The collapse of Coffee Republic (founded by brother and sister team Bobby and Sahar Hashemi in 1995) this week illustrates yet again that the cries of "green shoots" might have been a little premature!! Office workers and shoppers are, it seems, increasingly balking at paying more than £2 for a cup of frothy coffee. According to WSJ, KPMG, the administrator, is in talks with interested parties with a view to selling the remaining business as a going concern by the end of next week, following the closure of 10 coffee bars the administrator said were "no longer viable". KPMG partner Richard Hill said: 'The recession is hitting discretionary spending on the high street and some of the less profitable bars with expensive leases have suffered. 'However, Coffee Republic has a strong brand and I expect considerable interest in the profitable parts of the business.'
I wonder how many other leisure businesses or franchise operations will go the way of Coffee Republic before we get to the other side of this recession... There was an interesting FT article on Friday pointing out the difficulties of managing a franchise operation in a downturn - http://www.ft.com/cms/s/0/13d5bf54-6d74-11de-8b19-00144feabdc0.html?nclick_check=1
The collapse this week of Coffe Republic , the majority of whose outlets are franchise operations, highlighted the dangers facing people who often invest fortunes in return for the branding, logistical and managerial support of a larger franchising company which then fails.... [T]he tougher lending conditions facing potential recruits, and the poor trading environment means the price new entrants can expect to pay in franchise fees and other costs when setting up a business has fallen from £64,900 last year to £50,000.
