In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Pandora franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Pandora franchise, based on Item 7 of the company’s 2018 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Pandora franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Pandora outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of Pandora’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average, median, high, and low gross sales for the 248 franchised Pandora Stores located in the United States, which were continuously open and operating from January 1, 2017 through December 31, 2017
- 2017 range of gross sales by quartile for the 248 franchised Pandora Stores located in the United States, which were continuously open and operating from January 1, 2017 through December 31, 2017
Section I – Background Information
16 Things You Need to Know About the Pandora Franchise
Shares Fall as Pandora Cites Challenging U.S. Market
1. Pandora had a rocky start to 2018 as the brand’s shares fell in Copenhagen; it suffered the worst selloff in more than half a decade. The company’s stock lost more than 8 percent, driving Pandora’s market value down to its lowest since early 2015. According to Pandora, its biggest market, the U.S. retail market, has remained difficult. Although there has been an improved performance in online sales, Pandora said that the U.S. physical network, including franchisee stores, continued to deliver a “negative like-for-like performance.”
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2. Pandora lost more than a quarter of its market value in 2017 as its U.S. business was pummeled by a weak retail environment. Hedge funds started spotting opportunities to make money shorting the stock, and Pandora became a target for speculators expecting it to continue declining. Despite the company’s efforts to address market concerns, including promising a clearer communications strategy, Pandora shares had already lost 17 percent in the year through early 2018.
3. Pandora’s CEO Anders Colding Friis said 2017 “was a challenging and eventful year.” He added that the company now has a “clear strategy to utilize our fully integrated value chain to capitalize on the growth opportunities. We are confident this strategy will deliver continued growth and strong profitability in 2018 and the years to come.”
Opens State-of-the-Art Crafting Facility in Thailand
4. As part of Pandora’s long-term growth strategy, the company opened a new, highly modernized and green crafting facility in Lamphun (near Chiang Mai) in Northern Thailand in March 2017. The new facility is the first in a line of strategic initiatives to support Pandora’s efforts to meet increasing demand. The facility is located close to Pandora’s main production site in order to maximize stability and minimize risks.
5. Anders Colding Friis, Pandora’s president and CEO, said, “The site in Lamphun is only the first in a line of strategic initiatives. Over the next years, we will expand production capacity at our current site in Bangkok further, investing a total of DKK 1.8 billion in the period 2015 to 2019.”
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6. The new facility will eventually employ up to 5,000 people and is introducing new ways of combining effectiveness with Pandora’s indigenous craftsmanship developed by the company’s founder. This enables Pandora to increase effectiveness and better control production costs without compromising quality and the hand-finished uniqueness of each piece of jewellery.
7. According to Pandora’s senior vice president Thomas Touborg (who is responsible for production), “Our consumers’ increasing demands and expectations on improved flexibility are met by our new facility in Lamphun, where craftsmanship walks hand in hand with highly effective LEAN-oriented production principles creating a state-of-the-art production system.”
8. In addition to being designed to improve product quality, the facility has some of the best working conditions in the area, which is often a concern for international consumers. According to Pandora, it is also one of the most modern production facilities of its kind in Asia. The new facility has earned the Leadership in Energy and Environmental Design (LEED) certificate and meets the highest CSR and sustainability standards.
Takes Over Distribution in Ireland
9. As part of Pandora’s strategy to increase control over the Pandora brand, the company announced at the end of May 2018 that it had entered into an agreement with BJ FitzPatrick Holdings Ltd. to acquire their Pandora store network in Ireland at the beginning of June. The acquisition is consistent with the brand’s intentions to increase its owned and operated retail footprint in markets of importance and will allow Pandora to enter Ireland directly.
10. With the new agreement, Pandora plans to open 24 Pandora-owned concept stores and one shop-in-shop in Ireland. Additionally, Pandora will take over distribution to five franchisee concept stores and 10 shop-in-shops, mainly in Northern Ireland.
11. David Allen, president of EMEA in Pandora, said, “Over the years BJ FitzPatrick has ensured that both the Pandora brand and store network have been developed across Ireland. As an integrated part of our strategy to increase control of our brand and the distribution of Pandora jewellery, we will now continue the efforts to establish Pandora as the branded manufacturer that delivers the most personal jewellery experience.”
12. In 1982, a Danish goldsmith named Per Enevoldsen and his wife Winnie Enevoldsen started Pandora as a family-run jewellery shop in Copenhagen, Denmark. In the beginning, the Enevoldsens often traveled to Thailand looking for jewellery for importing. As demand for their product grew, the Enevoldsens shifted their focus towards wholesaling to clients in Denmark.
13. Around 1987, after several successful years as wholesalers, the retail activities were discontinued and the company moved to larger premises. At this time, the first in-house designer joined the company and Pandora began to focus on creating its own unique jewellery. Two years later, Pandora established a manufacturing site in Thailand, which is still in operation today.
14. Over the next decade, the company began selling affordable, hand-finished jewellery to the mass market and in 2000, Pandora launched its now signature charm bracelets in the Danish market. The charm bracelets quickly became popular and Pandora started to expand internationally, entering new markets including the United States, Germany, and Australia. Due to the increased demand for its products, Pandora opened three more manufacturing facilities in Thailand in 2010.
15. Since then, Pandora has continued to grow and now sells its products in more than 100 countries.
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16. Pandora has yet to appear on Entrepreneur’s Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Pandora franchise costs, based on Item 7 of the company’s 2018 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Pandora’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 256
- Outlets at the End of the Year: 281
- Net Change: +25
- Outlets at the Start of the Year: 281
- Outlets at the End of the Year: 301
- Net Change: +19
- Outlets at the Start of the Year: 301
- Outlets at the End of the Year: 268
- Net Change: -33
- Outlets at the Start of the Year: 30
- Outlets at the End of the Year: 37
- Net Change: +7
- Outlets at the Start of the Year: 37
- Outlets at the End of the Year: 46
- Net Change: +9
- Outlets at the Start of the Year: 46
- Outlets at the End of the Year: 112
- Net Change: +66
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
Part 1 – Statement of Actual, Average, and Median Gross Sales for Pandora Stores
A. Actual and Average Gross Sales
- Below is a statement of actual and average Gross Sales compiled from 248 franchised Pandora Stores located in the United States (“Franchised Stores”), which were continuously open and operating from January 1, 2017 through December 31, 2017 (“2017 Accounting Period”) and which reported the results from their operations to Pandora.
- As used in Item 19, the term “Gross Sales” means all revenue and income from any source derived or received by the Franchised Stores from, through, by, or on account of the operation of the Store, whether received in cash, in services, in kind, from barter and/or exchange, on credit (whether or not payment is actually received) or otherwise, less the amount of any documented refunds given in good faith to customers by the franchisee and less any sales taxes.
- Pandora obtained this Gross Sales information from unaudited franchisee reports submitted to it consistent with its reporting requirements. Pandora has not audited or otherwise reviewed the Gross Sales information submitted to it.
- The Franchised Stores included in Item 19 are primarily located within regional shopping centers or malls.