Shoprite Wants to Buy Your Franchisor. Should You Be Pleased?

By Tam Goldsmith

Shoprite’s proposed acquisition could give vida e caffè franchisees much more muscle behind the businesses they already own.

Vida e caffè could soon have one of Africa’s biggest retailers behind it. For franchisees, Shoprite’s size could mean better distribution, stronger buying power and more opportunities to grow, while keeping the coffee brand customers already know.

If you owned a vida e caffè franchise, the news this week would have given you plenty to think about. Shoprite has signed an agreement to acquire the coffee business, subject to regulatory approval and other conditions, which means one of Africa’s biggest retailers could soon be the company behind your franchise.

Vida brings an established network of approximately 400 corporate and franchised stores to the deal. Shoprite gets an immediate position in a coffee and quick-service restaurant market it wants more of, while vida gets the resources of a retailer operating on a completely different scale. For the franchisees who have already invested in the coffee brand, the important question is what Shoprite can actually do for their businesses.

There are good reasons to be optimistic.

Shoprite Has Something Useful to Bring

Shoprite already distributes to almost 4,000 stores through 29 distribution centres. CEO Pieter Engelbrecht has said that adding vida’s roughly 400 stores to that operation should make distribution more cost effective. Shoprite also buys coffee beans from vida’s existing supplier, so there is already some common ground between the two businesses.

Purchasing and distribution may not make exciting headlines, but they matter enormously when you are running a café. The price of products, reliable deliveries and the amount of time spent dealing with supply problems all have an effect on the business.

Shoprite also brings considerable marketing resources and a customer rewards programme with more than 30 million members. Put some of that capability behind vida and franchisees could find themselves with far more support than a standalone coffee business could reasonably build for itself.

The test will be whether those advantages eventually show up in the franchisee’s numbers. Better distribution is useful. Better distribution that helps an operator run a more profitable café is considerably more useful.

Vida Will Still Be Vida

Perhaps the most reassuring part of the deal is what Shoprite says it intends to keep.

Vida stores will continue trading under the vida e caffè brand and the franchise model will remain. Engelbrecht has also spoken about the acquisition creating another opportunity for franchisees to expand their businesses.

That matters because Shoprite is buying a business that has spent 25 years building its own identity. Vida was founded in Cape Town in 2001 and has grown well beyond its original South African base. Earlier this year it opened in Namibia, its eighth African country, and the company said that opening took its international African estate to 42 stores.

Franchisees have invested in that name and customers already know what to expect when they walk into a vida. There would be little sense in buying that recognition and then changing the parts people like.

Keeping the brand and franchise model intact suggests Shoprite understands that much of vida’s value already exists. Its job is to add to it.

Franchisees Should Watch Their Own Numbers

A bigger owner does not automatically make an individual franchise more profitable. Shoprite can bring enormous resources to vida, but franchisees will ultimately judge the deal by what happens inside their own businesses.

Purchasing costs, delivery reliability, marketing, customer numbers and access to good new locations will matter far more than the size of Shoprite itself. Operators should also watch any changes to systems, suppliers or procedures and what those changes cost them to introduce.

Shoprite has a good reason to make this work for existing franchisees. Independent operators have already put their own money into growing a significant part of the vida network. If those franchisees perform well and want to open additional stores, Shoprite gains experienced operators who already know how the business works.

Engelbrecht’s comments about giving franchisees further opportunities to expand are encouraging for precisely that reason. Shoprite appears to see franchisees as part of vida’s future rather than simply something inherited in the acquisition.

Shoprite Does Not Need to Fix Vida

Vida is not a coffee chain waiting to be rescued. Shoprite wants it because the business has already built something valuable.

It has a recognised brand, hundreds of locations, experienced operators and a format that has found its way into high streets, airports, forecourts, offices and other locations. It has also continued pushing outside South Africa, including its recent expansion into Namibia.

That should shape what happens next. Shoprite can concentrate on the things it already does extremely well, including buying, distribution, marketing and retail operations, while allowing vida to keep the character that made people buy its coffee in the first place.

There is always a temptation when a large company buys a smaller business to start changing things. In vida’s case, some restraint could be just as valuable as Shoprite’s resources. The brand has survived and grown for a quarter of a century in an intensely competitive market.

If Shoprite can make the business behind the counter more efficient without making the experience in front of the counter feel different, franchisees could end up with the best parts of both companies.

This Could Be a Very Good Next Chapter for Vida

There is a genuinely positive franchise story inside this acquisition. Vida has already proved that its concept can work across different locations and markets. Shoprite brings the infrastructure and retail experience to help an established business go further.

Existing franchisees could gain stronger support and more opportunities to expand. Future franchisees could also find the proposition more attractive if they are buying into a familiar coffee brand with the resources of Shoprite sitting behind it.

Much still depends on regulatory approval and what happens after the transaction is completed. Shoprite has nevertheless started with some of the right signals. It intends to keep the vida name, retain the franchise model and use its own capabilities to support the business.

Vida has spent 25 years building something customers recognise and franchisees are willing to invest in. Shoprite now has the chance to give that business considerably more muscle without changing what made it successful. Get that right and this could be a very good deal for Shoprite, vida and the franchisees who helped build the network.

What We Can Learn From This

When a franchisor changes ownership, franchisees should look beyond the size of the buyer and concentrate on what will change inside their own businesses. Purchasing costs, distribution, marketing, new locations and profitability are the measures that matter. Shoprite has the resources to make a meaningful difference in all of those areas, and franchisees should watch closely to see how those advantages reach them. If Shoprite strengthens the business while protecting the vida brand and its franchise model, the network could come out of this deal stronger than it went in.