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Barista Lavazza is planning to spread its aroma to the State capitals and Tier 2 cities via the franchise route. The North-centric coffee retailer hopes to add 15-20 cafes every year.
“All our outlets have largely been company-owned but now, for the first time, we have decided to go into Tier 2 cities with the help of franchises and these would include the State capitals,” said Mr Nilanjan Bhattacharya, COO, India and SAARC, Barista Lavazza.
The chain has 160 outlets mainly in the Delhi NCR region. It has been shutting down some of its unprofitable outlets in key areas in the metros. For instance, it recently shut two outlets in South Mumbai, giving away one of its premises to Australia’s Di Bella premium coffee chain.
“We should be back in South Mumbai soon, as there should be a route to revenue model,” added Mr Bhattacharya, alluding to the high rental costs of South Mumbai. However, its nearest competitor Café Coffee Day, which has outlets right next to Barista on Colaba Causeway in Mumbai, continues to thrive with two more outlets in the same locality.
According to Mr Harminder Sahni, MD, Wazir Advisors, a management consulting firm, “Lavazza is under financial pressure in its own country as the Italian economy is also slowing. Cafes should ideally have a cluster of stores in a locality and by doing away with certain stores it would be losing out to its competitors. At the same time, it has to build scale and has to look at going beyond the metros.”
However, Barista Lavazza claims to be growing in spite of the slowdown in retail. “Today, our same store sales growth is between 5 and 10 per cent and we are consolidating the number of stores in the metros. We are now trying to locate franchisees in Tier 2 cities to expand our footprint beyond the metros,” added Mr Bhattacharya.
Industry observers think it might not be suitable to appoint franchises at this stage. According to the CEO of a leading coffee chain, “Barista Lavazza still does not have a stable management team. It certainly does not have the capabilities to manage franchises with its current management bandwidth. Cafés are all about giving customer experience, which can be executed at the corporate level but may not get implemented by franchises.”
Barista Lavazza is trying to engage the youth by providing such platforms as ‘friendship jam’ at its outlets on the eve of Friendship Day.
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