The first store selling the Kiko Milano brand of cosmetics and makeup will open in the first half of 2019 with products imported by Castro Model Ltd. (TASE: CAST).
Castro says that under the agreement between the parties, the group plans to operate through a franchise for opening nationally deployed stores for the brand. Investment in the first two stores will total NIS 10-20 million, which Castro will fund with its own resources.
The agreement was signed with Tactica, a joint subsidiary of Castro and Hoodies, pending a full merger between them.
One of the main points in the agreement gives Castro the exclusive right to distribute the brand's products to Israeli consumers by setting up and operating brand stores and through e-commerce. The 10-year agreement will be automatically renewed for five more years; the parties will start negotiating a further five-year extension 12 months before the agreement expires, subject to the preliminary terms.
The agreement also states that in exchange for the rights granted to the franchise holder under the agreement, the franchise holder will pay the brand owner a €2 million development fee (Castro says that half of this was already paid to the brand owner in December 2017). The franchise holder will have the right to open up to 50 brand stores, with additional payment being made for each store. The franchise holder will pay royalties on sales in the stores and online sales. The franchise holder also undertook to invest a specified proportion of brand sales turnover in advertising and marketing the brand, and to buy all the brand's products exclusively from the brand owner.
Under the agreement, Castro undertook to refrain from competing with the brand's products during the period of the agreement and for 12 months after its termination. This clause does not apply to the group's activity in the Yves Rocher and Sacara brand stores. The Kiko Milano brand retains the right to cancel the agreement, including in the event of a significant change in control of the franchise holder. The franchise holder also undertakes to indemnify the brand for damage caused it as a result of the agreement.
Castro also stated that the agreement is subject to Italian law.
Published by Globes [online], Israel business news - en.globes.co.il - on October 10, 2018
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