Gloria Jean’s to close or move 25 stores to franchise-only

Coffee chain Gloria Jean’s is set to shift into a franchise-only business model, meaning up to 25 of its 400 Australian outlets could close or become franchise operations by the end of March.

The change follows a 100% takeover of the business in December 2013, when it was acquired by Singapore-listed Global Yellow Pages.

The company has around 800 stores internationally with further expansion plans, so it will shift focus from operating its own stores to a franchise model, the Australian Financial Review reports.

Gloria Jean’s executive chairman and co-founder, Nabi Saleh, said that owning property was a “distraction from our primary business strategy”.

“By March 31 our goal is to either have all these coffee houses successfully franchised or closed,” he said.

It was not revealed which Australian stores were set to close or convert into franchises. Gloria Jean’s was contacted by SmartCompany for further detail, but no reply was received prior to publication.

It was reported that Saleh said the business was “in talks” with potential franchise partners.

Franchise Advisory Centre director Jason Gehrke told SmartCompany shifting from in-house management to franchisee management was “fairly common” in mature franchise brands.

He says some franchise companies have a stable of company-owned stores which they use to test pilot concepts or for training.

“Sometimes the franchisor will buy back stores from franchisees that are underperforming, or they inherit stores that become company-owned,” he says.

“They may assume the operation of some stores to maintain the brand integrity.”

Gehrke says it is “no surprise” Gloria Jean’s could pursue the franchise-only model following its change of ownership.

“There are many franchises that choose not to have company-owned operations as they say they can be distractions from their core business,” he says.

He says if Gloria Jean’s wish to achieve the change over by March 31 they will likely be looking within their existing network of franchisees to take on another location.

Gehrke says the challenge of taking on another franchise location would be the cost of financing it, building up the business while continuing to grow existing operations and negotiating the right price from the franchisor.