Australian coffee cafe brand Gloria Jean's Coffees has ended its master franchise agreement in India with Citymax Hospitality, the hospitality division of the Dubai-based retail giant Landmark Group. Sources familiar with the development told dna that the partnership (between Gloria Jean's Coffees and Citymax Hospitality) has already ended and that a considerable number of coffee cafes have been shut down while some of them have been converted to a different brand.
Gloria Jean's Coffees could not be reached for a comment and Sunil Chandran, president, Citymax Hospitality did not respond to repeated calls and email seeking clarity on the situation.
However, a Citymax executive confirmed the development saying, "The Gloria Jean's franchise has been discontinued and existing outlets are now being operated under the Krispy Kreme Doughnuts brand."
Landmark Group's retail operations in India include Lifestyle (department stores), Max (apparel stores) and Home Centre (stores selling home-furnishing products) and Krispy Kreme Doughnuts (food and beverage outlets).
Gloria Jean's Coffees forayed into the Indian coffee cafe market with the launch of four outlets in the first quarter of 2008. While the plan was to scale up the chain to over 50 outlets gradually, Citymax was unable to expand beyond 27 outlets across Mumbai, Bangalore, New Delhi, Gurgaon, Chennai, Hyderabad, Ahmedabad and Pune. In fact, Citymax, finding it difficult to sustain the coffee cafe operations, shut down five Gloria Jean's Coffees outlets bringing the total number to 22 cafes.
While Citymax held back expansion of the cafes citing operational challenges, industry experts said the company was unable to focus on the cafe business in the manner it should have. "The hospitality arm (Citymax) has not been a very successful vertical and that showed clearly in the way coffee cafe business was being pursued. It met the same fate as their plans to set up a budget hotel chain under the Citymax Hotels banner that never took off," said a source familiar with the company's hospitality operations in India.
Sensing the challenges from competitive coffee cafe brands, primarily Cafe Coffee Day (CCD) and Tata-Starbucks venture, the Landmark Group had even planned to divest its interest in the Indian master franchise operations.
A sell mandate was given to home-grown private consulting and advisory firm Mahajan & Aibara Business Consulting. However, with things not moving in the desired direction, Citymax chose to shut down another five Gloria Jean's Coffees outlets.
"The balance i.e. eleven outlets in Bangalore, one in Chennai and five in Mumbai have been converted to Krispy Kreme Doughnuts with almost similar (food and beverage) offerings excluding sandwiches," said the Citymax executive.
Landmark Group had in August 2012 entered into a franchise agreement with Krispy Kreme Doughnuts Inc for the latter's India foray. The Indian arm Citymax Hotels had, in a statement then, said the franchising rights were obtained to develop 80 Krispy Kreme stores across south and west India over the next five years.
