Woolworths Offers to Buy South Africa Franchises to Reduce Operating Costs

Woolworths, which reported a 23 percent increase in full- year profit, is offering to buy all 76 local franchise stores “at fair value,” he said. Discussions to agree on business valuations with the owners have started, Susman said. Once valuation metrics are concluded, Woolworths will place offers to purchase that will expire on June 30 next year.

http://www.bloomberg.com
September 2, 2010

Woolworths Offers to Buy South Africa Franchises to Reduce Operating Costs
Nicky Smith

Woolworths Holdings Ltd., a South African food and clothing retailer, is ending its franchise business in the country and offered to buy all of the outlets after deciding it was complex and expensive to continue.

A strategic review by the Cape Town-based company found that ending the program will bring “significant savings to operating costs,” Chief Executive Officer Simon Susman said in an interview today. He declined to say how much will be saved.

Woolworths, which reported a 23 percent increase in full- year profit, is offering to buy all 76 local franchise stores “at fair value,” he said. Discussions to agree on business valuations with the owners have started, Susman said. Once valuation metrics are concluded, Woolworths will place offers to purchase that will expire on June 30 next year.

The “key factors in reaching the decision to stop franchising were that it had become increasingly more complex and expensive to operate a separate franchise business model with its own systems and processes,” Woolworths said in a company statement today. The offer amount will not be “material” it said.

“We have sufficient funds to do this,” Susman said.

To contact the reporter on this story: Nicky Smith in Johannesburg at ten.grebmoolb|83htimsn#ten.grebmoolb|83htimsn

http://www.bloomberg.com/news/2010-09-02/woolworths-offers-to-buy-south-africa-franchises-to-reduce-operating-costs.html


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