Is Caffe Nero a Franchise?

13/10/2018 18:00 | Start a business

caffe nero

The franchising sector is bursting with coffee franchises, all of whom are competing for a share of the lucrative UK coffee market. Amongst them, are big names like Caffe Nero, Starbucks, and Costa Coffee. The corporate structures of these businesses are often unclear and confusing, making it difficult to establish whether they're actually franchises. To clarify the issue, we're going to take a look at whether the Caffe Nero chain is a franchise.

Caffe Nero franchise UK

The British public feels a strong affinity for takeaway coffee and nowhere is this more obvious than the nation's high streets, train stations, shopping centres, and airports. Wherever you go, it's pretty difficult to avoid passing one of the UK coffee industry's "big three." Caffe Nero, Costa Coffee, and Starbucks have managed to successfully build three distinct coffee empires, all of which vie for a share of the high street and a slice of the enormous profits on offer.

Though competition from independent cafes is growing, these three companies still dominate the UK coffee landscape. There seems to be no sign that theyre willing to sacrifice their place at the top of the table, either. Of the three, Costa boasts the highest number of stores and Starbucks the largest international reach.

Despite this, Caffe Nero is perhaps best placed to continue its success in the UK. Having focused on providing its customers with high-quality coffee products, it's now well positioned to reap the benefits. Now more than ever, coffee consumers are interested in the quality of the bean, the ethics surrounding its production, and the techniques used to brew the coffee. These are three areas in which Caffe Nero has always focused and often excelled.

The business history

Caffe Nero was established in 1997, by Gerry Ford. As Starbucks, as well as many other large coffee franchises, began to expand in both the US and UK, Ford came to believe that conditions were right to launch a business that brought continental-style coffee bars to the UK. Having spent a considerable amount of time writing his PhD thesis in cafes, he thought he could replicate the aesthetic, mood, and style of an Italian coffee bar in a way that would distinguish Caffe Nero from an array of other coffee retailers.

The business success has proved him right. With over 825 stores spread over nine countries, Caffe Nero has become a truly global brand. In the UK alone, it operates approximately 630 stores and is amongst the top three most recognisable coffee brands on the high street.

Is Caffe Nero a franchise?

Though Caffe Nero is often thought of as a franchise, there are currently no franchise opportunities available in the UK. Expansion is strictly controlled within this key home market, as the business is very much aware that it must maintain its reputation as one of the top coffee outlets in the country. Consequently, all Caffe Nero locations in the UK are currently owned and operated by the company.

However, there are franchise opportunities in other international markets. The brand has facilitated much of its global expansion by signing master franchising agreements with organisations and individuals who have a more nuanced understanding of economic conditions in those target markets.

Caffe Nero franchise cost

Because there are no Caffe Nero franchise opportunities in the UK, its difficult to calculate what each franchise unit would cost. However, Gerry Ford, founder and CEO of the chain, has revealed that it costs approximately £250,000 to set up each new store. While this figure is likely to vary depending on the location and size of the business premises, it gives us a ballpark figure for how much a franchisee can expect to pay.

Over the last few decades, Caffe Nero has expanded at a rate of approximately 50 shops every year. While this is likely to slow down as the market becomes increasingly saturated, it seems as though franchising will continue to play an essential role in increasing the company's presence in other markets.

What other coffee franchises are there?

Besides Caffe Nero, there are a large number of other coffee franchises that could prove a worthwhile investment. Costa Coffee is probably the largest of these competitors, though the overwhelming success of their franchising programme has meant that currently they too have no opportunities available.

Esquires coffee brands itself as the fastest growing ethical coffee franchise in the world and has now opened more than 30 outlets across the planet. Dunkin' Donuts offers popular coffee options alongside its signature doughnuts, and Cafe2U is a mobile coffee retailer that's currently making big waves in the franchising sector.

>> Read more: Pret A Manger Franchise.

What types of coffee franchise can you open?

If youre looking to open a coffee business like Caffe Nero or Costa, there are generally three types of franchise to consider. They include;

1. Coffee Shop
The standard coffee outlet. Found across the country in various shapes, sizes, and styles. This is what the major coffee brands specialise in, and it's also where there's the most competition. However, if you think you've got what it takes to operate a high street coffee shop, this is where you'll turn the biggest profit.

A coffee shop can be a small kiosk in a shopping centre or a large premises that seats more than 50 customers. This means that franchise owners need to have an understanding of the industry and ensure that theyre matching the right type of shop to the location.

2. Mobile coffee retailer
For those that don't like being stuck in one place, a mobile coffee franchise could be the best option. Typified by Cafe2U, which brings high-quality, freshly brewed coffee to customers on a daily basis, mobile coffee franchising is relatively new and offers excellent growth prospects. Ideal for those who believe the coffee sector could be improved by a retailer who prioritises convenience above all else, mobile franchises are also far more affordable than a traditional brick and mortar retailer.

3. Distributor
Though far less popular, some franchises specialise in distribution services. These businesses will usually roast their own coffee, supply cafes with equipment, and source other materials required by the modern coffee bar.

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