Coffee franchise frothing with sale opportunity

Gloria Jean's 1The master franchise business behind one of New Zealand’s coffee shop chains has been placed on the market for sale.

The Gloria Jean’s brand is among NZ’s most recognised coffee retail chains comprising 17 franchised outlets. Ten are in Auckland, three in Christchurch, two in Hamilton, and one each in Wellington and Lower Hutt.

Gloria Jean’s was founded in Sydney, Australia, in 1996. Since then the company has grown considerably and is now branded in more than 900 coffee houses across 39 countries, including 400 in Australia.

Last year, parent company Gloria Jean’s International was purchased by Retail Food Group for $178,26 million.

Gloria Jean’s’ NZ master franchise was established in 2003 through a joint partnership between by coffee-loving businessman Paul Ewing, who had been operating a franchise in Brisbane for three years, and the company’s founders.

The first NZ Gloria Jean’s opened in the Northlands shopping centre in Christchurch. Soon after, the second NZ Gloria Jean’s site opened at the Palms Shopping Centre, also in Christchurch. Two years later Paul Ewing bought out the parent company shareholding to run the NZ division solo.

The brand’s NZ turnover has been steadily increasing in recent years. In the 2012/2014 financial year, the 17 NZ sites purchased 11.7 tonnes of roasted coffee beans. That figure increased to 14.5 tonnes in the 2014/2015 financial year, and is forecast to exceed 17 tonnes in the 2015/2016 financial year.

New franchises cost $55,000 to operate under the Gloria Jean’s brand, and are allocated on 10-year terms, with extendable rights of renewal. Franchisees then contribute two per cent of gross sales to a consolidated brand advertising budget, with a further six per cent of gross sales paid to the head franchisor, and $10,000 training fee for new franchisees.

The Gloria Jean’s master franchise business is being marketed for sale by Bayleys business broker, Tony van Camp, through expressions of interest.

Van Camp said that with a strong “cornerstone” presence, the brand is now poised to move into a new growth wave.

“The Gloria Jean’s brand has traditionally been very much focused in the bigger centres. There is therefore a big growth opportunity to establish outlets in provincial centres as the competition has done,” van Camp said.

“This could well see Gloria Jean’s locations in the likes of Whangarei, Tauranga, Rotorua, New Plymouth, Napier, Hastings, Gisborne, Nelson, Blenheim, Dunedin and Invercargill, which all have the population bases to sustain the necessary turnover required to underpin the brand.”

Van Camp said the Gloria Jean’s NZ master franchise business currently employs three staff including a MD, an operations manager, an an administrator.

“The master franchise company is essentially the administrative engine behind the Gloria Jean’s brand. As such, the company runs a lean back office focused business model,” van Camp explained.

“The master franchise has also identified food as an important growth opportunity for the brand, with initial feasibility studies and reports undertaken on the potential for establishing a centralised production kitchen supplying outlets with bakery items.

“The rationale is to compete with food-based retail outlets which have moved into the coffee retailing scene as a secondary product. Recent food offering trials at Gloria Jean’s Featherston St store in Wellington increased average spend by 20 per cent. Boxed salads were particularly enjoyed by female customers and cost was not indicated as a barrier.”

Van Camp said the master franchise has budgeted for a 30 per cent increase in outlet sales through the introduction of greater food menu offerings. Leading the transition into the food are the company’s existing Lorne St outlet and the soon to be opening Botany branch which are both being equipped with commercial kitchens.


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