QUARTZ: Coach is now a full-fledged American fashion house

“It has the potential to drive sales and really make [Coach] a total brand, as opposed to just a handbag brand,” says Robert Burke, CEO of retail consultancy Robert Burke Associates, of Coach 1941. “They’ve made a real push with specialty store retailers to be represented there and be sold there.”

QUARTZ | MARC BAIN

Since at least 2013, Coach has been in a sales slump, suffering from its reputation as a peddler of nice but unremarkable handbags, and the fact that Coach bags could often be had at a discount—the kiss of death for any “premium” brand. But now, a look around fashion’s best storefronts suggests that’s about to change.

As of this month, you’ll find clothes by Coach amid the racks of cool, forward-thinking labels at New York’s Opening Ceremony. At Colette in Paris, which buys some of the best European labels, Coach will be there, as it will be at luxury retailers Jeffrey and Saks Fifth Avenue in New York, Luisaviaroma in Florence, and Lane Crawford in Hong Kong, among others. And while some of these shops already carried Coach’s bags, it’s just as much the apparel—patchworked leather jackets and vests, as well as tops, dresses, and skirts printed with bustling, colorful prairie florals, with the label Coach 1941—that are finally steering the “affordable luxury” brand back toward the high-end.

Coach 1941 showed its latest collection at New York Fashion Week yesterday (Feb. 16), after an enthusiastic response to Coach’s first major runway presentation last September. That this line is simultaneously debuting at some of the top fashion retailers around the world could offer Coach’s image a much-needed boost.

There are indications that a turnaround is already taking hold. While the brand’s recent earnings report was far from stellar, it did show improvement. The company has been cutting way back on its promotions while introducing new designs, and CEO Victor Luis remarked in a call with analysts that Coach’s handbag sales in the above-$400 bracket grew to 35% of bag sales, up from around 30% last year. “The increases showed continued progress of our elevation strategy, with higher price points and more fashion-forward products,” he said.

Coach even expects to return to positive same-store sales growth by the fourth fiscal quarter this year.

The designer behind Coach 1941 is Stuart Vevers, a well-respected fashion veteran who previously reinvigorated accessories-driven brands Mulberry and Loewe. The English designer’s clothes and bags for Coach 1941 are cool, easy, and fun, and they have a broad appeal, in keeping with Coach’s accessible “affordable luxury” position in the market. They’ve already added some much needed energy to a brand that had become stagnant.

“There’s a nice, youthful spirit to the ready-to-wear,” says Jeffrey Kalinsky, founder of Jeffrey, which also bought Vevers’s work for Mulberry and Loewe. “It’s not just about a floral dress. It’s about a biker jacket. But the biker jacket is not in black leather. It’s in a shot of color.”

 Kalinsky is also an executive vice president at Nordstrom, which will carry Coach 1941, too. He says even though Coach’s main business is bags, clothing is critical in turning Coach into a complete fashion house. “In an accessory business, ready-to-wear gets to spin the fantasy about who the woman is,” he says.

Some of the clothes are selling well, Vevers has said, but Burke believes they’re more about image than sales. “It’s really meant to help in repositioning the brand and elevating it,” he says.

It’s hard to restore the luster of a brand that been overexposed in the mass-market, but there are noteworthy precedents, including Gucci and Burberry. As Burke points out, Gucci was mostly known as a mass-market handbag and accessories brand before Tom Ford took over as creative director, and made it supremely sexy, in the 1990s. And Burberry was a coat resource until Rose Marie Bravo helped it develop into a complete luxury house.

Whether this year will prove a similar turning point for Coach remains to be seen, but 2016 is important regardless. It’s the 75th anniversary of the company, which started as a family-run workshop in New York—in 1941, of course—making leather goods.

In 1996, Coach hired Reed Krakoff as creative director. He was instrumental in reworking the brand’s image and expanding the business into what it is today. Coach became ubiquitous in American malls and grew internationally, pioneering the affordable-luxury space now filled with American brands such as Michael Kors and Kate Spade. But the shine faded, and Vevers replaced Krakoff in 2014, the same year Luis took over as CEO.

It makes sense in that context that Kalinsky calls Coach 1941 a “natural evolution” of the brand rather than a change of course. It’s more than just a pivot away from recent history—it’s laying groundwork for the future, and it’s making Coach a brand to watch.

BLOOMBERG: What's Behind the Malaise in the Fashion World?

Robert Burke appears on Bloomberg Surveillance

WWD: Handbag Brands Brace for More Market Challenges

“Handbags have been a hot, call-to-action-type purchase, but now customers are looking for versatility and it’s resulted in very subtle trend and branding, which makes it less urgent to update your bag,” said Robert Burke, chief executive officer of fashion industry consulting firm Robert Burke Associates. “What happens when retail is shaky is that customers go back and shop their closet and see what they have.”

WWD | MISTY WHITE SIDELL AND DEBRA BORCHARDT

The handbag market’s been, well, a mixed bag.

Retailers are seeing a swelling inventory of sameness that lacks a “call-to-action” for the consumer to buy, yet investors have turned bullish on a few key players, such asCoach and Kate Spade, viewing these brands as relative bright spots. Stalling the market is the more cautious consumer-spending environment — and shoppers’ seeming unwillingness to buy fashion products — which could trigger even more promotions this spring and further pinch the bottom line of major brands.

Handbag stocks got a much-welcomed lift last week when Coach’s fiscal second-quarter earnings beat analysts’ expectations and gave investors hope that the other accessories brands would have similarly good results. In the two days following Coach’s earnings last Tuesday, Michael Kors Holdings’ stock leaped 6 percent while Kate Spade added 3.5 percent in value and Vera Bradley jumped more than 4 percent.

While Coach’s earnings per share of 68 cents were 2 cents better than consensus estimates, North American comparable-store sales dropped 4 percent, the eleventh quarter of decline, although the best performance in 24 months. So in traditional Wall Street fashion, not terribly bad results was cause for celebration. Most analysts were pleased that Coach’s turnaround efforts seemed to be taking hold and that the company was moving in the right direction under chief executive officer Victor Luis and executive creative director Stuart Vevers.

This week will provide a further temperature reading of the accessories market when Kors weighs in with its results on Tuesday. Kate Spade’s numbers will be out next month.

Regardless of whether those companies show stronger performances, the overall sense of the market is that accessories aren’t the surefire revenue generator they used to be. Gone are the days when shoppers would rush to stores to buy the latest “It” bag or shoe and accessories, like apparel, have suffered from the overall consumer ennui toward fashion.

At least one industry observer says the Internet has thwarted the shelf life of the segment.

For the high-end sector, there seems to be a somewhat confused and “oversaturated” market of designs that evoke the minimalism of Céline and the more-is-more aesthetic now signature to designs by Gucci under creative director Alessandro Michele and Fendi — giving the consumer no clear trend-driven incentive to buy.

“Handbags have been a hot, call-to-action-type purchase, but now customers are looking for versatility and it’s resulted in very subtle trend and branding, which makes it less urgent to update your bag,” said Robert Burke, chief executive officer of fashion industry consulting firm Robert Burke Associates. “What happens when retail is shaky is that customers go back and shop their closet and see what they have.”

“There is definitely a glut of merchandise without a point of view,” agreed Sarah Blair, Barneys New York’s senior vice president, divisional merchandise manager for shoes and bags. “Consumers are looking for newness and something with a good price value. This is not the days when they would buy the same bag in a new color. It used to be that brands were driven by an iconic bag in a plethora of colors, but that trend has plateaued.”

Neiman Marcus’ fashion director for women’s accessories, Ana Maria Pimentel, said: “I think sometimes when the economy fluctuates, designers think it’s easier to be safe, but it’s always best to step it up.”

Pimentel said there is still a “hunger” for accessories, though. “I think where we have seen success is when there is newness; she is not holding back if the product is new and emotional — I don’t think she is even being price-conscious if we are giving her a reason to buy.

“We have seen her slow in things that are stagnant and haven’t changed,” Pimentel added.

In an effort to stir emotion and design persona, labels like Fendi have stepped away from more classic, pared-down styles in favor of novelty bags fabricated in bright colors, with interchangeable straps and charms. “It’s so emotional and cute — people are really responding to that cheerfulness,” said Blair.

She also pointed to Altuzarra’s new collection of saddle bags, Loewe’s small elephant-shaped pouches, and Chloé as strong performers. Heritage labels including Delvaux and Mark Cross continue to entice consumers, she said.

But Burke said the novelty, accessory-for-your-accessory model that Fendi and others is promoting has done the larger market a disservice.

“What worries me about these novelty styles and the ability to accessorize your bag with a strap or ornament, is it means that customers are using an existing purchase…so it may be a reality from a retail perspective that these accessories mean that they don’t have to buy another bag,” he said.

Burke, like many others in the industry, said designs’ overexposure on social media often smothers a design’s success before it hits retail shelves. “Customers are looking at bags prior to delivery and are tired of it [by the time it gets to the store]. It tarnishes in some ways the impulse of a bag purchase,” he said.

“Bags had a lot more longevity before the Internet,” Burke continued. “If you think of the Fendi Baguette bag, it had a very long run. The shelf life for bags today is extremely short because of their exposure online.” He said a cocktail of “design, trendiness and exclusivity” is what now drives a bag’s success.

According to Blair: “It’s a volume business with high margins. I think a lot of people and designers are trying to get involved in this type of business.”

Just a few years ago, the launch of an accessories collection seemed like the surest way to bolster a designer’s bottom line — resulting in an explosion of merchandise. Now analysts are taking more of a wait-and-see approach — even for blockbuster brands like Kors.

Oliver Chen at Cowan & Co. wrote, “We note a cautious read-through for [Michael Kors] and Kate Spade, given Coach’s estimates that the North American premium women’s handbag and accessories market was essentially flat in the December quarter, with unit growth remaining positive, offset by lower [average unit retail]s due to heightened discounting activity.”

Chen said he has “concerns that [Michael Kors] could be under promotional risk, given management’s commentary on competition intensifying and driving higher levels of promotions than anticipated, notably in the outlet and wholesale channels.”

The consensus from FactSet for Kors’ third-quarter results is for $1.46 in earnings and sales of $1.35 billion. That would be lower than the earnings for the third quarter of 2015 of $1.48, but sales would be higher than last year’s third quarter, which came in at $1.31 billion. The average price target amongst analysts is $49.26. Unlike Coach, Kors is very promotional on its Web site, with many handbags marked down 50 percent.

David Schick of Stifel expects a challenging quarter from Kors, and is below Street estimates for earnings. “Our comp estimate reflects our concern that [Michael Kors] is reaching a saturation point in North America handbags,” wrote Schick. His survey told him that more shoppers intended to purchase from Coach than at Kors. It could be because Kors’ handbag line is mostly on the large size, whereas women’s preference is trending to smaller sizes.

Kate Spade is set to report its fourth-quarter results on March 1 before the market opens and analysts are expecting earnings of 32 cents a share on sales of $441 million. Both of those estimates are higher than the numbers delivered for the fourth quarter of 2014. The average price target on the stock is $28.06. Chen wrote, “We continue to view [Coach] as our favorite handbag name, but we still like Kate Spade, as we feel the brand is best prepared to weather a tough sector backdrop on elastic category expansion, prudent promos and controlled distribution.”

Wedbush Securities was also bullish on Kate Spade. At the end of December, the analysts wrote, “Our checks have consistently noted [Kate Spade] as the least promotional and best merchandised handbag brand compared to peers.” Kate Spade’s shareholders need for the company’s fortunes to change — the stock has fallen 46 percent over the past year, although in the last five days it has gained 6 percent. Most of that increase has come after Coach’s earnings.

Vera Bradley doesn’t report earnings until March 9, but that isn’t keeping investors from hoping for the best. The company has had very good success with its leather bags and the company guided the Street higher with its fiscal-year estimates. Gross margins were guided higher as well. Chen wrote, “We’re encouraged by solid third-quarter performance given better-than-planned revenues on reduced promo activity and disciplined expense management.”

Huffington Post: Robert Burke: Fashion's Secret Power Link

HUFFINGTON POST | RENATA M. BLACK 

Paradigm Shifters is a series of interviews with a select group of women and men from eclectic walks of life. It will highlight unspoken, real-life insights on how they have been able to turn weakness into strength. A naked soul point of view of how their breakdowns were really a preparation for breakthroughs. They are your quintessential paradigm shifters; internal shifts converted into genuine change.

Everything I have ever done has been focused on this underlying theme of shifting the paradigm because, "What we think determines what we feel and what we feel determines what we do." Hence, why Empowered by You takes lingerie, which has traditionally been seen merely as a tool of seduction and redirected that energy as a tool of empowerment.

I hope from these stories you will look at your own situations, struggles and accomplishments through a different lens. At the very least you will be more equipped with real life tools to change your own paradigm. At the end of the day, we are our own Alchemist turning the silver we were born with into the gold we are destined to become.

How did you get into the fashion industry?

After college I went to LA and was deciding whether to go to graduate school, but I needed to get a job until I figured out what I wanted to do. Some of my friends worked at the Ralph Lauren Polo store in Beverly Hills, so I thought it would be a fun job to do for a little while. I ended up working for the company for 11 years. Eventually I moved to New York and I worked in various positions. The company went public and franchise retail was brought in-house and I worked in the newly created retail division. I spent a short time in design (which Ralph encouraged me to do) before returning to retail. In my time there I had the opportunity to work very closely with Ralph, who has really been a fantastic mentor and supporter. 

In 1999 I was hired to be the V.P. Fashion Director at Bergdorf Goodman. At that particular time there were a lot of changes at BG. There's no store like Bergdorf in the world, but it had gotten very dusty. This was an amazing experience in my career. It was a fantastic team of people. I hired Michael Bastian (who has his own label now) as the Men's Fashion Director and Roopal Patel (now the Fashion Director at Saks Fifth Avenue) as the Women's Fashion Director. We had an incredible time and felt and realized that anything could happen. The CEO Ron Frasch and President Peter Rizzo at the time pushed us all to create the best store possible.

So how did Robert Burke Associates come about?

I was at Bergdorf's for 7 and a half years. I dealt with many established brands and new designers when they were just starting out: Tom Browne, Tory Burch, Proenza Schouler, and Derek Lam, plus the executives. I had this incredible vantage point into the business on what worked, what didn't work. I found that many of the brands had questions when they were looking for strategic growth and how they were going to position themselves. The only consultants out there were generally retired executives from department stores and I was about 42, and thinking about what else I wanted to do in my life. I wanted to open my own consultancy company. I went and I spoke to a handful of people: Anna Wintour, Rose Marie Bravo, who was still at Burberry, and Ralph. And Rose Marie and Anna said yes, do it, but Ralph said 'this is a terrible idea, you should come back and work for me', of course we talked it out. In the end, I started Robert Burke Associates, almost ten years ago. 
When I started out, Tory and Chris Burch were still married at the time, and Chris had just started an investment firm officed on 57th and Madison, so they offered me some office space. Our first client was Marchesa, Anna Wintour called me and said Harvey Weinstein's girlfriend (at the time), Georgina Chapman, wanted to start a new dress line, and asked if I would meet with them. So of course I said yes.

It was a fantastic start and I found that the industry did need someone who could advise brands. Brands often times need to have the perspective of the retailers, so we're unique in the way we approach things. We're not a Bain or McKinsey in that market research driven way, we are more competition and positioning driven. We work with international brands, who might be looking to come to the US and maybe don't understand nuances of the US market, like Alexandre Birman, a shoe designer from Brazil, as well his Schutz brand, which is looking at expansion in the US. So we do that type of work, and we do quite a bit of international and domestic retail, which is generally working with developers and local partners in a region.

What project would you say you are most excited about right now?

I would say the re-design and re-conceptualizing of the Beverly Center because it is such an iconic mall. It's exciting to make it into a strong retail destination for luxury and contemporary retail. Working with the Tommy Hilfiger brand globally has been a very interesting and exciting experience as well. It's a brand that is really poised for great growth.

What do you envision the future of fashion will be like? Do you have any advice for young designers or brands?

I think there is generally a lack of original ideas. This athletic apparel movement is a good example of everyone jumping on the same bandwagon. So I think new designers need to be very clear and focused and not try to be everything to everyone. We went through a period in the early 2000's where a young designer wanted to have a sunglass line, a jewelry line, a shoe line, a handbag line, a ready-to-wear line, and a secondary line, and what we've come out learning is that the customer appreciates when someone is the very best in their field at doing one thing. The advice I would give younger brands is to be very clear on who their customer is and what their product is. 

The company has evolved to work with bigger clients, because it's more advantageous, but I think it's very important to work with young designers and to see their design and help them in navigating. We've had many people who have worked with Robert Burke Associates and gone on to become quite successful. There is a young woman named Alison Chemla who interned here, who now has a jewelry line, Alison Lou, which is sold at Net-a-Porter and Matches, and she just opened a store in SoHo. George Sotelo launched a men's swimwear brand called Thorsun. That is really rewarding to see the people who worked here launch their brands at a relatively young age and find success.

What has been your biggest breakdown to breakthrough moment?

There were a few. Those experiences take you out of your depth. I had always been more interested in the business side. But I think I witnessed the bridging of design, retail and commerce while at Ralph Lauren, which set me up for my work at Bergdorf's. If I hadn't had that experience in intimate design meetings and Ralph asking me which color red I like and then in a store design meeting for a new Ralph Lauren store in London I wouldn't have become confident in what I went on to do advising brands. Unlike some very traditional houses, Ralph will put you in many different positions: you can be in a design meeting, then be in the retail store. That experience doesn't exist as much anymore, but it's important to gain as much experience as possible and hopefully have really good mentors along the way. And Ralph was really incredible in that way, he still is. 

That's the thing about fashion, it's never all business and it's never all creative. Like Andrew Rosen is highly unique because he's a product person and he's a business person. And at the end of the day, Ralph is a designer and a business and product person. You look at someone like Jason Wu, he's very left-brain and right-brain, he's very focused. He called me when he was first starting and asked to have lunch, and I could just tell he was very focused. Then six months later, Michelle Obama wore his dress.

What kind of legacy do you wish to leave behind?

Seeing the people I have worked with and mentored go out on their own. It's not about being successful, it's about having the courage to go out and follow your passion, and many times that inevitably leads toward success. Seeing those young people achieve and strive and become confident, that's probably what I am most proud of. And having some positive influence on them. I think that the creative and business processes in fashion sometimes have a rap of being difficult or pretentious, but I actually find it to be the opposite. I find there is a lot of nurturing and support. You definitely get what you put out, but my experience has been extremely positive. 

I was definitely influenced by the big names that I've been behind, and starting my own business was a very different experience from working for them. I wondered if I'd get the phone call back, or get the meeting, but I found that when you form those kind of deep relationships, you do. It's a very positive and loyal industry.

Listening to Robert's story and how all the circumstances of events in his life have led up to the point of creating a unique position in the market is quite extraordinary. By having a credible name in the industry, he has been able to create his own space where he uses his reputation and spotlight to launch others. He is not only a source of admiration but one of inspiration.

BUSINESS OF FASHION Op-Ed | Global Luxury: How to Win When You're Everywhere

BUSINESS OF FASHION | ROBERT BURKE - LONDON, United Kingdom — As the luxury market continues to grow globally and digitally, brands are facing new challenges in terms of how to capture and maintain customers’ interest at a local and international level.

The digital world, whether it be through a brand’s own website, its third-party partners, or social media, has drastically increased the amount of exposure that brands and their products can receive. While seemingly positive, this can be a double edged sword in the luxury world: digital exposure can go a long way towards increasing brand awareness, but it can also lead to consumer fatigue.

In a world where the term ‘omnichannel’ has become omnipresent, there is a fine line that brands must walk, in order to ensure they are providing customers with the products that they want, when and where they want them — and that they are simultaneously creating exclusivity and desire through the right amount of product scarcity.

This isn’t always achieved solely by a high price. Instead, desire is created when a brand strikes the right balance between availability and scarcity through its distribution.

Take the runaway success of Mansur Gavriel’s bucket handbag. It is not an expensive line — the handbags are an attainable price — but it’s very desirable as a result of the label’s distribution strategy. Before Mansur Gavriel releases its bags online at certain points in the year, it builds up a huge demand via Instagram and other online presences. When the products finally do drop, the site is usually overwhelmed with traffic and the products sell out within hours.

While this is an example in which there are surely missed opportunities for higher sales volumes, the sustained brand equity that this strategy creates is of higher value in the long run.

This idea of exclusivity through scarcity is not a new strategy, but it has become even more important, due to the accelerated turnover of information in the digital age. Hermès and Chanel are no strangers to this strategy: both have become infamous for their strategic release of their most iconic products, so much so that their loyal customers will travel the world in search of that one handbag that can only be found in a specific location.

Given that brands are investing heavily in their international flagships, this helps drive traffic to these far-flung locations. On top of that, the discerning luxury customer knows that, when they reach that destination, they will be greeted with a retail experience that matches the exclusivity of the product they seek.

Going forward, success really boils down to two things — brands have to look very closely at their overall communications strategies and also at controlling supply and demand. By possessing a product that few other consumers can have, the luxury consumer feels like an insider, like they’re been told a secret that nobody else knows. The minute that product starts being overexposed, its appeal starts to wane.

This isn’t just applicable to luxury brands. It was always thought that supply and demand was only relevant for luxury. But today, it’s becoming more evident that it’s significant for all brands. Think of Nike and its collaborations with Dover Street Market. Each of the Dover Street Market stores only has 300 or 400 pairs of shoes. During the last release, I passed Dover Street Market in New York and fans were camping out in front of the store overnight to — not because the shoes were $150, but because those loyal fans knew that once they were gone, you wouldn’t be able to get them anywhere else. That’s the crux of creating desire — availability vs. scarcity.

As told to Helena Pike

Robert Burke is chairman and chief executive of retail consultancy firm Robert Burke Associates.

BUSINESS OF FASHION: Why Orlebar Brown turned to franchising

“It’s a very viable way for brands to grow, but it all depends on the expertise of the local franchise partner,” says growth and global markets consultant Robert Burke of Robert Burke Associates. “It’s very, very important they are able to represent the brand so that it has a seamless experience with the consumer. The biggest risk is having the wrong partner. Entering the market and then exiting the market — that’s really detrimental to a brand.”

Orlebar Brown has used franchising to expand its global footprint, gaining a first-to-market advantage in important geographies without expending capital on directly operated retail locations.

BUSINESS OF FASHION | ROBIN MELLERY-PRATT - LONDON, United Kingdom — When swimwear specialist turned lifestyle brandOrlebar Brown decided to expand its retail footprint beyond the US and Europe, it didn’t plan an expensive rollout of directly operated stores. Instead, the company turned to franchising.

In August 2013, Orlebar Brown raised £8 million ($12.4 million) from private-equity firm Piper in exchange for a significant minority stake; capital that will support the expansion of the brand’s directly operated store network in the UK, the US and Northern Europe. But for more far-flung geographies, including Australia, Mexico, Singapore and China, chief executive Paul Donoghue and founder Adam Brown sought an alternative strategy that would allow the brand to enter several new markets quickly and cost-efficiently.

Orlebar Brown initially found traction with fashionable “tailored swimwear” that consumers could wear from the pool to lunch. To date, the company has sold 25,000 pairs of its classic navy blue mid-length shorts (£145). “The product that Adam [Brown] created has a relatively unique proposition,” says Donoghue. “It’s important that we’re able to get meaningful global distribution in a relatively short amount of time to retain a first mover advantage or a first to market proposition. That’s why franchising is attractive to us.”

Under franchising agreements, an external partner pays for the rights to use valuable branded assets to build a business, paying a percentage of sales revenue to the owner of the brand in return. The franchisee is effectively a wholesale partner, often buying product at costs lower than wholesale. For a brand, this makes franchising a slimmer margin channel than directly operated retail or even wholesale. But, critically, the franchisee bears the set-up costs of stores.

Franchising will allow us to accelerate expansion over the next couple of years with greater operational efficiency.

Luxury fashion brands like Tom Ford, Balmain and Ermenegildo Zegna have all successfully utilised the model. But franchising isn’t without risk. “Franchising is a high risk strategy. Bad franchisees can be extremely detrimental to a brand,” says Mortimer Singer of Marvin Traub Associates. But, “local franchisees have ‘lay of the land’ know-how and a well-placed store can serve as a billboard that can be accretive to global brand visibility.”

“We see franchise agreements as a genuinely meaningful part of our business — a fourth channel, running parallel to wholesale, digital and direct retail,” explains Donoghue.

Orlebar Brown, launched in 2007, is currently stocked at over 350 doors worldwide. Today, menswear accounts for 90 percent of the business and, divided by category, swimwear stands at 45 percent and polos and t-shirts at 30 percent, while the remaining 25 percent comes from the brand’s ‘every day’ collection (including shirts, outerwear, knitwear and trousers). The brand expects to reach £20 million (about $28.8 million) in revenue in 2016, a 40 percent increase over last year. And, while Orlebar Brown plans to deepen its wholesale accounts and expand its own retail network in markets closer to home (two directly operated stores are on course to open early this year in New York and Miami), the brand is tapping franchise agreements to drive further momentum.

“If you can get your retail concept resolved, you can always take it to a franchise format. Franchising will allow us to accelerate [expansion] over the next couple of years with greater operational efficiency,” explains Donoghue. “In the long term, what’s important to us is that we get our story and our product out to as many people as we possibly can.”

Orlebar Brown’s franchising strategy was informed by the success of two major Italian companies. “We studied Moncler and Brunello Cucinelli. They’ve done it in a really cerebral way, they’ve really thought about it. It’s about global cities, it’s about the right partners,” says Donoghue.

“It’s a very viable way for brands to grow, but it all depends on the expertise of the local franchise partner,” says growth and global markets consultant Robert Burke of Robert Burke Associates. “It’s very, very important they are able to represent the brand so that it has a seamless experience with the consumer. The biggest risk is having the wrong partner. Entering the market and then exiting the market — that’s really detrimental to a brand.”

“A bad franchisee will damage the brand,” agrees Singer. “If they buy too much inventory, they will try and flush the inventory by discounting too early, while poor sales associates can fail to represent the brand identity.”

Orlebar Brown has already entered into partnerships with retailers Peter Degotardi in Australia and Sunbarth in the US. “Sunbarth has a multi-brand swim business in the Caribbean, in the US and in France. They asked us to do the first franchise store in Cannes in 2014,” says Donoghue. Sunbarth has since opened another Orlebar Brown franchise store in East Hampton, the first in the US (and a strategic anomaly).

“The way we see them, they’re genuine partnerships,” he says. “It starts with getting ‘the pack’ [the brand’s concept and retail identity] really locked down. Then it’s about being really clear about the contract. We have to sign off every location. We retain that control,” Donoghue continues. “We opened a store in Cannes and East Hampton as tests in 2014. It taught us that we had to get the concept fully resolved — branding, store design, shop floor and the service proposition.” Orlebar Brown plans to open eight franchise locations in 2016, including one in Bondi Beach in Australia and one in Playa del Carmen in Mexico.

“It’s not that I don’t worry about the risk to the brand,” says Donoghue. “I worry about it all the time and that makes me think that it’s really important that we do all the things that negate that worry, like creating a really strong pack and keeping a close watch on everything.”

“My biggest fear is how the brand is going to be interpreted,” says Brown. “So I think it’s just as Paul [Donoghue] said — getting to know the partners.”

Often, brands use franchising strategies to expand quickly into new geographies, understand the local market and, then, over time, buy back franchised stores, turning them into directly operated retail outlets. “To do a Brunello Cucinelli and have the ability to buy back franchises to make them direct — that’s the ultimate goal of many brands. Using the franchise partner to really understand the market as a brand in a very thorough way, so that when you do have the financial ability to buy it back, you’re not going in fresh, you’re not going in inexperienced,” explains Burke. Singer agrees: “Smart brands will add buy back provisions where possible so that they can take over a mature business down the road.”

“Brunello Cucinelli went through this same process,” says Donoghue. “As I understand it, they’re starting to either buy them back. We would love to be sitting here in 10 years time, working that out.”

BLOOMBERG: What are you most thankful for this thanksgiving?

Robert Burke appears on Bloomberg Surveillance.