Mocha Blends tweaks franchising strategy
By Felipe F. Salvosa II, BusinessWorld | 07/01/2009 7:13 AM
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MANILA - Homegrown coffee shop chain Mocha Blends Corp. is banking on a new franchising strategy to continue expanding amid the economic downturn, and remains optimistic that the business would still grow this year.
The new business concept brings down the initial investment for franchisees to just around P500,000, compared to kiosks that cost at least P2 million and a full store that requires an initial P4 million, an official said.
This is because of a new technology eliminating the need for pricey espresso machines that eat up much of the franchise cost involved in setting up full stores and kiosks, said Ryle M. Nepomuceno, Mocha Blends brand manager.
The "espresso in a bottle" concept will be introduced for the first time in Mocha Blends "lounges," the chain’s new franchising package, which is essentially a take-out store featuring selected hot espresso and blended beverages from the full menu.
The quality of the beverages will remain the same as in full stores and kiosks despite the simplified work flow and product preparation, Ms. Nepomuceno said in an interview.
The initial investment of P500,000 covers the stall, with franchisees providing other equipment such as refrigerators, blenders, and cash registers. The espresso in a bottle technique no longer requires espresso machines which cost up to P1 million.
An over-the-counter store is ideal in malls, airports, universities, condominiums, and call centers, the company official said.
Mocha Blends will lend its name to the stall franchisee for three years, shorter than the normal five-year contract. This will make it easier for smaller investors like overseas Filipino workers — who might not be able to afford the standard franchise — to put up a business. Return on investment is expected in a year.
Mocha Blends lounges would also be able to sell "best-seller" beverages normally priced up to P400 "at friendlier prices," she said, citing a recent market study commissioned by the firm that found out customers were willing to spend only up to P150.
"We don’t want to limit our market. We’ve established that our market is A and B. and we know that a bigger percentage of that goes to the lower range. This is our subtle way of reaching out to them without plunging in too much," Ms. Nepomuceno said.
Mocha Blends, owned by a Filipino family based in Australia, has 30 branches, with one in Indonesia. Two are company-owned while the rest are franchisees.
While the urban centers are beginning to be saturated, provincial areas remain an untapped market for expansion, Ms. Nepomuceno said. "Visayas and Mindanao right now are looking pretty good. We are talking to an investor who’s interested."
At least three new outlets are expected to open this year: at the SM Mall of Asia in Pasay; Gerona, Tarlac; and in Legazpi, Albay.
Mocha Blends expects system-wide revenues to grow by 5% to 10%, Ms. Nepomuceno said.
Mocha Blends started operations in 2002 in Quezon City, with hand-crafted Elektra espresso machines imported from Italy by the father-and-son tandem of Florante and Andrew Dela Cruz.
Aside from coffee from the arabica and robusta varieties, full stores offer "semi-fine dining services" with a Filipino and Australian menu.
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