Abstract
Though EBOs’ (Exclusive Brand Outlet) risk-mitigation is a collective responsibility of lifestyle brand and the expansion partner (franchisee), a majority of lifestyle brands in India believe that the risk of capital investment/recurring expenses of EBOs and profit generated by EBOs has to be owned by the expansion partner. This belief and unbalanced business strategy of lifestyle brands though attract franchisees in the early stages of EBO expansion due to the brand’s reputation in the market or initial lucrative contract terms, it seriously fails to bring any long-term strategic and competitive advantages to the lifestyle brand as the drop-out rate of expansion partners increase significantly after one year of operation. This belief is also distracting lifestyle brands from understanding the long-term positive impact of EBO expansion frameworks that could balance the risk-mitigation and profits between the brand and the expansion partner. A single theory, model and framework of ‘Firm-Contracts’ and ‘Distribution Systems’ from the existing literature available across perspectives, paradigms, and areas of study (Economics, Business Law, Market Penetration, Business Strategy, Marketing and so on) is not entirely applicable that could be adopted to suit lifestyle brand’s EBO expansion plan in India and designing a framework without empirical pieces of evidence is also not appropriate. In this study, i) we have studied existing theories, models and frameworks relevant to market penetration and expansion; ii) analyzed 24 months’ of actual EBO data of a few select organized lifestyle brands in India across their existing expansion models; iii) borrowed experimental findings and insights from previous studies relevant in this context, to identify key decision and investment-making areas that could result in a balanced business contract between a lifestyle brand and the expansion partner thereby designing an economical/effective framework that would be useful in deployment of appropriate tactics of deciding a right EBO type for every City Type and the Store Location by a lifestyle brand in India. The framework is named as EBOE-LS.
Highlights
Lifestyle Brand: Each individual wants to have a unique identity that could be based on his/her, a) background such as nationality, ethnicity, culture, subculture, social class, affiliation, environment, etc; b) experiences and c) choices
Empirical: Interestingly, when we evaluated actual data related to contracts, product assortment, sales, consumers, inventory level, inventory turns, product sell-through and velocity, rate of sales, revenue generation, profitability, unit economics, and ROI across companyowned and company-operated EBOs (COCO) and franchisee-owned and franchise-operated EBOs (FOFO) stores we have found many insights which are contrary to what was believed by the lifestyle brands
EBO EXPANSION FRAMEWORK (EBOE-LS): Both qualitative and empirical findings unanimously indicate that the existing strategy of EBO expansion of select lifestyle brands is predominantly skewed in favor of the brand in addition to passing on a majority of investment risk onto expansion partners when franchised (FOFO) and predominantly skewed towards premium locations and cities when managed by themselves (COCO)
Summary
Online at https://mpra.ub.uni-muenchen.de/102551/ MPRA Paper No 102551, posted 26 Aug 2020 11:50 UTC. Though EBOs’ (Exclusive Brand Outlet) risk-mitigation is a collective responsibility of lifestyle brand and the expansion partner (franchisee), a majority of lifestyle brands in India believe that the risk of capital investment/recurring expenses of EBOs and profit generated by EBOs has to be owned by the expansion partner This belief and unbalanced business strategy of lifestyle brands though attract franchisees in the early stages of EBO expansion due to the brand’s reputation in the market or initial lucrative contract terms, it seriously fails to bring any longterm strategic and competitive advantages to the lifestyle brand as the drop-out rate of expansion partners increase significantly after one year of operation.
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