Alain Afflelou, which claims to be the world's largest franchisor of optical retail stores with the exception of Specsavers, which follows a different joint venture model, is moving swiftly with the acquisition of a discount-oriented Spanish franchising group, Optimil, and the opening of its first franchised stores in China and Latin America.
The French company is also launching a new chain of sunglass stores and counters, called Afflelou Sun, and developing a wholesale business with a line of glasses, Afflelou Paris, made in the Jura region of France.
The first free-standing Afflelou Sun franchise opened in Geneva last month. Six others have been opened or are being opened as shop-in-shops in existing franchised Alain Afflelou stores in France, including a location on the rue du Commerce in Paris.
One of the strong assets of the Afflelou Sun concept is that all the sunglass styles offered in the affiliated stores can be fitted with corrective sun lenses, including items sold under the Ray-Ban, Oakley or Maui Jim brands. Customers can pay for the sunglasses in monthly instalments over a 12-month period. Furthermore, all the opticians who adopt the Afflelou Sun format must undergo four days of intensive training.
The takeover of Optimil in Spain, where the company has already built up a network of more than 300 Alain Afflelou stores, follows its acquisition last year of a similar discount-oriented franchising group in France, Optical Discount. There are now 157 OD stores in France, Belgium and Morocco, up from 88 when the chain was acquired last August, and 40 of them are shops that were previously trading under Afflelou's former low-cost format, Claro. The group is targeting up to 400 OD stores in France in the long term. An Optical Discount store was recently opened by a franchisee in Madrid.
Led by Juan Manuel Botías and founded more than 30 years ago by his father, Optimil federates about 30 stores run by independent retailers operating for the most part in the eastern part of Spain. They will keep their banner, but they will follow the same commercial policies of Optical Discount, offering the major eyewear brands at discounted prices.
These stores charge lower prices in part because advertising expenses are kept at only 3 percent of sales instead of 7.5 percent for Alain Afflelou stores. The group claims to be the largest advertiser in the optical retail sector in Europe, with an annual budget of €50 million. OD, which was not doing any marketing before, launched its first campaign in France in March.
In China, Afflelou has decided to sign franchising contracts with different optical retailers in different provinces of the country, after studying the market for four years. The first Chinese stores are being opened in Chengdu and Chongqing under the Afflelou Paris banner, positioning it in a higher market segment than the majority of the optical stores operating in the country.
The potential of the Chinese market is huge, according to Afflelou's management, as the number of optical retail shops in the country is likely to double in the next few years from the current 60,000 doors. Almost all of them are run by independent retailers, and only about 2,000 of them carry a banner.
They generate on average an annual turnover of around €100,000, eight times lower than the average Afflelou store in France. The French company is aiming for a turnover of around €300,000 for its franchised stores in China. They will offer a selection of branded products selling at an average price of €150 for a package of frames and lenses, compared with an average of €370 in the French stores.
At least half of the range being offered in China will include the private label collection of Alain Afflelou, which represents about 50 percent of the volumes sold in its French stores and 70 percent of its sales in Spain – or 35 and 55 percent of their turnover, respectively. Alain Afflelou has started to sell some of the items in the collection to third parties as well.
Sales of Alain Afflelou frames and sunglasses have reached an annual level of about 1.5 million pieces. About 60,000 of them are manufactured in the Jura region of France and sold under the Afflelou Paris brand name. The company plans to raise their volume to 300,000 pieces a year. Chinese customers are expected to respond favorably to a dedicated line of eyeglasses made with European components and assembled in China.
Currently, Afflelou operates in 14 countries with a total of more than 1,400 stores. They are all franchised except for about 100 shops in France and 100 in Spain. Outside France, where it has 718 stores, it has a strong presence in Spain, with 300 stores, and Belgium, with around 40 stores. It also has franchise partners in Portugal, Switzerland, Portugal, Morocco and Tunisia.
Negotiations are taking place with potential franchisees in other parts of the Asia-Pacific region, notably in Hong Kong and Thailand. One of the newest franchisees is located in Punta Arenas, on the southern tip of Chile.
We have already reported about the development of a network of hearing aids shops and counters by Alain Afflelou, which now accounts for more than 150 points of sale. The next big move is going to be the launch in the next few days of a transactional website for contact lenses. Acting like a marketplace for affiliated opticians, it will send customers an automatic message when they have to replace the contact lenses they have ordered. The company is working on other internet-based applications for its glasses.
Led by Frédéric Poux, a 24-year veteran of the group who replaced its eponymous founder upon his retirement three years ago, the company is taking all these new initiatives at mid-way through the five-year period under the control of Lion Capital, which bought it from two other institutional investors, Bridgepoint Capital and Apax Partners, in 2012. The deal valued the company at about €780 million. The founder, who became a London resident for tax purposes in 2013, still holds 13 percent of the share.
At the end of the period, or around 2017-18, Lion Capital will probably want to cash out, and the group will then most likely fall under the ownership of a new institutional investor or go public again as in the past, an alternative that is favored by the management because it would facilitate its international expansion. The new capital structure may also help the group to reimburse a bond issue of €400 million that is set to mature three years from now.
According to the management, the company is generating an operating profit before amortization (Ebitda) of about €75 million a year, a figure similar to the profit it was making before Lion Capital stepped in, but the number of franchised stores has gone up substantially. Afflelou had 1,083 own and affiliated stores then.
At the retail level, the group's sales reached €820 million last year, including €800 million in the optical segment and €635 million in France. With the acquisition of Optical Discount, which had sales of more than €35 million in 2015, about 60 percent of the turnover is now in France, but Poux wants to achieve a balance between the domestic and the international market.
Unlike most buying groups, which focus on obtaining better purchasing conditions from suppliers, the Alain Afflelou group regards itself as a marketing and merchandising group whose goal is to maximize the franchisees' sales. This should make it easier to roll out its business model internationally, adding local adaptations.