Uchumi banks on franchising after Govt pulls plug on bailout
Uchumi Supermarkets has called for franchise bids for its Nairobi west branch just a month after it invited bids for its Langata Hyper branch.
This comes as the partly state owned retailer comes to grip with the failure to secure a strategic investor and the government’s freeze on fresh bailout cash.
Riddled with debt and unwillingness by suppliers to make deliveries, Uchumi is hoping to maintain the prestige of its brand carried on by bringing in players to use its name and locations and split revenue.
Uchumi acting chief executive officer Mohammed Ahmed told Citizen Digital that franchising two of its remaining 16 branches holds the key to a great comeback in the Kenyan retail space.
“We have started with Langata hyper and we are looking at Nairobi West. There is one which we are finalizing negotiations and hopefully we should be able to close soon. Once we finalize, we agree on the figures, it’s something that would happen in the next few days,” Mr Ahmed said.
Franchising has been part of Uchumi’s turnaround plan over the past two years but has been slow to takeoff as it intensely searched for a strategic investor to pump in Ksh5 billion.
But with that search fading and the government closing the taps on Ksh600 million in bailout money, Uchumi is making the last ditch play to stay afloat.
“The remaining money was on condition of the progress that we see. We don’t want to pump in money when we haven’t seen that there is value on what has gone in…..We have also challenged the other owners to come on board, government has done its part,” Trade principal secretary Chris Kiptoo said earlier this month.
Retail Traders Association chief executive officer Wambui Mbarire welcomed the franchising model arguing it could buy the retailer time to get its restructuring plans in place.
“It is a viable position and considering that they have been having cash constraints it might be one way of salvaging the brand going forward as they reorganize themselves to go back into the market as themselves but the brand name remains in the peoples mind,” Ms Mbarire said.
Mr Ahmed is optimistic the plan is the best available option for Uchumi to stay open.
“Of course where we are now is not for the faint hearted, but it is for those who believe in the business. From where I sit I believe Uchumi has a great opportunity to turn back,” he said.
Uchumi as currently structured continues to survive on the goodwill of suppliers, landlords and staff.