Creating a noise

Creative opens the first of its unique franchise operations in the region, after selecting one of its own distributors, Ashley, to become its partner.

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By  Michelle Sturman Published  May 7, 2001

Franchises|~||~||~|McDonalds, Burger King and Subway are three of the most famous, and successful chains that stretch around the globe, and whose names are synonymous with franchises. Franchising within the IT industry has not taken off in quite the way it has in the restaurant market, nor is it likely to. Whilst it is true that franchises do exist in the IT industry—Smartforce, ISS and Commerce One, for example—they are few and far between, and a vendor offering the channel the chance to franchise a commercial storefront is virtually unheard of; until now that is.

||**||The search|~||~||~|The search began two years ago when Creative decided to take its successful franchise business out of the Far East, namely Singapore and Hong Kong, to the Middle East. The search for the perfect franchise partner has finally ended with one of Creative’s own distributors—Ashley, based in Dubai—which made the stringent grading and guideline specifications required, to become the first Creative franchise in the Middle East.

What makes this particular franchise different from the likes of SmartForce and Commerce One, is that it is not an accountant, sales team, marketing manager and managing director based in an office block, it is a fully functional shop filled with products, Creative’s products. It is The Blastershop.

||**||The Blastershop|~||~||~|Owning The Blastershop, like most franchises, is based on certain criteria, not least of which is the financial ability to run the operation. But there are other equally important ingredients that need to be added to the pot to make the business a success. “We had been looking for a potential franchisee for the last two years, and were assessing everyone,” says Allan Chow, regional sales manager for Creative.

“We finally selected Ashley [one of our distributors], based on their commitment, past sales record, our relationship, and most importantly of all, their finance,” added Chow.

Everyone understands that it is financial strength that clinches almost any deal, and it certainly helped Ashley with the Creative franchise, explained Chow. “When you have a [Creative] franchise, it is not just for one year. It is for three years, and after that it comes up for renewal after five years or whatever.”

The way the Creative franchise works is essentially a seventy-five, twenty-five split between the two companies, with Ashley taking on the bulk of the financing required for The Blastershop. For this, Creative will take care of the marketing, design, and training of staff necessary for The Blastershop, whilst Ashley takes care of the lease of the premises, decoration costs and set-up. As with franchises across the world, the corporation dictates that The Blastershops follow strict guidelines, and orders are handed down from headquarters. “The colour, concept and theme are the same throughout all the worldwide Blastershops,” says Chow.

“If tomorrow, for example, we change [corporate] direction, then all The Blastershops will change direction as well,” he added.

||**||The strategy|~||~||~|There is however, a slight difference in strategy as is usual when working in the Middle East, that Creative and Ashley have had to contend with due to cultural differences. There are advertising and marketing campaigns that run successfully in the Far East, but would not be considered appropriate for this region. “I think what we are concerned about is that we have many successful models in the Far East, and although we have every confidence that the model here will be another success, the culture is very different here,” says Chow.
“If we have a successful model in Dubai, then we can apply it around the region,” he added.

Whilst the overriding theme for getting involved in any business proposition is to make money, the initiative between Creative and Ashley is unique. Unique in such a way that The Blastershop is used as a pull source for the brand, and not to take over the sales that Creative’s channel already provides, as some resellers believe. “Opening The Blastershop with our resellers all around us selling Creative products was a concern,” says Ahmad Farahani, general manager of Ashley.

“Since we are distributors for Creative as well, with our pricing [in the Blastershop], if [resellers] follow our policy, then they can make even more margin than they are right now,” added Farahani.

The Blastershop’s primary function is to draw in the crowds and maintain interest in Creative products. The difference that The Blastershop offers compared to the channel is that prices are fixed, and as a consequence, products are more expensive. “With The Blastershop, the purpose is more for the branding of Creative products because we have to sustain the momentum in this part of the world,” says Chow.

In fact, according to Chow and Farahani, many of Creative’s existing resellers have ventured into The Blastershop, just to check that product prices are not open for bargaining, and are higher than their own. Fortunately, due to the diversity of customers that shop for IT products in Dubai, The Blastershop is able to hold its own against the resellers that sell its products at a cheaper price. Many customers shopping in Dubai are still hung up on price, as “people think of price and because of that culture we have to support the resellers on their pricing, so we are not expecting to sell right now and get a big margin,” says Farahani. But there are many customers, that prefer to pay extra for products, knowing that they are purchasing straight from Creative.

“We were quite surprised when we explained to some customers that they could buy from other shops at a lower price than we are selling to them, because we are not allowed to undercut [the resellers]. And the customers say to us ‘we know, but we still want to buy from you’,” says Chow.

“You get peace of mind when you buy goods from outlets such as this,” he added.

||**||More than meets the eye|~||~||~|But there is much more to the concept of The Blastershop than merely making sure that it does not compete with its resellers, and keeping the market interested in purchasing Creative products. The Blastershop allows Creative to keep a tighter control on the competition between its resellers by maintaining pricing. But more importantly, it allows Ashley to help control the influx of grey market products that flow into the Middle East from other areas of the world.

Creative faced a daunting task in trying to control the grey market when the company first arrived in the Middle East, and brought localised products into the region to help combat the problem. And while the problem still exists, admit both Farahani and Chow, the problem is not as acute as it once was. It is hoped that The Blastershop will continue to help ease the problem, with customers being able to purchase from a Creative outlet and creating an awareness amongst end-users about the difference between genuine and grey products. “We work with Creative to try and solve the problem of grey market imports with my resellers,” says Farahani.
“I think that the Blastershop will help minimise the grey market,” added Chow.

The Blastershop is not a business transaction to be taken lightly, and like McDonalds with its mammoth-sized franchisee handbook, there are a number of rules and regulations that Ashley must abide by. One of the fundamental agreements of the contract is the premise of opening other Blastershops in the UAE and Iran during the first three-year tenure of the agreement. Ashley, as the franchisee, is in charge of finding sub-franchisers and getting The Blastershop concept to work again. Ashley is already on top of this particular aspect of the agreement with a Blastershop planned in Iran within the next six months. “We are already looking into the location and deciding where it should be,” says Farahani.

“The aim now is to find a sub-franchisee so we can sell Blastershop which would be exactly the same, but probably on a smaller scale,” Farahnai added.

||**||The expansion|~||~||~|The sub-franchisee agreement, according to Farahani, may be slightly different to his own franchise agreement—especially the cost—although Creative, unlike usual franchisees is flexible with certain agreement terms. When the original franchise agreement was laid out between Creative and Ashley, there were many changes to the agreement, and the reason, as Chow points out, is that Creative is not in fact a professional franchise company. “We do have a contract, but the franchise contract is flexible to a certain extent and there are many clauses that we can compromise on,” says Chow.

Despite the flexibility the franchisee is offered by Creative, there are a number of stipulations that must be adhered to, including the corporate image and direction. “If the franchisee stops performing, or does not perform the basic functions, then we have the right to terminate the contract,” says Chow.

“We have the same right as well,” adds Farahani.

A franchise fee is also imposed and the shop has to be 100% Creative, although non-competing products may be introduced by the franchisee, as long as approval is provided by Creative.

In Creative’s case, the relationship between themselves and Ashley has to be closer than a standard franchise deal, with a definite hands-on approach, complete with training. In this way, a powerful marketing tool with The Blastershop backs Creative, and Ashley gets to expand its horizons around the Middle East and set itself up as a sub-franchisee for other outlets. The overriding theme with The Blastershop is one of partnership, trust and of long-term investment and reward. ||**||

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