[Analysis] One year later: is the franchising plan bearing fruit for Delhaize?

Exactly one year ago, Belgian supermarket chain Delhaize announced it would sell all of its 128 stores to independent operators. They have completed the divestment, but can we already speak of a success story?

Social struggles

It was a bolt from the blue, the management’s announcement to sell all of its stores, to be operated by independent franchisees. However,he Ahold Delhaize subsidiary said it had to act to preserve profitability and growth. The decision came as a shock to the 9200 employees involved: spontaneous strikes immediately broke out across the country.

For the unions, an existential struggle began: they lose a significant part of their power when the workforce is divided. Today, they are seizing the anniversary of the so-called Future Plan to stress that the struggle is not yet over: they point to job losses in the transferred shops, with permanent workers leaving being replaced by students or part-timers. They denounce cost cuts and warn that success for franchised stores is not guaranteed.

First boost

The latter is true, of course: the franchising of the 128 branches has only started a few months ago and the whole operation will continue until autumn this year. Still, the first signs are positive: it was a huge first boost for Delhaize that it did manage to find buyers for all 128 stores within the year. Many observers had expressed doubts about the operation beforehand, and some organisations for the self-employed stirred up unease about the tighter franchise contracts.

In the end, that did not stop the franchisers (the majority of them experienced entrepreneurs), although it is true that the retailer did not appear spoilt for choice. Many entrepreneurs are taking over two or more shops – which, according to information relayed to RetailDetail editors, was not actually the intention initially.

Open on Sundays

The first franchised stores are now reopening one after another, without incidents or false notes, and they are reportedly also showing “encouraging results”: Ahold Delhaize CEO Frans Muller speaks of “accelerating comparable sales and stabilising market share”. To be fair, it would be much bigger news had this not been the case.

Delhaize is counting on the entrepreneurship of its affiliates to restore momentum in its 128 supermarkets. The franchisers can respond more decisively to the needs of their customers, with adjustments to the offer and the addition of local products. Work organisation on the shop floor – a perennial point of discussion with the unions – will now be managed more flexibly, improving productivity and service. An important gain is also the fact that the majority of the shops involved will open on Sundays: a significant competitive advantage over Aldi, Colruyt, Lidl and the Carrefour hypermarkets.

Festival

It is obvious that Delhaize’s market share will return to an upward trend in the coming months: after all, the base for comparison is very weak in the coming months, given the ongoing strikes a year ago. However, really growing again would not only mean regaining lost customers – which in itself will be hard enough – but also attracting additional customers or shopping trips.

Delhaize has visibly increased investment in marketing, in eye-catching promotions, in price cuts too. A clear charm offensive will be the food festival Wonderfood Adventure, which the retailer organises on 20 and 21 April. These efforts are needed to regain prominence in the minds and hearts of shoppers. After all, wounds have been inflicted. Not only was the financial damage great – possibly up to 250 million euros – but the brand image also received huge damage. Meanwhile, the competition has not been sitting still: Colruyt has started the integration of the 57 shops it acquired from Match and Smatch, Intermarché is continuing its momentum and Carrefour launched a new advertising campaign this week.

New business model

So when will we be able to clearly evaluate the entire Future Plan? To be honest, that will at least be in 2026. Only after the first full year with only franchised shops, we will know whether Delhaize is indeed growing again. Will profitability meet the group’s requirements, with margins towards 4 %? And that in a difficult market, with a different business model, where profit has to come from the wholesale margin…

It also remains to be seen whether all entrepreneurs will succeed in reviving the ailing shops. Some stores are structurally loss-making: will the unbridled efforts of an independent be enough to change even that? It certainly cannot be ruled out that some supermarkets will eventually have to quit after all.

Finally, Delhaize’s whole plan has also triggered a fierce debate in the industry about the big differences in working conditions and wage costs between franchised and integrated stores. Competitors are calling for a more level playing field: the fact that entrepreneurs keep the status of “self-employed small business” even when they operate more than ten shops angers affiliate companies. However, a breakthrough in this area still seems far, far away…