International Housewares Retail reveals Japan Home franchise supply terms: cost plus 3% to 10%

International Housewares Retail (01373) issued a supplementary announcement on 29 October 2026, setting out supply pricing, the allocation of inventory sales proceeds and responsibility for operating expenses under its Singapore Japan Home master franchise arrangement. For prospective franchise investors assessing this market, the key considerations extend beyond licence fees to ongoing procurement costs, cash settlement and safeguards for contractual obligations.

Supply priced at landed cost plus a mark-up, with third-party benchmarking

According to the supplementary announcement, the group will supply products to the master franchisee at landed cost plus a mark-up of 3% to 10%, benchmarked against at least two independent third parties. Supply revenue is one of the group’s income streams under the new model and is calculated separately from royalties.

This disclosure shows why assessing franchise costs requires more than looking at brand licensing fees. The prices franchisees pay for stock also affect day-to-day operating budgets. However, the supply mark-up is not the same as a shop’s gross profit margin: the 3% to 10% stated in the announcement relates to product supply pricing and cannot be used directly to estimate retail profitability.

Existing inventory proceeds allocated weekly; advances repaid at cost

Sales proceeds from existing inventory are subject to a specific arrangement: 66% is remitted to the franchisor each week, while the master franchisee retains 34%. This applies to existing inventory, rather than representing a general allocation of all future sales revenue covered by the announcement. Nor does it constitute a profit-sharing ratio between the parties.

The master franchisee bears shop operating expenses. If the group advances funds to cover these costs, it will be reimbursed in full with no mark-up. The arrangements are backed by a corporate guarantee and a S$1 million bank guarantee.

For prospective franchisees, these terms highlight a practical issue: when sales proceeds are received, when funds must be remitted and how operating advances are repaid should each be reflected in cash-flow budgets. Monthly turnover alone is not a reliable measure of available funds.

Lease and employment obligations transfer with operations

The transition covers 30 Japan Home shops in Singapore. On completion, the associated direct lease liabilities and operating costs will transfer to the master franchisee, which will also take on all shop operating staff and employment obligations. The group will retain a streamlined back-office team.

For the financial year ended 30 April 2026, the franchisor incurred approximately S$13 million in operating expenses for these 30 shops, equivalent to around HK$75.4 million. These are historical figures, not a guarantee of future expenditure, but they help illustrate the scale of the responsibilities involved in taking over the business.

The transaction also includes one-off asset transfers for shelving and fit-out, valued at S$39,000 and S$325,000 respectively, as well as the refund of up to S$2 million in lease deposits. These items differ in nature from ongoing supply costs and operating expenses and should be treated separately when assessing funding requirements.

What should prospective franchise investors note?

The annual caps set out in the announcement were determined with reference to factors including historical consumption rates, operating expenses, minimum annual fees and the cost value of inventory, with a buffer of 5% to 10%. Such transaction caps should not be treated as spending limits or profit forecasts for individual franchised shops.

These terms apply to this particular Singapore transaction; they are not franchise recruitment terms for Japan Home in Hong Kong. The practical lesson for investors considering the market is to check supply pricing, inventory settlement, repayment of advances, guarantees and staffing obligations individually before signing, and to budget separately for one-off takeover costs and ongoing working capital.