The newcomer: BoConcept makes U.S. push
A newer BoConcept location in Punta del Este in Uruguay.
“There is a large amount of growth for our brand into the more than $100 billion U.S. market.” —Torben Paulin, CEO of BoConcept
Judging on appearances, everything looks better in Scandinavia—the peaceful lifestyle, colorful cottages, lush fjords, sleek Volvos wagons and, of course, the breathtaking, gorgeous furniture that elevates daily living to an art form. It’s a look that’s becoming more common, showing up everywhere from apparel to automobiles.
BoConcept is a Danish furniture manufacturer that’s a newcomer to the Franchise Times Top 200+ as the franchised retailer looks to grow its U.S. presence while Scandinavian design goes mainstream across the globe.
Shabby- and farmhouse-chic remain popular on home renovation shows, but flip through the pages of Dwell or stroll through any high-end furniture retailer for a taste of what’s hot these days: clean lines, seductive curves, muted rooms with pops of color and high-end materials—a cross between mid-century modern and the bleeding edge of contemporary design. BoConcept’s luxuriantly spare tables, chairs, sofas and lighting are more on trend than ever, and designed to make a visual impact—especially in smaller spaces that are increasingly popular due to rising housing costs amid a resurgence of city living.
Steen Knigge, BoConcept’s marketing director for the Americas, artfully spun the tale of the 65-year-old furniture manufacturer and retailer and its roots as a humble cabinetmaker in Denmark. As it moved into upholstery and larger items like the sofas many years ago, BoConcept seized the opportunity to become a retailer, as well.
The company opened its first store in Paris in 1993, entered the American market at the turn of the century and is now preparing a dramatic addition of U.S. stores—starting with New York City—based on the strength of the economy and the popularity of its aesthetic.
Torben Paulin and Steen Knigge
Offering interior design services as well as its posh furniture stores, it’s easy to see why BoConcept is feeling bullish as the American economy continues its 10-year growth spurt.
Its sofas are totally customizable, from a bijou two-seater with fabric up to a hulking 20-seat sectional swathed in the softest aniline leather. The retailer’s dining and armchairs aren’t cheap—often in the thousands—but their combination of style, function and design recall some of the finest names in high-end furniture. But unlike every one of its competitors, BoConcept is a franchise, which brings some unique challenges, while positioning the company for rapid expansion throughout the United States.
BoConcept CEO Torben Paulin said the U.S. is one of three priority growth markets, as it aggressively searches for new multi-unit franchisees to expand its network.
“France and Germany, though much smaller than the U.S., each have approximately 35 BoConcept stores, so there is a large amount of room for growth for our brand into the more than $100 billion U.S. furniture market,” Paulin said.
Starting last December, BoConcept pulled the trigger on a five-year project to add as many as 40 additional stores in the United States.
With 19 North American stores, down from 28 just two years ago, Knigge said some of its American franchisees had difficulty “getting up to speed” in the years following the Great Recession. Likening the reduction to routine “spring cleaning,” he said the brand would like to move beyond its largely coastal presence to a wider North American footprint.
As the American franchisee network becomes stronger through attrition, the brand seeks to attract new owners to a system with approximately $500,000 new store costs, but claims two years of positive same-store-sales and a new flagship to increase its visibility within the U.S.
BoConcept’s products are thoroughly modern, often designed for urban living spaces.
“Our focus is to find the right franchisee partners right now in areas where we either have white space or where we want to refranchise,” he said. Following the departure of its New York City franchisee who owned three stores, BoConcept is opening a new company-owned location on Madison Avenue and has a pop-up shop in the SoHo neighborhood to maintain a toehold in the city as it seeks a new franchisee for the market.
A global migration
The brand’s current presence tends to mirror the political blue states, with its modern furniture tending to appeal to more liberal, city-dwelling audiences. Paulin said its Danish heritage perfectly fits the continued, global migration toward smaller dwelling spaces.
It has new stores opening in Connecticut, Atlanta’s Buckhead neighborhood with interest in eventually reaching Atlanta, San Diego, Chicago, Pittsburgh, the Pacific Northwest, the largest cities in Texas and Minneapolis, which is a New World hub for Scandinavian culture.
Compared with traditional, non-franchised furniture retailers that do an increasingly large percentage of their business online, BoConcept’s still-developing e-commerce plan is more nuanced as it needs to maintain its promise of the franchisor not stealing sales from its franchisees. The company also lacks a centralized warehouse to enable speedy shipping in a country as large as the United States, which Knigge suggested could be added in the near future.
“We can turn on the basket today if we wanted to,” he said, referring to online sales, “but there are certain things that strategically need to be in place, and it makes it a little harder when you are franchisee-based, because as you can imagine, the first question is who owns the order if it comes online?” Knigge said.
In its marketing materials aimed at prospective franchisees, BoConcept touts a global presence—60 countries and 250+ stores—and 15 million annual website visitors.
Knigge added BoConcept’s highly customizable furniture, with more than 100 fabric and leather choices for some items, further complicates its online strategy. The company’s experience in Europe, which is ahead of the U.S. market with online sales, has seen that many of its online shoppers are past in-store customers who are familiar with its product line and customization options.
Even with the challenges, he reiterated that both in-person stores and online sales will both be critical challenges going forward, especially as the company prepares for continued online migration, which the mattress industry has seen with new direct-to-consumer options.
“People will always buy furniture brick and mortar,” Knigge said, stressing the importance of trying out furniture and mattresses. “On the other hand, the mattress business in the U.S. has shown old, stubborn opinions are there to die … why wouldn’t that happen in furniture as well?”
Hottest sectors reflected in Top 200 newcomers
Fifteen companies entered the ranks of the 200 largest franchises for the first time this year, many of these showcasing major success stories. Looking at the Franchise Times Top 200’s most impressive newcomers, we see reflections of four promising industry categories.
Fitness and fun: Orangetheory is far and away the most impressive newcomer this year, with 111 percent year-over-year sales growth, debuting at No. 154 on our list. While the brand faces plenty of competition in the booming fitness category, Orangetheory’s cult-like following bodes well for it going forward. In March the company announced signing its 1,000th franchise agreement, and added nearly 250 studios in 2016.
Sky Zone is a textbook example of franchising success in a novel industry, seeing astronomical sales growth over the past several years. Kids and adults alike have gravitated to Sky Zone’s trampoline parks, as sales boomed from $51 million in 2012, to an astounding $307 million at the end of 2016. While a $1.2- to 2.9-million price tag can be a steep investment for aspiring franchisees, parks usually average around $2 million in sales each year.
Realty: As evidenced by the continued growth of Berkshire Hathaway HomeServices on our list, the home realty concept continues its hot streak. Realty One Group is another franchise cashing in on this trend, with 27 percent year-over-year sales growth, and a debut at No. 173 on our list.
Burgers: Freddy’s Frozen Custard and Steakburgers celebrates its 15th anniversary this year with a debut at No. 187 on the Top 200. Freddy’s all-American lineup of steakburgers, hot dogs and sundaes should serve as a differentiator in the crowded burger industry. A 27 percent jump in sales and 25 percent year-over-year unit growth shows Freddy’s is on the right track.
Smoothies: While the burger industry shows no sign of slowing down, many consumers are looking for healthier options. Smoothie King and Tropical Smoothie Café are tangible evidence of this, as they join the Top 200 for the first time this year. Time will tell if smoothie concepts remain a hot commodity in franchising, but annual sales growth of 20-plus percent for both companies is a promising sign.
—Alex Van Abbema