Marks & Spencer

A Case Study
 INTRODUCTION
• One of the major strategic tools in service industries' expansion, in
both domestic and international markets.
• Mixed retail businesses have turned towards franchising as a way of
entry in International Markets.
• Marks & spencer has adopted this Operating format as a mean of
entry strategy.
FRANCHISING IN EUROPE
The International Potential Of Franchising
In Western Europe £25.8 billion in 1986 to £49.6 billion by the end of
1990
In UK 450 to 500 franchisers and up to 27,000 franchised businesses
The French total of approximately 650-700 franchisers and up to
35,000 outlets.
Franchised Businesses in Europe
 FRANCHISING IN THE MIXED RETAILING
BUSINESS SECTOR
Business format franchising has been a critical modus operandi for
many of the niche players, offering highly specialized merchandise
mixes.
Early example of franchises were fast food business
ST. MICHAEL:
THE INTERNATIONAL FRANCHISE
Marks & Spencer Others
Franchise was formed in Lisbon in • E.g
1987 1. Tie Rack
It grows from company’s own export 2. Manoukain clothing
business.
Many of its Franchises are its own 3. The Body Shop
family business.
Long term relationship with company. Have first to establish relationship with
Franchisee i.e. Bastos Family has potential Franchisees.
enjoyed 30 years of relationship with Developed a distribution network
St Micheals. Set solid Standards
It was a strategic advantage for Marks Involving a greater degree of Risk
& Spencer for establishing Franchised
business with existing customer
FRANCHISING ALLOWS THE COMPANY THE
OPPORTUNITY TO EXPAND ITS GLOBAL PRESENCE
Tie Rack
• In 1989 only 11 overseas shop of Tie Rack
were Franchised.
• Company needed to develop a global
presence and infrastructure before
franchising its outlets.
• Capital intensive
Marks & Spencer
• Minimum capital intensive
• Used St Micheals Name in new markets.
• Test consumer behavior on St Micheals
name before expansion.
• Careful choice of Partner
• Access to Prime locations
• High Returns on Investment
• Rapid accumulation of market Knowledge
• Strengthening of Marks & Spencer Image
POTENTIAL FRANCHISEES MUST DEMONSTRATE THE
ABILITY TO ACHIEVE A MINIMUM LEVEL OF TURNOVER

Marks & Spencer

• Marks & Spencer have chosen a
middle road between those
formats based on supply of
merchandise only and those
based on a distinct formalized
style.
• Benetton and McDonald's.
Potential franchisees must
submit business plans based on
one year and five years, and
demonstrate the ability to
achieve a minimum level of
turnover which involves an initial
capital investment of £1 million.
BENEFITS TO THE FRANCHISEE

What Franchisee Gets What Franchisee Pays

Franchisee has the benefit of Purchase of merchandise.
proven systems Franchise fee based on a
The support of one of Britain's percentage turnover above an
major retailers agreed limit
Managerial support
Franchisee accrues from the
increased volume of sales.
DISADVANTAGE TO THE FRANCHISEE
Possibility of a company buy-out where the initial test marketing
proves positive.
Store operating formats are highly controlled with little scope for
modification.
Franchisee requires a significant amount of capital.
The benefit of St Michael franchising is that
growth through business format franchising
enables the company to establish a presence in
counties where population size or per capita
expenditure may not be sufficient to support a
major program of expansion.
The franchise group acts in a pioneering role.
Franchising allows the company to expand globally
into areas where it does not seek to establish a
full-scale operation.
Future opportunities exist in geographically distant
areas, or where the level of retail development is
significantly lower than in the UK.
franchising has a significant role to play in
establishing the international corporate image of
St Michael in world markets.