Aussie café chain makes another try in Czech market

After its recently failed debut in the Czech Republic, the Australian-owned global franchise Gloria Jean's Coffees is attempting a comeback. Originally, the Aussie chain opened three stores in Prague and one in Brno but was forced to close down after the collapse of its franchise partner HAM Gastro Czech. Although the coffee industry is said to be "recession-proof," the timing for the Gloria Jean's relaunch will be challenging. The chain is currently looking for a new franchise partner with the aim to set up in the Czech Republic by December. Ultimately, the company is hoping to open five new stores each year. During a recent visit to Prague, the global development manager for Gloria Jean's Coffees, Troy Franklin, sat down with The Prague Post to discuss how he hopes to make the business venture work the second time around.

The Prague Post: What was behind the failure of the first Czech master franchisee HAM Gastro?

Troy Franklin: Initially, they appeared to have a good corporate structure, and the initial performance of the business with the opening of the initial outlets was positive. HAM Gastro then struggled due to a restructuring of its parent company (a furniture business) and, despite the GJC brand having seen initial success in the market, we unfortunately saw the outlets close due to the nonperformance of HAM Gastro and the failure of its shareholders to support the company and GJC brand.

TPP: How many cafés would you like to have in the Czech Republic in the near future?

TF: We expect to open about five outlets a year. Five years after reopening in the Czech Republic, we would like to have 25 outlets.

TPP: Who is likely to be your new franchise partner?

TF: When we find a suitable partner, we will call them our master franchisee partner (MFP). A master-franchise relationship is like a marriage: We are not in it for a few days, but ideally for life. We need a partner with a strong financial background and experience in the multi-unit retail industry. We would prefer someone with experience in the food and beverage industry. Just identifying a company with sufficient financial resources is not sufficient; we would expect them to also be aware of the real estate market and know what sites are appropriate.

TPP: Are you close to finding a suitable candidate?

TF: We are involved in negotiations, but let's say we have a handful of candidates, and we will finally decide from a shortlist of three or four. Ideally, the preferred candidate will be selected by the middle of 2013. They will then have two years to establish the brand through operating their own GJC outlets before they can sub-franchise to third parties.

TPP: How much would it cost to become the MFP for the Czech Republic?

TF: It always depends on the country and the cost of establishing the business and leasing spaces and building the outlets and other factors. A new MFP would need to invest more than $1 million dollars to launch the brand and open the initial outlets in the Czech Republic. We are looking for people with integrity and trust, who share our joy and passion for the coffee business and what we stand for.

TPP: Have you already identified new places for cafés?

TF: We will initially look for light house outlets and, although they may be expensive locations, they will act as a magnet for our customers and a billboard for our brand. The main battlefield is Prague, and we would like to see a few sites in the Old Town area where there is a good mix of locals and tourists, but we're going to look at both sides of the river and into the suburbs. During the first five years, the focus will definitely be on Prague. Brno, which is not too far away, is also a possibility, but initially we want to cluster our outlets in Prague. Shopping centers will be another area of initial focus.

TPP: Is the Czech market for a coffee business challenging? Is the market unique?

TF: Europe has been a challenge for us, especially from a geographical perspective. We turned our attention to Europe a bit later than some of our competitors, because Australia is so far away. Additionally, we started to focus on Europe at about the same time the global financial crisis erupted.

Our home market of Australia didn't suffer from the crisis as much as some other parts of the world, including Europe. However, it is true the Czech Republic is not similar to Australia, the United States or the United Kingdom, where people tend to go more for take-away coffee in disposable cups. Here, customers are more likely to go sit down, and they want the time to relax and enjoy their experience in the outlet.

Czech customers are educated, exposed and worldly. Additionally, the younger generation wants to spend time in stylish and trendy places. They want to be associated with a great brand, and this creates great opportunity and potential.

In many ways, the Czech Republic is no more challenging than other markets in Europe or elsewhere.

TPP: Where is your current focus on the European market?

TF: We have succeeded in Romania, and in the past year we have doubled our business in Kazakhstan. We also opened a café in Azerbaijan, and we are in Turkey, Cyprus and Ukraine. As for countries neighboring the Czech Republic, we may potentially develop Slovakia simultaneously with the Czech Republic, or it may be treated as a separate business. We are also looking at opportunities in Georgia and other CIS countries. The primary focus at present is on the Czech Republic, Germany, Scandinavia and the United Kingdom.

TPP: In Australia, Gloria Jean's is often criticized for its links to the evangelical Christian Hillsong church. Is this a problem for the company?

TF: We have absolutely no corporate or financial links with Hillsong church. Our founder is a member of the church, but there are certainly no commercial or business links between Hillsong and Gloria Jean's Coffees.

Andrew Greene can be reached at
agreene@praguepost.com