COFFEE Republic outlined plans yesterday to speed up its transformation into a New York-style deli operator by seeking franchisees for most of its 46 outlets.

The group, which three years ago had more than 100 stores, said that it planned to retain no more than 10 to 15 outlets. The rest would be sold to franchisees who would pay a royalty to run them under the Coffee Republic Deli brand.

So far it has converted five of its stores to the deli format, sparking an average uplift in sales of 20 per cent. However, the group’s poor share price performance made it impossible to raise new equity to fund the conversion of the other sites.

Bobby Hashemi, chairman of Coffee Republic, said that the new strategy meant that conversion costs would now fall on the franchisees, who would also pay a premium to acquire the sites. “Delis are also more labour-intensive and better suited to an owner-operator model,” he added.

The first store to transfer to franchise ownership will be that on South Molton Street, in London’s West End, and Mr Hashemi said that he hoped to franchise the rest over the next two years. Eventually it will look to recruit franchisees for new stores “across the UK”.

The company’s operating losses narowed from £1.6 million to £1.1 million in the year to March 27, from turnover down 20 per cent to £17.6 million after the closure of several sites. Pre-tax losses fell from £1.75 million to £1.4 million.

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