Abbey axes plans for franchises

ABBEY National, which reports half-year figures on Wednesday, has quietly reversed a radical plan to hand over its entire branch network to local managers acting as franchisees.

Some elements of the scheme, such as the option for branch managers to run local advertising campaigns, will be retained, but the overall plan has been shelved.

One insider said: 'Basically it was a complicated way to incentivise staff to do what they should already be doing, such as selling more products and keeping an eye on costs.'

It is believed that Luqman Arnold, who was appointed chief executive last year, was not a fan of the scheme, which was launched as part of a drive to slash £250 million off costs.

About 70% of Abbey's branch network had operated on a basic franchise format since the scheme was launched in August 2000. Unlike traditional franchise operations, though, Abbey retained full control of these branches.

However, four area managers - in Belfast, west London's Ealing, Cardiff and Newcastle - had taken the scheme even further, signing contracts granting them 49% ownership of up to 12 branches in each of their regions. Their salaries were paid from the profit share.

The four franchisees were required to retain the Abbey National brand name and sell the bank's products, but were allowed to run their branches as they saw fit to achieve monthly sales targets set by head office. The four have now returned to Abbey as area directors. An Abbey spokesman said: 'We have said we have plans to get closer to our customers. The franchise scheme is not needed at this stage of our evolution.'

Separately, Abbey has put on hold plans to open further Costa Coffee outlets in its branches. It is believed that four have already been closed.

One insider said: 'It is extremely expensive to set up the Costa Coffee branches and there was no real evidence that it made any difference to the sales of our products.'