Franchise groups should multibrand, says DC Strategy

According to DC Strategy , Foodco Group Pty Ltd claims that keeping its Muffin Break and Jamaica Blue coffee and food brands separate gives it an edge over rival operations like Starbucks, Gloria Jean’s and Michel’s Patisserie .

The biggest advantage to the Australian-owned Foodco in keeping the brands separate is that it allows it to have both a Muffin Break and a Jamaica Blue store in the same shopping centre. Its rivals are largely limited to having just one site in each centre.

Managing director James Fitzgerald says that there are only a limited number of good retail sites available in Australia and New Zealand.

He says that some of Foodco’s rivals “are dreaming” if they believe they can maintain 300-plus viable sites in Australia and New Zealand.

Adrian McFedries, strategic director at DC Strategy in Melbourne, agrees with the overall rationale for the multibrand strategy. He claims it enables a business to access a larger market and leverage off its core expertise.

McFedries notes the Luxottica Group, world leader in the design, manufacture, marketing and distribution of prescription frames and sunglasses, through its ownership of the OPSM Group, operates a multibrand strategy with the OPSM, Laubman and Pank and Budget Eyewear brands.

He adds that the Flight Centre Group leverages its core expertise across multiple brands including Flight Centre, Escape Travel and Student Flights.

According to Foodco’s Fitzgerald, the key challenge specific to the operation of Muffin Break and Jamaica Blue is keeping the distinctive points of the brands separate. “Each brands has its own values and to ensure they are clearly defined Foodco maintains separate field [site] and marketing personnel for each brand.”

Still, operational similarities and a combined purchasing power are used to benefit both Muffin Break and Jamaica Blue.

DC Strategy points out the only difference between the two brands in the manner of operations is that Muffin Break, the bigger of the two, has a strata of state field managers who are responsible for each region’s field staff. With Jamaica Blue, field staff report directly to a national operations manager.

Both brands share Foodco’s general infrastructure of finance, contracts, general administration, site leasing, shop design, IT, products and training.

The first Muffin Break café opened in Coolangatta in 1989. There are now 203 outlets in Australia and New Zealand.

‘There are only a limited number of good retail sites available.’

Foodco aims to open five more by the end of June 2006 and add another 14 in the 2007 financial year.

Outside of Australasia, Muffin Break has 22 sites in the UK, one in California, and four in Dubai. The UK and US shops are operated directly by Foodco and the Dubai shops via a licence agreement.

Foodco expects most of its site growth outside Australasia over the next two years to occur in the UK with Muffin Break.

DC Strategy points out Muffin Break’s revenues for the 2005 financial year totaled $124.4 million and the revenues for the current financial year are expected to reach $136 million. Muffin Break stores typically cost $290,000.

Jamaica Blue’s first cafe opened in NSW in 1992. There are now 54 Jamaica Blue outlets in Australia and New Zealand, with another four expected to open by the end of July 2006 and another eight on top of that again earmarked for the 2007 financial year.

Internationally, Jamiaica Blue has 14 sites in Kuwait, two sites in Shanghai and one in Taiwan. These

are all operated under licence. Jamaica Blue achieved revenues of $41.4 million for the 2005 financial year and expects to lift this sum to $46 million in 2006.

A typical set up cost for a Jamaica Blue cafe is $320,000.

Foodco’s brands sell more than 27 million cups of coffee annually, breaking down to around 20 million

cups sold through Muffin Break and the remainder sold by Jamaica Blue.

A typical Muffin Break outlet sells more espresso coffee as a percentage of sales than any other of its products, according to DC Strategy.

Taste of success

• There are now 203 Muffin Break outlets in Australia and New Zealand

• Jamaica Blue now has 54 outlets in Australia and New Zealand

• They share Foodco’s general infrastructure including finance, contracts, site leasing, shop design, IT, products and training

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