Franchising and the Luxury Market: What’s the Relationship?

Who said franchising is only for the mass market? Here are the luxury brands “on the network.” There is a common prejudice in the business world: according to many, the franchise formula is not suitable for premium brands or those with a medium-high positioning. Affiliate programs are often labeled as cheap, capable of offering only accessible and mass-market products/services. While many of the world’s most widespread chains offer low-cost goods, this is not always the case: today I’ll show you many stories and premium brands that make luxury their distinctive feature.

Some Cases.

Daniel Joines launched his business in 2004 when he was looking for a suitable engagement ring to propose to his future wife. Dissatisfied with the search, he understood that there was room for innovation in the field of jewellery: customization. This is the idea on which Polished Diamonds is based, focused on diamonds and other gems, which through CAD software (Computer Aided Design), allows custom-designed rings at a reasonable cost, or to choose from a selection of about 300 prototypes. The first store was launched in Christchurch, New Zealand, before expanding to Auckland. Today, Polished Diamonds’ plan is to expand the chain through franchising: in Australia (the next stores will open in Sydney, Melbourne, and Brisbane), but not only there.

Luxury Bags (but used)

The Vendome Luxury Bags chain, founded in 2011, is all Italian and has a very particular business model: it is the only existing network specialised in the resale of luxury bags: from Louis Vuitton to Chanel, from Dior to Gucci, passing through Prada, Fendi, and Bottega Veneta. The model works because Vendome’s staff carefully selects only bags in perfect conditions, comparable to new ones, but clearly offering them at lower prices, between 40 and 50 percent off compared to new ones. Today the chain has 18 affiliates in Italy, in addition to four owned stores (one of which is abroad). The average turnover per store is around 300,000 euros annually.

Do you want to know the secrets of how the franchising formula works?

Momonì

“To design for women means to understand them. To empathise with their needs, which are also mine. I create garments that I would wear myself, not museum pieces that are unapproachable.”

With these words, Michela Klinz, co-founder and creative director of Momonì, tells the nature of her adventure, which started from a trip to the United States: in 2007, after travelling with the whole family, she came up with the idea of creating a small culotte, still one of the brand’s hallmarks today. By selecting fine raw materials and involving high-quality Italian artisans, she launched Momonì, the brand part of the NYKY company, founded in Treviso in 2008 by Klinkz together with Alessandro Biasotto.

As mentioned, initially production was limited to lingerie, but with the growing favour of the public, the line has been enriched with many products, creating “a complete collection with a sophisticated aesthetic, expressing an unprecedented combination of comfort and class, opening up to a new dimension of luxury, modern and contemporary,” as we read on the official website of the Italian brand.

The brand has always had a strong international vocation and is particularly strong in France, with the opening of corners and boutiques in Paris, Bordeaux, Lyon, and Cannes. Since 2018, Momonì has started a franchising program, and today there are 15 international boutiques, corners, and shop-in-shop locations, in addition to being present in 700 selected Italian multibrand stores, and 600 abroad.

The company’s significant progression is also evidenced by turnover: 12.5 million euros in 2017, sales increased by 25% in 2018, and turnover reached 25.5 million euros in 2019 (including the other brands of the Nyky group, OOF Wear and Attic and Barn).

The Dream of a Luxury Home

Many real estate agencies offer affiliate proposals in the luxury Real Estate sector, many of international scope. There is the Kensington holding, founded by Saudi entrepreneur Ahmed Bin Kandil Jadi, with a portfolio of 8 billion euros worldwide, including luxury properties, historic residences, and hotels. There is the German Engel & Völkers, which today has more than 700 agencies and over 8,500 employees in 34 countries. Among the best-known is Coldwell Banker, with a more than century-old history and over 100,000 agents, which offers a specific marketing program for the medium-high segment of real estate, the Coldwell Banker Global Luxury.

5-Star Hotels and Travel

Last but not least (despite the very tough period it is experiencing), there is the luxury travel and accommodation sector. There are several chains that offer the possibility of opening a five-star hotel. An example is the InterContinental Hotels Group (IHG), a group that includes brands like Holiday Inn, Crowne Plaza, and Intercontinental, with over 5,000 franchisees worldwide. There is also the Sheraton brand, with 435 hotels and 88 resorts in more than 70 countries worldwide (data: 2015). Part of Marriott International like Sheraton, among the luxury hotel chains, there is also W Hotels Worldwide, with dozens of locations around the world, especially in North America (29) and Asia.

In conclusion, we can say that luxury does not snub the franchise formula at all; even brands with high positioning can take advantage of a franchising development plan.