have a very simple system: blue, red, amber, green, for a partner, and we just everything grade on those. It wouldn’t necessarily stop us from talking to someone but it would make us maybe go a little bit deeper, if you had a few blues and reds and not too many ambers and greens we would maybe then use somebody like Red Flag or investigate other ways of checking out the business we’re going to work with.
BJ: We speak to other businesses, because generally, cream rises to the top. You don’t have to ask too many questions before you end up fi nding that they’re a UK operator
EF: You guys at Fitness First had an interesting experience with regional franchising?
Alex Rattray: It was at a time when the owner-operator group was going through quite a period of transitional change ... thankfully Landmark Group parachuted and took over the franchise relationship.
“You can’t take a UK home counties store and drop it into Dubai mall... You have to be flexible and adapt”
EF: One of the classic problems with international franchising is that you do it ’cos somebody comes to you and says: “Oh ... we’ve got some money – will you franchise to us?” Everyone is fl attered about going international, stumble into it and the fi rst three are with the wrong partners or on the wrong terms.
HC: Franchise is a relationship, everything’s about relationships, we have a hard time working with a contract. It’s like a contract when you’re married: it has only one purpose, to be terminated. If you leave that in the drawer until you need it for that purpose, never talk about it, never mention it, just fi nd solutions. That’s at least the way we look at
that’s in that market with this or that particular partner.
EF: I think that’s one of the strengths of international retailing in the UK is that it’s a small network; you can have a conversation with your peers about which is the best fi t for your brand. People are open to the question: “How do you get on with X?” and then you share that with the rest. I’d like to try to encourage that conversation as a group – “What about these guys / those guys...”
LB: Actually, for us, the Middle East was the easiest place to do that. Yes, you’re never going to see a set of published accounts but what you can get is pretty good anecdotal info about “these guys haven’t paid me for 12 months”, or whatever, that just gives you a view as to whether or not you think they’re going to be a right fi t for you.
it otherwise discussing legal things is always makes all the business diffi cult.
EF: and only one person benefi ts. And that’s the lawyer!
HC: Fortunately, we rarely get in this situation For instance, with China, we bought back our master franchise and now it’s joint venture and so we’re a little bit more in control.
EF: I think that *is* the approach for China. Plus it’s so big, you’ve got to have several relationships within the country. On the international side – do you get agreements checked out in each (territory’s) jurisdiction?
LB: We insist that a partner has an address in the UK so we can serve any papers to that address. Whether or not that address exists of course can be a different matter when we go to serve – but fortunately we’ve not got there yet.
BJ: I think people soon get to know, about a partner, if they were doing something wrong. I think most now know that everyone speaks to everyone, if a partner tries to do something untoward then their reputation dives.
HC: It’s interesting ... when you present a contract to somebody who’s new in the business they read it and say: “This is a tough contract!” and you say: “No, it’s just a diary of bad experiences!”
EF: What about counterfeit – is that an issue?
Sarah: Not necessarily at Jenny Packham but I used to work for the brand Orla Kiely, and that was copied regularly ... it’s anything with pattern. Anything that’s immediately recognisable. And it’s incredibly hard as you quite often see people sending photos from who knows where…
EF: I know M&Co may not have a problem with replication yet but some of the higher- end guys have started to get together to stop websites from selling fake product, they now advise each other and that’s quite helpful.
LB: What we do have is, for example, we’ve a store in a new market. We currently something they believe they can tell and our franchisee wants them and the hoops that you go through a) backwards and forwards on it
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