When the country’s leading retail chain Shwapno was feeling the financial pains of high capital investments in its aggressive network expansion, its then chief executive Sabbir Hasan Nasir in 2017-18 came up with an innovative franchise model.
In six years, the model became the growth engine of the country’s largest retail chain and Sabbir Hasan Nasir, who became the operator company ACI Logistics Ltd’s managing director earlier this year, is being regarded as the “guru” of Bangladesh’s retail industry.
“The story started with just six outlets built by franchisees and now over 400 of Shwapno’s more than 500 outlets are operating as franchises,” Sabbir Hasan Nasir told TBS in a recent interview.
The franchise channel contributes 2-3% net profit on sales to the company. In redefining the standards for business model innovation in the global retail market, Shwapno has become a forerunner in the industry.
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Nasir, at the heart of the innovation, took an approach that serves the purposes of both the growth-hungry retail brand and the opportunity-seeking small and medium-sized businessmen across the country.
What makes this franchise model unique? Shwapno transitioned from a conventional franchise setup to a model where the company maintains control over working capital and customer satisfaction, while SME investors could benefit from the brand’s long-term potential without extensive industry knowledge, he explained.
Typically, in franchise agreements, the franchisee runs operations and the franchisor receives a royalty or commission on sales.
Nasir’s model flipped this on its head. Shwapno’s management team controls operations and inventory, while franchise partners invest in lease advances, civil works, interior design, and equipment.
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Gross profits are shared between Shwapno and the franchisee on a 6:4 ratio, which means Shwapno gets Tk60 out of a Tk100 gross profit.
Shwapno bears the operational costs, including staffing and supply chain, while franchisees manage rent, utilities, and maintenance.
Nasir’s innovation stemmed from the need to circumvent high financing costs in 2016-17, when ACI Logistics was burdened with huge debt.
“I focused on creating a growth model not driven by debt, especially when debt was very expensive,” he said.
Thousands of businessmen across the country have accumulated a decent capital, and they just need a trusted partner like Shwapno to venture in and grow consistently.
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“By tapping into the SME investor market, we crafted a franchise structure that allowed investors to benefit from the strength of the Shwapno brand,” he added.
After numerous iterations, the model evolved into what it is today.
Looking ahead, Shwapno aims to expand to 2,000-3,000 franchises across Bangladesh in the next 4-5 years, with potential international growth on the horizon.
“Scale is important for the brand’s strength and profitability,” Nasir said, adding, “The more you sell, fixed costs per unit become less.”
Source: The Business Standard
