Debt-saddled Tuskys seeks franchising nod to stave off collapse

Debt-saddled Tuskys supermarkets wants to sell its brand to local supermarkets to be operated on a franchise basis as the struggling retailer battles to keep visibility amid steady branch closures.

The Competition Authority of Kenya (CAK) revealed in its annual report the retailer had made inquiries over launching franchising deals with other supermarkets.

The retailer, until recently Kenya’s top retailer with 53 stores, has less than 10 outlets operating amid stock-outs.

“The authority received an advisory request from Tusker Mattresses Limited regarding a proposed franchising project. Specifically, Tuskys sought advice on the necessary legal steps and requirements that they should put into consideration to enable the project become a success,” CAK Director-General Wang’ombe Kariuki said.

The model allows for companies to maintain visibility especially since Tuskys has shut down most branches across the country.

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It also allows the retailer sell the brand at a fee to local competitors, earning some income to help the company recover while reducing expenses and overhead costs of running its own branches.

Uchumi another retailer that has seen tough times in recent years tried the franchising model after it closed several branches where it sought to establish smaller outlets (Uchumi Express and Uchumi Mini) through which Uchumi Supermarket Ltd was to earn royalties of about four per cent of the sales.

The anti-trust body says Tuskys could be allowed to operate under the franchise mode once the details of the franchising agreements are provided.

At the moment, Tuskys total debts, including bank loans, are in excess of Sh10 billion and lenders have cut fresh credit lines.

Tuskys is pulling all stops to survive after more than 60 creditors tried to wind it up over unpaid debts.

The struggling retailer has organized fire sales, offering huge discounts on items and plans to sell non-core assets like furniture, fixtures and fittings in 19 branches, most of which have been shut by landlords for rent arrears.

The cash-strapped supermarket has made claims a mystery offshore investor based in tax-haven Cayman Islands has sought to rescue it with Sh2.1 billion bailout loan.

Kenya’s retail sector has seen major supermarket chains collapse in recent years, including Uchumi, Nakumatt, Deacons and Choppies.