Local franchise chains enjoy royalty sales abroad

Tous les Jours on Thursday signed a royalty deal with CBM Corporation Co., a Cambodia-based franchise company, to allow its brand name to be used in the Southeast Asian country.

Following the first deal with a Philippine retailer in December, the local bakery chain, operated by CJ Foodville, aims to accelerate its overseas expansion, the company said.

“We hope Tous les Jours will continue its Vietnamese success in Cambodia, creating a Korean sensation in the bakery industry in the Southeast Asian market,” said CJ Foodville CEO Kim Eui-yeol.

Korean companies have long paid royalties to international brands. However, a growing number have started receiving royalty fees from foreign operators.

Under the so-called “master franchise,” a brand owner sells its franchise right or passes over its business strategy to an operator with better understanding of an overseas market.

Korean companies have increasingly sought the strategy to break into overseas markets rather than entering a market directly.

Tous les Jours has seen a 72 percent annual growth in the Vietnamese market through direct investment. But the company chose a master franchise deal for other markets to reduce risks and initial investment costs.

“Selling a brand name, unlike entering a market directly, bears less financial burden. We will seek global markets more aggressively,” said a CJ Foodville official.

Genesis Group receives about 3.5 percent of regional sales as royalty fees for its fried chicken chain BBQ, with an additional $50,000 per new location.

The company, which operates some 350 outlets in 56 countries, recorded $8.7 million in royalty sales last year. Its total royalty earnings between 2006 and 2010 surpassed $23.5 million.

Amid fierce competition with international brands, local coffee house Hollys Coffee also has six locations in Malaysia, the United States, Peru and the Philippines through master franchise deals.

Industry watchers say master franchise deals currently center on Southeast Asia, where K-pop is widely popular. They expected, however, more companies would target developed markets such as the United States, Japan and Europe to enhance their images.

By Lee Ji-yoon (jylee@heraldcorp.com)