Figaro all set for expansion; minor owner say plan contestable

MANILA, Philippines - The Figaro Coffee Company plans to open 30 stores this year under a new chief executive officer (CEO), but one of its minor shareholders insists the company cannot expand without her consent to use the firm’s trademarks. Figaro CEO and President Jose Fernando T. Alcantara, who was appointed in September, told BusinessWorld they would refocus on expansion after finishing reorganization, which limited new branches to nine last year. Mr. Alcantara, former officer-in-charge for corporate planning of the restructured Negros Navigation Co., said half of Figaro’s 30 new outlets would be franchised. Most of the outlets will be full stores and kiosks, which cost about P9 million and P4.5 million, respectively. Figaro also sells coffee using carts, whose franchise costs P2.25 million This year, Figaro is targeting up to P700 million in sales from P400 million in 2008, while projecting profits of 15% and 30% of revenues. But in a separate interview, former Figaro CEO and minor stockholder Pacita U. Juan contested the expansion plans. "On the trademark issue, it’s incontestable... They don’t hold the trademarks so they can’t talk about expansion," she said in a text message. She also said the cost of the franchise is "way over our usual investment option." Ms. Juan, who owns 42% of the coffee chain and considers it her "baby," was ousted from the management last year after serving as its CEO for 15 years. On Sept. 10, it was reported that Ms. Juan had resigned from her post, but her reasons for stepping down were not known. Twelve days later, Ms. Juan, who relinquished her post in June, published a newspaper advertisement saying she owns four Figaro trademarks, including its trade name. She warned of seeking legal damages if these are used without her consent. "[I am] prepared to institute appropriate court sanctions against any individual or entity found using [my] name or any colorable imitation thereof, without [my] written authority," she wrote then. "As far as I know, the majority is in management, but as a minority, I have the right to know what’s going on," Ms. Juan told BusinessWorld. "I have not received any formal information on what the majority shareholders had done. I just heard that there is new management headed by non-Filipinos," she added. But Mr. Alcantara maintains that that the company is still fully-owned by Filipinos. The Tanseco family, he said, remained Figaro’s major owners even with the entry of new partners, whom he identified as the Liu group, owners of the Dominos Pizza franchise. "The new investor is only coming in for now as a fund lender. They came in to provide a stimulus fund through convertible notes or a loan that can be converted to equity," he said. He declined to say how much the new group is investing in the coffee chain. Mr. Alcantara said Figaro is open to Filipino investors since the company needs more funds to expand. 2010 listing eyed He said Figaro would remain resilient amidst the slowing global economy, noting that its customer base consists mostly of old coffee drinkers. He admitted, though, that this year could be challenging. "The market is not going away, but there is a negative mood, so that instead of stopping by coffee shops, people will just go home. They are shying away from spending on food and beverage," he added. Mr. Alcantara said they would try to attract the younger generating by expanding their food line, adding more cold beverages and installing wireless Internet at all stores by the third quarter. He also said Figaro might install computer stations inside their branches to attract people who would like to drink coffee while working. "We are reaching out to the younger generation... We have to expand outside our core market," Mr. Alcantara said. He said the company might sell shares to the public next year if the stock market improves, and once they finish improving the company’s finances. Mr. Alcantara said Figaro would defer international expansion this year, even if a number of investors from the Middle East and Shanghai have expressed interest in the franchise. "We have to slow down because the previous management had failed to [pursue] that direction," he said, noting that the company’s international ventures had been ill-timed. He also claimed Figaro had failed to maintain the quality of its products abroad. "We have to restrengthen the backbone, strengthen the head office. That would be our concentration for 2009." Asked to confirm whether Figaro’s foreign branches have folded, Ms. Juan said: "We have been [expanding internationally] since 2001, but every country is a challenge of course." - BusinessWorld