Follow by Email

Wednesday, June 25, 2014

"Mikel" Coffee Shops Hit the News!

The first time I saw a Mikel coffee shop was about 2 years ago; in Katerini. A friend of ours, an interior designer, had shown it to us because he was doing the interior design for the franchise. The entire concept of this franchise seemed brilliant to me. From design to products to service - the whole package simply looked perfect. I then wrote this article about my Mikel-experience.

I now am happy to see (and most impressed!) that Forbes magazine has discovered this Greek franchise success. Two articles about one company in as many days is quite a feat:

http://www.forbes.com/sites/panosmourdoukoutas/2014/06/22/starbucks-is-cutting-coffee-prices-in-greece/
http://www.forbes.com/sites/panosmourdoukoutas/2014/06/24/mcdonalds-lost-the-greek-market-is-starbucks-next/

In as much as I once owned and was running a franchise in the US, I think I know quite a bit about franchises. Mikel clearly is tops! The fact that the entire concept was developed and implemented by Greeks in Greece only goes to show that there are indeed great business talents in Greek society. The only trouble is that they don't get the attention which they should get so that other Greeks could learn from and be encouraged by them!

4 comments:

  1. Mikel is a representing case of a well presented franchise which has been turned into a joke. Just like Donut shops (Nanou), Frozen yoghurt, a series of souvlaki grill shops etc...Business which outlived their expectations within a couple of years, as almost everyone and anyone tried to materialize a piece of the same success, without considering all factors involved...Mikel seems to be a coffee shop well designed, yet when there's two or three of them in a 500m radius, they will eventually go out of business.... There's a really rotten philosophy over this kind of business here: The good idea of a businessman becomes a rage of immitation by others, whose only business feeling is dominated by two thoughts : 'I can do as well (or better) as others on this', 'I need to get my hands on this money-bringing trend ASAP'. No marketing orientation, no imagination, no innovation, no projection whatsoever....However, this is the reason that a Franchise can make good money for the conceiver...The case of Mikel has made the Franschise Owner really rich - I suppose - but it's clearly not a productive investment (selling coffee to each other ? for how long?) and it will remain so, unless they manage to export it somehow (in the Balkans for instance) and bring some fresh money in the country....

    ReplyDelete
    Replies
    1. A good franchisor - time will tell whether Mikel is one of them - understands that it is detrimental to his success to embark on a strategy of cannabilization. The franchisor makes his money on successful franchises, not on failing ones. That's why good franchisors will always assess the market potential of an area with a view towards the question as to how many franchises it warrants. He will never sell more than that however much demand there might be on the part of interested franchisees.

      I agree - and have always said so - that the focus should be on new businesses in the productive sector of the economy. No, Greece won't make it if the focus remains on selling each other coffee. However, within the sector of coffee shops, it is a benefit to the economy if excellence shows up. If for no other reason than that excellence tends to replace mediocrity, and that's a benefit for all consumers.

      You have to differentiate between the franchisor and the franchisee. The franchisor won't get rich quickly because, if he does it well, he has to make enormous upfront investments. Investments in product design, marketing, etc. --- all sorts of things which, longer term, will make it easier for franchisees to make money.

      The better the franchisor, the easier it is for the franchisee to make money soon. Normally, a new business owner has a long start-up phase where he has negative cash flows. The franchisee avoids all those troubles and he can make money rather quickly (if the franchise is good).

      The franchisee pays to the franchisor a one-time start-up fee and a percentage of turnover on an ongoing basis. In my time, contracts typically ran for 20 years. During the first 1-2 years, the franchisor doesn't really make money on the franchisee because he has to provide so much support to get the franchisee up and running. The franchisee, on the other hand, really benefits from that support and is happy to pay the royalties. After about 2 years, the franchisee has 'learned the business' and starts asking 'what do I really pay royalities for now?'. At the same time, the franchisor starts making money because the franchisee no longer draws on his resources. That's when the franchisor appreciates that he stipulated a 20-year contract and the franchisee starts regretting it...

      Everything I have seen of Mikel so far suggests that they really know what a franchisor should be doing!

      Delete
    2. And the name of the interior designer is? . . . . .

      Delete
    3. Watch the video:

      http://klauskastner.blogspot.co.at/2012/05/not-bad-home-not-bad-at-all.html

      Delete