[Editorial] Mr. Pizza purchasing cooperative offers model of shared growth

Mr. Pizza headquarters (the MP Group) and the Mr. Pizza Franchise Owner Association signed a “shared growth agreement” signed on Aug. 9 at Seoul City Hall. Starting from the left are pictured MP Group President Kim Heung-yeon, Seoul Mayor Park Won-soon, and Lee Dong-jae, Chairman of the Mr. Pizza Franchise Owner Association. (Kim Seong-gwang, staff photographer)

The Mr. Pizza Franchise Owner Association is establishing the South Korean franchise industry’s first-ever purchasing cooperative this year. It’s notable as a way for the owners to reduce costs by jointly purchasing some of their ingredients with the approval of the Mr. Pizza headquarters (the MP Group).

Also notable is the fact that this was made possible by a “shared growth agreement” signed on Aug. 9 by the MP Group and the association.

According to the agreement, the owners will be able to use the cooperative as of January next year to purchase 25 items that they previously could only buy through the headquarters, including frozen shrimp, bacon, and salad. The items reportedly represent around 30 percent of the company’s ingredient sales, totaling 12 billion won (US$10.7 million) per year. It’s an achievement realized by the “little guys” banding together, and it’s welcome as a way for them to benefit alongside the headquarters.

Before, there had been a few cases of purchasing cooperatives being established within the Social Franchise social enterprise, but no precedent exists for any major franchise business. In addition to the cooperation’s establishment, the franchises look to gain further strength with the agreement they reached with the headquarters to form a “joint purchasing committee” as of next January to set quality standards for the raw and subsidiary materials supplied by the headquarters and establish reasonable procedures and prices.

The MP Group’s corporate image and management performance have taken a hit due to incidents involving rich people behaving badly, including one last year involving former chairman Jung Woo-hyun assaulting a security employee. The conflict between the headquarters and the franchises has also intensified, prompting the city of Seoul to step in and mediate – which led to the two sides’ signing of their shared growth agreement.

The agreement does have limits. Ingredients like cheese and dough still have to be purchased through the head office. It’s also unfortunate that the head office is not involved in the cooperative’s establishment. Improving the brand image and achieving shared growth in sales will require the head office and franchises being yoked together under a shared destiny through the cooperative along the same lines as Dunkin’ Donuts or Burger King in the US.

We look forward to a wider scope of these kinds of shared growth measures between the Mr. Pizza headquarters and franchises – and to their expansion to the franchise industry as a whole.

　

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