Struggling retailer Tuskys just might have found a lifeline after notifying the Competition Authority of Kenya (CAK) of a plan to lease its brand through a franchise arrangement.
If approved, independent retailers would pay Tuskys a fee to trade using their brand name. CAK disclosed that Tuskys had sought guidance on the regulatory requirements for franchising in Kenya.
The move comes amid the delayed cash injection from a mystery offshore investor which Tuskys had maintained would allow it to turn things around. The Ksh2.1 billion debt financing deal announced in 2020 has yet to materialize, with the supermarket’s creditors raising doubts in court on the deal’s very existence. Tuskys owes suppliers, landlords and lenders over Ksh10 billion, and has seen its network of stores shrink from over 60 to 7 as of June 2021.
“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.
“Tuskys was requested to furnish the Authority with the final draft of the franchising agreement, once prepared and before execution, for its review,” CAK revealed in its annual report released on Monday, May 31.
The Competition Authority noted that the franchise arrangement could qualify for exemption from regulations banning restrictive trade practices by companies in the same industry.
Aside from the franchising fees, Tuskys hopes that the move will allow it to keep the iconic brand alive, positioning itself for a come-back if it manages to secure a strategic investor.
It expects that the strength of the brand owing to its rich history will be enough to attract independent retailers with the ability to pay suppliers, landlords and employees on time.
Importantly, Tuskys would be able to buy out the franchisees in the future to take back full control of their businesses.
It is likely that as part of the franchising agreement, franchisees would be required to put in place standardized operations and procedures so as to deliver the same Tuskys experience to customers in different areas.
At the same time, Tuskys continues to fight a liquidation suit filed by 60 of its creditors, among them home appliances maker Hotpoint who poked holes into the Ksh2.1 billion debt financing deal.
“In its numerous affidavits filed herein, the company has made vague references to an investor. This has been the talk for a period of nine months now.
“The company has availed [sic] absolutely no evidence of alleged funding support. It has also not disclosed the financier, the amount expected or the terms of financing. The issue of financing is vague, ambiguous, and totally lacks credibility,” Hotpoint stated in court documents.