Uchumi Supermarkets has concluded the handover deal for its Nairobi West branch that will see it operated by a franchisee.
Under the agreement, Uchumi Supermarkets will operate the branch and in exchange earn royalties for the use its brand.
“Franchising of this branch marks an important milestone for Uchumi Supermarkets Plc. We plan to franchise other stores in addition to cost leadership initiatives,” said Uchumi Supermarkets CEO Mohamed Mohamed in a statement.
The retailer declined to name the franchisee only indicating that “It's a local investor with wide experience in the Fast Moving consumer Goods (FMCG) industry”.
However, branding on the branch reads Al Jazeerah City Market Limited alongside the traditional Uchumi logo. The branch is currently stocked and operational.
Uchumi last year called on investors with financial muscle to bid for the franchise licence of the branch. This was after it had picked the Lang’ata Hyper Branch as the first to go under the franchise model. The deal for the Langata branch is yet to be finalised with Mr Mohamed referring to is as a work in progress.
The troubled retailer first contemplated the model in 2016 during its 35th annual general meeting when shareholders were briefed on its expansion plan. The retailer had termed it a cost-effective model that would return it to profitability.
During the meeting, Uchumi said that it targeted 200 franchise mini shops across the country as part of its turnaround strategy. The plan as announced did not, however, include giving up its own stores.
The retailer says it currently has six stores operating including Ngong Road, Adams Arcade, Jogoo Road, City Square, Aga Khan Walk, Eldoret and Meru. This is less than a quarter of the branches that the Uchumi had during its expansion years.
In 2015, Uchumi operated 37 stores in Kenya, Uganda and Tanzania. Capital woes hit the retailer forcing it to scale down operations. By 2017, the retailer was barely surviving on supplier goodwill and government bail out after it went under twice, amid heavy debt and stock outs.