Gap signs franchise deal for expansion in Mexico

SAN FRANCISCO, Sept 18 Fri Sep 19, 2008 12:00am EDT

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SAN FRANCISCO, Sept 18 (Reuters) - Gap Inc (GPS.N) said on Thursday that it would expand its Gap stores into Mexico through a franchise deal with department store chain Distribuidora Liverpool.

Gap, the global apparel retailer based in San Francisco, said the chain will have the exclusive right to sell Gap merchandise through a franchised "store within a store" model.

Distribuidora plans to evaluate the market and determine the target number of total stores, but expects to open its first Gap "store within a store" next spring, Gap said. The concept will not roll out in all Distribuidora Liverpool's stores.

Other global companies have been looking recently to the Mexican market with its growing middle class, including Starbucks Corp (SBUX.O).

The Seattle-based coffee chain is working with fast-food franchiser Alsea (ALSEA.MX) to increase its base of 201 coffee shops in Mexico by at least 80 new stores annually over the next five years.

Gap also said on Thursday that an existing agreement with Fawaz Alhokair Group for Gap and Banana Republic stores in Saudi Arabia would be expanded to include those brand's stores in Egypt and Jordan over the next five years. The first Gap stores in those countries are expected to open by this year's holiday season.

Gap has been expanding its franchise program over the past two years and, with the newly added countries, will soon operate in 21 countries. Currently, the company has some 70 franchised Gap stores and 30 franchised Banana Republic stores around the globe.

In the United States and Canada, the company operates some 2864 of its own Gap and Banana Republic stores. It also operates 306 of its own Gap and Banana Republic stores in the United Kingdom, France and Japan.

Gap's third chain, Old Navy, does not operate outside the United States and Canada. (Reporting by Alexandria Sage, editing by Leslie Gevirtz)

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