Hotel Chocolat announces new franchise agreement in Scandinavia

Hotel Chocolat has announced a new franchise agreement in Scandinavia.

As part of the new agreement, Retail Brands - an operator of international franchises in the Nordic region - will take over the company's operations of three Danish stores and expand the brand throughout Scandinavia.

Hotel Chocolat, which opened its first store in Copenhagen in 2012, said Retail Brands is "ideally placed" to further grow operations in Scandinavia. Retail Brands will aim to grow the business in accordance with a development agreement, with Hotel Chocolat retaining an option to buy back the business after a period of five years, pursuant to a pre-agreed formula. Goods will be sold to the partner on wholesale terms, and a royalty levied on sales.

Co-founder and chief executive Angus Thirlwell said: "Having proven the popularity of the Hotel Chocolat brand with Danish consumers we are excited to be entering our next phase of Scandinavia-wide growth. By combining the strengths of our products and brand with the operational skills of an in-country partner, our goal is to deliver sustainable growth in Denmark and the wider Nordic region."

Tobias Johan Toft, co-founder and chairman of Retail Brands, said: "We are delighted to add Hotel Chocolat to our brand portfolio. We are well advanced with our plans to open new stores and expect to open at the Bruuns Galleri shopping mall in Arhus and Ro's Torv mall in Roskilde this autumn."

Liberum said the rationale for the deal is sensible and plays to the strengths of both parties but should form a solid platform on which to deliver sustainable growth across these geographies.

"We reduce our sales numbers in FY19e by circa £2m, but the lower wholesale cost base means we upgraded out FY19e profit before tax by 1.7% and FY20e profit before tax by 2.9%.

"The recent share price weakness is unwarranted especially as growth is now being diversified across multiple channels. This deal follows on from the wholesale and franchising developments last year which all have the benefits of being capital light."

At 1015 BST, the shares were up 5.3% to 347.50p.