THE fashion in food retail, in SA and abroad, is the profusion of smaller neighbourhood food stores to offer working consumers the convenience of topup shopping during the week.
Woolworths, Pick 'n Pay, Spar and Metcash through the acquisition of the 7-Eleven chain have expanded into this sector.
Yet Shoprite's OK Franchise division, which trades through neighbourhood stores such as OK, Sentra and Value, and wholesalers Megasave, has shrunk .
There was a net loss of 60 franchised stores in the year to June, as 105 were closed and 45 were opened. Management said the division posted a loss as a result of poor trading conditions and a "continuing shake-out" of doubtful debtors.
Shoprite CEO Whitey Basson said one of the problems in this division was that the Sentra buying organisation was inherited and converted to OK franchise stores. There were franchisees there that should never have been franchisees as they were buying partners, not traders.
Now Shoprite is trying to create a base of franchisees who will fulfil their obligations.
Basson considers the neighbourhood convenience store market to be overtraded, partly because of Spar's growth, but also through extended franchising by Pick 'n Pay. Yet he still sees some opportunities for growth and expects OK Franchise to show a handsome profit this year, relieved of last year's write-offs.
Publisher: Business Day
Source: Business Day
